Free Status Report - District Court of Arizona - Arizona

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Wayne Gill, Esq. (Fla Bar. No. 114953) WALTON LANTAFF SCHROEDER & CARSON LLP 1700 Palm Beach Lakes Boulevard, 7th Floor West Palm Beach, Florida 33401 Telephone: (561) 689-6700 Facsimile: (561) 689-2647 Steven Plitt, Esq. (State Bar No. 007481) Daniel Maldonado, Esq. (State Bar No. 018483) BESS KUNZ, A Professional Corporation 3838 North Central Avenue, Suite 1500 Phoenix, Arizona 85012-1092 Telephone: (602) 331-4600 Facsimile: (602) 331-8600 Attorneys for Defendants IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA U-Haul International, Inc.; U-Haul Company Of Pennsylvania; U-Haul Company Of Florida; and Republic Western Insurance Company, Plaintiffs, vs. Lumbermens Mutual Casualty Company, Defendants. __________________________________ LUMBERMENS MUTUAL CASUALTY COMPANY, Defendant/Counter-Plaintiff, v. CASE NO.: CIV-04-0662-PHX-DGC (Maricopa County Superior Court Cause No. CV 2004-002438) PARTIES' JOINT STATUS REPORT

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Case 2:04-cv-00662-DGC

Document 131

Filed 07/14/2006

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REPUBLIC WESTERN INSURANCE CO.; U-HAUL INTERNATIONAL, INC.; U-HAUL COMPANY OF PENNSYLVANIA; U-HAUL COMPANY OF FLORIDA; AMERCO; AMERCO REAL ESTATE CO. D/B/A NOVI MANUFACTURING CO. AND WARRINGTON MANUFACTURING CO.; AMERCO REAL ESTATE SERVICES, INC.; AMERCO REAL ESTATE COMPANY OF TEXAS, INC. ; U-HAUL BUSINESS CONSULTANTS, INC.; U-HAUL COMPANY OF ARIZONA; U-HAUL COMPANY OF CALIFORNIA D/B/A PARAMOUNT MANUFACTURING CO.; U-HAUL CO. OF INDIANA, INC. D/B/A CHICAGO ASSEMBLY DIVISION; U-HAUL CO. OF MASSACHUSETTS, INC. D/B/A BOSTON TRAILER MANUFACTURING COMPANY, INC.; U-HAUL CO. OF MICHIGAN; AND UHAUL CO. OF TEXAS D/B/A DFW MFG. CO., INC.; Counter-Defendants.

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The parties respectfully submit their joint status report to the Court in compliance with the Court's order of June 12, 2006. A. Status of Discussions. 1. Counsel conferred by telephone on Friday, July 7, 2006. The parties do not agree as to what are the remaining claims, and disagree

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2.

as to the interpretation of certain parts of the Court's June 12, 2006 order on crossmotions for summary judgment. Counsel for defendant advised that defendant will be

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filing a motion for clarification as to certain parts of the Court's order, and that defendant needs such clarification in order to make a settlement evaluation. Counsel for plaintiffs advised that clarification of the Court's June 12, 2006 order is not required in

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order to discuss and achieve settlement. B. Description of the Legal and/or Factual Issues Precluding an Amicable Settlement from being Achieved. 1. Plaintiffs' description of the legal and/or factual issues precluding an amicable settlement from being achieved and Defendant's response.

In accordance with the Court's instructions as set forth in its order dated June 12, 2006, counsel for the parties met telephonically to discuss the settlement of this action in consideration of the Court's conclusions with respect to the parties' contractual obligations. In view of the Court's analysis and conclusion that the RU policies may be exhausted by payments of indemnity and LAE and the Court's grant of plaintiffs' motion for summary judgment with respect to the parties' contractual obligations, i.e., the attachment point of LMC's policies, counsel for plaintiffs was prepared in good faith to discuss settlement of the claims in this litigation. Plaintiffs used as the starting point for settlement negotiations the amount which defendant is legally obligated to pay

