Lennar Corp. v. Transamerica Insurance
227 Ariz. 238
| Ariz. Ct. App. | 2011Background
- Lennar developed Pinnacle Hill in Glendale; defects led to homeowner complaints and litigation.
- Lennar tendered claims under multiple CGL policies to TIG, USF&G, U.S. Fire and others in 1998.
- In 2000 the insurers sought a declaratory judgment of no duty to defend/indemnify; Lennar counterclaimed and cross-claimed.
- 2003 superior court granted summary judgment for insurers on coverage; this court later reversed on occurrence issue in Lennar I.
- About a year after Lennar I, insurers renewed bad-faith summary judgment motion; Lennar appealed; settlements have mostly resolved homeowners/insurers; remaining issues proceeded on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether genuine issues of material fact preclude summary judgment on bad faith. | Lennar asserts insurers lacked a reasonable basis and acted unreasonably while contesting coverage. | Insurers contend the prior adverse coverage ruling creates a fairly debatable issue and justifies withholding defense payment. | Genuine issues of material fact preclude summary judgment. |
| Whether law-of-the-case requires reversal of summary judgment. | Lennar argues Lennar I's law-of-the-case governs this appeal and requires reversal of insulation on bad faith. | Insurers contend law-of-the-case should apply to preclude reconsideration. | Doctrine does not require reversal here; but the case is remanded for trial on remaining issues. |
| Whether fair debatability can be decided as a matter of law or must go to the jury. | Lennar argues the meaning of policy terms and extrinsic evidence create genuine issues for the jury. | Insurers argue fair debatability can be decided as a matter of law when the coverage issue is clearly decided against the insured. | Fair debatability is a factual issue for the jury when extrinsic evidence bears on meaning. |
| Whether insurers owe ongoing claims-handling duties while a coverage action proceeds. | Lennar shows insurers continued to investigate, defend, and settle as claims were pending, violating duties. | Insurers claim filing a declaratory judgment action permits delaying claims handling duties. | Insurers may have ongoing duties; summary judgment inappropriate where evidence shows improper handling. |
Key Cases Cited
- Lennar Corp. v. Auto-Owners Ins. Co. (Lennar I), 214 Ariz. 255 (Ariz. App. 2007) (reversed summary judgment on occurrence and remanded)
- Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234 (2000) (implied covenant; insurer must have reasonable basis and know it)
- Deese v. State Farm Mut. Auto. Ins. Co., 172 Ariz. 504 (1992) (covenant breach and fiduciary duties in insurance contracts)
- Tobel v. Travelers Ins. Co., 195 Ariz. 363 (1999) (coverage fairly debatable and discovery context)
- Aetna Casualty & Surety Co. v. Superior Court, 161 Ariz. 437 (App. 1989) (insurer's reasonable basis and summary judgment context)
- Clearwater v. State Farm Mut. Auto. Ins. Co., 164 Ariz. 256 (1990) (insurer settlement control and first-party context)
- Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148 (1993) (extrinsic evidence; policy language interpretation)