KnightBrook Insurance v. Payless Car Rental System, Inc., 2014 U.S. Dist. LEXIS 122641

Background

On Feb. 17, 2010 Bovre rented a car from Payless; he did not initial the line declining Supplemental Liability Insurance (SLI) and claims the desk agent (Fisher) told him SLI was included, though he did not pay a premium.
On Mar. 1, 2010 Bovre collided with the McGills, who sued; Travelers and Payless advanced $530,000 but SLI insurers (including KnightBrook) denied coverage.
Bovre entered a Damron agreement with the McGills: McGills accepted $530,000 plus assignment of Bovre’s claims and a stipulated $8 million judgment; later the McGills sued KnightBrook and Payless entities in state court and removed the case to federal court.
KnightBrook (and KMIS) settled the McGills’ remaining demand for $970,000 and received an assignment of Bovre’s claims; KnightBrook (now a plaintiff) sued Payless/PCR asserting assigned negligence, breach (written and oral), negligent misrepresentation, equitable indemnification, and breach of fiduciary duty; Payless counterclaimed for bad faith.
Court resolved several summary-judgment issues: negligence and negligent misrepresentation assigned claims were time-barred; assigned breach of contract claims were extinguished by accord and satisfaction; equitable indemnification and breach of fiduciary duty survive in part because an agency issue (whether PCR was KnightBrook’s agent) presents disputed facts; bad-faith counterclaim likewise survives.
The Court denied (1) Plaintiff’s request for an adverse inference for missing 30(b)(6) testimony, (2) Defendants’ Rule 39(b) request for a jury trial (jury demand waived), and (3) Defendants’ motion in limine to exclude Plaintiffs’ expert (bench trial context and no prejudice shown).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are assigned negligence / negligent-misrepresentation claims time-barred?	Accrual occurred when KMIS denied coverage (July 1, 2010) so within limitations.	Accrual occurred no later than June 24, 2010 (Bovre had admitted he didn’t buy SLI and retained counsel), so claims untimely.	Claims accrued on or before June 24, 2010 and are time-barred; summary judgment for Defendants on counts 1–2.
Do assigned breach-of-contract (written and oral) claims survive? (contract formation/ambiguity)	Rental contract and attendant facts show SLI was included (failure to initial to decline); or an enforceable oral promise exists.	Contract and charge summary show Bovre did not procure SLI; any oral promise was too vague.	Factual dispute on whether written contract was ambiguous and whether an oral contract existed — but accord and satisfaction extinguished the claim as a matter of law; summary judgment for Defendants on counts 3–4.
Did the McGills’ settlement (Damron/assignment) discharge the contract claims (accord & satisfaction)?	Settlement resolved distinct contractual claims; accord and satisfaction does not extinguish separable claims against Payless.	The McGills sued on a single insurance contract; payment under the settlement was an accord and satisfaction that extinguished the claim.	The settlement was an accord and satisfaction that discharged the contract claim; assigned breach claims are extinguished.
Can KnightBrook obtain equitable indemnification / breach of fiduciary duty from Payless/PCR despite anti‑subrogation? (agency vs insured relationships)	Anti-subrogation inapplicable because PCR acted as KnightBrook’s agent (not as an insured) and KnightBrook paid a non-covered claim; agency permits indemnity/subrogation against an agent-tortfeasor.	PCR was an insured under the master SLI policy; anti-subrogation bars insurer recovery against its insured; no agency exists.	Anti-subrogation bars recovery in KnightBrook’s capacity as insurer, but disputed factual record about agency precludes summary judgment on claims against Defendants in their capacity as KnightBrook’s agents; counts survive in part.
Is Plaintiffs’ breach of fiduciary duty claim time-barred?	Accrual occurred later (post-depositions) when Plaintiffs knew a wrong caused injury.	Accrual occurred by summer 2010 (denial of SLI / correspondence), so claim untimely.	Court cannot determine accrual and appreciable injury as matter of undisputed fact; statute-of-limitations defense denied on summary judgment.
Did Defendants waive jury trial; if so, should court grant relief under Rule 39(b)?	Defendants relied on docket entry and good faith; request relief from waiver.	No jury demand was filed; counsel expressly stated no jury demand in Case Management Report—waiver.	Jury demand was waived; Rule 39(b) relief denied (failure to timely demand due to oversight/inadvertence).
Should Court adopt adverse inference for failure to produce 30(b)(6) witnesses?	Defendants had exclusive control and failed to produce corporate witnesses; adverse inference appropriate.	No bad faith shown; parties could have deposed third-party witnesses instead.	No showing of bad faith or spoliation; negative-inference motion denied.
Exclude Plaintiffs’ expert (Zlaket)?	Expert lacks reliable insurance practice basis and asserts legal conclusions.	(Plaintiffs) Expert testimony is admissible and helpful.	Motion denied — bench trial context and Court will separately screen legal conclusions; portions already relied upon in briefing.

Key Cases Cited

Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
Anderson v. Liberty Lobby, 477 U.S. 242 (jury standard for genuine dispute at summary judgment)
Damron v. Sledge, 105 Ariz. 151 (Arizona Damron assignment/settlement procedure)
Walk v. Ring, 202 Ariz. 310 (Arizona discovery rule for accrual)
Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148 (contract interpretation; extrinsic evidence for ambiguous contracts)
Consolidated Enterprises, Inc. v. Schwindt, 172 Ariz. 35 (anti-subrogation principle)