Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-02237/USCOURTS-azd-2_07-cv-02237-1/pdf.json

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

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

American Family Mutual Insurance Co., a

Wisconsin corporation, 

Plaintiff, 

vs.

National Fire & Marine Insurance Co., a

foreign corporation; et al, 

Defendants. 

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No. CV07-2237-PHX-NVW

ORDER

[Not for Publication]

Pending before the Court is Defendant National Fire & Marine Insurance

Company’s Motion for Summary Judgment (Phase One) (doc. #459).

A party moving for summary judgment must “file a statement, separate from the

motion and memorandum of law, setting forth each material fact on which the party relies

in support of the motion.” LRCiv 56.1(a). Any party opposing a motion for summary

judgment must file a separate statement responding to each paragraph of the moving

party’s separate statement of facts and setting forth any additional facts that establish a

genuine issue of material or otherwise preclude judgment in favor of the moving party. 

LRCiv 56.1(b). LRCiv 56.1(d) permits the moving party to file a “reply memorandum,”

but does not permit the moving party to file a separate statement responding to the

nonmoving party’s separate statement. Any evidentiary objections to the nonmoving

party’s separate statement may be included in the reply memorandum, but may not be

Case 2:07-cv-02237-NVW Document 586 Filed 09/03/09 Page 1 of 13
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made in a separate statement. Therefore, the Court disregards and does not rely upon

Defendant National Fire & Marine Insurance Company’s Response to Plaintiff’s Separate

Statement of Facts and Reply Statement of Undisputed Facts in Support of Defendant’s

Motion for Summary Judgment (doc. #543), including the supplemental declaration of

Reed Grandgenett (doc. #543-2).

I. Legal Standard for Summary Judgment

The Court should grant summary judgment if the evidence shows there is no

genuine issue as to any material fact and the moving party is entitled to judgment as a

matter of law. Fed. R. Civ. P. 56(c). The moving party must produce evidence and

persuade the Court there is no genuine issue of material fact. Nissan Fire & Marine Ins.

Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). To defeat a motion for

summary judgment, the nonmoving party must show that there are genuine issues of

material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). A material fact

is one that might affect the outcome of the suit under the governing law. Id. at 248. A

factual issue is genuine “if the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Id. 

The party seeking summary judgment bears the initial burden of informing the

court of the basis for its motion and identifying those portions of the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, which it believes demonstrate the absence of any genuine issue of

material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The nature of this

responsibility varies, however, depending on whether the moving party or the nonmoving

party would bear the burden of proof at trial on the issues relevant to the summary

judgment motion. If the nonmoving party would bear the burden of persuasion at trial,

the moving party may carry its initial burden of production under Rule 56(c) by

producing “evidence negating an essential element of the nonmoving party’s case,” or by

showing, “after suitable discovery,” that the “nonmoving party does not have enough

evidence of an essential element of its claim or defense to carry its ultimate burden of

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persuasion at trial.” Nissan Fire, 210 F.3d at 1105-06; High Tech Gays v. Defense Indus.

Sec. Clearance Office, 895 F.2d 563, 574 (9th Cir. 1990). 

When the moving party has carried its burden under Rule 56(c), the nonmoving

party must produce evidence to support its claim or defense by more than simply showing

“there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co.

v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Where the record, taken as a whole,

could not lead a rational trier of fact to find for the nonmoving party, there is no genuine

issue of material fact for trial. Id. 

In the context of summary judgment, the court presumes the nonmoving party’s

evidence is true and draws all inferences from the evidence in the light most favorable to

the nonmoving party. Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th

Cir. 1987). If the nonmoving party produces direct evidence of a genuine issue of fact,

the court does not weigh such evidence against the moving party’s conflicting evidence,

but rather submits the issue to the trier of fact for resolution. Id.

However, each numbered paragraph of the moving party’s separate statement of

facts shall be deemed admitted for purposes of the motion for summary judgment if not

specifically controverted by a correspondingly numbered paragraph in the opposing

party’s separate statement of facts. LRCiv 56.1(b).

