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U-HAUL INTERNATIONAL, INC. v. ACE AMERICAN INSURANCE COMPANY Motion for Partial Summary Judgment

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

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Case 2:10-cv-00886-ROS Document 17
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Greg S. Como, SB# 013187 como@lbbslaw.com Adam S. Polson, SB# 022649 polson@lbbslaw.com LEWIS BRISBOIS BISGAARD & SMITH LLP Phoenix Plaza Tower II 2929 North Central Avenue, Suite 1700 Phoenix, Arizona 85012-2761 Telephone: 602.385.1040 Facsimile: 602.385.1051 Attorneys for Defendant ACE American Insurance Co.
UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA U-Haul International, Inc., a Nevada Corporation, Plaintiff, No. 10-cv-886 DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT
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vs.
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ACE American Insurance Co., a Pennsylvania Corporation, Defendant. (Oral Argument Requested)
The issue presented by this motion is whether ACE American Insurance Co. (“ACE”) has a duty to defend an additional insured (U-Haul International, Inc.) when
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ACE’s policy plainly states that ACE “shall have no duty to defend” claims arising under the policy. Because the policy language is not susceptible to any other interpretation, ACE is entitled to partial summary judgment that it has no duty to defend U-Haul International, Inc.
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MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION This matter relates to insurance coverage claims asserted by U-Haul International, Inc. (“UHI”) under several insurance policies issued by ACE to TriMas Corporation (“TriMas”). Cequent Towing Products, Inc. (“Cequent ”) is a Named Insured on the ACE
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policies. Cequent manufactures towing products, and it manufactured a trailer hitch that was sold by a U-Haul corporate entity to Daniel Jamela. Mr. Jamela and his wife were killed in a car accident when Mr. Jamela lost control
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of his vehicle while pulling a U-Haul rental trailer attached with Cequent’s trailer hitch. The Jamelas’ personal representative filed a wrongful death lawsuit on behalf of the Jamelas’ minor children, against UHI, Amerco, Inc., and U-Haul Co. of Nebraska related to the accident in Maricopa County Superior Court. UHI now seeks a ruling that ACE must defend and indemnify UHI in the wrongful death lawsuit because it is an additional insured on the policies ACE issued to TriMas/Cequent. II. THE FACTS A. UHI and Cequent’s Products Indemnification Agreement
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On or about June 16, 2006, UHI and Cequent entered into a “Products Indemnification Agreement.” Paragraph 4 of the Products Indemnification Agreement provides as follows: Supplier [Cequent] represents and warrants that it has products liability insurance and commercial general liability insurance with commercially reasonable limits in effect at the time of execution of this Agreement and if so required by [UHI], that [UHI] will be named as an additional insured on either of those policies. [Cequent] shall deliver to [UHI], within thirty (30) days of the execution of this Agreement, a copy of the certificates of such insurance policies. Furthermore, [Cequent] agrees that it will not materially decrease or eliminate the coverages of such insurance policies without first giving thirty (30) days prior written notice to UHI. (DSSOF1 at ¶ 1).
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Defendant’s Separate Statement of Facts.
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B.
ACE’s Insurance Policies with TriMas/Cequent
ACE issued three insurance policies to TriMas/Cequent that are the subject of this litigation. First, ACE issued a commercial general liability policy, effective from June 30,
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2008, through June 30, 2009, at policy HDO G23743735 (“ACE's CGL Policy”). (DSSOF at ¶ 2). Second, ACE issued a products-completed operations policy, effective from June 30, 2008, through June 30, 2009 at policy HDO G23743693 (“ACE's Products Policy”). (DSSOF at ¶ 3). Third, ACE issued a commercial umbrella liability policy at XOO G24638509 effective from June 30, 2008, through June 30, 2009 (“ACE's Excess Policy”). (DSSOF at ¶ 4). UHI is not identified by name as an additional insured on ACE’s Policies. Rather, a Vendor’s Endorsement to ACE’s Products Policy provides coverage to any vendor whom Cequent has agreed to include as an additional insured. (DSSOF at ¶ 5). UHI seeks coverage pursuant to this Endorsement. C. The Jamela lawsuit.
The wrongful death lawsuit was filed by Knowledge Chenyika on September 1, 2009, as the personal representative of the Estates of Daniel Jamela and Marigold Jamela, and as the guardian and conservator of Mishael Jamela and Mariel Jamela (“the Jamela lawsuit”). (DSSOF at ¶ 6). The named defendants in the Jamela lawsuit are UHI, Amerco, Inc., and U-Haul Co. of Nebraska.2 (Id.)
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Amerco, Inc., and U-Haul Co. of Nebraska are not parties to this action filed against ACE.
