Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_11-cv-08057/USCOURTS-azd-3_11-cv-08057-0/pdf.json

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

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Timothy Youso and Michelle Youso,

Plaintiffs, 

vs. 

Pharmacists Mutual Insurance Company, 

Defendant.

No. CV-11-8057-PCT-NVW

ORDER 

Before the Court is Defendant Pharmacists Mutual Insurance Company’s Motion 

for Summary Judgment (Doc. 36). 

I. LEGAL STANDARD 

Summary judgment is proper 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 show 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). A material fact is one that might affect the outcome of the 

suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 

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

verdict for the nonmoving party.” Id. On summary judgment, the nonmoving party’s 

evidence is presumed true, and all inferences from the evidence are drawn in the light 

most favorable to the nonmoving party. Eisenberg v. Ins. Co. of North America, 815 

F.2d 1285, 1289 (9th Cir. 1987); Baldwin v. Trailer Inns, Inc., 266 F.3d 1104, 1117 (9th 

Cir. 2001). 

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II. PLAINTIFFS’ OBJECTIONS TO DEFENDANT’S STATEMENT OF 

FACTS AND DEFENDANT’S RESPONSE TO PLAINTIFFS’ 

SUPPLEMENTAL STATEMENT OF FACTS 

A. Legal Standard 

The Local Rules require that any party filing a motion for summary judgment file 

a statement, separate from the motion, and memorandum of law that sets forth each 

material fact on which the party relies in support of the motion. LRCiv. 56.1(a). “Each 

material fact in the separate statement must be set forth in a separately numbered 

paragraph and must refer to a specific admissible portion of the record where the fact 

finds support (for example, affidavit, deposition, discovery response, etc.).” Id. Only 

material facts should be included in the separate statement of facts; other undisputed facts 

that provide context may be included in the memorandum of law. Id.

Any party opposing a motion for summary judgment must file a separate 

controverting statement of facts that sets forth: 

(1) for each paragraph of the moving party’s separate 

statement of facts, a correspondingly numbered paragraph 

indicating whether the party disputes the statement of fact set 

forth in that paragraph and a reference to the specific 

admissible portion of the record supporting the party’s 

position if the fact is disputed; and (2) any additional facts 

that establish a genuine issue of material fact or otherwise 

preclude judgment in favor of the moving party. Each 

additional fact must be set forth in a separately numbered 

paragraph and must refer to a specific admissible portion of 

the record where the fact finds support. 

LRCiv 56.1(b). The moving party may file a reply memorandum, but the Local Rules do 

not authorize filing a separate statement responding to the nonmoving party’s 

controverting statement of facts. See LRCiv 56.1(d). The moving party may include its 

objections to the nonmoving party’s controverting statement of facts in its reply 

memorandum. The moving party would need to seek and obtain leave to file another 

separate statement. If such leave were granted, the nonmoving party would be granted 

opportunity to respond. 

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B. Rulings 

First, Defendant Pharmacists Mutual Insurance Company’s Response to Plaintiff’s 

Supplemental Statement of Facts (Doc. 44), which is separate from its reply 

memorandum (Doc. 43), is not permitted under the Local Rules. The vast majority of 

Defendant’s responses to Plaintiffs’ Supplemental Statement of Facts are that it admits 

that the witness gave the testimony contained in the deposition transcript and objects to 

Plaintiffs’ characterization of the testimony and/or the fact’s relevance. To the extent 

Plaintiffs have provided the relevant portions of transcripts cited, the transcript speaks for 

itself. Any factual assertions by either side that are not supported by admissible evidence 

in the record or that lack relevance will not be considered. Therefore, Defendant 

Pharmacists Mutual Insurance Company’s Response to Plaintiff’s Supplemental 

Statement of Facts (Doc. 44) will be stricken and not considered in deciding the Motion 

for Summary Judgment. 

Second, Plaintiffs’ response to Defendant’s separate statement of facts in support 

of its motion for summary judgment “admits,” i.e., does not dispute, all but 11 of 78 of 

Defendant’s factual assertions. Four of the “denials” dispute the fact asserted, but do not 

refer to a specific admissible portion of the record that supports Plaintiffs’ position. 

Seven of Plaintiffs’ “denials” include evidentiary objections. The objections to 

paragraphs 39, 40, 42, 43, and 45 for lack of foundation are overruled. The hearsay 

objections to paragraphs 39, 40, 41, 43, 44, and 45 are sustained to the extent the 

paragraphs assert the truth of statements made within correspondence attached as 

Exhibits 11 and 12 to the Declaration of Kirk Benson (Doc. 38). However, Mr. Benson’s 

declaration asserting that he received the attached correspondence, including specific bids 

for repairing Plaintiffs’ residence, is admissible. 

