Laufer v. Auditore
1 CA-CV 16-0288
| Ariz. Ct. App. | Oct 3, 2017Background
- Jack Laufer, a minority owner/employee of Sprayfoam Southwest, died in a two-car accident while driving a company truck; the other driver's insurer paid $15,000 and Diamond State (primary) ultimately paid $850,000 of its $1M UIM/UM limits after disputing seatbelt-related causation.
- Sprayfoam purchased a Diamond primary commercial auto policy (which included uninsured/underinsured motorist coverage) and an excess liability policy from Starr arranged by broker Auditore; Starr issued an excess policy form (XS-100 10 08) that expressly excluded uninsured/underinsured motorist coverage.
- A broker-issued binder stated the excess policy was intended to "follow" the form of the underlying policies but warned the binder was not the full policy, listed the Starr excess form, and said the policy controls over any binder inconsistency.
- The Laufers sued Starr (breach of contract, bad faith, and reasonable-expectations theory) and Auditore (negligent procurement/failure to advise). The superior court granted summary judgment for Starr and Auditore and awarded Starr $125,000 in attorney’s fees; the Laufers appealed.
- The Court of Appeals affirmed: it held the binder and the follow-form language did not override the excess policy’s express exclusion; the reasonable-expectations doctrine did not apply; and the Laufers failed to prove that Auditore’s alleged breach caused harm or that Sprayfoam would have purchased excess UIM coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the binder's "follow-form" statement make Starr's excess policy cover UIM losses despite an express exclusion in the excess policy? | Binder promised excess would follow underlying auto form (which had UIM), so exclusion should be unenforceable. | Binder expressly warned it was only an outline, listed the Starr form (which excluded UIM), and stated the policy controls over binder inconsistencies. | Held for Starr: the formal policy controls; the binder's warnings and listing of the XS-100 form negate plaintiffs' claim. |
| Does the "reasonable expectations" doctrine invalidate Starr's express exclusion? | Laufers: insured reasonably expected excess to provide UIM because of follow-form binder and broker conduct. | Starr: no adequate notice failure or insurer-induced expectation; binder put insured on notice of exceptions; no evidence Starr or broker promised UIM coverage. | Held for Starr: doctrine inapplicable; expectation was not objectively reasonable or induced by insurer, and insured would not have paid for excess UIM. |
| Did broker Auditore breach a duty to Sprayfoam/insureds by failing to advise that excess lacked UIM, and did that cause harm? | Laufers: Auditore (as agent) should have informed Sprayfoam so it could make informed elections binding all insureds. | Auditore: Sprayfoam (through CEO Radobenko) made coverage decisions and testified he would not have purchased excess UIM even if informed; no causation or harm shown. | Held for Auditore: summary judgment affirmed—no evidence of causation or that Sprayfoam would have bought UIM coverage. |
| Was Starr's award of attorney fees under A.R.S. § 12-341.01 appropriate? | Laufers argued limited; noted Ms. Laufer's widow status and complexity of issues. | Starr sought substantial fees; trial court exercised discretion. | Held: fee statute applicable; trial court’s $125,000 award affirmed as within discretion. |
Key Cases Cited
- Gordinier v. Aetna Cas. & Sur. Co., 154 Ariz. 266 (Ariz. 1987) (articulates limited circumstances where reasonable-expectations doctrine may prevent enforcement of unambiguous policy terms)
- Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383 (Ariz. 1984) (reasonable-expectations doctrine requires insurer-induced promise or conduct)
- Millar v. State Farm Fire & Cas. Co., 167 Ariz. 93 (App. 1990) (insured must have objective, insurer-induced expectation to invoke reasonable-expectations)
- Statewide Ins. Corp. v. Dewar, 143 Ariz. 553 (Ariz. 1984) (binders are contracts in contemplation of a later formal policy; policy supersedes binder)
- Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195 (App. 2007) (standard of review for summary judgment)