Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-02729/USCOURTS-azd-2_05-cv-02729-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Declaratory Judgment

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Mardian Equipment Company, an

Arizona limited partnership, 

Plaintiff, 

vs.

St. Paul Fire and Marine Insurance

Company; and Top Flite Construction,

Inc., 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-05-2729-PHX-DGC

ORDER

Defendant St. Paul Fire and Marine Insurance Company has filed a motion for

summary judgment. Doc. #33. Plaintiff has filed a response and Defendant has filed a reply.

Docs. ##48, 52. For the reasons set forth below, the Court will grant the motion.

I. Background.

On May 11, 2004, Plaintiff and Defendant Top Flite Construction (“Top Flite”)

entered into a Long Term Equipment Rental Agreement (“Agreement”) for Top Flite’s rental

from Plaintiff of a Lorain Boom Crane (“Crane”). The Agreement required Top Flite to

obtain insurance covering the value of the Crane against any loss or damage during the rental

period. Top Flite provided Plaintiff with a Certificate of Liability Insurance (“Certificate”)

that listed Plaintiff as an additional named insured on a Contractor’s Equipment Protection

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 1 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

Insurance Policy (“Policy”) issued to Top Flite by Defendant St. Paul Fire and Marine

Insurance Company (“St. Paul”). The Policy provided that St. Paul had the option of

repairing or replacing any damaged property. On May 20, 2004, the boom section of the

Crane was damaged.

Plaintiff commenced this action by filing a complaint in state court on August 9, 2005.

St. Paul removed the case to this Court on September 7, 2005. Docs. ##1-2. Plaintiff filed

an amended complaint on February 27, 2006. Doc. #25. The amended complaint asserts

breach of contract claims against both St. Paul and Top Flite, a negligence claim against Top

Flite, and a declaratory judgment claim seeking a declaration that the Federal Occupational

Safety and Health Administration (“OSHA”) regulations governing the operation of cranes

and derricks, 29 C.F.R. § 1926.550, require that the boom of the Crane be replaced rather

than repaired. Id.

II. Summary Judgment Standard.

Summary judgment is appropriate if the evidence, viewed in the light most favorable

to the nonmoving party, “show[s] that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); see

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). “Only disputes over facts that might

affect the outcome of the suit . . . will properly preclude the entry of summary judgment.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The disputed evidence must be

“such that a reasonable jury could return a verdict for the nonmoving party.” Id. Summary

judgment may be entered against a party who “fails to make a showing sufficient to establish

the existence of an element essential to that party’s case, and on which that party will bear

the burden of proof at trial.” Celotex, 477 U.S. at 322.

III. Discussion.

A. Plaintiff’s Breach of Contract Claim Against St. Paul.

Plaintiff alleges in the amended complaint that “St. Paul’s actions breached the terms

of the [Policy], to whom [Plaintiff] is a named insured.” Doc. #25 ¶ 20. St. Paul argues that

Plaintiff lacks standing to sue St. Paul because privity of contract must exist in order for a

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 2 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

contract claim to be actionable, and privity is lacking in this case because Plaintiff was not

a named insured on the Policy. Docs. ##33 at 3-4, 34 Ex. A. Plaintiff does not dispute that

it was not a named insured on the Policy on the date the Crane was damaged. See Doc. #49.

Rather, Plaintiff contends that St. Paul should be estopped from denying coverage to Plaintiff

because the Certificate stated that Plaintiff was an additional insured on the Policy and

Plaintiff reasonably and detrimentally relied on the Certificate. Doc. #48 at 12-14. Plaintiff

concludes that summary judgment is inappropriate because it “has put forth the necessary

facts to establish an estoppel claim[.]” Id. at 14.

The parties’ arguments and pleadings require the Court to address three issues:

(1) whether Plaintiff’s breach of contract claim fails for lack of privity, (2) whether Plaintiff

may pursue a claim based on promissory estoppel, and (3) whether Plaintiff can pursue a

claim for bad faith. The Court will address each of these issues separately.