II. Facts Undisputed or Presumed True for Summary Judgment

Astragal, L.L.C. (“Astragal”) was the developer of the project commonly known

as Astragal Luxury Villas at Thompson Peak located in Maricopa County, Arizona

(“Villas”). Astragal entered into a contract with George F. Tibsherany Development

Company (“GFTDC”) to serve as the general contractor for the Villas. GFTDC entered

into a subcontract agreement with Central Valley Specialties, Inc. (“Central Valley”),

among others, to perform work at the Villas. The subcontract required Central Valley to

maintain specifically described insurance coverage and to cause all its insurance

companies to name GFTDC as an additional insured on all insurance policies required

under the subcontract. A Certificate of Liability Insurance dated August 13, 2003, was

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“You” in the Policies refers to Central Valley.

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issued to GFTDC showing Central Valley was insured by National Fire & Marine

Insurance Company (“National Fire”).

National Fire issued two commercial general liability policies to Central Valley: 

policy number 72LP151863, effective August 13, 2002, through August 13, 2003; and

policy number 71LP158280, effective August 13, 2003, through August 13, 2004

(collectively “Policies”). The Policies include a blanket additional insured Endorsement

labeled “Additional Insured–Owners, Lessees or Contractors–Scheduled Person or

Organization (For Use When Contractual Liability Coverage Is Not Provided to You in

This Policy).” The Policies also include the following language:

2. Duties In The Event of Occurrence, Offense, Claim Or Suit

a. You1

 must see to it that we are notified as soon as practicable

of an “occurrence” or an offense which may result in a claim. 

To the extent possible, notice should include:

(1) How, when and where the “occurrence” or offense

took place;

(2) The names and addresses of any injured persons and

witnesses; and 

(3) The nature and location of any injury or damage

arising out of the “occurrence” or offense.

b. If a claim is made or “suit” is brought against any insured,

you must:

(1) Immediately record the specifics of the claim or “suit”

and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim

or “suit” as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices,

summonses, or legal papers received in connection

with the claim or “suit”;

(2) Authorize us to obtain records and other information;

(3) Cooperate with us in the investigation or settlement of

the claim or defense against the “suit”; and

(4) Assist us, upon our request, in the enforcement of any

right against any person or organization which may be

liable to the insured because of injury or damage to

which the insurance may also apply.

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d. No insured will, except at that insured’s own cost, voluntarily

make a payment, assume any obligation, or incur any

expense, other than for first aid, without our consent.

On October 19, 2004, Astragal Condominium Unit Owners Association (“Astragal

HOA”) filed a lawsuit against Astragal and GFTDC alleging numerous defects in the

construction of the Villas (“HOA Lawsuit”). At all relevant times, GFTDC was insured

under a commercial general liability policy issued by American Family Mutual Insurance

Co. (“American Family”). American Family provided a defense to GFTDC in the HOA

Lawsuit.

On August 11, 2005, GFTDC filed a third-party complaint in the HOA Lawsuit

against Central Valley and other subcontractors to recover damages against the

subcontractors to the extent they had failed to perform their scope of work in a

workmanlike manner. Gust Rosenfeld represented GFTDC in the HOA Lawsuit. 

Matthew Bedwell, an attorney at Gust Rosenfeld, provided Gloria Zanella, a legal

secretary for Gust Rosenfeld, with a draft letter to be mailed to each of the subcontractors

named as third-party defendants to GFTDC’s third-party complaint with a copy to each of

the insurance companies indicated on certificates of liability insurance or other insurance

documents for each subcontractor. In addition to the draft letter, Bedwell provided

Zanella with a list of subcontractors named as third-party defendants and a binder of

certificates of liability for the listed subcontractors. Zanella prepared a letter addressed to

each of the subcontractors and listed the insurance companies indicated on the certificates

of liability insurance for each particular subcontractor as recipients of a copy of the letter.

