United States District Court, D. Idaho
MEMORANDUM DECISION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
RONALD E. BUSH, Magistrate Judge.
Currently pending before the Court are Cross-Motions for Summary Judgment (Dkts. 95, 98) filed by Plaintiff Idaho Trust Bank and Defendant BancInsure, Inc. on August 19, 2013.
Plaintiff Idaho Trust Bank ("Idaho Trust") alleges that Defendants Continental Casualty Company ("CNA") and BancInsure, Inc. ("BancInsure") were required, but failed, to fully indemnify and defend Idaho Trust from claims made against Idaho Trust by Inland Storage, Inc. ("Inland Storage") and James Hutchens ("Hutchens"). The case began in the Fourth Judicial District of the State of Idaho, in and for the County of Ada, on December 23, 2011 (Dkt 1-1). BancInsure removed the case to this federal court on January 24, 2012 (Dkt. 1).
1. The Underlying Inland Storage Litigation
On August 3, 2009, Inland Storage filed a third-party complaint against Idaho Trust over its refusal to extend financing that it had allegedly promised for Inland Storage's planned 2008 construction of an RV and boat storage facility in San Antonio, Texas (the "RV Facility"). Compl., Dkt. 1-1, ¶¶ 13-14. The claims (Counts 1-4) included: (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing; (3) estoppel; and (4) detrimental reliance. Declaration of Ammon Hansen, Ex. J (Dkt. 101-9), ¶¶ 42-67. On or about February 25, 2010, Inland Storage and Idaho Trust settled their dispute (the "Settlement"). Included in the Settlement were terms for future loans from Idaho Trust to Hutchens and Inland Storage that, if completed, would result in the mutual release of claims between Idaho Trust and Inland Storage. Compl., ¶ 19.
A disagreement arose regarding the funding of a loan for Inland Storage to purchase the steel for the proposed RV Facility. Id. As a result, Inland Storage filed a second amended third-party complaint on July 27, 2010 to add claims, alleging a breach of the Settlement by failing to extend the 2010 steel loan. Id. Specifically, two claims (Counts 5-6) were added, which were breach of contract and breach of the implied covenant of good faith and fair dealing. Hansen Decl., Ex. J, ¶¶ 68-78.
On November 2, 2010, the state court granted Idaho Trust summary judgment on Counts 1-4 of the second amended third-party complaint. Each dismissed claim related to Idaho Trust's alleged breach of its commitment to finance the RV Facility in 2008. The court did not grant summary judgment on Inland Storage's claims that Idaho Trust breached the 2010 Settlement by failing to make the steel loan, finding there were genuine issues of material fact. Id . ¶ 20; Declaration of Carlton R. Burch, Ex. 7 (Dkt. 95-2), p. 8.
The case proceeded to a jury trial on Counts 5 and 6, from October 22, 2012 through November 1, 2012. Hansen Decl., Ex. U (Dkt. 101-19). The jury returned a verdict in favor of Idaho Trust, and the claims in Counts 5 and 6 were dismissed with prejudice. Id., Exs. U, V (Dkts. 101-19, -20).
2. BancInsure's Policy
Idaho Trust had purchased an Extended Professional Liability Insurance Policy from BancInsure, with a policy period from August 30, 2008 through August 30, 2010 ("the BancInsure Policy" or "the Policy"). Hansen Decl., Exs. A, P (Dkts. 101-1, 103). The Policy was not renewed for the second year, and expired on August 30, 2009. Among other coverages, the Policy provided coverage for "Company Lender Liability[, ]" specifically:
The Insurer will pay on behalf of the company, loss that is the result of a claim for a professional services wrongful act first made during the policy period or during the extended reporting period if exercised.
Ex. A, Sec. I.D. The Policy provides coverage for "lending wrongful acts." Ex. A, Sec. III.T. A "lending wrongful act" is defined as:
any actual or alleged error, misstatement, misleading statement, act or omission, or negligent or breach of duty by the company concerning an extension of credit, an actual or alleged failure or refusal by the company to extend credit; or an actual or alleged agreement by the company to extend credit. Lending wrongful act includes the servicing of loans for others under a contract or agreement.
Id. Interrelated wrongful acts are covered as they are deemed to be have been made when the earliest claim was first made. Id., Sec. III.B. "Interrelated wrongful acts" means "wrongful acts that have as a common nexus any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events or transactions." Id., Sec. III.Q.