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in the total amount of $1,462,628.64, plus attorneys' fees of approximately $350,000 and interest, pursuant to ARS §12-341.1. Although at the time of the filing of the complaint herein the Fernandez action had not yet been settled, and therefore the amount due with respect to that claim was uncertain at that time, the Fernandez Claim

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was settled after the complaint was filed, making the amount due under all the LMC

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policies certain and calculable. The amounts due were communicated to counsel for defendant in plaintiffs' August 15, 2005 settlement demand letter, and have at no time been disputed prior to this submission. Defendant should not be permitted to belatedly

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raise a putative issue of fact which was not raised in the parties' respective motions. However, rather than engage in the required meet and confer with a view towards settlement, counsel for defendant indicated that the putative existence of "open issues" precluded defendant from engaging in settlement discussions. The issues which

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defendant raised (discussed below), however, are red herrings, and are set forth for the clear purpose of rearguing the Court's clear analysis of the facts and the law, including its detailed analysis and construction of the relevant policy terms. Plaintiffs respectfully submit that the Court's inability to determine from the

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record what, if any, relief is available was due to the fact that the relief sought by plaintiffs in their motion for summary judgment was "the relief stated in the complaint", and that this request for relief was not entirely clear because, as stated above, at the time the complaint was drafted, the Fernandez Claim had not yet been settled. That issue has been clarified by the settlement of the Fernandez Claim, and no further judicial clarification is required. The amount due for Nelson is arrived at by adding the amount of the settlement due from LMC once its attachment point is reached ($500,000), adding the LAE paid by RWIC ($386,481.60) and subtracting the amount paid by LMC pursuant to an interim funding agreement ($666,221), totaling $220,260.60. The

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amount due for Fernandez is arrived at by subtracting the remaining RWIC policy limit

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available after the settlement of the Martinez claim ($5 million) from the total Fernandez settlement ($8,174,976), adding the LAE paid by RWIC ($2,178,161.54), and subtracting the amount of the settlement paid by LMC ($1,241,925.54), totaling

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$1,242,368.04. Defendant's Reply to Plaintiffs' description of the legal and/or factual issues precluding an amicable settlement from being achieved: Count III of LMC's counterclaim seeks damages against Republic Western for reimbursement regarding the Nelson and Fernandez claims. The Court's order includes the statement that the Court will grant plaintiffs' motion for summary judgment with respect to the parties' contractual obligations. However, the order does not state that this ruling extends to any disputed contractual obligations not discussed in the order. Although the Court has held that LAE comes within the RU policies' definition of "ultimate net loss," and that therefore LAE reduces the Republic Western RU policies' occurrence limit, the Court has not ruled upon the independent and separate issues of

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whether LAE paid under the RGMM and RXMM policies reduce those policies' products-completed operations aggregate limits and, if so, whether any such reduction in those aggregate limits causes the RU policies to drop down to attach immediately in excess of any such reduced limits. These issues are separate from the issue of whether

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LAE reduces the RU policies' occurrence limit. The issue of whether LAE reduces RGMM's and RXMM's products-completed operations aggregate limits depends on the interpretation of the terms and wording of RGMM's products-completed operations

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aggregate limit endorsement (to which the RXMM policy follows form) and does not depend upon whether (as the Court has determined) LAE is included in the RU policies' definition of "ultimate net loss." If the Court resolves this issue in LMC's favor, then

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RGMM's and RXMM's full occurrence limits totaling $2,000,000 were available for the Fernandez settlement (except to the extent reduced by prior indemnity payments). This would result in LMC being entitled to judgment against Republic Western of not less than $492,081.40, with LMC owing nothing to plaintiffs.