To obtain addresses for the insurance companies, Zanella researched the Arizona

Department of Insurance website, the internet, and other sources. She then compiled the

insurance companies’ addresses on a document titled “List of Insurer Addresses.” After

obtaining the addresses, Zanella printed a copy of each letter for each of insurance

companies indicated on the letter as a copy recipient. Zanella addressed envelopes for

each insurance company that was copied on one of the letters and enclosed a copy of the

signed letter and enclosures provided by Bedwell. After stuffing the envelopes and

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sealing them, Zanella placed the envelopes in the firm’s outgoing mail baskets for postage

to be affixed by mail room employees and for delivery by Central Courier personnel to

the United States Postal Service. She did not arrange for any of the letters to be mailed

by certified or registered mail. 

If Zanella was unable to locate an insurance company’s address, a copy was

mailed once the address was obtained. Zanella’s affidavit states, “To my knowledge,

every subcontractor and insurance company carbon copied on the letter was mailed a

copy.” Her affidavit does not state that she recalls, has personal knowledge of, or has

records of printing a copy for National Fire, addressing an envelope to National Fire, or

mailing a letter addressed to National Fire.

A letter dated August 17, 2005, was sent to Michael Howard, Central Valley, that

demanded a defense and indemnity from Central Valley as well as insurance coverage as

an additional insured under Central Valley’s insurance policy (“Central Valley Tender

Letter”). The letter states that Central Valley was “required to name GFTDC as an

additional insured under the policies issued by National Fire & Marine Insurance

Company, National Union Fire Insurance Company, Western World Insurance Company

and Owners Insurance Company.” The Central Valley Tender Letter also states:

Accordingly, please immediately place your insurance carrier on

notice of this claim and further put them on notice that GFTDC will be

looking to them directly as an additional insured for coverage under the

policy in regard to the allegations being presented by the condominium unit

owners association. By copy of this correspondence to your agent and

insurance carrier, we are formally placing them on notice of GFTDC’s

demand for defense and coverage under the terms and conditions of the

policy of insurance noted above and noted in the attached certificate. 

GFTDC formally demands that your insurance carrier respond to this

request for defense and coverage within 20 days. In addition, GFTDC

intends to look to you and your insurance carrier for the payment of all

expenses and costs associated with this defense as it relates to the

allegations from the condominium unit owners association. Please confirm

within 20 days of the date of this correspondence your agreement to defend

and indemnity [sic] GFTDC completely in regard to any and all allegations

being presented.

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The Central Valley Tender Letter indicates a copy was mailed to each of the following: 

National Fire & Marine Ins. Co., National Union Fire Ins. Co., Western World Ins. Co.,

and Owners Ins. Co. 

However, National Fire denies receipt of the Central Valley Tender Letter. The

Declaration of Reed Grandgenett, Special Claims Administrator for National Fire, states

that he has personal knowledge that “National Fire conducted an exhaustive review of its

files to determine whether [GFTDC] tendered its defense and indemnification to National

Fire with respect to the [HOA Lawsuit] pursuant to the [Policies]” and that “National Fire

was unable to locate receipt of any tender for defense or indemnification by [GFTDC]

with respect to [the HOA Lawsuit] under the [Policies].” 

American Family is seeking to recover defense costs and indemnification from

National Fire under the theory American Family and National Fire both insured GFTDC. 

American Family’s Third Amended Complaint seeks (1) indemnification in connection

with the Astragal HOA property damage claims, (2) contribution for the cost of the

defense, and (3) equitable contribution for breach of duties by failing to participate in the

defense of GFTDC.

III. Analysis

Under the doctrine of equitable contribution, an insurer who has paid a claim may

seek contribution directly from other carriers that are liable for the same loss. W.

Agricultural Ins. Co. v. Indus. Indem. Ins. Co., 838 P.2d 1353, 1355 (Ariz. App. 1992). 

One insurer may be required to contribute to another insurer’s payment of a claim if the

policies cover (1) the same parties, (2) in the same interest, (3) in the same property, and

(4) against the same casualty. Id. The doctrine is appropriate where two insurers have

agreed to indemnify the same party because it avoids the loss claimant making an

arbitrary choice as to which insurer should pay and it does not give one indemnitor an

incentive to avoid paying a just claim to its insured hoping the other indemnitor will pay. 

