Opinion
No. 1 CA-CV 14-0819
03-01-2016
COLONY INSURANCE COMPANY, Plaintiff/Counterdefendant/Appellee, v. ESTATE OF LAKEISHA S. ANDERSON, by and through Personal Representative, GLORIA JOHNSON, both individually and on behalf of all statutory beneficiaries, Defendant/Counterclaimant/Appellant.
COUNSEL Meagher & Geer, PLLP, Scottsdale By Thomas H. Crouch, Kurt M. Zitzer, Rob A. Justman Counsel for Plaintiff/Appellee Law Office of Frederick Taylor, PC, Phoenix By Frederick F. Taylor Counsel for Defendants/Appellants
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2013-007964
The Honorable John Christian Rea, Judge
AFFIRMED
COUNSEL Meagher & Geer, PLLP, Scottsdale
By Thomas H. Crouch, Kurt M. Zitzer, Rob A. Justman
Counsel for Plaintiff/Appellee Law Office of Frederick Taylor, PC, Phoenix
By Frederick F. Taylor
Counsel for Defendants/Appellants
MEMORANDUM DECISION
Presiding Judge Kent E. Cattani delivered the decision of the Court, in which Judge Randall M. Howe and Judge Samuel A. Thumma joined. CATTANI, Judge:
¶1 The Estate of Lakeisha S. Anderson appeals from the superior court's summary judgment ruling that Colony Insurance Company had no duty to defend or indemnify its insured, Palm View Group Home, in an underlying lawsuit brought by the Estate seeking damages for Lakeisha Anderson's death while in Palm View's care. For reasons that follow, we affirm.
FACTS AND PROCEDURAL BACKGROUND
¶2 Anderson died during the night of September 14-15, 2008 while living at Palm View. One year later, the Estate sued Palm View alleging, among other related claims, that Palm View's negligence had caused Anderson's death. Although the Estate delivered the summons and complaint to Palm View in January 2010, the Palm View employee who received them was not authorized to accept service, and the employee placed the documents in a drawer without informing management. Palm View's manager became aware of the documents in September 2010 and then promptly notified Colony, its insurer, of the lawsuit. Colony thereafter disclaimed coverage. After the Estate refiled its claims and properly served Palm View, Palm View failed to respond and default judgment was entered against it for $1.1 million in compensatory and $1.1 million in punitive damages.
¶3 Colony then filed this action seeking a declaration that Palm View's insurance policies—which Colony alleged were "claims-made and reported" policies that required both that the injury occur and that the injured party's claim for damages be made and reported during the covered period—did not provide coverage for the claims and judgment stemming from Anderson's death. The Estate counterclaimed seeking a declaration requiring Colony to pay policy limits for the underlying wrongful death judgment.
¶4 The parties' cross-motions for summary judgment show the rather involved timeline of Palm View's insurance coverage. Palm View cancelled its prior liability insurance policy in the summer of 2008. In July 2008, Palm View's manager, working through Palm View's insurance agent at Copper Silver Insurance Agency ("CSI"), applied for a new commercial general liability policy to cover the group home. The application sought an occurrence policy, which provides coverage if an injury (the occurrence) takes place within the policy period, even if the claim is made after the policy period. See Thoracic Cardiovascular Assocs., Ltd. v. St. Paul Fire & Marine Ins. Co., 181 Ariz. 449, 453 (App. 1994) (describing characteristics of occurrence policies); see also id. (describing differences between claims-made and occurrence policies). The State of Arizona requires licensed and contracted group homes like Palm View to maintain occurrence commercial general liability coverage (although it permits additional claims-made professional liability coverage).
¶5 Because of the type of insurance involved, CSI worked through surplus lines broker Burns & Wilcox Ltd. ("B&W") to procure insurance quotes from insurers not licensed in Arizona. See Ariz. Rev. Stat. ("A.R.S.") § 20-407. Two such insurers responded. Colony returned a quotation—by sending it to B&W, which then forwarded the quotation to CSI—for a claims-made policy. Another insurer also quoted a "Claims Made and Written Demand" policy, although B&W appended a coversheet stating the quotation was for an occurrence policy.
