United States District Court, D. Nevada
HOWARD D. McKIBBEN, Chief District Judge.
Plaintiff Companion Property and Casualty Group's ("plaintiff") first amended complaint (#46) filed on March 23, 2013, asserts fourteen causes of action against ten defendants based on their alleged involvement in procuring a workers' compensation policy from plaintiff for Sky High Sports, an entity operating indoor trampoline centers. All defendants have appeared and answered plaintiff's complaint. Sky High has asserted three counterclaims against plaintiff.
Plaintiff has settled its claims against defendants Pinnacle Underwriters, Highpoint Risk Services, and according to a stipulation filed by the parties (#155) Risk Placement Services, Joan Vascones, and Gloria Lam (collectively "RPS"). Plaintiff has also reached a settlement with defendants Consolidated Agency Partners, dba Menicucci Insurance Associates and Karen Faust (collectively "CAP"), which is contingent on the court's determination that the settlement was reached in good faith. CAP's motion for good faith settlement determination remains pending.
Presently before the court are several motions for summary judgment. The CAP defendants have filed a motion for summary judgment on all of plaintiff's claims (#165). Plaintiff has responded (#175), and CAP has replied (#181). Defendants Sky High Sports, LLC, Sky High Sports Orange County Operations, LLC, and Rolland Weddell (collectively "Sky High") have filed a motion for summary judgment on all of plaintiff's claims as well as on their counterclaims and one of their affirmative defenses (#168). Plaintiff has responded (#174), and Sky High has replied (#180). Finally, plaintiff has filed a motion for partial summary judgment on its claim of negligent misrepresentation (#170). Defendants have opposed (#177, #178) and plaintiff has replied (#182).
Sky High Sports operates recreational indoor trampoline centers. ( See Pl. Mot. Summ. J. Ex. 1 (Raymond Dep. 11-12); CAP Opp'n Pl. Mot. Summ. J. Ex. C (Weddell Dep. 6-16); Sky High Mot. Summ. J. Ex. S at 2)). Before 2010, Sky High's workers' compensation coverage was issued under the "amusement" class code. (Pl. Mot. Summ. J. Ex. 2 (Lewis Dep. 19-20, 40-41, 43)). Sky High owner and managing member Rolland Weddell ("Weddell") met with insurance broker Karen Faust ("Faust") of Menicucci Insurance Associates ("Menicucci") to discuss Sky High's insurance needs, including workers' compensation. ( Id. at 24; id. Ex. 5 (Weddell Dep. 134-36); CAP Mot. Summ. J. Ex. M (Weddell Dep. 16); id. Ex. D (Faust Dep. 31-32)). During their conversation, Faust and Weddell discussed the nature of Sky High's business. Faust claims Weddell said Sky High employees do not teach people how to do back flips or tricks on the trampolines and do not perform such in the scope of their duties. (CAP Mot. Summ. J. Ex. D (Faust Dep. at 41-42, 76-77); Pl. Mot. Summ. J. Ex. 5 (Wedell Dep. 78)). Faust did not ask whether employees jump up and down on the trampolines. (CAP Mot. Summ. J. Ex. M (Weddell Dep. 77)). However, Weddell says he told Faust that employees "travel on the trampolines and... in order to travel they jump on the trampolines"; he also told her that employees would "perch" on pads separating the trampolines until they have to move. (Pl. Mot. Summ. J. Ex. 5 (Weddell Dep. 48, 76-78)). Faust did not visit any Sky High centers or interview any employees. ( Id. at 32-33, 37, 40)). While she did visit the web site, she did not recall seeing any AIRobics training depicted on the site. (CAP Mot. Summ. J. Ex. D (Faust Dep. 37-40, 72, 124, 213-14)).