Id. at 1356. However, if a party to an insurance policy breaches it, the other party is no

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longer obligated to perform its contractual obligations under the policy. Holt v. Utica

Mut. Ins. Co., 759 P.2d 623, 628 (Ariz. 1988). 

A. GFTDC Failed to Properly Tender Its Demand for Defense and

Indemnification to National Fire.

National Fire contends that American Family may not obtain equitable

contribution from National Fire because GFTDC failed to tender its defense and demand

indemnification. American Family contends that genuine issues of material fact

regarding GFTDC’s tender of defense preclude summary judgment. 

Before an insurer’s duty to defend may be found, it must be shown that the insurer

received sufficient notice that the insured was tendering the defense to it. Purvis v.

Hartford Accident & Indem. Co., 877 P.2d 827, 830 (Ariz. App. 1994). A tender of

defense, “whether written or oral, must contain full and fair information concerning the

pending action and an unequivocal, certain and explicit demand to undertake the defense

thereof, with an offer to surrender control of the action to the indemnitor at least as to that

portion of the claim for which the indemnitee seeks ultimately to hold the indemnitor

liable.” Litton Sys., Inc. v. Shaw’s Sales & Serv., Ltd., 579 P.2d 48, 52 (Ariz. App. 1978);

accord Purvis, 877 P.2d at 830. “What is required is knowledge that the suit is

potentially within the policy’s coverage coupled with knowledge that the insurer’s

assistance is desired.” Purvis, 877 P.2d at 830 (quoting Hartford Accident & Indem. Co.

v. Gulf Ins. Co., 776 F.2d 1380, 1383 (7th Cir. 1985)).

Arizona law recognizes a “mail delivery rule.” Lee v. Arizona, 182 P.3d 1169,

1171, ¶ 8 (Ariz. 2008). Under this common law rule:

[T]here is a presumption that a “letter properly addressed, stamped and

deposited in the United States mail will reach the addressee.” That is, proof

of the fact of mailing will, absent any contrary evidence, establish that

delivery occurred. If, however, the addressee denies receipt, the

presumption of delivery disappears, but the fact of mailing still has

evidentiary force. The denial of receipt creates an issue of fact that the

factfinder must resolve to determine if delivery actually occurred.

Id. (citations omitted). See Anderson v. United States, 966 F.2d 487, 491-92 (9th Cir.

1992) (mailbox rule applied where plaintiff’s contention she had mailed tax return was

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supported by her notarized statement that she had mailed the return, her sworn testimony

that she had seen the postal clerk postmark her return and place the envelope in the

mailing pouch, and the affidavit of a witness who accompanied plaintiff to the post office,

waited in the car, and saw plaintiff return to the car from the post office without the

envelope that had contained the tax return).

American Family urges the Court to presume, under the common law mailbox rule,

that the Central Valley Tender Letter was received by National Fire. The “mail delivery

rule,” however, requires “proof of the fact of mailing.” See Lee, 182 P.3d at 1171, ¶ 8. 

The evidence submitted by American Family shows only that GFTDC’s counsel prepared

tender letters to numerous subcontractors, intended to mail copies to all of the

subcontractors’ insurers, did not mail all of the letters and copies at the same time, placed

some envelopes with letters in the firm’s outgoing mail baskets, and did not send any of

the letters or copies by registered or certified mail. It does not show that anyone has

personal knowledge of, or records of, printing a copy for National Fire, addressing an

envelope to National Fire, or mailing a letter addressed to National Fire. American

Family has not submitted proof that the Central Valley Tender Letter was actually mailed

to National Fire by GFTDC or its counsel. There is, therefore, no basis for applying the

“mail delivery rule” or presuming National Fire received the Central Valley Tender

Letter. 

National Fire has produced evidence negating an essential element of American

Family’s case and shown that American Family does not have enough evidence to carry

its ultimate burden of persuasion at trial. See Nissan Fire, 210 F.3d at 1105-06. 

