Zurich American Ins. Co. v. Coeur Rochester Inc.

• Decision Date: 24 June 2010
• Docket Number: No. 3:08-CV-109-ECR-RAM.,3:08-CV-109-ECR-RAM.
• Citation: 720 F.Supp.2d 1223
• Parties: ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. COEUR ROCHESTER, INC., Defendant.
• Court: U.S. District Court — District of Nevada

720 F.Supp.2d 1223

ZURICH AMERICAN INSURANCE COMPANY, Plaintiff,

v.COEUR ROCHESTER, INC., Defendant.

No. 3:08-CV-109-ECR-RAM.

United States District Court,D. Nevada.

June 24, 2010.

Andrew A. Goode, Jonathan Gross, Jay E. Framson, Tony Abdollahi, Bishop, Barry, Drath, Emeryville, CA, Christian L. Moore, David R. Grundy, Lemons, Grundy & Eisenberg, Reno, NV, for Plaintiff.

Brad M. Johnson, Holland & Hart, LLP, Reno, NV, Jose A. Ramirez, Holland & Hart, LLP, Greenwood Village, CO, Walter H. Bithell, Holland & Hart, LLP, Boise, ID, J. Stephen Peek, Holland & Hart, LLP, Las Vegas, NV, for Defendant.

Order

EDWARD C. REED, JR., District Judge.

This diversity case arises out of a coverage dispute between an insurer and its insured. Plaintiff Zurich American Insurance Company (“Zurich”) filed suit for declaratory relief after denying a claim filed by Defendant Coeur Rochester, Inc. (“Coeur”) for loss or damage of Coeur's insured property, a gold and silver mine. Coeur counterclaimed, alleging breach of contract, bad faith, and unfair claims practices. Both parties have filed motions for summary judgment or partial summary judgment, and Zurich has raised several evidentiary matters.

The motions are ripe, and we now rule on them.

I. Factual and Procedural Background

Coeur operates the Rochester and Nevada Packard Mine (“Rochester Mine”), which consists of approximately 11,000 acres of property near Lovelock, Nevada, on which Coeur both owns patented mining claims and controls unpatented mining claims. The Rochester Mine includes the open-pit mine at issue in this case (the “Rochester Pit”), which produces gold and silver ore. The usual method of mining at the Rochester Pit, like any open-pit mine, involves dynamite blasts. The blasts break ore from the ground in the pit, which is then hauled away from the blast site for processing. On September 21, 2006, a planned dynamite blast not only dislodged the expected bench ¹ of ore on the pit floor, but also resulted in the collapse of a section of the highwall ² above the bench. After the collapse, it was determined that the highwall was unstable, so that further mining of the affected area would be unsafe. Coeur later began operating the Rochester Pit again under a revised mining plan, designed to avoid the danger of the unstable highwall. This revised mining plan, however, required leaving a substantial amount of high-grade ore in place, while mining lowergrade replacement ore instead.

Coeur filed an insurance claim based on the policy issued to it by Zurich (“the Policy”); the claim was for a total of $7,435,327. Coeur's calculation of its damages has since been modified. ³ Coeur now asserts a claim for net revenue from ore lost or damaged in the highwall collapse in the amount of $7,010,714, a sum which includes $8,467,068 for high-grade ore that could not be mined because of the collapse, minus $1,456,353 in lower-grade replacement ore mined as mitigation of damages. (D.'s Opp. at 6(# 89)). ⁴ In the alternative, Coeur asserts that it is entitled to collect the $7,010,714 under the business interruption coverage of the Policy. (D.'s Opp. at 22(# 89).) Also, Coeur seeks $51,839 in extra expenses incurred as a result of its mitigation efforts. ( Id. at 26.)

After an investigation, Zurich denied the claim on various grounds by means of a letter dated September 20, 2007. ( See Letter from Tracy Smith to Carolyn Turner (Sept. 20, 2007) (“Denial Letter”), Bithell Decl., Ex. T (# 103-22).) Coeur disputed this determination, but after further investigation, on December 5, 2007, Zurich informed Coeur that it had decided to adhere to its decision to deny the claim.

On February 29, 2008, Zurich filed its Complaint (# 1), seeking a declaratory judgment that Coeur's claim was properly denied. On June 11, 2008, Coeur filed its Answer and Counterclaim (# 8), seeking damages for breach of contract, bad faith, and violation of Nevada's Unfair Trade Practices Act, Nev.Rev.Stat. § 686A.310.

