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United States v. TK Construction, US, LLC

United States District Court, D. Idaho

June 28, 2017

UNITED STATES OF AMERICA, for the use and benefit of CONTRACTOR'S EQUIPMENT SUPPLY CO., an Idaho corporation, doing business as CESCO, Use-Plaintiff,
v.
TK CONSTRUCTION, US, LLC, a Colorado limited liability company; AMY FISCHER, an individual; NORTH AMERICAN SPECIALTY INSURANCE COMPANY, a New Hampshire corporation; AMERICAN MINING INSURANCE COMPANY, an Iowa corporation; and ALTERRA AMERICA INSURANCE COMPANY, a Delaware corporation, Defendants.

          MEMORANDUM DECISION AND ORDER RE: ALTERRA'S MOTION FOR SUMMARY JUDGMENT (DKT. 75)

          Ronald E. Bush Chief U.S. Magistrate Judge

         Pending for decision is Defendant Alterra America Insurance Company's (“Alterra”) Motion for Summary Judgment (Dkt. 75). Having heard oral argument and being otherwise advised, the Court rules as follows.

         FACTUAL BACKGROUND[1]

         TK Construction US, LLC (“TK”) contracted with the United States of America for TK to furnish labor, materials and equipment, and perform certain work required to complete a highway improvement project in Boise County, Idaho. (Second Amend. Compl. (Dkt. 47) ¶ 10.) TK then made rental contracts with CESCO for a John Deere 300D Articulated Haul Truck (the “Truck”) and a John Deere 350G Excavator (the “Excavator”) to use on the highway project. Id. ¶ 13.

         Alterra issued an insurance policy to TK (“the Policy”). The Truck and the Excavator were listed on a schedule of insured property. The Policy excluded losses “caused by” mechanical breakdown, with language providing that “‘We' do not pay for loss caused by any mechanical, structural, or electrical breakdown or malfunction including a breakdown or malfunction resulting from a structural, mechanical, or reconditioning process.” (Dkt. 75-3 at p. 21.) Elsewhere the Policy described “what must be done in case of a loss, ” which included giving prompt notice of the loss with a description of the property; exhibiting the damaged and undamaged property as often as Alterra reasonably requests and allowing Alterra to inspect the property; and not making any voluntarily payments or incurring any other expenses except as respects protecting the property from further damage. (Dkt. 75-3 at pp. 35-37, 55.)

         Under the Policy, payments for “your losses” were to be made to “you” (defined as the “Insured, ” which was TK) “unless another loss payee is named in the policy.” (Dkt. 75-3, p. 25.) “Losses to property of others” were to be paid to “‘you' on behalf of the owner; or the owner.” (Id.) Policy Endorsement No. 4 added the Truck and the Excavator to the “Schedule of Coverages” and named CESCO as a Loss Payee. (Id. at p. 55.) In pertinent part, Endorsement 4 provided: “We will pay ‘loss' to you and: Cesco Rentals.” (Id.)

         On or about May 8, 2013, the Truck's transmission was damaged. CESCO and Pacific Torque removed, repaired, and replaced the transmission. The “Service Estimate” document created in that process states that CESCO's mechanic “went out on a no movement call, found truck loaded, transmission locked in forward gear, transmission oil looked and smelled burnt . . .” CESCO's shop foreman, Barry Smith, said TK called him to say that the Truck would not move. Smith called that a “transmission failure.” (Pl.'s Statement of Facts, Dkt. 75-2, ¶¶ 5-10.)

         On July 18, 2013, Alterra received its first notice of the loss related to the Truck (“the Truck claim”). Nearly a month later, on August 16, 2013, Alterra hired an independent investigator to perform an investigation on the truck and its transmission. Alterra made a decision to deny the Truck claim based upon that investigation. (Def.'s Statement of Facts, Dkt. 78-1, ¶ 2.) On September 18, 2013, the outside adjusting firm assigned by Alterra to adjust the claim sent a letter to TK denying the Truck claim because it fell within the mechanical breakdown exclusion in the Policy.[2] (Pl.'s Facts ¶ 11.)

         On or about October 15, 2013, the Excavator was damaged when it was struck by falling rock. Alterra received notice of the loss in December 2013 (“the Excavator claim”). On April 11, 2014, the Excavator claim was approved and Debra Thompson, an employee of Markel Service, Inc. (Alterra's parent company), submitted a Payment Request Form, requesting that a check be issued to CESCO and mailed to TK. On or about April 14, 2014, Alterra mailed a check for the Excavator claim to TK, made out to TK only. On April 20, 2015, subsequent to the filing of this lawsuit, a separate payment was made to CESCO, in the amount of the Excavator claim, minus the deductible, plus interest at the statutory rate. (Pl.'s Facts ¶¶ 12-16.)

         SUMMARY JUDGMENT STANDARD

         Summary judgment is appropriate where a party can show that, as to any claim or defense, “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). One principal purpose of summary judgment “is to isolate and dispose of factually unsupported claims . . . .” Celotex Corp. v. Catrett, 477 U.S. 317, 323-34 (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.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). There must be a genuine dispute as to any material fact - a fact “that may affect the outcome of the case.” Id. at 248.

         The evidence must be viewed in the light most favorable to the non-moving party, and the Court must not make credibility findings. 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. See 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 dispute as to a material fact. See Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001) (en banc). 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. See 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 his favor. See Devereaux, 263 F.3d at 1076. The non-moving party must go beyond the pleadings and show by “affidavits, or by the depositions, answers to interrogatories, or admissions on ...


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