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The Jamela lawsuit alleges that Mr. Jamela contacted U-Haul West Maple to obtain equipment to move his family belongings from Omaha to Dallas. (DSSOF at ¶ 7). Mr. Jamela allegedly rented a 12 foot cargo trailer from the U-Haul defendants and also
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purchased from them a trailer hitch and other towing equipment. (Id.) The U-Haul defendants allegedly attached the towing equipment and trailer to Mr. Jamela’s 2005 Honda Pilot. (Id.) Cequent manufactured the trailer hitch sold to Mr. Jamela. (DSSOF at ¶ 8). On July 1, 2008, Mr. Jamela was operating a 2005 Honda Pilot on Interstate 435 in Kansas. (DSSOF at ¶ 9). Mr. Jamela apparently lost control of his vehicle, crossed the highway median, and collided head-on with a Peterbilt diesel tractor. (Id.) Mr. Jamela and his wife, Mrs. Jamela, died as a result of the accident. (Id.) Plaintiff in the Jamela lawsuit alleges various acts or omissions that potentially caused the fatal accident, including: • UHI, Amerco, Inc., and U-Haul Co. of Nebraska represented that all equipment was in working order, was suitable for the 2005 Honda Pilot, and the equipment could be safely towed behind the vehicle (DSSOF at ¶ 10); • The Gross Vehicle Weight Rating of the loaded trailer exceeded the maximum applicable trailer weight specified by Honda (Id.); • The trailer hitch that was sold was too small to safely tow the trailer (Id.); • The tires on the trailer were underinflated, and the air pressure varied considerably amongst the tires (Id.);
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• The brakes on the trailer did not function correctly and/or did not function at all (Id.); and • The trailer lights and/or electrical system were non-functional (Id.). Plaintiff in the Jamela lawsuit states the following counts against UHI, Amerco, Inc., and U-Haul Co. of Nebraska: (1) negligence; (2) strict liability; (3) failure to warn— speeds; (4) failure to warn—tow vehicle; (5) wrongful death; (6) survival action; (7) negligent infliction of emotional distress—Mishael Jamela; and (8) punitive damages. (DSSOF at ¶ 11). D. UHI’s Lawsuit Against ACE
On March 22, 2010, UHI filed the present action against ACE. UHI alleges that it is an additional insured on the ACE Policies, and is entitled to be defended and
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indemnified by ACE for the Jamela lawsuit. (DSSOF at ¶ 12). UHI seeks declaratory relief as to whether ACE has a duty to defend UHI. (Id.) UHI also alleges that ACE breached its obligations by failing to provide a defense under the ACE Policies. (Id.) UHI further alleges that ACE did not timely respond to UHI's
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request for defense, and that UHI has been prejudiced because UHI did not accept the tender of defense. (Id.) E. ACE’s Policies Do not Include a Duty to Defend
Because UHI’s tender to ACE is based on Cequent’s product (the trailer hitch), we
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focus on ACE's Products Policy, rather than ACE's CGL Policy.3
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ACE’s CGL Policy excludes coverage for liability arising from the Products-Completed Operations hazard. (DSSOF at ¶ 16).
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1.
ACE’s Products Policy
Under ACE’s Products Policy, Cequent has a $1,000,000 self-insured retention. (DSSOF at ¶ 13). Cequent is responsible for paying the first $1 million in defense costs,
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settlements, or judgments for claims arising under the Policy. (Id.) ACE’s Products Policy functions similar to excess insurance – it only attaches after the named insured has exhausted the self-insured retention through the defense and/or payment of a covered claim. ACE does not have a duty to defend claims arising under its Products Policy. Endorsement Number 2 to ACE’s Products Policy provides in part as: You [Cequent] and we [ACE] mutually agree that the Claim Service Organization shown in the Schedule [ESIS, Inc.] will provide investigation, administration, adjustment, and settlement services, and will provide for the defense of all claims or “suits” arising under this policy. Accordingly, you agree with us that we shall have no duty to defend any such “suit”, [nor] to pay any “allocated loss adjustment expense” with respect to such claim or “suit” except as provided in paragraph 4 below. (DSSOF at ¶ 14) (emphasis added).4 Under ACE’s Products Policy, if the amount of the judgment or settlement exceeds the $1,000,000 deductible, all “Allocated Loss Adjustment Expense” (i.e., defense costs), is paid by the insured and ACE in the same proportion as the amount each contributed to the judgment or settlement. (DSSOF at ¶ 15). However, if the judgment or settlement does not exceed the deductible, or if the claim or suit is settled without payment of damages, all “Allocated Loss Adjustment Expense” is borne solely by the named insured
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ACE's CGL Policy has a nearly identical provision in Endorsement Number 2. (DSSOF at ¶ 17).
