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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Benjamin McClure, 

Plaintiff, 

v. 

Country Life Insurance Company, et al., 

Defendants. 

No. CV-15-02597-PHX-DLR

ORDER 

 Plaintiff Benjamin McClure purchased a disability insurance policy from 

Defendant Country Life Insurance Company (“Country Life”) in 1995. In January 2013, 

McClure submitted a claim for benefits after suffering a traumatic brain injury. McClure 

alleges that Country Life and Defendant CC Services, Inc. (“CCS”), an affiliated 

company providing various services to Country Life, breached the insurance contract and 

administered his claim in bad faith. 

 At issue is CCS’s motion for summary judgment, which is fully briefed. (Docs. 

201, 231, 262.) CCS argues that it cannot be liable for breach of contract or bad faith 

claim administration as a matter of law because it is not a party to the insurance contract 

and is not a partner, principal, or agent of County Life. For the following reasons, the 

motion is denied.1

 

1

 CCS’s request for oral argument is denied because the issues are adequately briefed and oral argument will not assist the Court in resolving the pending motion. See

Fed. R. Civ. P. 78(b); LRCiv. 7.2(f). 
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I. Legal Standard 

 Summary judgment is appropriate when there is no genuine dispute as to any 

material fact and, viewing those facts in a light most favorable to the nonmoving party, 

the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Facts are 

material if they might affect the outcome of the case under governing law, and a dispute 

over those facts is genuine “if the evidence is such that a reasonable jury could return a 

verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 

(1986). Summary judgment may also 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 Corp. v. Catrett, 

477 U.S. 317, 322 (1986). 

II. Local Rule of Civil Procedure 56.1 

 Preliminarily, CCS objects to numerous paragraphs in McClure’s controverting 

statement of facts on grounds that they violate Local Rule of Civil Procedure 56.1. This 

District’s Local Rules of Practice impose specific requirements on the form and content 

of summary judgment motions. As relevant here, “[a]ny party filing a motion 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). Each of these facts “must refer to a specific admissible portion of the 

record where the fact finds support (for example, affidavit, deposition, discovery 

response, etc.).” Id. Likewise: 

Any party opposing a motion for summary judgment must file a statement, separate from that party’s memorandum of law, 

setting 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. 
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LRCiv 56.1(b). 

 The rule distinguishes between a separate statement of facts and a memorandum of 

law because the two documents serve different purposes. The court should be able to 

glean which facts, if any, are genuinely disputed by reviewing the parties’ separate and 

controverting statements of facts. Working from that baseline of facts, the court then 

looks to the parties’ memoranda of law to determine whether any genuinely disputed 

matters are material under governing law, or whether the movant is entitled to judgment 

as a matter of law. Thus, factual disputes should be aired in the parties’ separate 

statements, while legal disputes should be addressed in their memoranda of law. The 

court may deem a movant’s separate statement of facts to be true if the non-moving party 

does not comply with these rules. See Szaley v. Pima Cty., 371 Fed. App’x, 734, 735 (9th 

Cir. 2010). 

 CCS correctly notes that many paragraphs in McClure’s controverting statement 

of facts do not comply with Rule 56.1(b) because they contain legal arguments over the 

significance or effect of facts, rather than disputes over the factual matter itself. (Doc. 

262 at 3-4; Doc. 232 ¶¶ 2, 16-19, 21.) 

The Rule requires the controverting party to provide a specific record reference supporting the party’s position if a 

fact is disputed; it does not permit explanation and argument supporting the party’s position to be included in the response to the moving party’s statement of facts. Argument may be made in the response or reply brief on the motion for 

summary judgment, but within the page limits. 

Pruett v. Arizona, 606 F. Supp. 2d 1065, 1075 (D. Ariz. 2009). CCS’s objections are 

well-taken and, for purposes of this order, the Court “will disregard each of those 

paragraphs except for the word ‘controverted’ and the references to the record.” Id.

 CCS also objects to several paragraphs that include additional facts “for 

completeness,” instead of listing these facts as separate statements as required under Rule 

56.1(b)(2). (Doc. 262 at 3-4; Doc. 232 ¶¶ 9-11, 15, 20.) Although the Court agrees that 

these paragraphs do not strictly adhere to the Rule 56.1(b), the Court nonetheless will 

consider the facts (but not the arguments) included to the extent they are supported by 
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citations to admissible portions of the record. 

 Lastly, CCS objects to paragraph 20 of McClure’s controverting statement of facts 

because it does not cite to any portion of the record for evidentiary support. (Doc. 262 at 

4; Doc. 232 ¶ 20.) CCS’s objection is sustained. Paragraph 20 of McClure’s separate 

statement contains no reference to the record and, instead, advances legal arguments 

more appropriately made in the response memorandum. The Court therefore will not 

consider it for purposes of this order. 

