Court Opinion

ID: 9907558
Source: CourtListenerOpinion
Date Created: 2023-12-06 18:01:19.046757+00
Date Added: 2024-06-11T09:59:53.399662
License: Public Domain

NOT FOR PUBLICATION                           FILED
                                                                          DEC 6 2023
                    UNITED STATES COURT OF APPEALS
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

DAVID STREETER; KATJA STREETER,                 No.    23-35086

                Plaintiffs-Appellants,          D.C. No. 9:20-cv-00188-DLC

 v.
                                                MEMORANDUM*
USAA GENERAL INDEMNITY
COMPANY,

                Defendant-Appellee.

                   Appeal from the United States District Court
                            for the District of Montana
                   Dana L. Christensen, District Judge, Presiding

                    Argued and Submitted November 16, 2023
                              Seattle, Washington

Before: McKEOWN and GOULD, Circuit Judges, and BENNETT,** District
Judge.

      This is an insurance recovery case, resulting from two fires that occurred

within a period of twenty-four hours and were investigated by law enforcement as

potential arson. Plaintiffs-Appellants David and Katja Streeter—the owners of the

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Richard D. Bennett, United States Senior District
Judge for the District of Maryland, sitting by designation.
subject property—promptly made a fire loss claim with their insurer, Defendant-

Appellee USAA General Indemnity Company (“USAA GIC”). After USAA GIC

issued payments in the amount of $644,328.72, the Streeters filed suit in the United

States Court for the District of Montana, alleging claims for breach of contract,

violations of Montana’s Unfair Trade Practices Act, and declaratory judgment, and

seeking punitive damages, attorney fees, and costs. At the close of discovery,

USAA GIC moved for summary judgment based on the Streeters’ failure to

cooperate, and the district court ultimately entered summary judgment for USAA

GIC on those grounds. On appeal, the Streeters challenge the district court’s entry

of summary judgment and secondarily seek certification of a question to the

Montana Supreme Court regarding the enforcement of a contractual duty to

cooperate.

      1. We review the district court’s grant of summary judgment de novo to

determine whether, viewing the evidence in the light most favorable to the

nonmoving party, there is no genuine issue of material fact and the movant is

entitled to judgment as a matter of law. Frudden v. Pilling, 877 F.3d 821, 828 (9th

Cir. 2017). Having done so, we conclude that summary judgment was properly

granted.

      The duty to cooperate typically arises from the inclusion of a cooperation

clause in an insurance policy—such as the one included in the Streeters’ policy.

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Because this cooperation can fairly be characterized as a duty, the failure to

comply can result in the loss of coverage under the policy. See, e.g., Tran v. State

Farm Fire & Cas. Co., 961 P.2d 358, 363 (Wash. 1998) (applying Washington

law).

        As the Streeters filed this action in federal court on the basis of diversity of

citizenship, we apply the substantive law of Montana, the forum state. Med. Lab’y

Mgmt. Consultants v. Am. Broad. Cos., Inc., 306 F.3d 806, 812 (9th Cir. 2002).

The Montana Supreme Court has not specifically addressed the level of

cooperation required in an insurance contract. However, that court has held that an

insured’s failure to comply with the notice requirement of an insurance policy

precludes recovery under the policy if it causes prejudice to the insurer’s ability to

investigate the claim and participate in litigation. Steadele v. Colony Ins. Co., 260

P.3d 145, 150–51 (Mont. 2011); Contractors Bonding & Ins. Co. v. Sandrock, 321

F. Supp. 3d 1205, 1211–12 (D. Mont. 2018). Of import here, the United States

District Court for the District of Montana addressed the issue of noncooperation in

Seymour v. Safeco Insurance Company, an insurance diversity case in which the

insured failed to provide the insurer with a written estimate to support a request for

additional payment. No. CV 13-49-BU-DLC-RWA, 2014 U.S. Dist. LEXIS

190110 at *2–3 (D. Mont. 2014), adopted by, 2015 U.S. Dist. LEXIS 181837 (D.

Mont. May 13, 2015). In holding that this noncooperation “preclude[d] any

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additional recovery under the [p]olicy” and thus the insured’s claim for breach of

contract failed, id. at *22–23, the court reasoned that “[a]n insured’s failure to

provide documents requested by the insurer or to submit to an examination under

oath impairs an insurer’s ability to conduct a legitimate claim investigation to

determine whether coverage exists.” Id. at *21.