The Policy also contains a significant exclusion, important to resolution of the issues before the Court, which states that the insurer is not liable to make any payment for loss in connection with any claim "based upon, arising out of, relating to, in consequence of, or in any way involving:"
any assumption by the company or an insured person of any liability or obligation under any contract or agreement, or the failure to perform any contract or agreement, unless such company or insured person would have been liable even in the absence of such contract or agreement[.]
Id., Sec. IV.A.13.
3. Tender of Defense to BancInsure
On October 2, 2009, counsel for Idaho Trust sent a letter providing notice of the August 24, 2009 claim and tendered the claim to BancInsure pursuant to the Policy. A copy of the Inland Storage complaint was attached to the letter. Hansen Decl., Exs. B & C (Dkts. 101-2, -3).
Demcy Wilson, a claim adjustor for BancInsure, responded to Idaho Trust, acknowledging receipt of the notice of the claim and making a general reservation of rights and defenses in the matter. Id., Ex. D (Dkt. 101-4). Wilson also informed Idaho Trust that Kalchik, Pratt & Associates ("KPA") would investigate the claim. Id.
Ted Equals, Western Regional Manager for KPA, sent a letter to Idaho Trust's counsel on October 6, 2009, confirming that his firm had been engaged by BancInsure to investigate the facts surrounding the Inland Storage litigation. Id., Ex. E (Dkt. 101-5).
On December 28, 2009, Wilson, on behalf of BancInsure, sent counsel for Idaho Trust a letter, stating the following:
BancInsure, Inc. has previously approved and hereby confirms the approval of legal representation and the provision of the lawsuit defense on behalf of the Bank by Erik Stidman [sic] of Holland and Hart, subject to the Bank absorbing the initial $50, 000 of defense expenses in light of the self-insured retention of $50, 000. BancInsure will advance and make payment of indemnification of any and all reasonable defense expenses, which exceed $50, 000, subject to the applicable limits of liability and other terms and provisions under the Extended Professional Liability Insurance Policy No. PLI0010678.
Id., Ex. F (Dkt. 101-6). In the letter, Wilson discussed the Policy's "Company Lender Liability" insuring agreement and explained: "All claims involving interrelated wrongful acts shall be considered a single claim and shall be deemed to have been first made when the earliest claim was first made." Id., Ex. F at 4. See id., Ex. A., Sec. III.B. The letter went on to discuss several provisions and definitions from the Policy, and in the letter BancInsure agreed to make payment of indemnification and "any and all reasonable defense expenses" to Idaho Trust for the Inland Storage litigation. Id., Ex. F at 1 and 3-7.
4. BancInsure Terminates its Defense of Idaho Trust
On November 11, 2010, following the state district court's order dismissing Counts 1-4 in the Inland Storage litigation, Mr. Equals wrote counsel for Idaho Trust to say that the Policy did not cover damages related to Counts 5 and 6. According to the letter, BancInsure's position was that the Policy's contract exclusion at Section IV.A.13 applied to Counts 5 and 6. Hansen Decl., Ex. M (Dkt. 101-12). BancInsure also reserved "any and all defenses" but did not specifically name other exclusions. Id.
On December 10, 2010, Idaho Trust requested reconsideration of the decision. Id., Ex. N (Dkt. 101-13). BancInsure said no, through a reply letter from Equals on December 17, 2010, stating: "[t]he remaining causes of action are related solely to the 2010 Settlement Agreement and are breach of contract claims, as there was nothing pled in the nature of tort allegations to implicate liability coverage." Id., Ex. O (Dkt. 101-14). BancInsure refused to continue its defense of Idaho Trust in the Inland Storage litigation.
5. Idaho Trust Tenders Claim to CNA
On October 21, 2010, Idaho Trust provided notice and tendered a claim to CNA related to the Inland Storage second amended third-party complaint. Id., Ex. Q (Dkt. 101-15). CNA first denied coverage on February 9, 2011 and later confirmed its denial on April 27, 2011. Id., Exs. R, S, T (Dkts. 101-16, -17, -18).
SUMMARY JUDGMENT STANDARD
One principal purpose of summary judgment "is 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 is instead 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).
The evidence, including all reasonable inferences which may be drawn therefrom, must be viewed in a light most favorable to the non-moving party and the Court must not make credibility findings. See id. at 255. 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 ...