Absent material revisions after the relevant date, we cite a statute's current version. --------
¶6 Palm View's manager apparently without having seen the quotation documents elected the Colony policy, CSI then sent a request to B&W to "[p]lease bind" coverage, and B&W sent a request to Colony to "[p]lease bind" in order to create a temporary insurance contract pending issuance of the policy. See A.R.S. § 20-1120(A), (B). Colony sent B&W a "Binder Confirmation" for claims-made coverage, effective August 13, 2008, and B&W forwarded the Colony binder to CSI with an appended B&W coversheet. Although the Colony binder specified claims-made coverage, B&W's appended coversheet listed occurrence coverage. Palm View's manager did not recall seeing the binder documentation.
¶7 Colony sent the policy to B&W on September 12, 2008, and B&W forwarded it to CSI on September 24. This policy (the "2008 Policy") provided claims-made commercial general liability coverage of up to $1,000,000 for each occurrence. It specified that coverage applied "only if . . . [a] claim for damages because of the [alleged injury] is first made against any insured and reported to us . . . during the policy period of any Extended Reporting Period." The policy period spanned August 13, 2008 to August 13, 2009, with an extended reporting period lasting for an additional 60 days until October 12, 2009.
¶8 Palm View allowed the Colony policy to expire in August 2009 without renewing it. After a five-month gap in coverage, Palm View acquired a new Colony policy (the "2010 Policy") that specified that there was no coverage for injuries that occurred before January 26, 2010.
¶9 After briefing and argument, the superior court granted Colony's summary judgment motion and denied the Estate's. The court reasoned that the 2008 Policy was a claims-made policy and was in effect at the time of Anderson's death; although the injury occurred during the policy period, no claim was made to Colony until after the policy expired, and the 2008 Policy therefore did not cover the Estate's judgment against Palm View. The court further concluded that the 2010 Policy did not provide coverage because the injury occurred before that policy's retroactive date.
¶10 After denying the Estate's motion for reconsideration as well as Colony's request for attorney's fees, the court entered judgment in favor of Colony. The Estate timely appealed.
DISCUSSION
¶11 The Estate argues the superior court erred by determining that the 2008 Policy did not provide coverage for the Estate's judgment against Palm View; the Estate does not challenge the court's ruling regarding the 2010 Policy.
¶12 We review the court's grant of summary judgment de novo, viewing the facts in the light most favorable to the party against whom judgment was entered. Wells Fargo Bank, N.A. v. Allen, 231 Ariz. 209, 213, ¶ 14 (App. 2012). We similarly consider de novo issues of contract interpretation. Great W. Bank v. LJC Dev., LLC, 238 Ariz. 470, 475, ¶ 9 (App. 2015). We will affirm summary judgment if it is correct on any basis supported by the record, even a basis not relied upon by the superior court. See Mutschler v. City of Phx., 212 Ariz. 160, 162, ¶ 8 (App. 2006).
¶13 A plaintiff seeking summary judgment "must submit 'undisputed admissible evidence that would compel any reasonable juror to find in its favor on every element of its claim.'" Allen, 231 Ariz. at 213, ¶ 18 (citation omitted). Summary judgment is proper if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves, 166 Ariz. 301, 305 (1990). This generally includes instances in which "the facts produced in support of the claim or defense have so little probative value, given the quantum of evidence required," that no reasonable person could find for its proponent. Orme Sch., 166 Ariz. at 309.
¶14 The Estate argues that the binder issued in August 2008 provided occurrence coverage, and that the binder (not the final policy, which provided claims-made coverage) was in effect at the time of Anderson's death on September 14-15, 2008. An insurance binder is only valid, however, until the policy for which it was given is issued. A.R.S. § 20-1120(B) ("No binder shall be valid beyond the issuance of the policy with respect to which it was given, or beyond ninety days from its effective date, whichever period is the shorter."). The Estate recognizes that on September 12, 2008, Colony emailed the final policy to B&W to transmit to Palm View, but contends that the policy was not issued until September 24 when B&W emailed it to Palm View's agent CSI.
¶15 The Estate's position conflates issuance of the policy by the insurer with delivery to the insured. The statute governing the duration of binders specifies that the policy itself supersedes the binder upon "issuance," not delivery, of the policy. See A.R.S. § 20-1120(B). Other insurance statutes distinguish issuance from delivery. See, e.g., A.R.S. §§ 20-710(B) ("issue and deliver its policies"), 20-1101(2) (contracts or policies "not issued for delivery in this state nor delivered in this state"), 20-1401.01(A) ("deliver or issue for delivery").
