Edens v. Netherlands Insurance
834 F.3d 1116
10th Cir.2016Background
- Zachery Edens (22) died when another driver turned left into his northbound motorcycle; the motorcycle was owned by his parents, David and Rhonda Edens.
- Edens Structural Solutions LLC (Edens LLC) held a commercial auto policy with The Netherlands Insurance Company (Netherlands) that included Uninsured/Underinsured Motorist (UM) coverage under endorsements.
- David (CEO/executive officer of Edens LLC) and Rhonda (his wife) claimed Zachery was an insured under the policy’s UM coverage as a family member of an executive officer and demanded $1,000,000; Netherlands denied coverage after requesting documentation.
- Plaintiffs (David, Rhonda, and Edens LLC) sued Netherlands for breach of contract, bad faith, and related claims; district court granted summary judgment to Netherlands, concluding the policy precluded UM coverage because the motorcycle was owned by David and Rhonda.
- On appeal the Tenth Circuit reviewed (1) whether the relevant endorsement (Business Auto Extension Endorsement §17(C)) was ambiguous; (2) bad-faith dismissal; and (3) discovery/privilege and policy-production arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §17(C) of the Business Auto Extension Endorsement is ambiguous | §17(C) can be read to provide UM coverage to Zachery because it focuses on the auto that struck him (a third-party car), not the auto he occupied | §17(C) unambiguously covers only insureds occupying an auto not owned by the named insured, the individual, or a family member; here the motorcycle was owned by parents so excluded | Court: Unambiguous; §17(C) covers insureds occupying any auto they or family do not own (or pedestrians struck by such autos); no coverage because motorcycle owned by David/Rhonda |
| Whether reasonable-expectations doctrine applies (and if Plaintiffs forfeited the argument) | If ambiguous, the endorsement should be construed under reasonable expectations in Plaintiffs’ favor | Netherlands: Plaintiffs didn’t raise ambiguity or reasonable-expectations below, so they waived/forfeited those arguments | Court: Ambiguity argument preserved; reasonable-expectations need not be reached because policy is unambiguous |
| Whether Plaintiffs can pursue a bad-faith claim absent coverage | Bad-faith claim may survive even if breach-of-contract claim fails; Vining suggests bad faith can be independent | Netherlands: Under Oklahoma law, bad-faith prima facie case requires proof the insurer was required to pay under the policy (i.e., coverage) | Court: Under Oklahoma law insured must show coverage as an element of bad faith; dismissal proper because no coverage |
| Discovery/procedure: privilege log and uncertified policy production | Netherlands waived privilege by failing to timely produce a privilege log and should be compelled to produce unredacted claim file; Netherlands failed to produce certified policy in initial disclosures so should be precluded from relying on exclusions | Netherlands: Any discovery defects were not properly presented to or ruled on by the district court; termination of motions in limine was within court’s discretion | Court: No abuse of discretion—Plaintiffs failed to timely move to compel or properly present Rule 37 issues; district court properly terminated motions in limine and could consider certified policy at summary judgment |
Key Cases Cited
- Greystone Constr., Inc. v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011) (standard of review for summary judgment in diversity cases)
- Haberman v. Hartford Ins. Grp., 443 F.3d 1257 (10th Cir. 2006) (forum state's substantive law governs in diversity cases)
- Bituminous Cas. Corp. v. Cowen Constr., Inc., 55 P.3d 1030 (Okla. 2002) (unambiguous insurance-policy language is given ordinary meaning)
- Am. Econ. Ins. Co. v. Bogdahn, 89 P.3d 1051 (Okla. 2004) (reasonable-expectations doctrine applies when policy language is ambiguous or exclusions are hidden)
- Max True Plastering Co. v. U.S. Fid. & Guar. Co., 912 P.2d 861 (Okla. 1996) (both parties may rely on reasonable expectations; doctrine explained)
- Vining ex rel. Vining v. Enter. Fin. Grp., Inc., 148 F.3d 1206 (10th Cir. 1998) (bad-faith liability discussion; does not eliminate coverage element requirement)
- Badillo v. Mid Century Ins. Co., 121 P.3d 1080 (Okla. 2005) (elements of bad-faith claim under Oklahoma law)
- Wynn v. Avemco Ins. Co., 963 P.2d 572 (Okla. 1998) (whether policy language is ambiguous is a question of law)
- Cranfill v. Aetna Life Ins. Co., 49 P.3d 703 (Okla. 2002) (ambiguity test from perspective of a reasonable lay person)