      Considering the Montana Supreme Court’s decisions in notice-prejudice

cases and Seymour, we affirm the district court’s entry of summary judgment in

this case. The district court correctly held that an insurer prevails on a

noncooperation defense under Montana law when the insurer establishes: (1) the

insured failed to cooperate in a material and substantial respect, (2) with an

insurer’s reasonable and material request, (3) thereby causing actual prejudice to

the insurer’s ability to evaluate and investigate a claim.1

      Considering whether the Streeters failed to cooperate in a material and

substantial respect, the record shows that when the Streeters turned their phones

over to One Source for the data pull, they presented an authorization that set

parameters on the data that USAA GIC could access. After USAA GIC discovered

1
  On appeal, the Streeters argue that enforcement of a cooperation clause requires
a showing of notice—whether that means a showing of the insurer’s repeated
requests for the insured’s compliance, deliberate conduct by the insured, and/or the
insurer’s warning to enforce the clause. We decline to embrace such an
unworkable, subjective standard, which, as USAA GIC correctly notes, is not part
of the relevant policy language.

                                           4
a discrepancy between the Verizon cell phone records and the extracted data, the

insurer requested an expanded scope, including an examination any and all

indicators of factory resets, data hiding or similar. The Streeters authorized USAA

GIC to review communications and voicemail but did not authorize USAA GIC to

examine indicators of factory resets, data hidings, or the like. And before USAA

GIC received additional extraction reports based on the expanded scope, the

Streeters revoked the right for One Source to share any information from the data

pulls with USAA GIC entirely. While the Streeters participated in interviews and

provided some of the requested materials,2 the Streeters refused to cooperate when

USAA GIC requested more information to determine whether the Streeters’

statements aligned with the evidence. The undisputed record clearly reflects that

the Streeters failed to substantially cooperate with USAA GIC during its

investigation.

      “An insured’s breach of a cooperation clause releases the insurer from its

2
  In an attempt to show cooperation, the Streeters argue that they “temporarily
suspended” authorization until USAA GIC met their demands, and further that
their cooperation with other requests is sufficient to establish cooperation. Both
arguments are unpersuasive. With respect to the Streeters’ first argument, placing
conditions on cooperation would impede an insurer’s ability to conduct a
legitimate claim investigation and is contrary to the terms of the policy and the
purpose of cooperation clauses more generally. Turning to the Streeters’ second
argument regarding evidence of their cooperation, state courts in other jurisdictions
routinely reject the notion that initial or partial cooperation is sufficient. See, e.g.,
Pilgrim v. State Farm Fire & Cas. Ins. Co., 950 P.2d 479, 484 (Wash. Ct. App.
1997).

                                           5
responsibilities if the insurer was actually prejudiced by the insured’s breach.”

Tran, 961 P.2d at 365. When “insurers are inhibited in their effort to process

claims due to uncooperativeness of the insured, they suffer prejudice” as a matter

of law. Id. at 365–66.

      Here, the Streeters did not cooperate with USAA GIC’s request for

additional information, which impaired USAA GIC’s ability to investigate the

validity of the claim before issuing substantial payment—$644,328.72—to its

insured. Accordingly, the Streeters’ failure to cooperate caused actual prejudice to

USAA GIC’s ability to evaluate and investigate the claim.

      At bottom, the district court correctly entered summary judgment for USAA

GIC, as the evidence in this case permits but one conclusion—that the Streeters

failed to cooperate with USAA GIC during its investigation, prejudicing the

insurer’s investigation into the set of fires giving rise to the Streeters’ claims. As

such, we AFFIRM the district court’s grant of summary judgment to

Defendant-Appellee USAA GIC.

      2. We have “long looked with disfavor upon motions to certify that are filed

after the moving party has failed to avail itself of a prior opportunity to seek

certification.” Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1108 (9th Cir. 2013)

(citing Thompson v. Paul, 547 F.3d 1055, 1065 (9th Cir. 2008)). To overcome the

presumption against certification in such instances, “particularly compelling

                                           6
reasons must be shown when certification is requested for the first time on appeal

by a movant who lost on the issue below.” In re Complaint of McLinn, 744 F.2d

677, 681 (9th Cir. 1984). The Streeters did not mention the possibility of

certification until after the district court entered judgment against them, and they

have not shown “particularly compelling reasons” to overcome the presumption

against certification. Accordingly, we decline to certify any question to the

Montana Supreme Court.

      AFFIRMED.

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