Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-02237/USCOURTS-azd-2_07-cv-02237-2/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[Not for Publication]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 Northland Insurance Company’s Motion for

Summary Judgment (Phase One) (doc. #472).

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

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made in a separate statement. Therefore, the Court disregards and does not rely upon

Defendant Northland Insurance Company’s Response to Plaintiff’s Separate Statement of

Facts and Supplemental Statement of Undisputed Facts in Support of Defendant’s Motion

for Summary Judgment (doc. #555).

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 Willman & Sanetra Plastering (“Willman”), among

others, to perform work at the Villas. The subcontract required Willman 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

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“You” in the Policy refers to Willman.

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subcontract. A Certificate of Liability Insurance dated April 19, 2002, was issued to

GFTDC showing Willman was insured by Northland Insurance Company (“Northland”).

Northland issued a commercial general liability policy to Willman, policy number

RL000148, effective April 19, 2002, through April 19, 2003 (“Policy”). The Policy

includes a Contractor’s Blanket Additional Insured Endorsement. The Policy also

includes 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.

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.

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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 Willman 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

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

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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 Northland, addressing an envelope to Northland, or mailing

a letter addressed to Northland.

A letter dated August 17, 2005, was sent to Rick Senetra, Willman, that demanded

a defense and indemnity from Willman as well as insurance coverage as an additional

insured under Willman’s insurance policy (“Willman Tender Letter”). The letter states

that Willman was “required to name GFTDC as an additional insured under the policies

issued by Northland Insurance, Western Agricultural, National Union Fire Insurance

Company, Genesis Indemnity, Hartford Insurance Company, AIG, Kemper Indemnity

Insurance, Liberty Mutual and Great States Insurance Company.” The Willman 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.

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

Northland Insurance, Western Agricultural, National Union Fire Ins. Co., Genesis

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Indemnity, Hartford Insurance Co., AIG, Kemper Indemnity Ins., Liberty Mutual, and

Great States Ins. Co.

However, Northland denies receipt of the Willman Tender Letter. Scott Stanek, a

Managing Director for Northland, personally reviewed Northland’s claims file regarding

the HOA Lawsuit and was unable to locate a copy of the Willman Tender Letter or any

other letter or communication tendering the defense or indemnification of GFTDC to

Northland. An electronic log note from the Northland file dated April 17, 2006, states

that no tender had been received from the project developer. The attorneys who

represented Willman in the HOA Lawsuit did not receive a copy of the Willman Tender

Letter.

American Family is seeking to recover defense costs and indemnification from

Northland under the theory American Family and Northland 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 Northland.

Northland contends that American Family may not obtain equitable contribution

from Northland because GFTDC failed to tender its defense and to 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 Willman Tender Letter was received by Northland. 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 Northland, addressing an

envelope to Northland, or mailing a letter addressed to Northland. American Family has

not submitted proof that the Willman Tender Letter was actually mailed to Northland by

GFTDC or its counsel. There is, therefore, no basis for applying the “mail delivery rule”

or presuming that Northland received the Willman Tender Letter. 

Northland 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 Northland. See

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

indemnity to Northland relieves Northland of its obligations to GFTDC under the Policy.

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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.

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

Policy, which required GFTDC to immediately send Northland “copies of any demands,

notices, summonses, or legal papers received in connection with the claim or ‘suit’” by

failing to send Northland 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

Willman Tender Letter to Northland, Northland contends GFTDC should have attempted

further contact with Northland when it did not receive a response within 20 days as

demanded by the letter to ensure that Northland was notified as required by the Policy. 

American Family contends that it would be inequitable to enforce the Policy’s notice

requirements because Northland did not deliver a copy of the Policy to Northland 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 Northland was deprived 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

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

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copy of the Policy. 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 Policy’s requirements that insureds immediately send Northland copies

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

the unwary.” GFTDC’s subcontract with Willman required Willman to obtain insurance

that named GFTDC as an additional insured. A Certificate of Liability Insurance was

issued to GFTDC showing Willman was insured by Northland. If GFTDC wanted to read

the specific language of the Policy, it could have requested that Northland send it a copy. 

Requiring insureds to send Northland 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. Northland does not contend that GFTDC failed to send

specific documents or comply with specific procedures or timelines—GFTDC did not

send Northland anything it received in connection with the HOA Lawsuit.

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

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

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the subcontract with Willman, Northland likely would not have received notice of that

event or any need to send GFTDC a copy of the Policy.

GFTDC’s counsel prepared a letter to Willman that identified Northland as a copy

recipient. American Family cannot claim that GFTDC did not know that the Policy

required it to send Northland 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 Policy, which required GFTDC to send Northland documents

related to the HOA Lawsuit. 

GFTDC’s breach of the Policy’s notice requirements relieves Northland of its

obligations to GFTDC under the Policy.

IV. Attorneys’ Fees

Northland 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

Northland 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 Northland’s request for

attorneys’ fees.

V. Rule 54(b) Certification

There is no just reason for delay in entry of final judgment in favor of Defendant

Northland Insurance Company. Granting Northland summary judgment resolves all

claims in this action against this Defendant. Further, the issues decided in this Order are

discrete and do not overlap with issues to be decided later in this case. 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 today in this action on similar issues. For these reasons, pursuant to Fed. R. Civ.

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P. 54(b), the Court directs entry of final judgment against Plaintiff American Family

Mutual Insurance Co. and in favor of Defendant Northland Insurance Company.

IT IS THEREFORE ORDERED that Defendant Northland Insurance Company’s

Motion for Summary Judgment (Phase One) (doc. #472) is granted.

IT IS FURTHER ORDERED that Defendant Northland Insurance Company’s

request for attorneys’ fees 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 Northland

Insurance Company. The Court directs the Clerk to enter final judgment against Plaintiff

American Family Mutual Insurance Co. and in favor of Defendant Northland Insurance

Company.

DATED this 2nd day of September, 2009.

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