1. Privity.

“‘Privity is that connection or relationship which exists between two or more

contracting parties.’ It arises from the mere fact of entering into a contract. Generally,

privity of contract must exist before one may seek to enforce or defeat the contract.” Samsel

v. Allstate Ins. Co., 19 P.3d 621, ¶ 14 (Ariz. Ct. App. 2001), vacated on other grounds by

Samsel v. Allstate Ins. Co., 59 P.3d 281 (Ariz. 2002) (citation omitted); see Hayden Bus. Ctr.

Condos. Ass’n v. Pegasus Dev. Corp., 105 P.3d 157, ¶ 19 (Ariz. Ct. App. 2005) (“Time after

time, . . . Arizona courts have insisted on privity for breach of contract claims.”).

In this case, it is undisputed that there was no privity of contract between Plaintiff and

St. Paul during the relevant time period. Top Flite and St. Paul entered into the Policy on

July 7, 2003. Doc. #34 ¶ 1. Plaintiff was not named as an additional insured on the Policy

until July 1, 2004, more than one month after the Crane was damaged. Doc. #34 ¶ 12.

The naming of Plaintiff as an additional insured on the Certificate did not create

privity of contract between Plaintiff and St. Paul because a certificate of insurance only

provides information regarding a policy’s contents and does not constitute a contract of

insurance. See Cont’l Cas. Co. v. Signal Ins. Co., 580 P.2d 372, 376 (Ariz. Ct. App. 1978)

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 3 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

(holding that the State of Arizona was not insured under an insurance policy despite a

certificate of insurance indicating otherwise because a certificate “cannot contradict the terms

of a policy; it only provides information as to the policy’s contents”); SLA Prop. Mgmt. v.

Angelina Cas. Co., 856 F.2d 69, 73 (8th Cir. 1988) (“The law governing this issue is clear.

‘The certificate is not part of the contract of, or necessary to, the insurance. It served merely

as evidence of the insurance[.]’”) (quoting Boseman v. Conn. Gen. Life Ins., 301 U.S. 196,

203 (1937)) (alterations omitted). Moreover, the Certificate in this case explicitly provides

that it was “issued as a matter of information only” and “[did] not amend, extend or alter the

coverage afforded by the [Policy].” Docs. ##34 Ex. C, 49 Ex. 5. “[W]hen a certificate of

insurance contains language stating that the certificate does not amend, extend, or alter the

terms of any insurance policy mentioned in the certificate, the terms of the certificate are

subordinate to the terms of the insurance policy. The certificate of insurance will not suffice

to create insurance coverage if such coverage is precluded by the terms of the policy.” TIG

Ins. Co. v. Sedgwick James of Wash., 184 F. Supp. 2d 591, 597 (S.D. Tex. 2001). 

The Court will grant St. Paul’s motion for summary judgment with respect to the

breach of contract claim because there was no privity of contract between Plaintiff and St.

Paul on the date the Crane was damaged. See Hayden, 105 P.3d ¶ 24 (“[W]e uphold the

privity requirement in commercial cases and affirm the trial court’s grant of summary

judgment to Pegasus.”); Stratton v. Inspiration Consol. Copper Co., 683 P.2d 327, 329-30

(Ariz. Ct. App. 1984) (“Since there was no privity of contract between appellant and

Inspiration, appellant has no claim for a personal judgment sounding in breach of contract.”);

see also Contempo Constr., 736 P.2d at 16 (affirming summary judgment in favor of the

defendant on a breach of contract claim and holding that the plaintiff failed to raise the issue

of promissory estoppel where the complaint alleged no facts amounting to detrimental

reliance); Johnson Int’l, 967 P.2d at ¶ 50 (same).

2. Promissory Estoppel.

“The elements of promissory estoppel are a promise, which the promissor should

reasonably foresee would cause the promisee to rely, upon which the promisee actually relies

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 4 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

to his detriment.” Contempo Constr. Co. v. Mountain States Tel. & Tel. Co., 736 P.2d 13, 16

(Ariz. Ct. App. 1987). “A promissory estoppel claim is not the same as a contract claim.