American Family has not submitted direct evidence of a genuine issue of fact regarding

GFTDC’s failure to tender its defense and demand for indemnification to National Fire. 

See Eisenberg, 815 F.2d at 1289. GFTDC’s failure to tender its defense and demand for

indemnity to National Fire relieves National Fire of its obligations to GFTDC under the

Policies.

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B. GFTDC Breached Its Contractual Obligation to Immediately Send

Northland Copies of Any Demands, Notices, Summonses or Legal

Papers Regarding the HOA Lawsuit.

National Fire contends that GFTDC breached Section IV, paragraph 2(c)(1) of the

Policies, which required GFTDC to immediately send National Fire “copies of any

demands, notices, summonses, or legal papers received in connection with the claim or

‘suit’” by failing to send National Fire a copy of the HOA Lawsuit complaint or summons

served on GFTDC on October 25, 2004, or a demand for defense. Even if GFTDC had

mailed the Central Valley Tender Letter to National Fire, National Fire contends GFTDC

should have attempted further contact with National Fire when it did not receive a

response within 20 days as demanded by the letter to ensure that National Fire was

notified as required by the Policies. American Family contends that it would be

inequitable to enforce the Policies’ notice requirements because National Fire did not

deliver a copy of the Policies to National Fire and therefore GFTDC did not have notice

of the notice requirements. 

An insured’s failure to give notice does not relieve an insurer of its contractual

liability unless it can show that it has been prejudiced thereby. Lindus v. N. Ins., 438 P.2d

311, 315 (Ariz. 1968); Zuckerman v. Transamerica Ins. Co., 650 P.2d 441, 445, 447

(Ariz. 1982); Liberty Mut. Fire Ins. Co. v. Mandile, 963 P.2d 295, 302 (Ariz. App. 1997). 

Nonetheless, American Family does not dispute that failure to receive notice caused

actual prejudice by depriving National Fire of opportunity to investigate the claim,

participate in GFTDC’s defense, control the litigation, and contribute to the settlement

agreement reached in the HOA Lawsuit. See Motiva Enterprises, LLC v. St. Paul Fire &

Marine Ins. Co., 445 F.3d 381, 386 (5th Cir. 2006) (breaching a consent-to-settle

provision prejudiced a primary insurer as a matter of law where the insurer was not

consulted about the settlement, the settlement was not tendered to it, and the insurer had

no opportunity to participate in or consent to the ultimate settlement decision).

Relying on Zuckerman, American Family contends that “it would be inequitable

and contrary to GFTDC’s reasonable expectations to enforce a boilerplate policy

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conditions [sic] of which it had no notice” because National Fire did not provide GFTDC

a copy of the Policies. In Zuckerman, an insurance policy for fire loss contained a clause

requiring that any action for recovery on a claim insured under the policy must be

commenced within twelve months after the loss, which was significantly shorter than the

Arizona limitations period for an action on a written contract. 650 P.2d at 442-43, 444. 

Within the one-year period, the insured consulted counsel and also negotiated directly

with the insurer’s adjuster. Although tentative settlement was reached, the agreement fell

apart, and the insured filed an action against the insurer three months after the expiration

of the one-year policy period. Id. at 443. The Arizona Supreme Court held the insurer

was estopped to enforce the adhesive clause because it did “no more than provide a trap

for the unwary.” Id. at 448-49. The court further found the insurer was not prejudiced by

the fact that the suit was brought more than one year after the loss occurred because there

never was any dispute regarding the loss, its cause, the existence of coverage for the loss,

or the amount of damage. Id.

Here, the Policies’ requirements that insureds immediately send National Fire

copies of legal papers received in connection with lawsuits against the insureds is not “a

trap for the unwary.” GFTDC’s subcontract with Central Valley required Central Valley

to obtain insurance that named GFTDC as an additional insured. A Certificate of

Liability Insurance was issued to GFTDC showing Central Valley was insured by

National Fire. If GFTDC wanted to read the specific language of the Policies, it could

have requested that National Fire send it a copy. Requiring insureds to send National Fire

copies of legal papers received in connection with lawsuits against the insureds for which

they want coverage is not outside of reasonable expectations and is identical to the

requirement in other subcontractors’ policies covering GFTDC as an additional insured. 