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LMC has not agreed to any amounts claimed by plaintiffs to be due. Plaintiffs should not be permitted to belatedly raise any putative issues of fact which were not raised in the parties' respective motions. LMC's disputes regarding plaintiffs'

calculations of alleged amounts include, but are not limited to, the lack of cites in
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plaintiffs' summary judgment motion to any evidence of record corroborating what plaintiffs claim in their descriptive list herein of legal and factual issues to be the total amounts of LAE paid by Republic Western for the Nelson and Fernandez claims. Another factor impacting settlement at this time is that the Court has not ruled on LMC's affirmative defense of estoppel. If LMC prevails on its estoppel defense, then all of plaintiffs' claims against LMC would be barred as a matter of law. (LMC's affirmative defense of estoppel was raised in LMC's summary judgment motion. However, plaintiffs did not seek summary judgment on this issue and the Court's order does not mention LMC's estoppel defense.) Resolution by the Court of these issues,

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and the other issues listed herein in LMC's descriptive list of factual and legal issues

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precluding settlement, is needed in order for the parties to have a starting point for settlement negotiations. The fact that the Fernandez claim settled after this action was filed does not (as

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plaintiffs' counsel claims) provide any clarity as to whether Republic Western's tender to LMC to settle the Fernandez case was proper. (As to the Fernandez claim, the complaint only requests a declaration as to whether Republic Western's tender to LMC to settle the Fernandez claim was "proper," and the only relief requested in plaintiffs'

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summary judgment motion is "the relief requested in the complaint and the dismissal of LMC's counterclaims. . .") This is because the calculation of Republic Western's legal share of the Fernandez settlement is not a percentage of, or dependent upon, the overall amount of the Fernandez settlement.

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Therefore, the factual and legal issues listed by LMC in this report as precluding settlement do in fact preclude settlement, are not "red herrings" as plaintiffs' counsel claims, and are not submitted for any improper purpose. LMC further states that it denies plaintiffs' attorney fee claim both as to entitlement and amount. 2. Defendant's objection to Plaintiffs' inclusion of argument regarding Defendant's descriptive list of the legal and/or factual issues precluding an amicable settlement from being achieved.

Defendant does not construe the Court's order as requesting argument in the parties' joint report as to any party's list of legal and/or factual issues precluding settlement. However, defendant, without waiving its said objection, has included herein

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defendant's argument in reply to plaintiffs' arguments. Plaintiffs respond that their

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statements on the "issues" raised by LMC are necessary and proper to provide the Court with a balanced discussion of the parties' positions. 3. Defendant 's description of remaining issues, Plaintiffs' response, and Defendant's reply.

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a)

The extent to which plaintiffs' summary judgment motion has been denied. (The Court's order states that plaintiffs' summary judgment motion is granted in part and denied in part.)

Plaintiffs' Response: It is clear that the Court denied Plaintiffs' motion, if at all, only to the extent that the Court was unable to determine the monetary relief available to Plaintiffs. With the settlement of the Fernandez Claim, this is no longer an issue. Plaintiffs can establish that Defendant is required to pay $220,260.60 with respect to the Nelson Claim, and $1,242,368.04 with respect to the Fernandez Claim, plus attorneys' fees of approximately $350,000 and interest, pursuant to ARS Section 12-341.1. Plaintiffs will gladly provide the Court with supporting documentation for their

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attorneys' fees claim under ARS Section 12-341.1 as may be directed by the Court. Defendant's Reply: The statements in the Court's order that: "The Court is unable to determine from the record what, if any, relief is available to plaintiffs and defendant." (emphasis supplied), the Court's statement that plaintiffs' summary judgment motion is

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denied in part, and the Court's statement that LMC's summary judgment motion is denied in part, rebut plaintiffs' allegation that ". . . it is clear that the Court denied plaintiffs' motion, if at all, only to the extent that the Court was unable to determine the

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monetary relief available to plaintiffs." LMC further replies by citing its response above to plaintiffs' descriptive list. b) The extent to which LMC's summary judgment motion has not been denied. (The Court's order states that defendant's summary judgment motion is denied in part.) Plaintiffs' Response: See Response (a) above. Moreover, it is clear that no part of Defendant's motion was granted. All that is left is to discuss the amount to be paid by

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Defendant. Defendant's Reply: See LMC's response above to plaintiffs' descriptive list, and LMC's reply above to plaintiffs' response (a). The statement in the Court's order that LMC's summary judgment motion is denied in part provides further confirmation that

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there is a part of LMC's summary judgment motion that has not been denied. c) Identification of "the remaining claims" referred to in the Court's order.