Promissory estoppel provides an equitable remedy and is not a theory of contract liability.”

Double AA Builders, Ltd. v. Grand State Constr., L.L.C., 114 P.3d 835, ¶ 45 (Ariz. Ct. App.

2005) (citations omitted); see Johnson Int’l, Inc. v. City of Phoenix, 967 P.2d 607, ¶ 49

(Ariz. Ct. App. 1998) (“Promissory estoppel is not a theory of contract liability, but instead

a replacement for a contract when parties are unable to reach a mutual agreement.”); AROK

Constr. Co. v. Indian Constr. Servs., 848 P.2d 870, 878-79 (Ariz. Ct. App. 1993) (holding

that promissory estoppel was a proper claim for relief as an alternative to a contract claim

and stating that damages for promissory estoppel may be more limited than damages for

breach of contract); see also Chewning v. Palmer, 650 P.2d 438, 440 (Ariz. 1982)

(distinguishing equitable estoppel claim from breach of contract claim); Kordsiemon v.

Christianson, 735 P.2d 827, 829 (Ariz. Ct. App. 1986) (holding that the doctrine of res

judicata did not apply because a promissory estoppel claim is not the same as a breach of

contract claim). 

In this case, Plaintiff has not alleged a promissory estoppel claim against St. Paul. See

Doc. #25 (alleging breach of contract, negligence, and declaratory judgment claims).

Plaintiff does allege that “Top Flite was . . . required to provide a Certificate of Liability

Insurance naming [Plaintiff] as an additional insured” and that “[t]he Certificate provided that

St. Paul was the primary insurer[.]” Id. ¶ 9. Even under a notice pleading standard, these

allegations cannot reasonably be construed as alleging detrimental reliance by Plaintiff, an

essential element of a promissory estoppel claim. See Contempo Constr., 736 P.2d at 16;

Leal v. Allstate Ins. Co., 17 P.3d 95, ¶ 23 (Ariz. Ct. App. 2000) (“The Leals . . . assert claims

of promissory estoppel and detrimental reliance, but they do not allege that they actually

relied to their detriment on a promise by Allstate. . . . The Leals have not alleged any

substantial detriment and, thus, these claims fail.”); see also Associated Gen. Contractors of

Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983) (stating that a court may

not assume that the plaintiff can prove facts different from those alleged in the complaint);

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 5 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

Under Arizona law, a promissory estoppel claim must be specifically pled. See

Johnson Int’l, 967 P.2d at ¶ 49 (“Although Arizona is a notice pleading state, claims of

promises for purposes of promissory estoppel must be specifically plead.”); Contempo

Constr., 736 P.2d at 16 (“The general rule is that estoppel must be specifically pleaded or

else it is waived.”). The Court need not decide whether a heightened pleading standard

applies in this case because Plaintiff has not sufficiently pled a promissory estoppel claim

even under the more liberal notice pleading standard.

- 6 -

Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1035 (9th

Cir. 2005) (same). Because Plaintiff’s complaint does not assert a claim against St. Paul for

promissory estoppel, Plaintiff cannot rely on such a claim to defeat summary judgment.1

3. Bad Faith.

Finally, Plaintiff’s prayer for relief seeks a judgment against Defendants “in an

amount to be determined by jury for refusing to comply with federal law in bad faith.”

Doc. #25 at 6, ¶ 4. To the extent Plaintiff has asserted a bad faith insurance claim against

St. Paul, the claim is barred because “[a]n insurance company’s duty of good faith and fair

dealing exists only between the insurer and its insured. An insurance company owes no duty

of good faith to a third-party claimant.” Smith v. Allstate Ins. Co., 202 F. Supp. 2d 1061,

1065 (D. Ariz. 2002); see Leal, 17 P.3d ¶ 21 (“[I]t is well established that a third-party

claimant, a stranger to the contract, cannot sue the insurer for tortious breach of the duty of

good faith.”).

