State Farm Fire & Cas. Co. v. Aberdeen Enterprizes II, Inc.
| Decision Date | 06 August 2020 |
| Docket Number | Case No. 18-CV-654-TCK-FHM |
| Parties | STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Corporation, Plaintiff, v. ABERDEEN ENTERPRIZES II, INC., an Oklahoma Corporation, et al., Defendants. |
| Court | U.S. District Court — Northern District of Oklahoma |
Before the Court is the Motion for Summary Judgment filed by Plaintiff State Farm Fire and Casualty Company ("State Farm") pursuant to Fed.R.Civ.P. 56. (Doc. 49). This is a declaratory judgment action in which State Farm seeks a determination concerning the rights and liabilities of the parties under two Business Insurance Policies. Defendants have responded opposing the motion. (Docs. 52, 54).
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The movant bears the burden of showing that no genuine issue of material fact exists. See, Zamora v. Elite Logistics, Inc., 449 F.3d 1106, 1112 (10th Cir. 2006). The Court resolves all factual disputes and draws all reasonable inferences in favor of the non-moving party. Id. However, the party opposing a motion for summary judgment may not "rest on mere allegations" in its complaint but must "set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). The party opposing a motion for summary judgment must also make a showing sufficient to establish the existence of those elements essential to that party's case. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-33 (1986).
A movant that "will not bear the burden of persuasion at trial need not negate the nonmovant's claim, "but may "simply ... point[ ] out to the court a lack of evidence for the nonmovant on an essential element of the nonmovant's claim." Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998) (internal citations omitted). If the movant makes this prima facie showing, "the burden shifts to the nonmovant to go beyond the pleadings and 'set forth specific facts' that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant." Id. (citing Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir.), cert. denied, 506 U.S. 1013 (1992)). Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988) (internal citations omitted).
State Farm issued a Business Policy (Policy Number 96-73-6754-7) to Jim D. Shofner. At all relevant times, Mr. Shofner was an officer of Aberdeen Enterprizes II, Inc. ("Aberdeen"). Aberdeen is a debt collection company specializing in collection of court fines, penalties, and assessments. Aberdeen was added as a Named Insured to Policy Number 96-73-6754-7 on June 12, 2013. When Policy Number 96-73-6754-7 was cancelled effective January 14, 2016, State Farm issued another Business Policy (Policy Number 96-B1-W299-2) to Jim D. Shofner and his wife Renita Shofner. Aberdeen was an Additional Insured under Policy Number 96-B1-W299-2 pursuant to Endorsement CMP-4789. That Endorsement extended additional insured status to Aberdeen "but only with respect to [its] liability as co-owner of the premises." There are no claims against Aberdeen in the Underlying Action for "liability as co-owner of the premises."
On January 1, 2010, Aberdeen entered into an Agreement for Collection ("Agreement") with the Oklahoma Sheriffs' Association ("OSA"). The Agreement required Aberdeen to provide debt collection services to the OSA in its capacity as administrative agent for participating Oklahoma County Sheriffs. Pursuant to the Agreement, Aberdeen would collect "fines, penaltiesand assessments of certain 'Warrants ... issued by the County Sheriffs in the State of Oklahoma.'" (Doc. 5-1, p. 2).
On November 2, 2017, Ira Lee Wilkins, on behalf of a putative class, filed Case No. 17-CV-606-TCK-FHM ("Underlying Action") in the Northern District of Oklahoma. The Plaintiffs in the Underlying Action ("Underlying Plaintiffs") filed a Second Amended Complaint ("SAC") on September 21, 2018. The Defendants named in the SAC include Aberdeen, Mr. Shofner, fifty-three Oklahoma Sheriffs, the Court Clerks of Tulsa and Rogers counties, the Boards of County Commissioners of Tulsa and Rogers Counties, and Tulsa County Court Administrator Darlene Baily. ("Underlying Defendants"). The Underlying Plaintiffs seek to recover from the Underlying Defendants for alleged economic harm and detention resulting from a debt collection practice which they contend was based on extortion, conspiracy, coercion, threats, detention and the illegal issuance of arrest warrants.
As a result of the Underlying Action, certain Underlying Defendants made demand on State Farm for defense and immunity under the Policies. The Underlying Defendants who made demand on State Farm for defense and indemnity consist of those alleging that they are Named Insureds or Additional Insureds under the Policies. Certain other Underlying Defendants made demand on Aberdeen for defense and indemnity pursuant to the Agreement for Collection. Aberdeen, in turn, made a demand on State Farm to indemnify it under the Policies for its defense and indemnity of the Underlying Defendants.
