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Moore Construction Co. v. Quanta Specialty Lines Insurance Co.

June 22, 2009


The opinion of the court was delivered by: Sandra M. Snyder United States Magistrate Judge



Plaintiff is proceeding with counsel with a civil action in this Court. The matter has been referred to the Magistrate Judge pursuant to 28 U.S.C. § 636(b) and Local Rules 72-302 and 72-303.

Pending before the Court is the motion of Defendant Quanta Specialty Lines Insurance Company (Quanta or Defendant) for summary judgment on various claims stated in the complaint that was originally filed in the Tuolumne County Superior Court on November 8, 2007, and was removed to this Court on or about January 4, 2008. (Notice of Removal, Doc. 4, p. 10.) Defendant filed its motion on February 9, 2009, including a memorandum of law, statement of undisputed facts, and declarations of John Manzi, Andrew R. Neilson, and Frank Schulze. Plaintiff filed opposition on April 15, 2009, including a memorandum of law, statement of disputed facts, and declaration of Walter Moore. Defendant filed a reply on April 24, 2009, including a memorandum of law and objections to evidence, as well as a proposed order. Defendant's motion came on regularly for hearing on May 1, 2009, at 9:30 a.m. in Courtroom 7 before the Honorable Sandra M. Snyder, United States Magistrate Judge. Andrew Ryan Neilson appeared on behalf of Defendant, and Herman A.D. Franck, V appeared on behalf of Plaintiff. After argument the matter was submitted to the Court.

Defendant moves for judgment with respect to two different contracts, which the Court will analyze separately.

I. Summary Judgment

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). Under summary judgment practice, the moving party [A]lways 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 (1986). It is the moving party's burden to establish that there exists no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. British Airways Board v. Boeing Co., 585 F.2d 946, 951 (9 th Cir. 1978).

Where a party with the ultimate burden of persuasion at trial as to a matter moves for summary judgment, it must demonstrate affirmatively by evidence each essential element of its claim or affirmative defense and must establish that there is no triable issue of fact as to each essential element such that a rational trier of fact could render a judgment in its favor. Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 888 (9 th Cir. 2003). If a party moves for summary judgment with respect to a matter as to which the opposing party has the ultimate burden of persuasion at trial, then the moving party must show that the opposing party cannot meet its burden of proof at trial by establishing that there is no genuine issue of material fact as to an essential element of the opposing party's claim or defense; the moving party must meet the initial burden of producing evidence or showing an absence of evidence as well as the ultimate burden of persuasion. Nissan Fire Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9 th Cir. 2000). In order to carry its burden of production, the moving party must either produce evidence negating an essential element of the opposing party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial. Id. (citing High Tech Gays v. Defense Indus. Sec. Clearance Office, 895 F.2d 563, 574 (9th Cir. 1990)). In order to carry its ultimate burden of persuasion on the motion, the moving party must persuade the court that there is no genuine issue of material fact. Id.

However, "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." Celotex Corp. v. Catrett, 477 U.S. 317, 323. 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. "[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.

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 (1986). 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 or admissible discovery material in support of its contention that the dispute exists. Rule 56(e); Matsushita, 475 U.S. at 586 n.11. 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 (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, 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." T.W. Elec. Serv., 809 F.2d at 630. 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 (quoting Fed. R. Civ. P. 56(e) advisory committee's note on 1963 amendments). The evidence of the opposing party is to be believed, Anderson, 477 U.S. at 255, 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 (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)(per curiam)). Nevertheless, it is the opposing party's obligation to produce a factual predicate from which an 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). Although the Court must not weigh the evidence, the Court must draw reasonable inferences; evidence that is too insubstantial or speculative may be insufficient to establish the existence of a genuine issue of material fact. Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1255 (9 th Cir. 1982); Dept. of Commerce v. U.S. House of Rep., 525 U.S. 316, 334 (1999). A mere scintilla of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party. Anderson, 477 U.S. at 251-52. 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. Id. at 587.

The showings must consist of admissible evidence, Hollingsworth Solderless Terminal Co. v. Turley, 622 F.2d 1324, 1335 n.9 (9 th Cir. 1980), or pleadings, depositions, answers to interrogatories, admissions, and affidavits or declarations, Fed. R. Civ. P. 56(c). Affidavits shall be based on personal knowledge, set forth such facts as would be admissible in evidence, and show affirmatively that the affiant is competent to testify to the matters stated therein. Fed. R. Civ. P. 56(e). Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. Id. Declarations pursuant to 28 U.S.C. § 1746 may be used with the same force and effect as affidavits. Pollock v. Pollock, 154 F.3d 601, 611, n.20 (6 th Cir. 1998). A plaintiff's verified complaint may be considered as an affidavit in opposition to summary judgment if it is based on personal knowledge and sets forth specific facts admissible in evidence. Lopez v. Smith, 203 F.3d 1122, 1132 (9 th Cir. 2000). Personal knowledge may be inferred from declarations themselves, such as from facts concerning a declarant's position and participation, Barthelemy v. Air Line Pilots Ass'n, 897 F.2d 999, 1018 (9 th Cir. 1990); however, a court cannot draw an inference about facts not specifically put in the record by a party, and a court will not assume that general averments embrace specific facts needed to sustain a complaint, Lujan v. National Wildlife Federation, 497 U.S. 871, 887 (1990). An admission in a pleading, including a defendant's failure to deny an allegation in a complaint, constitutes an admission. Fed. R. Civ. P. 8(d); Lockwood v Wolf. Corp., 629 F.2d 603, 611 (9 th Cir. 1980). Unauthenticated documents cannot be considered on a motion for summary judgment. Hal Roach Studios, Inc. v. Richard Feiner and Co., 896 F.2d 1542, 1550 (9 th Cir. 1990). Legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9 th Cir. 1978).