III. Discussion 

The facts relevant to CCS’s motion largely are undisputed. CCS and Country Life 

are two among many affiliated companies operating under the tradename “COUNTRY 

Financial.” They share corporate officers and a majority shareholder, and correspond 

under the same COUNTRY Financial tradename and logo. Pursuant to an intercompany 

servicing agreement, CCS agreed to provide Country Life and other COUNTRY 

Financial affiliates “with services necessary to operate their business,” including 

accounting, actuarial, billings, claims, finance, human resources, information technology, 

marketing, management, policy administration, and underwriting. CCS describes itself as 

“sort of the payroll entity” for COUNTRY Financial affiliates. Employees at the 

affiliates, including those who handled McClure’s claim, technically are CCS employees 

because CCS provides payroll, benefits, and other human resources services for them. 

This arrangement allows employees to easily transition from one affiliate to another. The 

servicing agreement, however, explicitly denies the creation of “any partnership, joint 

venture, employment, principal-agent or other relationship” between CCS and the other 

COUNTRY Financial affiliates. 

 McClure purchased his insurance policy from Country Life. CCS was not a 

signatory to that contract and is not mentioned in it. Based on these undisputed facts, 

CCS argues that it cannot be liable for breaching the insurance contract or the covenant 

of good faith inherent in it. McClure, however, contends that a jury reasonably could 

find CCS jointly and severally liable based of its own direct involvement in the 
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administration of his claim, and under alter-ego or joint venture theories. The Court 

agrees with McClure, in part. 

A. Alter Ego Liability 

 First, the Court doubts that alter-ego liability is implicated by the relationship 

between CCS and Country Life. Arizona law “allows a parent corporation to be held 

liable for the acts of its subsidiary when the individuality or separateness of the 

subsidiary has ceased[.]” Gatecliff v. Great Republic Life Ins. Co., 821 P.2d 725, 728 

(Ariz. 1991). This case, however, does not involve a parent company and its subsidiary. 

There is no evidence that CCS is Country Life’s parent company, or vice versa. Rather, 

the undisputed evidence is that CCS and Country Life are two among many affiliated 

companies all operating under the shared tradename. 

 Regardless, the undisputed evidence does not support McClure’s alter-ego theory. 

To prevail on an alter-ego liability theory, a plaintiff “must prove both (1) unity of 

control and (2) that the observance of the corporate form would sanction a fraud or 

promote injustice.” Id. Although the evidence would permit a reasonable jury to find for 

McClure as to the first element, unity of control, he has not made a sufficient showing on 

the second prong. The Court is not confronted here with an insurer attempting to evade 

liability for the actions of a third-party administrator’s employees. Country Life readily 

admits that it is McClure’s insurer and is bound by the insurance contract. Country Life 

also acknowledges that the CCS employees assigned to it are its agents, and therefore 

Country Life is responsible for the actions of those employees even though, on paper, 

they are employees of CCS. Country Life is not hiding behind CCS’s operational 

services to avoid potential contractual or bad faith liability. Under the circumstances, the 

Court concludes that observance of the corporate form would not sanction fraud or 

promote injustice. 

B. Joint Venture 

 McClure alternatively argues that a jury reasonably could find CCS jointly and 

severally liable for breach of contract and bad faith claim administration because it 
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engaged in a joint venture with Country Life. The Court agrees. 

 Under Arizona law, privity of contract generally must exist before a party may be 

held liable for breaching it. See Goodman v. Physical Res. Eng’g, Inc., 270 P.3d 852, 

857 (Ariz. Ct. App. 2011.) Likewise, because an insurer’s duty to act in good faith is 

inherent in every insurance contract and is non-delegable, an insured generally cannot 

bring bad faith claims against an entity not privy to the contract because the noncontracting party owes no duty of good faith. Ingram v. Great Am. Ins. Co., 112 F. Supp. 

3d 934, 940-41 (D. Ariz. 2015) (citing Walter v. Simmons, 818 P.2d 214, 223 (Ariz. Ct. 

App. 1991)). Arizona recognizes an exception to these general rules, however, when an 

“insurer and its agent are engaged in a joint venture.” Farr v. Transamerica Occidental 

Life Ins. Co., 699 P.2d 376, 386 (Ariz. Ct. App. 1984). 