Plaintiffs' Response: The simple issue presented to the Court in the parties' respective motions was the attachment point of the LMC policies. In deciding that issue, the Court held that the RU policies may be exhausted by payments of indemnity and LAE, and, therefore, LMC is contractually obligated to make payments under its policies upon the exhaustion of the RU policies. All of Defendant's defenses and claims are subsumed by this holding. Plaintiffs submit that the only "remaining claim" that can exist in view of the Court's conclusions with respect to the parties' contractual obligations are the

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precise amounts due from LMC to Plaintiffs.

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Defendant's Reply: See LMC's response to plaintiffs' descriptive list, and LMC's replies to plaintiffs' responses (a) and (b). LMC submits that the only contractual

obligations ruled on by the Court were those contractual issues that were discussed in
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the Court's order. The factual and legal issues listed by defendant were presented to the Court for summary judgment ruling, but were not discussed or ruled upon by the Co urt. LMC further submits that the "remaining claims" referred to in the Court's order therefore include, as a minimum, the issues listed by LMC in its descriptive list. LMC

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additionally states that its equitable estoppel affirmative defense is not a matter of a contractual obligation. Also, for the reasons stated in LMC's response to plaintiffs' descriptive list, resolution of the remaining issues may result in a finding that LMC is entitled to recover damages from Republic Western on its counterclaim against

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Republic Western. d) The extent of the "contractual obligations" referred to in the Court's order.

Plaintiffs' Response: See Response (c) above. Defendant's Reply: See LMC's response above to plaintiffs' descriptive list, and LMC's replies above to plaintiffs' responses (a), (b), and (c). e) Whether, based on the Court's order, LAE paid by Republic Western reduces the annual products-completed operations aggregate limits contained in Republic Western's RG and RX policies and if so, whether any such reduction or exhaustion requires the Republic Western RU policy to drop down to attach

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immediately in excess of such reduced limits.

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Plaintiffs' Response: The Court correctly recognized that for the RG and RX policies, LMC agrees that LAE is included in a determination of whether the policy limits have been exhausted (Order at p. 5). Inherent in that agreement, and in the Court's ruling that

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LAE and indemnity are included in a determination of whether the attachment point of the LMC policies has been reache d, is a finding that the aggregate limits of liability provided by the RG and RX policies are eroded and exhausted by the payment of defense and indemnity in connection with products claims paid during the policy period.

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Defendant's Reply: See LMC's response above to plaintiffs' descriptive list, and LMC's replies above to plaintiffs' responses (a), (b), (c), and (d). f) Whether the Court's order constitutes a ruling on LMC's affirmative defense of estoppel and, if so, on what grounds.

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Plaintiffs' Response:

The gravamen of LMC's estoppel claim was its reasonable

expectations argument - - that the broker led LMC to believe that the LMC policies would not attach until $7 million in indemnity was paid, i.e., that LAE is not included as part of "ultimate net loss." The Court clearly ruled that the reasonable expectations doctrine is inapplicable here and is not a shield for sophisticated insurers. Accordingly, it is beyond peradventure that the Court's order rules on and disposes of LMC's affirmative defense of estoppel. Defendant's Reply: The Arizona reasonable expectations doctrine, and Arizona's common law doctrine of equitable estoppel, are separate legal issues. The Court's order

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did not rule on LMC's affirmative defense of equitable estoppel. Furthermore, the

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Court's ruling as to the reasonable expectations doctrine was limited to the finding that the doctrine does not protect insurers. descriptive list. Also, see LMC's response to plaintiffs'

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g)

Whether, regardless of the applicability of the reasonable expectations doctrine, the undisputed statements made by U-Haul's insurance agent to LMC, and the statements made by or on behalf of U-Haul in the policy applications that LMC's policy would not attach until after $7,000,000 had been paid for indemnity only,

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requires a finding, as a matter of law, that this was the intent of the policy language which is at issue on the parties' cross-motions for summary judgment. Plaintiffs' Response: See Response (f) above. The Court's Order clearly and unequivocally rules that, as a matter of law and fact, LMC's policies do in fact attach