The Court is not obligated to consider matters that are in the record but are not specifically brought to its attention; the parties must designate and refer to specific triable facts. Even in the absence of a local rule, for evidence to be considered, the party seeking to rely on it must specify the fact by indicating what the evidence is or says and must indicate where it is located in the file. Although the Court has discretion in appropriate circumstances to consider other material, it has no duty to search the record for evidence establishing a material fact. Carmen v. San Francisco United School Dist., 237 F.3d 1026, 1029 (9 th Cir. 2001).

A party moving for summary judgment is entitled to the benefit of any relevant presumptions that support the motion provided that the facts giving rise to the presumption are undisputed. Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1254 (9 th Cir. 1982).

II. General Commercial Liability Policy for Construction Business (Contract QNG0005381-00)

A. Allegations of the Complaint

The third claim in Plaintiff's complaint is for breach of a written contract entered into on or about July 31, 2005, policy number QNG0005381-00, between Plaintiff and Defendant, consisting of a general commercial liability policy to cover Plaintiff's operations as a general contractor.

The policy contained provisions concerning adjustment of premiums after an audit. Plaintiff alleged that the premium rates were prepared when future revenues were estimated to be $3,600,000, amounting to an actually "paid/owing" premium amount of $169,344; however, the actual levels of sales were $766,939, which generated revised premium amounts of $9,019 and $27,057, yielding a difference in premiums of $133,267 if the premiums were adjusted under paragraph 2 of the "Minimum Premium Endorsement" part of the insurance contract, "[See Exhibit A, page 3]." (Doc. 4, pp. 18-19, attachments BC-1, BC-2, D to third claim; Doc. 4 p. 19.) Despite Plaintiff's request for a return of the sum, Defendant refused and failed to return the funds. (Id. p. 19.)

The fourth claim is a common count for money had and received by defendant for the use and benefit of Plaintiff in the sum of $133,261.00 in the form of an insurance premium overpayment. (Doc. 4, p. 20.) Plaintiff alleged that the insurance policy provided for an adjustment; to the extent that the policy is to be read differently, it is ambiguous, and any ambiguity should be read in favor of Plaintiff; to allow Defendant to keep the higher premiums paid would constitute unjust enrichment. Id. p. 20.

B. The Parties' Contentions

With respect to the general commercial liability policy, Defendant argues that after the end of the contract's term, Defendant audited the basis for the premium and refunded what was due under the contract; therefore, Plaintiff cannot establish a breach of contract, an essential element of Plaintiff's case. Plaintiff, however, argues that the terms of the contract with respect to audits and/or return of excess premiums after an audit are ambiguous, and thus there is an issue of material fact as to whether or not Defendant breached the contract.

C. Facts Concerning the General Commercial Liability Policy and Audit

Frank Schulze, a broker at Rogers & Young Insurance Services, was Plaintiff's insurance broker in July 2005, and Schulze faxed to Moore Construction (Moore) a general liability insurance proposal dated July 27, 2005, after which the proposal was accepted, and coverage was bound. (Schulze Decl. ¶ 1, Ex. A p. 4.)

Plaintiff does not deny that he received the proposal (as distinct from denying that he was provided with "minimum premium provisions") in July 2005, but he points to an insurance summary prepared by Rogers and Young that was dated January 11, 2006, a date about six months after the inception date of the policy.

(Moore Decl., ¶ 16, Ex. N, response to interrogatory no. 8 re: RFA (requests for admissions) 35.) The existence of a later summary does not contradict the assertion of sending the proposal to Plaintiff. Further, in his response to interrogatory no. 8, Plaintiff cites to a list of witnesses and documents, but neither the identity nor the substance of the evidence known by such witnesses or reflected by such documents is set forth or appropriately brought to the Court's attention. The Court concludes that there is no real dispute as to the sending of the proposal.

Further, the undisputed evidence shows that the policy was thereafter issued, had a term that began on July 31, 2005 and ended on July 31, 2006, and was subject to a later audit conducted on September 28, 2006. (Undisp. Facts nos. 16, 23-24.)

