Auto-Owners Insurance Company v. Allstate Insurance Company

• Court: District Court, D. Arizona
• Decided: August 1, 2023
• Docket: 2:22-cv-01689
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8

Auto-O wners Insurance Company, ) No. CV-22-01689-PHX-SPL ) 9 ) 10 Plaintiff, ) ORDER vs. ) ) 11 ) Allstate Fire and Casualty Insurance ) 12 Company, ) 13 ) ) 14 Defendant. )

15 Before the Court are Defendant Allstate Fire and Casualty Insurance Company’s 16 (“Defendant”) Motion for Summary Judgment (Doc. 20) and Plaintiff Auto-Owners 17 Insurance Company’s (“Plaintiff”) Cross-Motion for Summary Judgment (Doc. 22). The 18 Motions are fully briefed. (Docs. 20, 21, 22, 25, 28). The Court now rules as follows.1 19 I. BACKGROUND 20 On October 4, 2022, Plaintiff initiated this action against Defendant. (Doc. 1). 21 Plaintiff is a Michigan corporation providing automobile insurance to non-party Carol Moe 22 (“Moe”) who is an Arizona resident. (Doc. 8 ¶ 1; Doc. 21-1 at 88). Defendant is an Illinois 23 corporation also providing automobile insurance to Moe. (Doc. 8 ¶ 2). 24 On February 8, 2020, Moe suffered injuries during an accident that occurred in 25 Arizona while she was operating her 2012 Yamaha golf cart (the “Yamaha”). (Doc. 21 at 26

27 1 Because it would not assist in resolution of the instant issues, the Court finds the pending motions are suitable for decision without oral argument. See LRCiv. 7.2(f); Fed. 28 R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). 1 2; Doc. 21-1 at 88). Moe had an auto insurance policy with Plaintiff which described and 2 rated the Yamaha and provided underinsured motorist (“UIM”) coverage. (Doc. 21 at 1). 3 Moe also had an auto insurance policy with Defendant which described and rated Moe’s 4 2014 Ford Escape (the “Ford”) and provided UIM coverage. (Id. at 1–2). Moe’s policy 5 with Defendant did not describe or rate the Yamaha. (Doc. 21 at 1; Doc. 21-1 at 54). After 6 the accident, Moe submitted a UIM claim to Plaintiff, and Plaintiff paid the claim 7 ($287,500.00) in full. (Doc. 21 at 2). 8 Plaintiff’s policy—which insured the Yamaha—contained the following provision: 9 OTHER UNDERINSURED MOTORIST COVERAGE If there is other Underinsured Motorist Coverage which 10 applies, we will pay our share of the compensatory 11 damages. . . . Our Share will be the ratio of our limit of liability to the total of all limits which apply. . . . 12 The coverage extended to automobiles you do not own will be 13 excess over any other coverage available to you. 14 (Doc. 21-1 at 30). Defendant’s policy—which insured the Ford—contained the following: 15 Section 2 – Underinsured Motorists-Coverage SU 16 If a premium is shown on the Policy Declarations for Underinsured Motorists Insurance, we will pay damages 17 which an insured person is legally entitled to recover from the 18 owner or operator of an underinsured auto because of bodily injury sustained by an insured person. 19 The bodily injury must be caused by an accident and arise out 20 of the ownership, maintenance, or use of an underinsured auto. We will not pay any punitive or exemplary damages, fines or 21 penalties under Underinsured Motorists Insurance. . . . 22 If There Is Other Insurance 23 If the insured person was occupying a vehicle you do not own, Underinsured Motorists Insurance under this policy will be 24 excess over any other valid and collectible insurance available to the insured person, whether such other insurance is stated 25 to be primary or excess. This means that when the insured person is legally entitled to recover damages in excess of the 26 amount available under the other policy, we will pay up to the limit of liability of this policy, but only after all other 27 collectible insurance has been exhausted and subject to the 28 Limit of Liability provision of this policy. 1 (Id. at 80–81). 2 Plaintiff’s Complaint alleges, under its sole claim for equitable contribution, that 3 Defendant is responsible for half of the amount paid to Moe for her UIM claim. (Doc. 8 at 4 3). On March 10, 2023, Defendant moved for summary judgment. (Doc. 20). That same 5 day, the parties provided a Joint Stipulated Statement of Facts. (Doc. 21). On April 10, 6 2023, Plaintiff filed a Response to Defendant’s Motion and a Cross-Motion for Summary 7 Judgment. (Doc. 22). On April 27, 2023, Defendant filed its Reply to Plaintiff’s Response 8 and Response to Plaintiff’s Cross-Motion. (Doc. 25). Finally, on May 18, 2023, Plaintiff 9 filed its Reply to Defendant’s Response. (Doc. 28). 