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Farmers Alliance Mutual Insurance Co. v. Jesus Hurtado Dairy, LLC

United States District Court, Ninth Circuit

November 27, 2013

JESUS HURTADO DAIRY, LLC, et al, Defendants.


MIKEL H. WILLIAMS, Magistrate Judge.

Pending before the Court are cross-motions for summary judgment filed by Plaintiff Farmers Alliance Mutual Insurance Company and Defendants John and Susan Reitsma. (Dkts. 22 & 26).[1] All parties have consented to the jurisdiction of the undersigned United States Magistrate Judge (Dkt. 36). Having reviewed the pleadings, memoranda, and affidavits pertinent to these motions (Dkts. 22, 25, 26 & 29-33) and entertained oral argument on November 5, 2013, the Court has concluded that the Plaintiff's motion should be granted and summary judgment entered in its favor.


This is an insurance coverage dispute that has resulted in three separate lawsuits. The Plaintiff is Farmers Mutual Alliance Insurance Company ("Farmers"), an insurance company that provided certain property and liability insurance coverage to Defendants Jesus Hurtado and Hurtado Dairy, LLC for Jesus Hurtado's dairy operations in the vicinity of Twin Falls, Idaho. Also named as Defendants are John and Susan Reitsma, residents of Twin Falls County, Idaho who leased to Hurtado the particular dairy farm where the loss resulted.[2]

The primary issues in this case relate to interpretation of the Farmers insurance policy so the relevant facts can be briefly stated. Jesus Hurtado is a dairyman who owns or operates a number of farms in the vicinity of Twin Falls Idaho. (Policy, p. 4).[3] One of these was a dairy farm in Hollister, Idaho that he leased from the Reitsmas. Hurtado and Reitsma entered into the lease agreement on December 17, 2007. (Reitsmas' Statement of Material Facts, ¶ 2, Dkt. 26-2, and Lease Agreement, Dkt. 26-8). Under the terms of the Lease Agreement, Hurtado was to procure and maintain in force the following types of insurance: public liability insurance in the minimum single limit coverage of $2, 000, 000, fire and casualty insurance on his personal property brought to the leased premises, and Workers Compensation insurance for Hurtado's employees as required by law. (Lease Agreement, p. 4, Exhibit "D" to McFeeley Aff., Dkt. 26-8). Reitsma was to insure the property "against fire, wind, theft and other casualty in the amount of its replacement" during the term of the lease. ( Id. ).

After the lease went into effect, Reitsma purchased an insurance policy with Travelers Indemnity Company insuring the Reitsmas' interest in the property. (Reitsma Aff. ¶ 8, Dkt. 25-2). Hurtado purchased a Farmowners' Insurance Policy from Farmers which included Hurtado Dairy LLC and John Reitsma as "additional insureds." (Policy, p. 25-26). The policy included both liability and property coverages; however, it also covered a variety of locations besides the premises leased from the Reitsmas. (Policy p. 4). The leased premises where the accident occurred is referred to as "Location 4" in the policy. ( Id. ). Location 4 included a milking parlor, upon which was located the milking carousel that was damaged on the day of the loss. (Reitsma Aff. ¶ 8.).

At the time of the loss, two employees of Hurtado Dairy were attempting to "bump start" the milking carousel with a front end loader or backhoe, which they had attached to the carousel by means of a chain. ( Id., ¶ 9). According to John Reitsma's affidavit, the employees had gotten the carousel rotating when one of the employees attempted to back up the front end loader. The other employee was unable to unhook the chain from the carousel in time and so the backhoe pulled the carousel off its track. ( Id. ¶¶ 9-10). The carousel had to be totally replaced.

After the incident, the Reitsmas and Hurtado made claims under their respective policies. Farmers denied coverage on the policy issued to Hurtado. (Reitsma Aff. ¶ 12, Dkt. 25-2). Travelers accepted the claim and paid the Reitsmas $977, 354.77 to replace the carousel. ( Id. ¶ 12). It also filed a separate subrogation lawsuit against Hurtado Dairy in state court in Twin Falls County, Idaho. (McFeeley Aff. Exhibit D, Dkt. 25-4). Hurtado also filed an action in state court against Farmers and his insurance agent, Brian Petersen alleging negligence, breach of contract, and bad faith. ( Id. at Exh. C, Dkt. 25-3). However, the only issues before the Court in this lawsuit relate to coverage under the Farmers policy issued to Hurtado.


