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Daniel W. Crandall v. Hartford Casualty Insurance

August 22, 2011


The opinion of the court was delivered by: Honorable Ronald E. Bush U. S. Magistrate Judge


Currently pending before the Court is Defendants' Motion for Summary Judgment (Docket No. 36). Having carefully reviewed the record, participated in oral argument, and otherwise being fully advised, the Court enters the following Memorandum Decision and Order:


Plaintiff brings this lawsuit as the "legal assignee of claims" for, LLC ("CatRisk"), an Idaho limited liability company providing electronic medical billing services to small physician practices in several states. See Pl.'s Compl., pp. 1-2 (Docket No. 1). CatRisk performed these services entirely over the internet, using computer network technologies to communicate with its medical, insurance, and governmental clients/subscribers. See id. at p. 2. To insure the risk of a computer system failure, CatRisk purchased a "Special Multi-Flex Spectrum Policy" (the "Policy") from Defendant Hartford Casualty Insurance Company ("Hartford Casualty"), effective on May 1, 2008. See id.

Plaintiff alleges that on May 21, 2009, CatRisk suffered a sudden and catastrophic mechanical breakdown, resulting in the total loss of computer functions. See id. at pp. 3 & 7. Functionality was restored eight days later and CatRisk was able to resume business operations. See id. Plaintiff reported the incident to CatRisk's insurer, Defendant Hartford Casualty, and, on June 3, 2009, Plaintiff submitted a formal claim for losses and damages. See id. at p. 7. In a July 15, 2009 letter, Defendant Hartford Casualty denied Plaintiff's claim. See id.

As a result of Defendant Hartford Casualty's denial of coverage, Plaintiff asserts the following claims: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) negligent misrepresentation; (4) punitive damages; and (5) negligent infliction of emotional distress. See id. at pp. 8-14. Plaintiff asserts these claims against both (1) Defendant Hartford Casualty and (2) Defendant Hartford Steam Boiler Inspection and Insurance Company ("Hartford Steam Boiler").*fn1

Collectively, Defendants move for summary judgment, arguing, first, that Plaintiff's claims fail because CatRisk, as the named insured, is the real party in interest and that any assignment of CatRisk's claims to Plaintiff was invalid; second, that Plaintiff's claims for negligent infliction of emotional distress, lost compensation, and losses on investment in CatRisk should be dismissed because CatRisk, as the named insured, is incapable of holding such claims; third, that Plaintiff's remaining claims for damages are speculative, unrelated to any duties owed by Defendants, and amount to improper claims for prospective economic advantage; fourth, that Plaintiff's claim for punitive damages is procedurally defective; fifth, that Plaintiff's negligent misrepresentation claim is not recognized under Idaho law; and, finally, that Plaintiff's contract claims against Defendant Hartford Steam Boiler must be dismissed because Defendant Hartford Steam Boiler was not a party to the Policy at issue in this action. See Defs.' Mem. in Supp. of Mot. For Summ. J., p. 1 (Docket No. 36, Att. 1).


A. Motion for Summary Judgment: Standard of Review

Summary judgment is used "to isolate and dispose of factually unsupported claims . . . ." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). It is "not a disfavored procedural shortcut," but rather is "the principal tool[ ] by which factually insufficient claims or defenses [can] be isolated and prevented from going to trial with the attendant unwarranted consumption of public and private resources." Id. at 327. "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

However, the evidence, including all reasonable inferences which may be drawn therefrom, must be viewed in a light most favorable to the non-moving party (see id. at 255) and the Court must not make credibility findings. Id. Direct testimony of the non-movant must be believed, however implausible. Leslie v. Grupo ICA, 198 F.3d 1152, 1159 (9th Cir. 1999). On the other hand, the Court is not required to adopt unreasonable inferences from circumstantial evidence. McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). To carry this burden, the moving party need not introduce any affirmative evidence (such as affidavits or deposition excerpts) but may simply point out the absence of evidence to support the nonmoving party's case. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000).

This shifts the burden to the non-moving party to produce evidence sufficient to support a jury verdict in its favor. Anderson, 477 U.S. at 256-57. The non-moving party must go beyond the pleadings and show "by [its] affidavits, or by the depositions, answers to interrogatories, or admissions on file" that a genuine issue of material fact exists. Celotex, 477 U.S. at 324.