State Farm has provided a defense for certain Underlying Defendants subject to a reservation of rights, including the right to bring this declaratory judgment action. State Farm contends the Policies do not provide coverage to the Underlying Defendants for the damages the Underlying Plaintiffs seek to recover. State Farm moves for summary judgment finding that the Policies do not provide coverage for the damages the Underlying Plaintiffs seek to recover from the Underlying Defendants in the Underlying Action and therefore: (1) State Farm has no duty to indemnify the Underlying Defendants for liability they may have to the Underlying Plaintiffs in the Underlying Action; (2) State Farm has no duty to satisfy any judgment entered against the Underlying Defendants in the Underlying Action; and (3) State Farm has no duty to continue the defense of the Underlying Defendants in the Underlying Action.
"Under Oklahoma law, the interpretation of insurance contracts is 'a matter of law for the Court to determine ....'" Yousuf v. Cohlmia, 741 F.3d 31 (10th Cir. 2014) (quoting Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla. 1991)). "Parties may contract for risk coverage at will and are bound by the policy terms to which they agree." Yousuf v. Cohmia, 718 F. Supp. 2d 1279, 1285 (N.D. Okla. 2010) (citing Dodson, 812 P.2d at 376). "The construction of an insurance policy should be a natural and reasonable one, fairly constructed to effectuate its purpose." Id. (quoting Wiley v. Travelers Ins. Co., 534 P.2d 1293, 1295 (Okla. 1974)). "[N]either forced nor strained construction will be indulged, nor will any provision be taken out of context...." Dodson, 812 P.2d at 376. "Coverage does not turn on the legal theory under which liability is asserted, but on the cause of the injury." Farmers Alliance Mut. Ins. Co. v. Willingham, 2009 WL 3429768, *4 (N.D. Okla. 2009); Zurich Am. Ins. Co. v. Good To Go, LLC, 2018 WL 8333413, *8 (W.D. Okla. 2018). Courts are not at liberty to rewrite the policy for the parties where it is otherwise unambiguous. Am. Econ. Ins. Co. v. Bogdahn, 89 P.3d 1051, 1054 (Okla. 2004).
The first step in coverage analysis is to determine if the insuring agreement in the policy extends coverage to the damages sought to be recovered from the insured. Dodson, 812 P.2d at 377. If coverage is extended, the next step is to determine if policy exclusions apply, thereby negating coverage. Id. "The insured has the burden of showing that its claim is covered under the policy." Boggs v. Great Nation Ins. Co, 659 F. Supp. 2d 1199, 1204 (N.D. Okla. 2009). "Once the insured establishes coverage, 'the insurer has the burden of showing that a loss falls within an exclusionary clause of the policy.'" Id. (quoting Pitman v. Blue Cross & Blue Shield of Okla., 217 F.3d 1291, 1298 (10th Cir. 2000)).
A. Extension of Coverage
Subject to their terms and conditions, the Policies extend coverage to "bodily injury" and "property damage" caused by an "occurrence." The Policies define the term "bodily injury" in relevant part as "bodily injury, sickness or disease ... including death." The Policies define the term "property damage" in relevant part as "physical injury to or destruction of tangible property."
The Underlying Plaintiffs do not seek to recover for "bodily injury." The Underlying Plaintiffs' SAC consists of one hundred and two (102) pages setting forth three hundred and seventy-two (372) numbered paragraphs. One section of the SAC is devoted exclusively to "INJURY TO THE NAMED PLAINTIFFS." (SAC, Doc. 5, ¶¶ 155-213). Nowhere in their SAC do the Underlying Plaintiffs allege bodily injury, sickness, disease, or death. Instead, the Underlying Plaintiffs allege "economic harm," "physical bodily confinement," and "physical restraint." (SAC, Doc. 5, ¶¶ 99, 315, 327, 337, 351-52). One of the Underlying Plaintiffs, David Smith, alleges he "experienced stress and anxiety." (SAC, Doc. 5, ¶¶ 20, 174).
Physical confinement and physical restraint do not constitute "bodily injury, sickness, or disease." Armstrong v. Federated Mut. Ins. Co., 785 N.E.2d 284, 292-93 (Ind. Ct. App. 2003) (...
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