B. Plaintiff’s Declaratory Judgment Claim Against St. Paul.

Plaintiff seeks a declaration that the OSHA regulations obligate Defendants to replace,

rather than repair, the boom of the Crane. Doc. #25 ¶¶ 27-29. Plaintiff contends that the

OSHA regulations apply to the Policy because Arizona has explicitly adopted the

regulations, and contracts of insurance must be read in light of all controlling state statutes.

Doc. #48 at 2-5. St. Paul argues that Plaintiff lacks standing to pursue any of its claims

against St. Paul because Plaintiff was not a named insured on the Policy when the Crane was

damaged. Doc. #33 at 5. 

St. Paul’s standing argument focuses on Plaintiff’s breach of contract claim. Neither

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 6 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

St. Paul nor Plaintiff addresses the specific issue of whether Plaintiff has standing to bring

a declaratory judgment claim against St. Paul. Because standing is a jurisdictional

prerequisite, the Court will address the issue sua sponte. See RK Ventures, Inc. v. City of

Seattle, 307 F.3d 1045, 1056 (9th Cir. 2002) (“We raise this standing issue sua sponte, as the

law requires.”); Bernhardt v. County of L.A., 279 F.3d 862, 868 (9th Cir. 2002) (“The district

court had both the power and the duty to raise the adequacy of Bernhardt’s standing sua

sponte.”).

Plaintiff brought its declaratory judgment claim pursuant to Arizona’s Declaratory

Judgments Act, A.R.S. § 12-1831. Because this action has been removed to federal court,

however, Plaintiff’s state law claim must be converted to a claim brought under the Federal

Declaratory Judgment Act (“Act”), 28 U.S.C. § 2201. See Inst. for Studies Abroad, Inc. v.

Int’l Studies Abroad, Inc., 263 F. Supp. 2d 1154, 1156 (S.D. Ind. 2001) (“The federal, rather

than the state, Declaratory Judgment Act controls this litigation, despite the fact that this

litigation was brought pursuant to [an] Indiana statute[.]”); Little Giant Mfg. Co. v.

Chromalox Indus. Heating Prods., No. 1:96-CV-44, 1996 WL 363026, at *3 (E.D. Tex.

June 26, 1996) (“When a declaratory judgment action filed in state court is removed to

federal court, that action is in effect converted into one brought pursuant to the federal

Declaratory Judgment Act[.]”); Hinkle Excavation & Constr. v. Constr. Equip. Int’l, Ltd.,

No. C00-4090, 2000 WL 33915812, at *2 (N.D. Iowa Nov. 20, 2000) (same); Herbalife Int’l,

Inc. v. St. Paul Fire & Marine Ins. Co., No. Civ.A. 5:05CV41, 2006 WL 839515, at *3 (N.D.

W. Va. Mar. 30, 2006) (same). This is so because under the Erie doctrine, federal courts

sitting in diversity apply state substantive law and federal procedural law, and the Act is a

procedural statute. See id.; Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); West Publ’g Co.

v. McColgan, 138 F.2d 320, 324 (9th Cir. 1943) (“The Federal Declaratory Judgment Act

was not a jurisdiction-conferring statute, but an act to establish a new procedure in the federal

courts . . . . ‘Thus, the operation of the Declaratory Judgment Act is procedural only.’”)

(citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937)); see also Fischer & Porter

Co. v. Moorco Int’l, Inc., 869 F. Supp. 323, 326 (E.D. Pa. 1994) (“Case law indicates that the

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 7 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

Act is procedural in nature, and therefore federal law, not state law, governs whether claims

may be heard under it.”) (citation omitted); Carlson Holdings, Inc. v. NAFCO Ins. Co., 205

F. Supp. 2d 1069, 1074 (D. Minn. 2001) (“[D]eclaratory judgment acts are procedural rules

and, thus, in a diversity case, the Federal Declaratory Judgment Act should apply.”) (citing

Skelly Oil Co. v. Phillips Petro. Co., 339 U.S. 667, 671 (1950)).