¶16 Case law also bears out the distinction: an insurer issues a policy that is then delivered to the recipient. See, e.g., Acacia Mut. Life Ass'n v. Berry, 54 Ariz. 208, 215 (1939) ("[T]he application was there accepted [at insurer's home office] and the policy issued. Actual physical delivery of the policy was later made in Arizona."); Gov't Emps. Ins. Co. v. Fenton, 164 Ariz. 440, 440 (App. 1989) ("The policy subsequently issued by [insurer] was delivered to [the insured] in Texas."); U.S. Fid. & Guar. Co. v. Indus. Comm'n, 114 Ariz. 472, 474 (App. 1977) ("[Insurer] issued its policy, delivered it to the Agency and billed the Agency for the premium."). Here, even though the policy was not actually delivered to Palm View (or, more precisely, to its insurance agent CSI) until B&W emailed it on September 24, 2008, Colony had already issued the policy on September 12 when it sent it to B&W for delivery.
¶17 The Estate argues that B&W was Colony's agent, so sending the policy to B&W was in effect Colony emailing the document to itself; in the Estate's view, the policy was not issued until B&W emailed it to CSI. As the party asserting agency, the Estate had the burden to show a principal-agent relationship. See Curran v. Indus. Comm'n, 156 Ariz. 434, 437 (App. 1988). Agency can be either actual—if the principal has in fact authorized the agent to act on its behalf—or apparent—if the principal has induced a third-party to believe the purported agent has authority. Gulf Ins. Co. v. Grisham, 126 Ariz. 123, 126 (1980).
¶18 Here, the Estate did not establish that B&W acted as Colony's agent—that is, as a representative of the insurer—rather than simply as a conduit. The Estate did not present an express agreement by which Colony granted B&W authority to act on its behalf. Nor did it present any evidence that Colony contemplated B&W would solicit prospective insureds on its behalf. See Sparks v. Republic Nat'l Life Ins. Co., 132 Ariz. 529, 542 (1982). Rather, the record shows that CSI and B&W worked together to identify potential surplus line insurers and that CSI worked through B&W to procure liability insurance on Palm View's behalf. Accordingly, the Estate provided no evidence of actual agency.
¶19 The Estate argues that, because all communications between Palm View and Colony went through B&W, B&W had apparent authority to act on Colony's behalf. But Arizona law mandates that surplus coverage—that is, coverage procured from an insurer not licensed in Arizona—be procured through a surplus lines broker. See A.R.S. § 20-407(A), (C) (authorizing insurance agent to obtain surplus lines insurance for clients "if the insurance producer uses a surplus lines broker licensed in this state for the transaction of the insurance with the surplus lines insurer."). The fact that Palm View (and CSI) had to work through surplus lines broker B&W to contact surplus lines insurer Colony does not establish that Colony delegated any authority to B&W (or led Palm View to believe B&W was Colony's agent and had authority to bind Colony). See Grisham, 126 Ariz. at 126.
¶20 Finally, even assuming B&W was the insurer's agent, the Estate's argument fails because Colony itself issued the final, formal written policy contract and transmitted it for (eventual) delivery. See Berry, 54 Ariz. at 216 ("The law seems to be well settled that it is sufficient delivery of the policy when the application is approved and the policy issued in accordance with the plan and for the amount of the application and mailed by the insurance company to its agent for delivery to the insured.") (quoting Kansas City Life Ins. Co. v. White, 33 Ariz. 303, 309 (1928)). Additionally, although B&W appended a coversheet under its own letterhead to certain documents from Colony, each coversheet expressly designated Colony as the sole insurance supplier and expressly referenced the "attached company quote [or binder]." Thus, the Estate did not establish apparent agency.
¶21 The Estate further contends that, even if the policy (and not the binder) was in effect, the policy impermissibly changed a material term of the contract—from occurrence coverage in the binder to claims-made coverage in the policy—and that the changed term cannot be enforced. The argument fails, however, because the binder, like the policy itself, provided claims-made coverage.
¶22 The binder, a temporary insurance contract under A.R.S. § 20-1120(A), constituted a contract between Colony (the insurer) and Palm View (the insured). See Liberty Ins. Underwriters, Inc. v. Weitz Co., 215 Ariz. 80, 83, ¶ 7 (App. 2007). Courts construe such contracts in accordance with their plain meaning. Sparks, 132 Ariz. at 534. Ambiguous provisions—but only those that are truly ambiguous in light of the transaction as a whole—are construed against the insurer. Keggi v. Northbrook Prop. & Cas. Ins. Co., 199 Ariz. 43, 46, ¶ 11 (App. 2000).