III. UNDISPUTED FACTS 

In early 2007, Plaintiffs finished building a house in Lake Havasu City, Arizona 

(the “House”). While living in the House, they built another house in Lake Havasu City 

and began moving some of their personal property to their new house in the fall of 2009. 

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On November 27, 2009, the day after Thanksgiving, a gas grill malfunctioned, resulting 

in a fire that totally burned the House. At the time of the fire, Plaintiffs did not rent any 

part of the House to others and had not made any attempt to rent the House to others. 

After the fire, Plaintiffs removed more of their personal property from the House. For 

approximately one month after the fire, Plaintiffs lived in a friend’s house. By early 

January 2010, Plaintiffs had moved into their new house. To date, Plaintiffs have not 

rebuilt the damaged House. 

When Plaintiffs decided to build the House, they contacted Defendant regarding 

insurance coverage for the House. At that time, they already had a renter’s policy with 

Defendant. Defendant provided Plaintiffs with a questionnaire asking them for 

information regarding the House so that Defendant could prepare a quote for insurance 

coverage. Based on the information provided by Plaintiffs, Defendant used computer 

software to estimate the cost of reconstructing the House and removing debris to be 

$281,203 and provided Plaintiffs with a quote for insurance coverage for the House. 

Plaintiffs had borrowed funds to construct the House, and their lender advised 

Defendant that the minimum amount of insurance it required was $327,000. In response, 

Defendant revised its quote to reflect a dwelling limit of $273,000, which met the loan 

requirement of $327,000 because Defendant’s policy contained a provision that would 

increase the coverage limit shown in the declarations by 20% if certain conditions were 

met. Plaintiffs purchased policy number HO 0089893 00 from Defendant, which 

provided coverage for the period February 9, 2007, to February 9, 2008. The policy was 

renewed for the period February 9, 2008, to February 9, 2009 (as policy number HO 

0089893 01), and again for the period February 9, 2009, to February 9, 2010 (as policy 

number HO 0089893 02). 

The policy in effect at the time of the fire (policy number HO 0089893 02) 

provided the following coverage limits: (A) Residence $305,021.14; (B) Related 

Structures on the Premises $29,528; (C) Personal Property $206,694; and (D) Loss of 

Use $88,583. If certain conditions were met, the Coverage A limit would be increased to 

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$381,276.14, and the policy would provide coverage for loss to the House, including 

debris removal, of $400,339.95. 

The policy stated that it covered “the residence on the ‘described location.’” It 

defined “described location” as the house where Plaintiffs reside. It defined “insured 

premises” as the “described location” and that part of any other premises used by 

Plaintiffs as a residence and shown on the policy as an “insured premises.” Regarding 

loss of rent, the policy stated it would pay for the fair rental value of “that part of the 

‘described location’ rented or held for rental” by Plaintiffs if it were made unfit for use as 

a residence by a covered loss. It would “pay only for the period of time reasonably 

required to repair or replace the part of the ‘described location’ rented or held for rental to 

others.” 

The policy also stated that Defendant would pay for the necessary and reasonable 

increase in living costs Plaintiffs incurred to maintain their normal standard of living if 

the part of the “described location” they occupied was made unfit for use as a residence 

by a covered loss, but only for the time reasonably required to make it fit for use or for 

the time reasonably required for permanent relocation. The policy further stated that 

coverage for related private structures included unattached structures, fences, driveways, 

sidewalks, and other permanently installed outdoor fixtures. 

Upon receiving notice of the fire, Defendant assigned an employee to investigate 

the loss and handle the claim. On Saturday, November 28, 2009, the day after the fire, 

Defendant made arrangements to issue a $10,000 advance payment to Plaintiffs and to 

obtain a rental car for their use because their three cars had been stored in the garage 

during the fire and were damaged. Defendant immediately retained an independent 

adjuster to investigate the fire loss and arranged to have a fence installed around the 

property. Defendant retained a cause-and-origin investigator whose initial assessment 

indicated that the source of the fire was a gas grill. Defendant notified Plaintiffs not to 

enter the House or remove items from the House until the investigation was completed. 

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By December 14, 2009, Defendant reached agreement with Plaintiffs to pay a total of 

$121,626 for the loss to their three vehicles. 

On December 21, 2009, Defendant sent a reservation of rights letter to Plaintiffs. 

On December 31, 2009, Defendant was notified that Plaintiffs had retained a public 

adjuster. In January and February 2010, Defendant obtained bids from multiple 

contractors to repair the House. One of the contractors agreed to do the work for the 

amount of the insurance limit ($400,339.95). Another provided a not-to-exceed bid of 

$408,670.62. On February 2, 2010, and again on February 26, 2010, Defendant 

requested information to pay off the mortgage of the House under a reservation of rights. 

On February 19, 2010, Defendant issued a second advance payment of $10,000 to 

Plaintiffs. 