The Act provides that “[i]n a case of actual controversy within its jurisdiction, . . . any

court of the United States . . . may declare the rights and other legal relations of any

interested party seeking such declaration[.]” 28 U.S.C. § 2201(a) (emphasis added). Thus,

by its very terms, the Act incorporates Article III’s mandate that federal courts may exercise

jurisdiction only over an actual case or controversy. See U.S. Const. art. III, § 2; Aetna Life

Ins. Co., 300 U.S. at 240 (“The Declaratory Judgment Act of 1934, in its limitation to ‘cases

of actual controversy,’ manifestly has regard to the constitutional provision and is operative

only in respect to controversies which are such in the constitutional sense.”); Gov’t

Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222 (9th Cir. 1998) (“A lawsuit seeking federal

declaratory relief must first present an actual case or controversy within the meaning of

Article III, section 2 of the United States Constitution.”); see also Fischer & Porter Co., 869

F. Supp. at 326 (“The Act incorporates Article II’s requirement that federal courts only

entertain cases and controversies.”); Standard Fire Ins. Co. v. Sassin, 894 F. Supp. 1023,

1026 (N.D. Tex. 1995) (“The Declaratory Judgment Act does not exempt federal district

courts from the constitutional requirements that there be an actual controversy between the

parties.”). 

In determining whether an actual controversy exists under the Act, the question is

whether the facts show that “there is a substantial controversy, between parties having

adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a

declaratory judgment.’” Golden v. Zwickler, 394 U.S. 103, 108 (1969) (quoting Md. Cas.

Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). Here, Plaintiff and St. Paul have no

present adverse legal interests. There was no privity of contract between Plaintiff and St.

Paul on the date the Crane was damaged, and Plaintiff concedes that it is not a third-party

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 8 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

beneficiary of the Policy. See Doc. #48 at 13. Plaintiff therefore lacks standing to bring a

declaratory judgment claim against St. Paul concerning the meaning of the Policy. See

Newcal Indus., Inc. v. IKON Office Solutions, Inc., No. C04-2776 FMS, 2004 WL 3017002,

at *8 (N.D. Cal. Dec. 23, 2004) (“In cases in which plaintiffs have sought declaration

regarding rights and obligations under a contract to which it is not a party, other district

courts have similarly found deficiencies in standing.”) (citing Douglas v. Don King

Productions, Inc., 736 F. Supp. 223, 224 (D. Nev. 1990); Meyer Mfg. Co. v. Cuisine-Ware,

Inc., No. 86 C 8144, 1987 WL 5394 (N.D. Ill. Jan. 14, 1987)); see also Carlson Holdings,

Inc., 205 F. Supp. 2d at 1073-74 (holding that an insured lacked standing to bring a

declaratory judgment claim against its insurance company’s reinsurers because there was no

privity of contract between the insured and the reinsurers); Standard Fire Ins. Co., 894 F.

Supp. 1026-28 (holding that an insurer lacked standing to bring a declaratory judgment claim

against a tort plaintiff where the tort plaintiff had no legally cognizable interest in the

insurance contract between the insurer and the tortfeasor); Am. Home Assurance Co. v.

Liberty Mut. Ins. Co., 475 F. Supp. 1169, 1172-73 (E.D. Pa. 1979) (holding that liability

insurers of a contractor lacked standing to bring a declaratory judgment action against the

liability insurer of a subcontractor regarding the legal effect of an indemnity agreement

between the contractor and subcontractor because whatever practical interest the plaintiffs

might have had “concerning the force and effect of the indemnity agreement [was] not

sufficient to constitute an adverse legal interest of the variety required under § 2201”). 

Because Plaintiff lacks standing to pursue its declaratory judgment claim against St.

Paul, the Court will grant summary judgment on the claim.

IT IS ORDERED that Defendant St. Paul Fire and Marine Insurance Company’s

motion for summary judgment (Doc. #33) is granted.

DATED this 22nd day of August, 2006.

Case 2:05-cv-02729-DGC Document 61 Filed 08/22/06 Page 9 of 9