Zurich filed the pending “Motion for Summary Judgment or, in the Alternative, Partial Summary Judgment [Plaintiff Zurich American's Claim for Declaratory Relief; Counterclaimant Coeur Rochester's Claim for Breach of Contract]” (# 81) on September 1, 2009. Coeur opposed (# 89) the motion (# 81), and Zurich replied (# 98). Zurich also filed objections (# 99) to certain evidence submitted by Coeur in opposition to the motion (# 81). Coeur opposed (# 113) Zurich's objections (# 99), and Zurich replied (# 125)

On September 28, 2009, Zurich filed a “Motion for Partial Summary Judgment [Coeur Rochester's Claims for Bad Faith, Violation of Nev.Rev.Stat. § 686A.310, Punitive Damages]” (# 91). Coeur opposed (# 103) the motion (# 91), and Zurich replied (# 115). On October 30, 2009, Zurich filed a “Motion to Exclude Evidence of Coeur's Damages Pertaining to Bad Faith, Statutory Violations Claims [FRCP 37(c) ]” (# 119). This motion (# 119) seeks to exclude certain evidence Coeur submitted in opposition to Zurich's motion for partial summary judgment (# 91). Coeur opposed (# 126) the motion (# 119), and Zurich replied (# 127).

Also on September 28, 2009, Coeur filed a “Motion for Partial Summary Judgment on Liability” (# 94). Zurich opposed (# 106) the motion (# 94), and Coeur replied (# 122).

Zurich requested (# 100) oral argument on the pending motions for summary judgment and partial summary judgment. We granted (# 129) the request (# 100). The parties presented their oral arguments at a hearing on June 15, 2010, after which the Court took the matter under submission.

II. Summary Judgment Standard

Summary judgment allows courts to avoid unnecessary trials where no material factual dispute exists.

N.W. Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir.1994). The court must view the evidence and the inferences arising therefrom in the light most favorable to the nonmoving party, Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996), and should award summary judgment where no genuine issues of material fact remain in dispute and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Judgment as a matter of law is appropriate where there is no legally sufficient evidentiary basis for a reasonable jury to find for the nonmoving party. Fed.R.Civ.P. 50(a). Where reasonable minds could differ on the material facts at issue, however, summary judgment should not be granted. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996).

The moving party bears the burden of informing the court of the basis for its motion, together with evidence demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the party opposing the motion may not rest upon mere allegations or denials in the pleadings, but must set forth specific facts showing that there exists a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Although the parties may submit evidence in an inadmissible form-namely, depositions, admissions, interrogatory answers, and affidavits-only evidence which might be admissible at trial may be considered by a trial court in ruling on a motion for summary judgment. Fed.R.Civ.P. 56(c); Beyene v. Coleman Sec. Servs., Inc., 854 F.2d 1179, 1181 (9th Cir.1988).

In deciding whether to grant summary judgment, a court must take three necessary steps: (1) it must determine whether a fact is material; (2) it must determine whether there exists a genuine issue for the trier of fact, as determined by the documents submitted to the court; and (3) it must consider that evidence in light of the appropriate standard of proof. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Summary judgment is not proper if material factual issues exist for trial. B.C. v. Plumas Unified Sch. Dist., 192 F.3d 1260, 1264 (9th Cir.1999). “As to materiality, only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Disputes over irrelevant or unnecessary facts should not be considered. Id. Where there is a complete failure of proof on an essential element of the nonmoving party's case, all other facts become immaterial, and the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Summary judgment is not a disfavored procedural shortcut, but rather an integral part of the federal rules as a whole. Id.

III. Discussion

Both Zurich and Coeur seek summary judgment on Zurich's declaratory judgment claim and on the issue of liability with regard to Coeur's breach of contract claim. (P.'s Mot. (# 81); D.'s Mot. (# 94).) In addition, Zurich seeks summary judgment on Coeur's claims for bad faith and for violation of Nevada's Unfair Trade Practices Act. (P.'s Mot. (# 91).) We will discuss these matters, and the related evidentiary motions filed by Zurich, separately.

A. Zurich's Objections (# 99)

Zurich presents several objections to evidence submitted by Coeur in support of its opposition (# 89) to Zurich's motion for summary judgment (# 81). Specifically, Zurich objects to a spreadsheet attached as an exhibit to the Declaration of Casey Kiel (# 89-3), as well as portions of the Kiel Declaration itself. ( See Objections at 2(# 99).) Zurich also objects to one paragraph of the Declaration of Alan Tattersall (# 89-4). ( Id.) We will consider each of these matters separately.

1. Exhibit to Kiel Declaration

Attached to the Kiel Declaration as Exhibit 1 is a spreadsheet describing the damages Coeur alleges it suffered because of the south highwall collapse. (Kiel Decl., Ex. 1 (# 89-3).) This spreadsheet has four separate boxes, the first three of which calculate the net revenue...