Cravens v. Montano

• Docket Number: CV-24-0143-PR
• Decision Date: 29 April 2025
• Citation: Cravens v. Montano, CV-24-0143-PR (Ariz. Apr 29, 2025)
• Parties: MICHAEL COREY CRAVENS, SURVIVING SPOUSE OF SAMANTHA J. CRAVENS, DECEASED, Plaintiff/Appellee, v. MARTIN A. MONTANO JR., A SINGLE MAN; AND CASAS CUSTOM FLOOR CARE, LLC, AN ARIZONA LIMITED LIABILITY COMPANY, Defendants. CINCINNATI INDEMNITY COMPANY, Plaintiff in Intervention/Appellant, v. MARTIN A. MONTANO JR., Defendant in Intervention.
• Court: Arizona Supreme Court

1

MICHAEL COREY CRAVENS, SURVIVING SPOUSE OF SAMANTHA J. CRAVENS, DECEASED, Plaintiff/Appellee, v. MARTIN A. MONTANO JR., A SINGLE MAN; AND CASAS CUSTOM FLOOR CARE, LLC, AN ARIZONA LIMITED LIABILITY COMPANY, Defendants.

CINCINNATI INDEMNITY COMPANY, Plaintiff in Intervention/Appellant, v. MARTIN A. MONTANO JR., Defendant in Intervention.

No. CV-24-0143-PR

Supreme Court of Arizona

April 29, 2025

Appeal from the Superior Court in Pima CountyNo. C20192093 The Honorable Kellie Johnson, Judge The Honorable D. Douglas Metcalf, Judge The Honorable Brenden J. Griffin, Judge

Memorandum Decision of the Court of Appeals, Division Two No. 2 CA-CV-2023-0108 Filed June 3, 2024

Patrick J. Lopez, Nathan S. Rothschild, Alexander Winkelman(argued), Mesch Clark Rothschild, Tucson, Attorneys for Michael Corey Cravens

Michael J. Raymond(argued), Raymond Greer, P.C., Scottsdale Attorneys for Cincinnati Indemnity Company

VICE CHIEF JUSTICE LOPEZauthored the Opinion of the Court, in which CHIEF JUSTICE TIMMER, JUSTICES BOLICK, BEENEMONTGOMERY, KING, and JUDGE MORSE joined.^[*]

OPINION

LOPEZ, VICE CHIEF JUSTICE

¶1We consider the meaning of the phrase "in connection with your business" as it relates to an employee's use of a "nonowned""covered auto" as defined in Cincinnati Indemnity Company's ("Cincinnati") automobile insurance policy.We hold that an employee operates a non-owned auto "in connection with your business" when using the vehicle while engaged in the employer's business.To qualify, an employee's use of a vehicle must be directly involved with, or in furtherance of, an employer's business purpose but does not include a routine commute to or from an employer's office.

¶2We also consider the enforceability of a contingent agreement under United Services Automobile Ass'n v. Morris, 154 Ariz. 113(1987).We hold that a contingent Morris agreement is enforceable if it otherwise meets the substantive requirements of such agreements to ensure against fraud, collusion, unfairness, or unreasonableness.

BACKGROUND

¶3 On April 26, 2018, Martin Montano Jr., an employee of Casas Custom Floor Care, LLC("Casas"), was scheduled to arrive at the company's main yard at six in the morning, receive the day's assignment, and travel in a work vehicle to the assigned jobsite.That morning, Montano woke up feeling ill and informed his supervisor he would be late and would meet the team at the site.On his way to the site, Montano discovered a nail in his tire and drove to his mother's house to borrow her truck.Montano finally arrived at the jobsite, at around 11 a.m., in his mother's truck.

¶4 After completing the day's remaining work, Montano drove to Casas's main yard to correct his timesheet because, earlier that week, he had preemptively filled out the timesheet to reflect a full day's work.On his way to the yard, Montano ran a red light and collided with Samantha Cravens's vehicle, killing her.

¶5Michael Cravens("Cravens"), the surviving spouse, sued Montano and Casas.Cravens alleged that Montano negligently caused the wrongful death of his wife, and that Casas was vicariously liable for Montano's actions.At the time of the accident, Cincinnati insured Casas under an automobile insurance policy (the "Policy").The Policy extended insurance coverage to Montano if he, in part, was using a "covered auto""in connection with" Casas's business.

¶6 Cincinnati defended Casas in the lawsuit but issued Montano a reservation of rights letter disputing its obligation to defend or insure him.Cincinnati argued that, under the Policy, it was not required to provide coverage for Montano unless at the time of the accident he was driving "in connection with [Casas's] business," meaning that he was acting in the course and scope of his employment.Cincinnati refused coverage absent a court finding that Montano satisfied this condition.

¶7 After Cincinnati reserved its rights, Montano and Cravens entered into a Morris Agreement (the "Agreement").In the Agreement, the parties stipulated to Montano's liability in the accident, agreed to enter a $3.85 million judgment against Montano in favor of Cravens-only to be collected against the insurance policy proceeds-and assigned Montano's rights under the Policy to Cravens.Before Montano and Cravens filed this stipulated judgment with the court, Cincinnati intervened in the case to file a complaint against both Montano and Cravens contesting the Agreement.Cravens counterclaimed, pursuant to his assigned rights, arguing that Cincinnati breached its contractual obligation to indemnify Montano by denying coverage.

