Zumbrun v. United Services Auto. Ass'n.

• Decision Date: 03 August 1989
• Docket Number: No. CIV. S-88-307 LKK.,CIV. S-88-307 LKK.
• Citation: 719 F. Supp. 890
• Court: U.S. District Court — Eastern District of California
• Parties: Ron ZUMBRUN and Ann Zumbrun, Plaintiffs, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant.

719 F. Supp. 890

Ron ZUMBRUN and Ann Zumbrun, Plaintiffs, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant.

No. CIV. S-88-307 LKK.

United States District Court, E.D. California.

August 3, 1989.

Dennis M. Campos, Tracey S. Buck-Walsh, Diepenbrock, Wulff, Plant & Hannegan, Sacramento, Cal., for plaintiffs.

Otto F. Becker, Thornton, Taylor & Downs, San Francisco, Cal., for defendant.

ORDER

KARLTON, Chief Judge.

This matter is before the court on plaintiffs' motion for partial summary judgment. For the reasons that I explain below, the motion is granted in part and denied in part.

I CASE BACKGROUND

The Zumbruns, plaintiffs herein, own a home in Carmichael, California, which sits atop a cliff overlooking the American River. Defendant United States Automobile Association ("USAA") executed and delivered to plaintiffs a standard flood insurance policy pursuant to the National Flood Insurance Act, 42 U.S.C. § 4001, et seq., insuring the house.¹ In the Winter and Spring of 1986, heavy rains caused the American River to flood. Plaintiffs allege that these rains and the flooded river caused the bluff which supports their home to slide, causing serious damage to the home. On March 7, 1986, plaintiffs filed a claim with USAA under their flood insurance policy. Some 15 months later, USAA sent the Zumbruns' a written denial of their claim, which explained that denial of the claim was based on the conclusion of its engineer that "the failure of the slope near their home was not the result of a mud slide but is erosion." Plaintiffs' Exhibit 19. The letter continued: "Also, the erosion is a natural process and not of the type described in the policy." Id. The Zumbruns filed suit.

In their Second Amended Complaint, the Zumbruns assert a cause of action against USAA for breach of the insurance contract, and seek judgment for the sum of the policy amount plus consequential damages, interest, costs, and reasonable attorneys' fees. USAA filed its answer to the Zumbruns' complaint and asserted twenty (20) affirmative defenses. Many of these defenses are predicated upon policy exclusions which were not articulated in USAA's June 4, 1987 letter denying the Zumbruns' claim.

In the instant motion for partial summary judgment, the Zumbruns contend that USAA has waived its third through fifth, seventh through tenth, and thirteenth through twentieth affirmative defenses by failing to specify them as reasons for denying the claim in its June 4, 1987 letter. Plaintiffs also seek a determination that they suffered a covered loss under the insurance policy.

II SUMMARY JUDGMENT STANDARDS UNDER FED.R.CIV.P. 56

Summary judgment is appropriate when it is demonstrated that there exists 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); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Poller v. Columbia Broadcasting System, 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962); Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir.1985); Loehr v. Ventura County Community College Dist., 743 F.2d 1310, 1313 (9th Cir. 1984).

Under summary judgment practice, the moving party

Always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). "Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the `pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. Indeed, summary judgment should be entered, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322, 106 S.Ct. at 2552. "A complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. In such a circumstance, summary judgment should be granted, "so long as whatever is before the district court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323, 106 S.Ct. at 2553.

If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968); Ruffin v. County of Los Angeles, 607 F.2d 1276, 1280 (9th Cir.1979), cert. denied, 445 U.S. 951, 100 S.Ct. 1600, 63 L.Ed.2d 786 (1980).

In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Rule 56(e); Matsushita, 475 U.S. at 586 n. 11, 106 S.Ct. at 1355 n. 11; First Nat'l Bank, 391 U.S. at 289, 88 S.Ct. at 1592-93; Strong v. France, 474 F.2d 747, 749 (9th Cir.1973). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party, Anderson, 477 U.S. at 248-49, 106 S.Ct. at 2510-11; Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436 (9th Cir.1987).

In the endeavor to establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." First Nat'l Bank, 391 U.S. at 290, 88 S.Ct. at 1593; T.W. Elec. Serv., 809 F.2d at 631. Thus, the "purpose of summary judgment is to `pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356 (quoting Fed.R.Civ.P. 56(e) advisory committee's note on 1963 amendments); International Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985).

In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Rule 56(c); Poller, 368 U.S. at 468, 82 S.Ct. at 488-89; SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982). The evidence of the opposing party is to be believed, Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party, Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356 (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam)); Abramson v. University of Hawaii, 594 F.2d 202, 208 (9th Cir.1979). Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F.Supp. 1224, 1244-45 (E.D.Cal.1985), aff'd, 810 F.2d 898, 902 (9th Cir.1987).

Finally, to demonstrate a genuine issue, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356 (citation omitted).

III HAS DEFENDANT WAIVED VARIOUS AFFIRMATIVE DEFENSES?

Plaintiffs seek summary judgment on various affirmative defenses alleged for the first time by defendant in its Second Amended Answer. As I shall explain, I agree with plaintiffs that policy-based defenses must be raised at the time of denial or they are waived.

A. Governing Law

The first step in resolving any legal question is identification of the body of law governing resolution of the dispute.

The policy at issue was executed and delivered under the so-called "Write Your Own" ("WYO") program pursuant to the Flood Disaster Protection Act of 1973, 42 U.S.C. § 4002, and its governing regulations, 44 C.F.R. pt. 62 (1988) (see n. 1, infra), and explicitly provides that it is governed by federal common law. As I have previously noted, "recognizing that federal law must govern does not preclude the court from borrowing state law as a rule of decision in appropriate cases." Federal Deposit Ins. Corp. v. Main Hurdman, 655 F.Supp. 259, 265 (E.D.Cal.1987). The question of whether federal or state law should provide the rule of decision in cases like that at bar appears to be a matter of first impression.

In determining the source of the rule of decision, the predominant consideration must be congressional intent. Id. at 265, quoting Mardan Corp. v. C.G.C. Music, Ltd., 804 F.2d 1454, 1458 (9th Cir.1986). Absent an expression of congressional intent, the court must determine "whether formulating a uniform federal rule would be appropriate as a matter of judicial policy." Id. The Ninth...