10 II. LEGAL STANDARD 11 Summary judgment is appropriate where “the movant shows that there is no genuine 12 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” 13 Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). If 14 the movant fails to carry its initial burden of production, the nonmovant need not produce 15 anything. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Co., Inc., 210 F.3d 1099, 1102–03 16 (9th Cir. 2000). “In reviewing cross-motions for summary judgment, each motion must be 17 considered on its own merits.” Acosta v. City Nat’l Corp., 922 F.3d 880, 885 (9th Cir. 18 2019) (citation omitted). A court need consider only the cited materials, but it may consider 19 any other materials in the record. Fed. R. Civ. P. 56(c)(3). “[F]ederal courts sitting in 20 diversity jurisdiction apply state substantive law and federal procedural law.” Freund v. 21 Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003) (quoting Gasperini v. Ctr. for 22 Humans., Inc., 518 U.S. 415, 427 (1996)). 23 III. DISCUSSION 24 The parties each move for summary judgment on Plaintiff’s sole claim for equitable 25 contribution. The parties agree that no factual dispute exists and that the only remaining 26 dispute is a question of law for the Court to decide: whether Defendant should be required 27 to reimburse Plaintiff for fifty percent of the amount Plaintiff paid to Moe with respect to 28 her UIM claim. Whether Defendant should be so required depends on whether its UIM 1 policy is “primary” with Plaintiff’s or “excess”.2 Defendant asserts that Arizona law— 2 specifically, A.R.S. § 28-4010(B)—applies and requires that Plaintiff’s UIM policy be 3 considered primary and Defendant’s UIM policy be considered excess. (Doc. 20 at 1–2). 4 Conversely, Plaintiff contends that § 28-4010(B) is inapplicable to the present case. (Doc. 5 22 at 6–9). Plaintiff argues that the parties’ UIM policies—according to their own terms— 6 provide that their respective coverages in this case are primary and that both parties should 7 contribute equally to Moe’s loss. (Id. at 1–2). 8 Statutory provisions affecting insurance policies “cannot be contracted away by 9 either party.” D.M.A.F.B. Fed. Credit Union v. Emps. Mut. Liab. Ins. Co. of Wis., 96 Ariz. 10 399, 402 (1964) (citing U.S. Fid. & Guar. Co. v. Hirsch, 94 Ariz. 331 (1963)); see also 11 Higginbottom v. State, 203 Ariz. 139, 142 (Ct. App. 2002) (“It has long been the rule in 12 Arizona that a valid statute is automatically part of any contract affected by it, even if the 13 statute is not specifically mentioned in the contract. . . . Thus, where a contract is 14 incompatible with a statute, the statute governs.”); State Farm Mut. Auto. Ins. Co. v. 15 Fireman’s Fund Ins. Co., 149 Ariz. 179, 182 (1986) (“Insurers cannot avoid the sweep of 16 the statute by simply rewriting their other insurance clauses; the legislative intent to 17 allocate coverage cannot be so easily defeated by resourceful drafters.”). Although Plaintiff 18 insists this case should be resolved by simple interpretation and application of the parties’ 19 policies, the Court finds that it need not construe or even consider their policies if it finds 20 that § 28-4010(B) applies. Thus, the Court will first determine whether the statute applies. 21 Only if it does not will the Court construe the parties’ policies by their plain and ordinary 22 meaning to determine whether Defendant’s coverage is primary or excess. 23

24 2 “Primary insurance is coverage where ‘under the terms of the policy, liability 25 attaches immediately upon the happening of the occurrence that gives rise to liability.’ . . . An ‘excess’ or secondary insurance policy provides coverage where ‘under the terms of 26 the policy, liability attaches only after a predetermined amount of primary coverage has 27 been exhausted.’” Am. Fam. Mut. Ins. Co. v. Cont’l Cas. Co., 200 Ariz. 119, 121 (Ct. App. 2001) (quoting Archer-Daniels-Midland Co. v. Phx. Assurance Co. of N.Y., 975 F. Supp. 28 1129, 1134 (S.D. Ill. 1997)). 1 Section 28-4010(A) and (B) provide as follows: 2 A. If two or more policies affording valid and collectible motor vehicle liability insurance apply to the same motor vehicle that 3 is involved in an occurrence out of which a liability loss arises 4 and one of the policies affords coverage to a named insured engaged in the business of selling, repairing, servicing, 5 delivering, testing, road testing, parking or storing motor vehicles, both of the following are conclusively presumed: 6 1. If at the time of loss the motor vehicle is being 7 operated by a person engaged in one of the businesses . . . the insurance afforded by the policy issued to the 8 person engaged in the business is primary and the 9 insurance afforded by any other policy is excess. 