 “A joint venture . . . is a special relationship between two or more parties to 

engage in and carry out a single business venture for joint profit without any actual 

partnership or corporate designation.” Helfenbein v. Barae Inv. Co., Inc., 508 P.2d 101, 

104 (Ariz. 1973). “The elements of a business joint venture generally include: (1) an 

agreement; (2) a common purpose; (3) a community of interest; (4) an equal right of 

control; and (5) participation in profits and losses.” Estate of Hernandez v. Flavio, 930 

P.2d 1309, 1312 (Ariz. 1977). In the insurance context, however, Arizona courts have 

permitted joint venture liability to be submitted to juries despite the absence of proof of 

profit and loss sharing or joint right to control. See Sparks v. Republic Nat’l Life Ins. Co., 

647 P.2d 1127, 1138 (Ariz. 1982) (“A joint venture requires an agreement, a common 

purpose, a community of interest, and an equal right to control.”); Farr, 699 P.2d at 386 

(“[W]e note that here there was no proof of profit and loss sharing and no proof of a joint 

right to control. Thus, the classical elements of a joint venture are missing. But if that is 

true here, it was also true in Sparks.”); Ingram, 112 F. Supp. 3d at 941 (noting that joint 

venture liability may attach notwithstanding absence of profit and loss sharing or joint 

control). 

 CCS argues, first, that joint venture liability cannot apply to it because CCS and 
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Country Life “are part of the same corporate family,” and therefore an actual corporate 

designation already exists. Notably, however, CCS has stressed its separateness from 

Country Life throughout its motion. For example, CCS highlights the fact that the 

servicing agreement denies the creation of “any partnership, joint venture, employment, 

principal-agent or other relationship” between CCS and the other COUNTRY Financial 

affiliates. Further, it does not appear that CCS and Country Life are subsidiaries of the 

same parent corporation. Although both share the COUNTRY Financial tradename, it is 

undisputed that COUTNRY Financial is a tradename only, and not an existing corporate 

entity. Given these facts, the Court is not persuaded that the existing affiliation between 

CCS and Country Life renders joint venture liability inapplicable. 

 Next, CCS contends that joint venture liability cannot attach because McClure has 

not produced evidence that the two entities share in profits and losses or enjoy equal 

rights of control. As previously explained, however, Arizona courts have permitted joint 

venture liability in the insurance context notwithstanding the absence of proof on these 

two elements. See Farr, 699 P.2d at 386. 

 The Court also disagrees that McClure has offered no evidence of joint right of 

control. Under Arizona law, “equal right to control” does not mean that each venturer 

has “an equivalent amount of control over the venture’s operation[.]” Estate of 

Hernandez, 930 P.2d at 1313. Rather, “each joint venturer must share, to some extent, in 

the control of the venture. In other words, it is sufficient that a venturer has some voice 

or right to be heard in the control and management of the venture.” Id. At the very least, 

there are disputed questions of fact on this issue. For example, James Anderson, CCS’s 

Rule 30(b)(6) witness, testified that CCS is responsible for payroll and benefits, but 

Country Life ultimately controls the day-to-day actions of those employees assigned to it. 

He could not, however, identify any managerial or supervisory employees at Country 

Life that are not also CCS employees. Moreover, the laundry list of services that CCS 

agreed to provide to Country Life includes management and policy administration. 

McClure also provided numerous training materials that apparently apply to all 
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COUNTRY Financial affiliates. Considering COUTNRY Financial is merely a 

tradename, a jury reasonably could conclude that one or more of the affiliated companies 

operating under the shared tradename drafted these universal training materials. Further, 

given the extensive operational services CCS agreed to provide COUNTRY Financial 

affiliates, a jury reasonably could infer that it played some part in drafting the materials 

that govern the conduct of all affiliates. 

 For these reasons, CCS has not shown that joint venture liability is inapplicable as 

a matter of law. Because a reasonable jury could conclude that CCS and Country Life 

were engaged in a joint venture, summary judgment in favor of CCS is not appropriate. 

C. Direct Involvement 

 Though not necessary to the disposition of the present motion, the Court also finds 

that a jury reasonably could find CCS liable for bad faith based on its direct involvement 

in the handling of McClure’s claim. Although CCS employees, as agents for Country 

Life, were directly involved in the handling of McClure’s claim, CCS argues there is no 

evidence that CCS itself had such involvement. This argument is unpersuasive. “Where 

a joint venture exists, each of the parties is the agent of the others and each is likewise a 

principal so that the act of one is the act of all.” Sparks, 647 P.2d at 1138. Thus, to the 

extent CCS and Country Life may be deemed joint venturers, a jury reasonably could 

find that the actions of CCS employees are attributable to both entities. 

 For these reasons, 

IT IS ORDERED that CCS’s Motion for Summary Judgment (Doc. 201) is 

DENIED. 

 Dated this 1st day of August, 2017. 

Douglas L. Rayes 

United States District Judge