The proposal stated that the commercial general liability policy included the following "conditions": 25% minimum earned premium; 80% minimum & deposit premium. (Schulze Decl., Ex. A, fourth page (unpaginated).)

The proposal faxed to Moore from Rogers and Young included insurance premium audit information. It was stated that if the proposed premium was based on estimates of annual exposures, they might be subject to audit at the expiration of the policy for the actual exposures. (Id. at eighth page, last paragraph.) It explained that an audit was a report of the findings from an examination of the insured's operation, records, and books of account to determine the actual insurance exposures for the coverage provided. (Id. at tenth page.) With respect to when an audit was necessary, the information indicated that an audit should be performed annually, or after the expiration of a policy which had a variable premium base. Examples of coverage subject to an audit included general liability and premises operations liability. (Id.) It was stated that an audit was necessary to determine the correct exposure or premium base for the insurance coverage afforded; if necessary, an adjustment would be made to the premium that was estimated when the policy was issued. (Id.)

Reference to the policy reflects that the Common Policy Declarations included a statement that the policy consisted of various coverage parts for which a premium was indicated. It is stated:

This premium may be subject to adjustment. The policy writing minimum premium for this policy is $5,000. (Manzi Decl., Ex. B, p. QUANTA 000009.)

The "TOTAL POLICY PREMIUM" is listed as $169,344. (Id.) Although Plaintiff purports to dispute this fact, there is no evidence warranting a reasonable inference that this was not the amount of the total policy premium stated on the declarations.*fn1

The premium was based on an estimated exposure of $3,600,000 with stated rates. (Id. at p. QUANTA 000012.) A composite rate endorsement to the policy stated that the composite rated premium for the policy should be based on exposure consisting of $3,600,000 in sales/receipts, with a composite rate of $47.04/$1000. (Id. at QUANTA000055.) The contract states that the insurer may examine and audit the insured's books and records relating to the policy during the term of the policy and for three years afterwards, and that the first named insured shown in the declarations is the payee for any return premiums that would be paid. (Id. p. QUANTA000015.) It contains provisions concerning premium auditing:

5. Premium Audit

a. We will compute all premiums for this Coverage Part in accordance with our rules and rates

b. Premium shown in this Coverage Part as advance premium is a deposit premium only. At the close of each audit period we will compute the earned premium for that period and send notice to the first Named Insured. The due date for audit and retrospective premiums is the date shown as the due date on the bill. If the sum of the advance and audit premiums paid for the policy period is greater than the earned premium, we will return the excess to the first Named Insured.

c. The first Named Insured must keep records of the information we need for premium computation, and send us copies at such times as we may request. (Id., Ex. B, p. QUANTA000032.)

Although Plaintiff sets forth the terms of the minimum premium endorsement in his declaration (Decl. ¶ 7), Plaintiff also purports to dispute the assertion that the policy contained a minimum premium endorsement by stating that the issue is whether Moore Construction was entitled to an audit and refund based on actual project revenues. (Pltff.'s Responsive Stmt., no. 18.) Again, the Court looks only to the face of the documents at this point, and thus considers Plaintiff's setting forth of the language of the provision to indicate the lack of any dispute as to the presence of the endorsement language in the contract. The policy stated:


The premium(s) due for this policy shall be calculated in accordance with the following:

1. The minimum earned premium shall be fully earned at the inception of the policy and is twenty-five percent (25%) of the amount entered as the total policy premium in the Declarations.

2. The premium entered on the Declarations is a provisional premium only and is subject to adjustment in accordance with the audit provisions of this policy.

3. The minimum policy term premium for this policy is eighty percent (80%) of the premium shown as the total policy premium in the Declarations. In the event of a return premium we will return the lesser of:

a. The return premium calculated in accordance with the audit rules on this policy; or

b. Twenty percent (20%) of the premium shown as the total policy premium in the Declarations. (Manzi Decl., Ex. C.)

With respect to the policy, there are several pages relating to audit adjustments in the policy resulting in premium changes. (Manzi Decl., Ex. B, pp. QUANTA000001-000003.) John Manzi, Quanta's Policy Services Manager, explains that an audit yielded the return premium calculation of -$119,219. (Manzi Decl. at ¶ 6, Ex. B, at QUANTA000003.) Other pages indicate other calculations with other categories but are not explained. (Id. at QUANTA000001-02.)

Plaintiff declares that Defendant Quanta conducted an audit of premiums due by Stan Caplan and a company called Overland Solutions, Inc., which confirmed an amount of an adjustment owing in the amount of $133,267. (Decl. of Moore, ΒΆ 13, Ex. D.) This assertion appears to involve a statement of a third party offered for the truth of the matter asserted, and thus appears to be inadmissible hearsay. Plaintiff has not established that Caplan was acting on behalf of ...

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