¶23 Here, the binder documents provided by Colony unambiguously provided claims-made, not occurrence, coverage. This "Binder Confirmation" issued under a Colony header specified the form of commercial general liability coverage as "Claims-Made." Further, in the context of the transaction at large, see Keggi, 199 Ariz. at 46, ¶ 11, the claims-made form of coverage was consistent with Colony's quotation, the only prior written document received from Colony and which unambiguously specified claims-made coverage. Although Palm View had initially applied for occurrence coverage, Arizona law generally permits claims-made policies, see Sletten v. St. Paul Fire & Marine Ins. Co., 161 Ariz. 595, 597-98 (App. 1989), and Colony's claims-made quote and the subsequent coverage binder was not outside the realm of what might be expected. Palm View's apparent confusion regarding the binder documents resulted from a failure to review the documents, not from an ambiguity in its terms.
¶24 The Estate relies on a single statement by B&W on a page with B&W letterhead appended to the Colony document that lists the form of coverage as "commercial general liability occurrence." The Estate contends that this page constituted the entirety of the insurance binder. But the B&W page itself clarified that Colony (not B&W) was the only participating insurer, and it further specified that all exclusions, endorsements, and conditions were "as per attached company binder." That attached binder—Colony's "Binder Confirmation" document—expressly provided for claims-made, not occurrence, coverage. Accordingly, because the binder provided claims-made coverage, the issuance of the claims-made policy did not impermissibly modify a material term of the contract.
¶25 Finally, the Estate argues that claims-made coverage contravened the reasonable expectations doctrine in light of Palm View's reasonable expectation of occurrence coverage. This doctrine protects against enforcement of an unknown term in a standardized form contract if one party to the contract had reason to believe the other party would not have agreed to the contract had it known of that term. First Am. Title Ins. Co. v. Action Acquisitions, LLC, 218 Ariz. 394, 400, ¶ 31 (2008). The doctrine comes into play in four general situations: (1) if the contract term "cannot be understood by the reasonably intelligent consumer who might check on his or her rights," even if otherwise unambiguous; (2) if the term is unusual, unexpected, or "emasculates apparent coverage" and was added without full and adequate notice to the insured; (3) if actions reasonably attributable to the insurer "create an objective impression of coverage in the mind of a reasonable insured"; and (4) if actions reasonably attributable to the insurer have induced a specific insured to believe coverage exists. Id. at 401, ¶ 33 (quoting Gordinier v. Aetna Cas. & Sur. Co., 154 Ariz. 266, 272-73 (1987)).
¶26 None of the four conditions are satisfied in this case. First, the Colony policy documents expressly stated that they "provide claims-made coverage," as did the Colony quotation and binder documents, which clearly specified "Claims-Made" commercial general liability coverage. Had Palm View's manager read the binder (or the quotation before it), the form of coverage offered would have been apparent. Second, although claims-made coverage was different than the occurrence coverage requested in Palm View's application, it cannot reasonably have been unexpected in light of Colony's quotation (effectively a counter-offer) of claims-made coverage. Moreover, there is no indication Colony was informed that Palm View required (rather than just desired) occurrence coverage, so the quotation of claims-made coverage did not unreasonably undermine requested coverage.
¶27 The third and fourth tests present a closer question in light of B&W's coversheet listing the form of coverage as "commercial general liability occurrence." But the impression or expectation of coverage must be based on actions reasonably attributable to the insurer, not the non-agent broker through which the insured procured the surplus lines policy, see id., and for the reasons described above, supra ¶¶ 18-21, B&W's statement is not reasonably attributable to Colony. For these reasons, the Estate has not shown that the doctrine of reasonable expectations would allow the claims-made policy to be construed as an occurrence policy.
¶28 Accordingly, only Colony's claims-made policy was in effect and enforceable at the time of Anderson's death. Although Anderson's death—the occurrence giving rise to Palm View's liability—took place during the policy period, no claim was reported to Colony until September 2010, well after the policy (and extended reporting period) had expired in late 2009. On this basis, the superior court did not err by granting summary judgment in favor of Colony.
¶29 Both parties request an award of attorney's fees under A.R.S. § 12-341.01. In an exercise of our discretion, we decline to award fees to either party. As the prevailing party, Colony is entitled to its costs on appeal upon compliance with ARCAP 21.
CONCLUSION
¶30 For the foregoing reasons, the judgment is affirmed.