10 2. If at the time of loss the motor vehicle is being operated by a person other than a person described in 11 this subsection, the insurance afforded by the policy issued to a person engaged in a business described in 12 this subsection is excess over all other insurance available to the operator as a named insured or 13 otherwise. 14 B. Except as provided in subsection A, if two or more policies 15 affording valid and collectible liability insurance apply to the same motor vehicle that is involved in an occurrence out of 16 which a liability loss arises, it is conclusively presumed that the insurance afforded by that policy in which the motor 17 vehicle is described or rated as an owned automobile is primary and the insurance afforded by any other policy or 18 policies is excess. 19 A.R.S. § 28-4010(A)–(B) (emphasis added).3 Courts have explained that Section B serves 20 as the “general rule,” while Section A provides the exception: 21 22 [A.R.S. § 28-4010] governs the allocation of loss when two or more insurers issue motor vehicle liability policies covering 23 the same loss. The statute creates conclusive presumptions as to which policy provides primary coverage and which policy 24 provides excess coverage. The general rule, pursuant to A.R.S. 25 3 The parties do not dispute that § 28-4010’s reference to “liability insurance” 26 includes UIM coverage. Indeed, Arizona law is clear that the statute’s reference to liability 27 insurance was intended to include “all types of coverage,” including UIM coverage. See Nationwide Mut. Ins. v. CNA Ins. Co., 159 Ariz. 368, 370–371 (Ct. App. 1989) (holding 28 that § 28-4010 applies to uninsured motorist coverage). [§] 28-[4010](B), is that the primary policy is the one which 1 describes and rates the vehicle as “owned”; any other policy provides excess insurance. However, an exception to this 2 general rule is provided in A.R.S. [§] 28-[4010](A). 3 John Deere Ins. Co. v. W. Am. Ins. Grp., 175 Ariz. 215, 216 (Ct. App. 1993) (emphasis 4 added); see also Allstate Ins. Co. v. Universal Underwriters, Inc., 199 Ariz. 261, 263 (Ct. 5 App. 2000) (describing Section B as the “general rule”).4 In sum, § 28-4010 applies to 6 determine primary versus excess coverage whenever two or more policies cover the same 7 loss. Assuming that none of the policies cover an insured who is engaged in a motor vehicle 8 business, Section B applies to determine which policy is primary and which is excess. If, 9 however, one of the policies covers a named insured who works in such a business, then 10 Section A applies to determine which policy is primary and which is excess. 11 Here, both Plaintiff and Defendant’s UIM policies applied to Moe’s accident 12 involving the Yamaha. Likewise, Moe—the named insured under both policies—was not 13 engaged in the motor vehicle business at any relevant time. Thus, it would appear that 14 Section B should apply to determine whether Defendant’s UIM coverage is primary or 15 excess. Given that the Yamaha was described and rated by Moe’s policy with Plaintiff but 16 not in her policy with Defendant, Section B would seem to dictate that Plaintiff’s coverage 17 is primary and Defendant’s coverage is excess. Indeed, this is exactly the summary 18 judgment argument made by Defendant. (See Doc. 20 at 7–8). 19 Plaintiff argues that § 28-4010 is inapplicable to the present case. The Court is 20 entirely unpersuaded, as Plaintiff’s position is unsupported by the caselaw and other legal 21 authority. Moreover, Plaintiff’s argument blurs the line between Section A and Section B 22 of § 28-4010, and otherwise obfuscates the true intent of the statute which has been 23

24 4 See also Steven Plitt, Determining primary and excess coverages, The Claim 25 Adjuster’s Automobile Liability Handbook § 3:1 (Thomson Reuters ed., Nov. ed. 2022) (noting that most jurisdictions determine priority of policies “based upon the language of 26 the respective policies’ other insurance clauses,” but that Arizona has “uniformly fixed 27 primary and excess coverage priorities in automobile liability cases by enacting [A.R.S.] § 28-4010” which provides that “[i]n all cases except garage operations, the primary 28 coverage follows the vehicle [and] [e]xcess coverage follows the non-owner operator”). 