Schalk v. Infinity Ins. Co., Case No. 3:20-cv-00615-YY
| Decision Date | 16 April 2021 |
| Docket Number | Case No. 3:20-cv-00615-YY |
| Parties | STEVEN SCHALK, Plaintiff, v. INFINITY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Oregon |
FINDINGS AND RECOMMENDATIONS
Plaintiff Steven Schalk has brought suit against defendant Infinity Insurance Company ("Infinity"), alleging claims for (1) declaratory relief, (2) breach of contract, and (3) breach of the implied covenant of good faith and fair dealing. Compl. ¶¶ 42-70, ECF 1-1. The dispute arises out of an insurance policy that plaintiff purchased from defendant for coverage of plaintiff's vintage 1966 Chevy Nova ("Nova"). Defendant removed the case from Clackamas County Circuit Court. This court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1).
Defendant has filed a Motion for Summary Judgment (ECF 8) and plaintiff has filed a Motion for Partial Summary Judgment (ECF 11). For the reasons set forth below, defendant's motion for summary judgment should be GRANTED, plaintiff's motion should be DENIED, and judgment should be entered in defendant's favor.
Under Federal Rule of Civil Procedure 56(a), "[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 substantive law governing a claim or defense determines whether a fact is material. Moreland v. Las Vegas Metro. Police Dep't, 159 F.3d 365, 369 (9th Cir. 1998).
The party moving for summary judgment bears the initial responsibility of informing the court of the basis for the motion and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party does so, the nonmoving party must "go beyond the pleadings" and "designate 'specific facts showing that there is a genuine issue for trial.'" Id. at 324 (citing FED. R. CIV. P. 56(e)).
The court "does not weigh the evidence or determine the truth of the matter, but only determines whether there is a genuine issue for trial." Balint v. Carson City, Nev., 180 F.3d 1047, 1054 (9th Cir. 1999). "Reasonable doubts as to the existence of material factual issue are resolved against the moving parties and inferences are drawn in the light most favorable to the non-moving party." Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000).
On August 6, 2016, plaintiff purchased Infinity's "Classic Collectors" insurance policy for the Nova. Maloney Decl., Ex. A, ECF 9-1. The policy states that the agreed value of the Nova was $357,750. Id.
On June 23, 2017, plaintiff was transporting the Nova in a trailer from his home in Milwaukee to a car show at the Portland International Raceway Center ("PIR"). Pl.'s Examination Under Oath ("EUO") 52, ECF 10-7.1 Plaintiff did not strap the Nova into the trailer, and the car was damaged during the drive to the car show. Id.
Plaintiff submitted an insurance claim to Infinity, and the parties engaged in various actions that are described in more detail below. At one point, Infinity asked plaintiff to provide his bank statements. Plaintiff refused and filed this suit.
The parties' motions for summary judgment center around whether, in failing to provide his bank statements, plaintiff breached the "duties" clause of the policy, which provides:
Maloney Decl., Ex. A, at 13, ECF 9-1. Relevant here too is the policy's provision against fraud, which states:
"Cooperation is essential to the insurance relationship because that relationship involves a continuous exchange of information between the insurer and the insured interspersed with activities that affect the rights of both, and the relationship can function only if both sides cooperate." 14 Couch on Insurance § 199:1 n.2 (3d ed. 2009) (citing Staples v. Allstate Ins. Co., 176 Wash. 2d 404 (2013)).
Some degree of cooperation between the insurer and insured is . . . necessary in the first-party insurance context. . . . [T]he insurer needs information pertaining to the circumstances and amount of loss, and the insured needs information as to the status of its claim. . . . [W]hat each of the direct parties to the insurance contract needs is in the hands of the other[.]
Id. "Cooperation clauses also guard against collusion and fraud." Staples, 176 Wash. 2d at 411 (2013) (citing Eakle v. Hayes, 185 Wash. 520, 524-25 (1936)).
A cooperation clause "is a material condition of the policy, and a breach of the provision by the insured, constitutes a defense to liability on the policy and relieves the insurer of its obligations under the contract in the absence of a waiver by, or estoppel of, the insurer or statutory enactments to the contrary." 14 Couch on Insurance § 199:6 (3d ed. 2009).