¶8 Cravens moved for summary judgment on the coverage issue.The superior court granted the motion, ruling that Montano was using his mother's truck "in connection with" Casas's business at the time of the accident.Consequently, Cincinnati was obligated to indemnify Montano under the Policy.

¶9 Cincinnati moved for summary judgment on the enforceability of the Agreement.The court denied the motion.The court held a two-day reasonableness hearing and determined that the Agreement was enforceable against Cincinnati.The court entered the $3.85 million stipulated judgment in favor of Cravens against Montano and ordered Cincinnati to pay Cravens.The court also awarded Cravens his reasonable attorney fees.Cincinnati appealed the court's rulings concerning coverage and the Agreement.

¶10The court of appeals affirmed the superior court's rulings on coverage and the Agreement.Cravens v. Montano, No. 2 CA-CV 2023-0108, 2024 WL 2823307, at *12 ¶ 58 (Ariz. App. June 3, 2024)(mem. decision).We granted review because the meaning of a material term in an auto insurance policy concerning the scope of coverage for an employee's use of a vehicle "in connection with [an employer's] business" is an issue of statewide concern that is likely to recur.We have jurisdiction pursuant to article 6, section 5(3) of the Arizona ConstitutionandA.R.S. § 12-120.24.

DISCUSSION

¶11We review de novo a grant of summary judgment.Rosenberg v. Sanders, 256 Ariz. 359, 364 ¶ 24 (2023).Summary judgment is appropriate if the material facts are not genuinely disputed, and the moving party is entitled to judgment as a matter of law.Ariz. R. Civ. P. 56(a);Neptune Swimming Found. v. City of Scottsdale, 256 Ariz. 551, 559 ¶ 23 (2024).We uphold the superior court's factual findings as to the Morris Agreement unless they are "clearly erroneous, but we review any legal conclusions de novo."Associated Aviation Underwriters v. Wood, 209 Ariz. 137, 171 ¶ 107 (App. 2004).

I.

¶12We begin with the coverage issue under the Policy.We interpret insurance policies de novo.Fid. Nat'l Title Ins. Co. v. Osborn III Partners LLC, 254 Ariz 440, 443 ¶ 14 (2023).Because an insurance policy is a contract, "the terms of the policy must govern."Apollo Educ. Grp., Inc. v. Nat'l Union Fire Ins. Co., 250 Ariz. 408, 411 ¶ 11 (2021)(quotingDairyland Mut. Ins. Co. v. Andersen, 102 Ariz. 515, 517(1967)).We interpret the terms "in the broader context of the overall contract,"id., and accord undefined terms "their plain and ordinary meaning, examining the policy 'from the viewpoint of an individual untrained in law or business,'"Fid. Nat'l Title Ins. Co., 254 Ariz. at 443 ¶ 14(quotingWalker v. Auto-Owners Ins. Co., 254 Ariz. 17, 20 ¶ 10 (2022))."If a policy is subject to 'conflicting reasonable interpretations,' it is ambiguous, and we interpret it by examining, as pertinent here, the 'transaction as a whole.'"Walker, 254 Ariz. at 20 ¶ 10(quotingTeufel v. Am. Fam. Mut. Ins. Co., 244 Ariz. 383, 385 ¶ 10 (2018)).

¶13 Cravens and Cincinnati each argue that the scope of the Policy's coverage centers on the phrase "in connection with your business."The superior court and court of appeals' rulings also turned on this phrase.Cravens,2024 WL 2823307, at *2-3 ¶¶ 12-14, *6 ¶¶ 28-29.This analysis, however, is too narrow to determine coverage under the Policy.To determine the scope of coverage under the Policy, we must reconcile two related and seemingly competing phrases: (1)"in your business," and (2)"in connection with your business."An accurate interpretation of the Policy requires a reading that harmonizes both phrases.SeeAztar Corp. v. U.S. Fire Ins. Co., 223 Ariz. 463, 475 ¶ 41 (App. 2010)("When interpreting an insurance contract, we have a duty to 'harmonize all parts of the contract . . . by a reasonable interpretation in view of the entire instrument.'"(alteration in original)(quotingBrisco v. Meritplan Ins. Co., 132 Ariz. 72, 75(App.1982))).

A.

¶14 Cincinnati contracted with Casas to provide automobile liability insurance for injuries and damages resulting from the use of a covered auto.The Policy provided that Cincinnati "will pay all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'"

(Emphasis added.)Casas purchased an expanded coverage policy that amended this coverage to include its employees as insureds.The first relevant phrase-"in your business"-arises from the Expanded Coverage Plus Endorsement:

Who is an insured is amended by adding the following: . . . Any of your "employees" while using a covered"auto"in your business or your personal affairs, provided you do not own, hire or borrow that "auto."

(Emphasis added.)Notably, this coverage expansion is conditional.To trigger coverage, the Policy must cover the vehicle, and it must be used in Casas's business.In other words, an employee is an insured only while using a covered auto and such use is "in your business."

¶15 The second relevant phrase-...