However, the Court is "not required to comb through the record to find some reason to deny a motion for summary judgment." Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026, 1029 (9th Cir. 2001) (quoting Forsberg v. Pac. Northwest Bell Tel. Co., 840 F.2d 1409, 1418 (9th Cir. 1988)). Instead, the "party opposing summary judgment must direct [the Court's] attention to specific triable facts." Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003). A statement in a brief, unsupported by the record, cannot be used to create an issue of fact. Barnes v. Independent Auto. Dealers, 64 F.3d 1389 n. 3 (9th Cir. 1995).

B. A Valid Assignment? Plaintiff's Standing to Maintain CatRisk's Causes of Action

Defendants preliminarily question CatRisk's purported assignment of its claims against Defendants Hartford Casualty and Hartford Steam Boiler to Plaintiff. Specifically, Defendants contend that (1) Plaintiff "cannot demonstrate that a valid assignment of the claims from CatRisk to [Plaintiff] ever actually occurred" and (2) even if the assignment was valid, it was done to "circumvent[ ] the well-established rule that a corporate entity may not represent itself pro se." See Defs.' Mem. in Supp. of Mot. for Summ. J., p. 3 (Docket No. 36, Att. 1).

1. CatRisk's Assignment of Its Claims to Plaintiff

Throughout his Complaint, Plaintiff identifies himself as "the legal assignee" of CatRisk's claims. See, e.g., Pl.'s Compl., pp. 1 & 5 (Docket No. 1). However, Defendants question the legitimacy of any such assignment, claiming that "there exists no evidence that the assignment of a chose in action was completed and delivered from CatRisk to [Plaintiff]." See Defs.' Mem. in Supp. of Mot. for Summ. J., p. 4 (Docket No. 36, Att. 1).

Plaintiff does not dispute the need for CatRisk to formally assign its claims to Plaintiff in order for Plaintiff to proceed on CatRisk's behalf against Defendants -- indeed, Plaintiff seems to suggest that a written assignment actually exists, but says that it could not be found. See Pl.'s Opp. to Defs.' Mot. for Summ. J., p. 1 (Docket No. 46, Att. 1). Regardless, Plaintiff indicates that CatRisk has since executed a resolution that ratified the previous assignment and authorized the execution and delivery of a replacement assignment. See id. at pp. 1-2. That "Resolution" states in relevant part that CatRisk resolves and consents to the following action:

* Ratify the previous absolute assignment of all claims, demands and causes of action of any kind whatsoever legally actionable under CatRisk's insurance contracts entered into with Daniel W. Crandall . . . following the occurrence of the May 21, 2009 equipment breakdown disaster, which prior assignment and resolution cannot be located in the current written records of the company.

* This absolute assignment extended to any and all claims, legally actionable under CatRisk's insurance contracts . . . .

* The previous assignment specifically granted any and all claims, which the undersigned has or may have against Hartford Casualty Insurance Company and Hartford Steam Boiler Inspection & Insurance Company, including breach of contract, bad faith, punitive damages, etc.

* The previous assignment was absolute in that the undersigned relinquished all interest and control in any cause of action whatsoever to the assignee who became therewith the real and legal party in interest; and therefore assignee could in his own name and for his own benefit prosecute, collect, settle, compromise and grant releases on said claim as he in his sole discretion deems advisable.

* CatRisk . . . is hereby authorized to execute and deliver the replacement assignment to Daniel W. Crandall . . . .

See 3/16/11 Crandall Aff. at Ex. 1 (Docket No. 39, Att. 1). The contemporaneous "Absolute Claims Assignment" (presumably the "replacement assignment" referenced above) mirrored the Resolution's direction by "absolutely assign[ing] to Daniel W. Crandall . . . any and all claims, including demands, and causes of action of any kind whatsoever which the undersigned has or may have . . . against Hartford Casualty Insurance Company and Hartford Steam Boiler Inspection & Insurance Company . . . ." See id. at Ex. 2.

Notwithstanding Defendants' argument that CatRisk's most recent (re)assignment of claims to Plaintiff lacked corporate formalities and took place after Defendants' Motion for Summary Judgment on the issue (see Defs.' Reply in Supp. of Mot. for Summ. J., p. 2, n.1 (Docket No. 47)), the Court cannot conclude as a matter of law that CatRisk has not assigned its claims to Plaintiff. To be sure, the record reflects the possibility of either (1) a proper, original assignment of claims from CatRisk to Plaintiff, or (2) a subsequent (re)assignment of claims from CatRisk to Plaintiff. Construing the facts supporting these possibilities in Plaintiff's favor, the Court cannot find here that either no assignment between CatRisk and Plaintiff ever ...

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