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after the exhaustion of the underlying RWIC policies by the payment of indemnity and LAE. As a sophisticated insurer, LMC may not reasonably rely on the putative

statements of the broker to contradict the clear contractual terms. Defendant's Reply: Plaintiffs' response is non-responsive because it does not address LMC's described issue regarding the parties' intent, and/or the fact that the Court should consider the application for the policy in considering the overall intent of the subject insuring agreement. Instead, plaintiffs' "response" merely asserts a factual issue of reasonable reliance which was not part of the Court's order. h) Whether the Court's order, in view of the Court's specific finding that the last sentence of the RU policies' definition of ultimate net loss precludes payment for

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expenses covered by the underlying policies, constitutes a finding by the Court that none of the LAE paid by Republic Western comes within the RU policies' definition of "ultimate net loss."

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Plaintiffs' Response: This is an utter misstatement of the Court's finding. The Court did not find that the last sentence of the RU policies' definition of ultimate net loss precludes payment for expe nses covered by the underlying policies or excludes such payments from the RU Policies' definition of ultimate net loss. Rather, it held that the

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plain reading of the policy suggests that this provision avoids possible redundancy of payments. That is, the RU policies will not pay for defense costs that have already been paid by the underlying policies. This, too, would apply to LMC's policies. Defendant's Reply: Page 8 of the Court's order states: "A plain reading of the policy

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suggests that this provision avoids possible redundancy of payments by insuring that the excess policy does not provide payment for expenses covered by the underlying policies." Plaintiffs have taken the position in their summary judgment motion that LMC's following form endorsements subjects the LMC policy to Republic Western's insuring agreement including the RUMM's policy's definition of "ultimate net loss." All of the Republic Western policies underlie the LMC policy. Therefore, pursuant to the Court's aforesaid finding, LAE paid by any of the three Republic Western policies is excluded from the RUMM policy's definition of "ultimate net loss" when determining the extent of LMC's obligation, as well as when determining the extent of the RUMM

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policy's obligation.

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C.

Statement Regarding Whether a Hearing or Further, Limited Briefing Would Aid the Court and Parties in Resolving This Case. Plaintiffs' statement: a) It is Plaintiffs' position that no hearing or further briefing is necessary.

1.

2.

Defendant's statement: b) It is defendant's position that a hearing and/or further limited briefing on the matters set forth above would aid the Court and parties in resolving this case. RESPECTFULLY SUBMITTED this 14th day of July, 2006. RUBIN FIORELLA & FRIEDMAN, LLP Bruce Friedman, Esq.. 292 Madison Avenue, 11th Floor New York, NY. 10017 And MARISCAL, WEEKS, McINTYRE & FRIEDLANDER, P.A.

By: ___s/Gerald Gaffaney________________ Gerald Gaffaney, Esq. David J. Ouimette, Esq. 2901 North Central Avenue, Suite 200 Phoenix, AZ 85012 Attorneys for Plaintiffs WALTON LANTAFF SCHROEDER & CARSON LLP Wayne Gill, Esq. Southtrust Center 1700 Palm Beach Lakes Boulevard, 7th Floor West Palm Beach, Florida 33401 and

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KUNZ, PLITT, HYLAND, DEMLONG & KLEIFIED, P.C.

By: ___s/Daniel Maldonado_____________ Steven Plitt, Esq. Daniel Maldonado, Esq. 3838 N. Central Avenue, Suite 1500 Phoenix, AZ 85012 Attorneys for Defendants ORIGINAL electronically filed with the USDC Court this 14th day July, 2006; and A copy delivered to Judge Campbell; ... and a COPY of the foregoing electronically served and mailed this 14th day of July, 2006 to: Gerald Gaffaney, Esq. David J. Ouimette, Esq. MARISCAL, WEEKS, MCINTYRE & FRIEDLANDER, P.A. 2901 North Central, Suite 200 Phoenix, AZ 85012 Attorneys for Plaintiff Bruce Friedman, Esq. Mark S. Fragner, Esq. RUBIN, FIORELLA & FRIEDMAN, LLP 292 Madison Avenue, 11th Floor New York, NY 10017 Attorneys for Plaintiff

____s/Adriana Garcia_______________

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