1 conclusively and clearly set forth by Arizona courts. Plaintiff begins by asserting that the 2 “primary purpose” of § 28-4010 is “to create conclusive presumptions as to ‘which policy 3 provides primary and which excess coverage when two or more policies cover the same 4 motor vehicle loss and the named insured in one of the policies is engaged in the automobile 5 business.’” (Doc. 22 at 6 (quoting Fireman’s Fund, 149 Ariz. at 179)). The first half of this 6 assertion is accurate. The parties agree that § 28-4010 was intended to create conclusive 7 presumptions as to which policy is primary whenever two or more policies are applicable 8 to cover a loss. (Docs. 22 at 6–7 & 25 at 3). That said, the second half of this assertion is 9 misleading to the extent it implies that § 28-4010 is only applicable where one of the named 10 insureds is engaged in the automobile business. As noted above, this is only true in the 11 realm of Section A, which requires one of the named insureds to be “engaged in the 12 business of . . . motor vehicles.” § 28-4010(A). In contrast, Section B contains no reference 13 at all to the motor vehicle business and serves as the general priority rule whenever two or 14 more policies are applicable to the same loss. See § 28-4010(B). In sum, Plaintiff is 15 incorrect to assert that the statute is not applicable merely because Moe was not engaged 16 in the motor vehicle business or because the loss does not “concern[] a vehicle that is being 17 serviced, road tested, etc.”5 (Doc. 22 at 7). 18 Plaintiff contends that a second “primary concern” of § 28-4010 is to establish 19 priorities “when there is a loss where an individual is using or occupying a non-owned 20 vehicle.” (Id.). Plaintiff argues that this concern is not raised in this case because Moe 21 “purchased two different automobile liability policies for her own vehicles” and was

22 5 The Court recognizes that Plaintiff is directly citing Fireman’s Fund when it states 23 that the statute was enacted “to create conclusive presumptions as to ‘which policy provides primary and which excess coverage when two or more policies cover the same motor 24 vehicle loss and the named insured in one of the policies is engaged in the automobile 25 business.’” (Doc. 22 at 6 (quoting Fireman’s Fund, 149 Ariz. at 179)). However, Fireman’s Fund dealt solely with Section A. See Fireman’s Fund, 149 Ariz. at 181 (“It is undisputed 26 that Cummings is in the business of selling and repairing automobiles and thus is within 27 the ambit of [§ 28–4010](A). Therefore, the conclusive presumptions of subsection (A) are triggered.”). Fireman’s Fund simply cannot be read to hold that Section B requires the 28 insured’s engagement in the motor vehicle business. 1 driving her own vehicle at the time of the accident. (Id.). Plaintiff relies on American 2 Family for its finding that Section B “was enacted to address the conflict between policies 3 that cover an insured individual using a non-owned vehicle and policies that insure the 4 vehicle and whoever is driving it.” (Id. at 6–7 (quoting Am. Family Mut. Ins. Co. v. Cont’l 5 Cas. Co., 200 Ariz. 119, 122 (Ct. App. 2001))). The Court is again unpersuaded. While it 6 may be true that Section B was enacted to address conflicts involving non-owned vehicles, 7 this is not the same as Section B being enacted for the sole purpose of addressing such 8 conflicts. American Family recognizes the former but does not hold the latter. Moreover, 9 the express language of § 28-4010(B) does not contain any requirement that the insured be 10 using a non-owned vehicle for the statute to apply. See Bither v. Country Mut. Ins. Co., 226 11 Ariz. 198, 200 (Ct. App. 2010) (“The best indication of legislative intent is the plain 12 language of the statute.”). Rather, Section B is simply concerned with resolving the conflict 13 that arises where two separate policies are implicated by the same occurrence. The mere 14 fact that courts in some cases have applied § 28-4010 to situations involving the insured’s 15 use of a non-owned vehicle does not necessarily mean that the statute was intended to only 16 apply to such situations. Plaintiff fails to cite to any definitive legal authority supporting 17 such a narrowing of the statute’s reach. 18 Finally, Plaintiff relies on Jackson for its discussion of the legislative intent behind 19 § 28-4010. (Doc. 22 at 8–9). Like here, Jackson involved two separate insurance policies 20 covering the same person. Jackson v. Nationwide Mut. Ins. Co., 228 Ariz. 197, 198 (Ct. 21 App. 2011). Unlike here, the insured in Jackson was a garage owner engaged in the motor 22 vehicle business. Id. The appellant in Jackson—who was injured when an uninsured 23 motorist struck his vehicle while he was riding in the passenger seat—argued that § 28- 24 4010(A)(1) applied and required that both of the garage owner’s policies were primary, 25 given that the vehicle was being operated “by a person engaged in” the business. Id. at 201. 