Motions for summary judgment are governed by Rule 56 of the Federal Rules of Civil Procedure. Rule 56 provides, in pertinent part, that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion." Fed.R.Civ.P. 56(a). See also, Anderson v. Liberty Lobby, 477 U.S. 242, 247-48, 106 S.Ct. 2505 (1986). Once the moving party has met this initial burden, the nonmoving party has the subsequent burden of presenting evidence to show that a genuine issue of fact remains. The party opposing the motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial. Id. at 248. If the non-moving party "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" then summary judgment is proper as "there can be no genuine issue of material fact, ' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When applying the above standard, the court must view all of the evidence in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255; Hughes v. United States, 953 F.2d 531, 541 (9th Cir.1992). The standards generally applicable to motions for summary judgment do not change where the parties file cross motions. See, e.g. Cady v. Hartford Life & Accidental Ins. Co., ___ F.Supp.2d ____, 2013 WL 1001073 (D. Idaho 2013); Western Watersheds Project v. Bureau of Land Management, 2010 WL 3735710 at * 3, n. 5 (D. Idaho 2010).

Finally, the Court is guided by principles of insurance policy interpretation as set forth by the Idaho Supreme Court, as federal courts sitting in diversity apply state law to all substantive issues in the case. See, e.g., Now Disc., Inc. v. Munn, 2010 WL 4853380 at *2 (D. Idaho 2010).


The Farmers policy at issue in this lawsuit is over a hundred pages long, and the parties have raised numerous issues and sub-issues in their efforts to prevail on their arguments regarding coverage. Thankfully, only certain portions of the policy are relevant. Those portions are: 1) the declarations pages and schedules that describe what property is insured, 2) Coverages E, F, and G (which apply to property damage), 3) Coverage L (which applies to liability), 4) the "Additional Insured" endorsements that added Hurtado Dairy and John Reitsma as insureds to the liability portion of the policy, and 5) the "Equipment Breakdown Coverage" endorsement.

The Court concludes that there is no coverage for this loss. First, Farmers is correct that Jesus Hurtado never purchased property coverage for "Location 4" where the milking barn and carousel were located. The only coverage that applies to "Location 4" is liability coverage, not property coverage. Nor does coverage exist under the "Equipment Breakdown Coverage" endorsement, since this coverage, like property coverages E, F, and G, is meant to apply only to property which is specifically identified in the schedules and for which the insured has paid a premium. The liability portion of the policy does not cover the loss because among other reasons, it contains exclusions for damage to property that is rented, occupied, or used by the insured. Nor do the "additional insured" endorsements for Reitsma and Hurtado Dairy provide coverage, because these endorsements are designed to cover only liability that the "additional insureds" incur by reason of their relationship to the named insured, Jesus Hurtado. Each of these issues, as well as applicable sub-issues, will be addressed in more detail below.

A. Property Coverage (Coverages E, F, and G).

The first issue is whether the policy provides property loss coverage for the milking barn where the carousel was located. The Court agrees with Farmers that Hurtado never purchased this type of coverage for this location.

In analyzing this issue, it is important to keep in mind that the policy as a whole covers several different farm locations. (Policy p. 4). "Location 4, " which is the premises rented from the Reitsmas where the milking parlor and damaged carousel were located, was only one of these locations. In addition to Location 4, Hurtado also owned and operated other farms in the vicinity, and the policy doesn't necessarily have to provide the same types of coverage for all locations. ( Id.). This makes even more sense when one remembers that Jesus Hurtado rented some farm locations, and owned others.

The primary insuring clauses under Coverages E, F, and G, are set out at the beginning of subsections entitled "Principal Property Coverages." For Coverage E the insuring clause states:

Coverage E-Farm Barns, Buildings, and Structures
"We" cover additional farm dwellings, farm barns, farm buildings, portable buildings and structures, tenant's improvements and betterments, and other structures located on the "insured premises" for which a "limit" is shown in the "declarations."

(Policy at p. 56). "Insured premises" is defined as either: a) "the location shown on the declarations, or b) "other land you' use for farming." ( Id.). However, that does not mean that coverage automatically exists for any location at which the insured farms, because the insuring clause only covers "insured premises" "for which a limit is shown in the declarations." (emphasis added). According to the definitions, "declarations" includes "schedules." (Policy, p. 56, definition 3). The schedules are an extensive list of covered real and personal property, along with a dollar amount showing the limit of coverage for each item. (Policy, p. 5-10). Turning to the schedules for Coverage E, it is apparent that no property connected with "Location 4" is listed. ( Id. ). All the listed property relates to an entirely different farm, described here as "Location 1." The insuring ...

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