On May 14, 2010, Defendant issued payment for personal property loss, based on 

its determination that the actual cash value of personal property loss was $132,181.32. 

On May 14, 2010, Defendant also issued payment of $1,831.38 for personal property 

inside the vehicles and payment of $400,340, the policy limit for structure loss and debris 

removal. On December 15, 2010, Defendant paid Plaintiffs $3,727.84 for additional 

living expenses. On April 13, 2011, Defendant issued payment of $1,000 to correct an 

earlier mathematical error. 

IV. ANALYSIS 

A. Count One: Negligence 

The Complaint alleges that Defendant had a duty “to reasonably, accurately and 

fairly assess and determine the amount and extent of insurance coverage to be provided to 

Plaintiffs such that Plaintiffs could, in the event of loss, adequately and reasonably 

replace their residence with a structure of like kind and quality.” At least one 

experienced contractor agreed to repair the House for the policy limit. Therefore, the 

insurance coverage Defendant sold to Plaintiffs was sufficient to repair the House, and if 

Defendant owed any duty to Plaintiffs to advise them that they should purchase more 

coverage, it was not breached. 

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B. Count Two: Breach of Contract 

The Complaint alleges that Defendant “breached the contact of insurance between 

itself and Plaintiffs by failing to timely and fairly indemnify or compensate Plaintiffs for 

their covered losses pursuant to the insurance policy, including payment for the structural 

loss, replacement of personal property, payment for loss of use, and payment of 

additional living expenses.” 

Regarding Coverage A, Plaintiffs do not dispute that Defendant paid the structural 

policy limit, which was expanded by 20% for replacement costs, even though Plaintiffs 

did not actually replace the structure. They contend that the May 14, 2010 payment was 

untimely because the bids upon which the payment was made were submitted in February 

2010.1

 Three months from bids to payment is not unreasonable, especially during the 

period when Defendant was seeking information to pay off Plaintiffs’ mortgage and 

considering that the payment was for replacement costs that were never incurred. 

Regarding Coverage B, Plaintiffs contend that Defendant should have paid an 

additional 10% for “related structures.” But Plaintiffs agree with Defendant that the 

stone retaining wall existed, was not damaged, and did not need repair. 

Regarding Coverage C, Plaintiffs have submitted no evidence that they were 

entitled to more than what they were paid for loss of personal property. 

Regarding Coverage D, Plaintiffs have submitted no evidence that they were 

entitled to more than what they were paid for additional living expense or loss of rent. 

They do not dispute that Defendant reimbursed them for covered expenses through 

March 1, 2010, even though they had moved into their new home by early January 2010. 

They also do not dispute that they did not rent or hold out for rent any portion of the 

House. 

 1

 Plaintiffs refer to a letter dated January 12, 2010, but the exhibit they reference is 

dated January 12, 2011, and describes a bid Defendant received in February 2010. 

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Plaintiffs contend, however, that they were entitled to be paid for rental income 

they would have received if they had been able to rent the House beginning January 1, 

2010, when they anticipated moving into their new home. They fail to acknowledge that 

the insurance policy they purchased for the House required that they reside in the House 

and it only provided loss of rent coverage if they occupied part of the House and rented 

part of it to others. If they had moved to their new home and no longer resided in the 

House, the policy likely would not have provided any coverage, much less loss of rent 

coverage. 

On the undisputed material facts, therefore, Defendant did not breach its contract 

with Plaintiffs. 

C. Count Three: Bad Faith 

The Complaint alleges that Defendant breached the covenant of good faith and fair 

dealing, and acted in bad faith, by failing to timely acknowledge the significantly 

inadequate coverage limits on Plaintiffs’ structural coverage and summarily tendering the 

structural policy limits to Plaintiffs and by failing to timely and reasonably compensate 

Plaintiffs for their personal property losses, loss of use damages, and additional living 

expenses. It further alleges bad faith by knowingly withholding material and relevant 

information from Plaintiffs concerning the facts surrounding their claim. 

As found above, the insurance coverage provided to Plaintiffs was adequate to 

repair the House, and Defendant timely and reasonably paid Plaintiffs what they were 

entitled to under their insurance policy. Thus, there is no basis for finding Defendant 

acted in bad faith or that Plaintiffs are entitled to punitive damages. 

IT IS THEREFORE ORDERED that Defendant Pharmacists Mutual Insurance 

Company’s Response to Plaintiff’s Supplemental Statement of Facts (Doc. 44) is 

stricken. The Clerk shall leave the imaged document in the record. 

IT IS FURTHER ORDERED that Defendant Pharmacists Mutual Insurance 

Company’s Motion for Summary Judgment (Doc. 36) is granted. 

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IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Defendants 

and against Plaintiffs and that Plaintiffs take nothing. The Clerk shall terminate this case. 

Dated this 29th day of January, 2013. 

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