A federal court, sitting in diversity, applies state law in interpreting an insurance policy. Travelers Prop. Cas. Co. of Am. v. ConocoPhillips Co., 546 F.3d 1142, 1145 (9th Cir. 2008). Under Oregon law, if the duty to cooperate "is breached, the insurer may have a complete defense to coverage." Mosley v. Allstate Insurance Co., 165 Or. App. 304, 312 (2000), abrogated on other grounds, Scott v. State Farm Mut. Auto. Ins. Co., 345 Or. 146, 154-56 (2008); see also Stumpf v. Cont'l Cas. Co., 102 Or. App. 302, 309 (1990) ().
The court will enforce the cooperation clause if:
(1) the insurer diligently sought the insured's cooperation;
(2) the insured willfully failed to cooperate; and
(3) the insured's failure to cooperate prejudiced the insurer.
Assurance Co. of Am. v. MDF Framing, Inc., No. CV 06-169-MO, 2008 WL 361289, at *3 (D. Or. Feb. 7, 2008), aff'd, 338 F. App'x 625 (9th Cir. 2009) (). "The defense of noncooperation is one that must be proven by the insurer." Johnson v. Doughty, 236 Or. 78, 83 (1963).
The three factors are addressed in turn below.
Plaintiff does not appear to dispute that defendant diligently sought his cooperation. At oral argument, Infinity's counsel observed that, with respect to diligence, "there's no dispute there," and plaintiff did not disagree. Nevertheless, a review of the evidence shows no factual dispute that defendant acted diligently.
"An insurer must act with 'reasonable diligence and good faith' to secure an insured's cooperation." Assurance, 2008 WL 361289, at *3 (quoting Bailey, 258 Or. at 221). "[A]n insurer cannot be relieved of liability because of an alleged breach of cooperation clause by the insured in a situation where it has not itself exercised diligence and good faith." Bailey, 258 Or. at 221 (quoting Imperiali v. Pica, 338 Mass. 494, 498 (1959)). Id. (quoting Imperali, 338 Mass. at 498).
"To prove reasonable diligence and good faith, an insurer must establish the company used the same degree of diligence to secure the insured's cooperation that would have been exercised by a reasonable and prudent person where the cooperation of the insured would be to its advantage in protecting it against liability, rather than to relieve it therefrom." Assurance, 2008 WL 361289, at *3 (quoting Bailey, 258 Or. at 224) (quotation marks omitted). "Whether or not an insurer exercised reasonable diligence and good faith should be determined 'in light of the particular facts and circumstances of each case.'" Id. (quoting Bailey, 258 Or. at 225).
In Assurance the court found the insurer acted with diligence when it sent a certified letter to the insured, and when that letter was never claimed, personally served the insured with the letter. 2008 WL 361289, at *4. The insurer also retained counsel who sent letters to the insured and attempted to contact the insured by telephone. Id. The court held that these efforts did not fall below the "reasonable diligence and good faith requirement." Id.
Here, too, Infinity made reasonably diligent and good faith attempts to secure plaintiff's cooperation. On June 20, 2019, Infinity's counsel sent plaintiff's counsel a letter by United States mail and email requesting an examination under oath ("EUO"), inspection of the vehicle, and "[a]ll bank statements for one year prior to loss and six months after loss," as well as other documentation. Pearce Decl., Ex. 6, ECF 10-6. This request was "confirmed in later correspondence on July 26, 2019 and September 2019." Id., Ex. 9, at 2, ECF 10-9. On October 15, 2019, Infinity explained in detail why its request for financial documentation was reasonable, and even included case law in support. Id., Ex. 8, ECF 10-8.
On December 6, 2019, Infinity sent plaintiff's counsel a letter by United States mail and an email, advising that it was denying the claim because "investigation into this claim could not be completed due to your lack of communication." Id., Ex. 9, at 1, ECF 10-9. The letter citedthe cooperation clause of the policy and the fact that Infinity "had...
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