26 The court rejected the argument, finding that “nothing in the plain language of § 28-4010 27 [] suggests the legislature intended the provision to apply to determine priority between 28 two policies issued to the same garage owner.” Id. at 202. “Rather, the conclusive 1 presumptions of § 28-4010 were intended ‘to place primary liability on the party who is 2 most responsible for the loss and thus encourage the negligent party to use due care.’” Id. 3 (quoting John Deere, 175 Ariz. at 218). The court found that “[t]hese considerations would 4 not be served where both policies are issued to the same party ‘engaged in the business of 5 . . . repairing . . . motor vehicles.’” Id. (quoting § 28-4010(A)). 6 At first glance, Jackson appears highly relevant to the present action because both 7 cases involve a priority dispute between two insurance policies issued to the same person. 8 Indeed, Plaintiff argues that this Court should reject application of § 28-4010 for the same 9 reason that Jackson did. (Doc. 22 at 9). Specifically, Plaintiff asserts that Jackson “made 10 clear that the statutory intent was to resolve a conflict in a situation involving two different 11 policies, issued to two different parties, and not to a situation involving two policies 12 purchased by and issued to the same individual.” (Id.). Plaintiff further asserts that “[t]his 13 is also not a situation where there is an intent to place primary responsibility on the 14 negligent party,” but rather that “[t]his is simply a situation where the insured (Moe) has 15 paid premiums for UIM coverage under two different policies [that both] apply here.” (Id.). 16 The Court remains unpersuaded. Jackson dealt with Section A (the exception) rather 17 than Section B (the general rule). This distinction is significant, and the Court rejects 18 Plaintiff’s attempts to sweep it under the rug. Where two or more policies cover the same 19 loss, the general rule for determining which is primary and which is excess is simple: “the 20 primary policy is the one which describes and rates the vehicle as ‘owned.’” John Deere, 21 175 Ariz. at 216. The legislative intent behind the general rule is also simple: “[t]he statute 22 does no more than determine which carrier is excess and which is primary when two 23 separate policies apply.” Brown v. State Farm Mut. Auto. Ins. Co., 163 Ariz. 323, 325 24 (1989). Where two or more policies cover the same loss and one of them covers a named 25 insured engaged in the business of motor vehicles, the exception to the general rule applies. 26 When working under the exception, determining which policy is primary and which is 27 excess requires consideration of who was operating the motor vehicle and whether that 28 individual was engaged in the motor vehicle business. The legislative intent behind the 1 | exception is more complicated. See John Deere, 175 Ariz. at 216—18 (noting public policy 2| of “placing primary liability on the party who is most responsible for the loss and thus encouraging the negligent party to use due care” and otherwise discussing legislative intent 4) behind Section A). 5 In sum, the Court sees no reason why the general rule for priority determination— 6| set forth in § 28-4010(B)—should not apply. Plaintiff's attempts to argue statutory intent 7 | are unsupported and do little more than muddy the waters in an otherwise straightforward 8 | case. Both Plaintiff and Defendant’s policies covered Moe’s loss. Pursuant to § 28- 9} 4010(B), Plaintiff's policy is primary because it describes and rates the Yamaha. Defendant’s policy, on the other hand, is excess because it does not describe and rate the Yamaha. Given that § 28-4010(B) applies and resolves the priority dispute, the Court need not address the parties’ other arguments, particularly those related to interpretation and 13 | application of the parties’ policies. 14 IV. CONCLUSION 15 In sum, this Court holds that A.R.S. § 28-4010(B) applies, Plaintiff's UIM coverage is primary, and Defendant’s UIM coverage is excess. Defendant is not liable for any 17 | amount to Plaintiff unless and until Plaintiff's UIM policy is maxed out. Accordingly, 18 IT IS ORDERED that Defendant Allstate Fire and Casualty Insurance Company’s Motion for Summary Judgment (Doc. 20) is granted. Plaintiff's sole claim for equitable 20 | contribution (Count I) is dismissed with prejudice. 21 IT IS FURTHER ORDERED that Plaintiff Auto-Owners Insurance Company’s 22 | Cross Motion for Summary Judgment (Doc. 22) is denied. 23 IT IS FURTHER ORDERED that the Clerk of Court shall enter judgment and 24 | terminate this action accordingly. 25 Dated this 28th day of July, 2023. 26 AG 27 United States District Madge 28 10