National Fire does not contend that GFTDC failed to send specific documents or comply

with specific procedures or timelines—GFTDC did not send National Fire anything it

received in connection with the HOA Lawsuit.

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Moreover, the Policies included a blanket additional insured endorsement. If

GFTDC was covered as an additional insured under the Policies as a result of entering

into the subcontract with Central Valley, National Fire likely would not have received

notice of that event or any need to send GFTDC a copy of the Policies.

GFTDC’s counsel prepared a letter to Central Valley that identified National Fire

as a copy recipient. American Family cannot claim that GFTDC did not know that the

Policies required it to send National Fire papers received in connection with the HOA

Lawsuit or was surprised by such a requirement. It is not inequitable to find GFTDC

breached Section IV, paragraph 2(c)(1) of the Policies, which required GFTDC to send

National Fire documents related to the HOA Lawsuit. 

GFTDC’s breach of the Policies’ notice requirements relieves National Fire of its

obligations to GFTDC under the Policies.

IV. Attorneys’ Fees

National Fire seeks award of attorneys’ fees under A.R.S. § 12-341.01(A). Under

the statute, the Court may exercise its discretion to award attorneys’ fees to the successful

party in any contested action arising out of a contract upon consideration of multiple

factors. Associated Indem. Corp. v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). Because

National Fire has not addressed any of the factors the Court should consider in

determining whether to exercise its discretion under the statute and has not presented in

any argument in favor of exercising such discretion, the Court will deny National Fire’s

request for attorneys’ fees.

V. Rule 54(b) Certification

This Order resolves entirely American Family’s claims in this lawsuit against

National Fire that arise from National Fire’s commercial general liability policies issued

to Central Valley, policy numbers 71LP158280 and 72LP151863. The issues decided

here are discrete and do not overlap with issues to be decided later in this lawsuit. 

American Family has pled other claims in this lawsuit against National Fire arising from

policies issued to other insureds, but those claims are not affected by this Order. 

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Moreover, an immediate appeal of this Order would not threaten duplication of judicial

work through repetitive appeals on related issues or transactions and may contribute to

appellate economy by permitting review of this Order in conjunction with review of other

Orders issued and certified as final today in this action on similar issues. 

For these reasons, pursuant to Fed. R. Civ. P. 54(b), the Court finds no just reason

for delay in the entry of final judgment and directs entry of final judgment against

Plaintiff American Family Mutual Insurance Co. and in favor of Defendant National Fire

& Marine Insurance Company on American Family’s claims in this lawsuit against

National Fire arising from National Fire’s commercial general liability policies issued to

Central Valley, policy numbers 71LP158280 and 72LP151863.

IT IS THEREFORE ORDERED that Defendant National Fire & Marine Insurance

Company’s Motion for Summary Judgment (Phase One) (doc. #459) is granted.

IT IS FURTHER ORDERED that Defendant National Fire & Marine Insurance

Company’s request for attorneys’ fees and costs pursuant to A.R.S. § 12-341.01(A) is

denied.

IT IS FURTHER ORDERED that the Court expressly determines that there is no

just reason for delay in the entry of final judgment in favor of Defendant National Fire &

Marine Insurance Company on claims in this lawsuit arising out of its policies issued to

Central Valley Specialities, Inc., policy numbers 71LP158280 and 72LP151863. The

Court directs the Clerk to enter final judgment against Plaintiff American Family Mutual

Insurance Co. and in favor of Defendant National Fire & Marine Insurance Company on

Plaintiff American Family Mutual Insurance Co.’s claims in this lawsuit against

Defendant National Fire & Marine Insurance Company arising from National Fire &

Marine Insurance Company’s commercial general liability policies issued to Central

Valley Specialities, Inc., policy numbers 71LP158280 and 72LP151863.

DATED this 2nd day of September, 2009.

Case 2:07-cv-02237-NVW Document 586 Filed 09/03/09 Page 13 of 13