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(Cequent). (Id.) 2. ACE’s Excess Policy
With respect to ACE’s Excess Policy, ACE’s duty to defend UHI is limited to three
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situations: (1) when damages are covered by “underlying insurance” but the limits are exhausted by payment; (2) when damages are covered by “other insurance” (i.e., policies not listed on ACE’s Excess Policy) but the “other insurance” is exhausted by payment; and (3) when there is no coverage under the “underlying insurance” or “other insurance,” and the applicable self-insured retention under ACE’s Excess Policy has been exhausted. (DSSOF at ¶ 18). Here, none of the three conditions necessary to trigger a duty to defend under ACE’s Excess Policy has occurred. It is undisputed that the underlying insurance limits have not been exhausted. Moreover, while there is a dispute as to whether ACE’s Products Policy covers the loss; if it does not, then there would be no coverage under ACE’s Excess Policy either.5 III. ACE HAS NO DUTY TO DEFEND UHI As the above discussion shows, ACE has no duty to defend UHI under the Products Policy. Instead, Cequent has a duty to pay defense costs for covered claims, and ESIS, Inc. (a third-party administrator) administers the defense of those claims.
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Courts have upheld similar policy language, finding the insurer has no duty to defend. In Air Liquide Am. Corp. v. Continental Cas. Co., 217 F.3d 1272 (10th Cir. 2000), the Tenth Circuit considered a similar provision to Endorsement Number 2 in ACE’s
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Products Policy that provided as follows: You have entered into an agreement with the claim service organization shown in the Schedule (the "Claim Service Organization"), whereunder the Claim Service Organization shall provide investigation, administration, adjustment, and settlement services, and shall provide for the defense of all claims or "suits" arising under this policy. Accordingly, you agree with us that we shall not have any duty to defend any such "suit," or to pay with respect to any claim or "suit" any ALAE [Allocated Loss Adjustment Expense]. Air Liquide Am. Corp., 217 F.3d at 1279-1280. The Tenth Circuit held that because of this provision, the insurer had no duty to defend the named insured. Additionally, the Court in Air Liquide Am. Corp. noted that there would be no duty to defend an additional insured as well: The Deductible Endorsement reveals that Air Liquide [the named insured] has contracted with a third party to provide adjustment and defense services, but that in no way obligates Air Liquide to provide a defense to additional insureds. Simply put, the CIGNA policy eliminates a duty to defend, and Appellants' attempts to locate any such duty within the policy are misguided. Air Liquide Am. Corp., 217 F.3d at 1280; see also, Forecast Homes, Inc. v. Steadfast Ins. Co., 105 Cal. Rptr.3d 200 (Cal. App. 4th Dist. 2010) (insurer had no duty to defend additional insured when named insured had not paid its self-insured retention). Air Liquide Am. Corp. and Forecast Homes are in accord with Arizona case law. In Hartford Ins. Group v. Royal-Globe Co., 21 Ariz. App. 224, 229, 517 P.2d 1117, 1122 (Ct.
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App. 1974), the Arizona Court of Appeals held that an insurer had no duty to defend a party not named in the policy because the insurer had not assumed a contractual obligation to do so. See also, Kepner v. Western Fire Ins. Co., 109 Ariz. 329, 330, 509 P.2d 222, 223
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(1973) (holding that an insurer may impose restrictions on its contractual liability under an insurance policy); Mission Ins Co. v. Nethers, 119 Ariz. 405, 581 P.2d 250, 253 (Ct. App. 1978) (“[A]n insurer has the right to limit coverage by use of an endorsement, and when it has done so the plain language of limitation must be respected.”). Here, ACE has no duty to defend any suit “arising under this policy.” This broad language includes claims against UHI just as surely as it does claims against Cequent. Lastly, as for ACE’s Excess Policy, there is no duty to defend because the limits of the underlying insurance have not been exhausted. As such, this is a moot point. IV. CONCLUSION For the foregoing reasons, the Court should grant ACE's Motion for Partial Summary Judgment and find that ACE has no duty to defend U-Haul in the Jamela lawsuit. RESPECTFULLY SUBMITTED July 15, 2010. LEWIS BRISBOIS BISGAARD & SMITH LLP By ___/s/Adam S. Polson______ Greg S. Como Adam S. Polson Attorneys for ACE American Insurance Company CERTIFICATE OF SERVICE I hereby certify that on July 15, 2010, I electronically transmitted the foregoing document to the Clerk’s office using the Court's CM/ECF System and thereby served all counsel of record in this matter.
/s/ Danielle Strickland
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