Faust believed that Sky High's classification should be sports and fitness instead of amusement. ( See Pl. Mot. Summ. J. Ex. 6; id. Ex. 4 (Faust Dep. 37)). The premium with a fitness class code was significantly less than the premium with an amusement class code. (Pl. Mot. Summ. J. Ex. 5 (Weddell Dep. 135-36) (testifying that the premium for amusement was 2.5 times more expensive than that of sports and fitness). Weddell asked Faust to place Sky High's workers' compensation coverage. ( Id. )
Faust prepared an "Acord 125, " an application for workers' compensation insurance. (CAP Mot. Summ. J. Ex. D (Faust Dep. 99). In the "Nature of Business/Description of Operations" box, she wrote: "Sports and fitness facility using trampolines. Employees are used at the front desk for check, monitoring wrist bands for time, food area, maintenance. They do not teach nor are they out on the trampolines." (Pl. Mot. Summ. J. Ex. 3A). Under "Rating Information, " Faust included the fitness class code. ( Id. ) Finally, she represented that Sky High did not have "any policy or coverage declined, canceled, or non-renewed during the prior 3 years, " and that no work was performed "underground or above 15 feet." ( Id. )
Faust emailed Sky High's application to insurers and wholesale brokers, including defendant RPS. ( See id. Ex. 6). In her emails, Faust noted that the policy had been written under the "amusement" code but that she felt it had been misclassed and should be "classed in Physical Fitness." ( Id. ) She stated that employees are not on trampolines unless someone needs help, that they do not provide any training or officiating, and that although Sky High offers Airobics and dodge ball, employees stand on the "catwalk" and call out moves and do not participate nor go out on the trampolines. ( Id. ) She pointed to Sky High's web site for "information on the business." ( Id. )
Several insurers declined to quote. (Pl. Mot. Summ. J. Ex. 4 (Faust Dep. at 205-06)). One stated it would pass because Sky High had trampolines and the losses showed "some claims where employees jumped off the trampolines and injured themselves." ( Id. ; id. Ex 7).
RPS forwarded the application to defendant Pinnacle, which forwarded the application to Dallas National. (CAP Mot. Summ. J. Ex. P; id. Ex. A (Leatzow Dep. 52); id. Ex. N (Lam Dep. 21)). Dallas National, acting as plaintiff's general agent, underwrote the policy, bound coverage and issued Sky High a workers' compensation policy with effective dates of September 21, 2010, to September 21, 2011. (CAP Mot. Summ. J. Ex. B (Hirsch Dep. 43-47); Sky High Mot. Summ. J. Ex. C.; id. Ex. H).
Jerry Sam of Dallas National reviewed the application and made the final decision to bind coverage. (CAP Mot. Summ. J. Ex. C (Sam Dep. 17-18, 27)). Sam described his review as "almost like box underwriting." ( Id. at 52-53)). He compared the estimated losses to the estimated premium to determine if the numbers fit "in the box"; as the "loss run ratio" (estimated losses to estimated premium) was under 40 percent, Sam issued the policy without further investigation. ( Id. at 31-32, 52-53, 83, 161-62, 164-66)). Although Sky High's "loss runs" - a history of prior loss claims - were available to Sam, he did not review them. ( See id. at 50, 159, 166); id. Ex. F). The loss runs available to Sam contained some claims possibly involving trampolines. ( Id. Ex. F). Faust's email did not make it into Dallas National's file and therefore was not considered by Sam. ( Id. Ex. C (Sam Dep. at 174, 190)). While Sam assumed that employees would at least occasionally be on the trampolines in the course of maintenance, cleaning, or assisting customers, and that they would engage in "low exposure jumping, " he testified that had the application stated employees were on the trampolines, he would have investigated further, and had he known employees were jumping on trampolines, he would not have issued the policy. ( Id. at 93-94, 108-09, 121-30).
On July 6, 2011, Faust prepared and submitted a renewal application. ( See Pl. Mot. Summ. J. Ex. 3D). The renewal application was in all material respects identical to the original application. ( See id. ) Faust also submitted updated loss run information. ( See CAP Mot. Summ. J. Ex. T; id. Ex. U; id. Ex K; id. Ex. C (Sam Dep. 64, 66, 82-83, 209-12, 215)). The updated loss runs contained some injuries possibly related to the trampolines. (Sky High Mot. Summ. J. Ex. K). Available in Dallas National's file at the time of renewal was a document suggesting Sky High had been classified under "amusement" in the past. (CAP Mot. Summ. J. Ex. C (Sam Dep. 182-85); id. Ex. F; Sky High Mot. Summ. J. Ex. E). Plaintiff renewed the policy and bound coverage from September 21, 2011, to September 21, 2012. (Sky High Mot. Summ. J. Ex. N).
On October 3, 2011, Sky High employee Jake Likich became paralyzed when, while trying to perform a trick on the trampoline, he landed on his head, upper back and neck area instead of on his back. (Pl. Mot. Summ. J. Ex. 13; CAP Opp'n Ex. I (Reeve Dep. 27)). Likich had been on duty at the time and was jumping with other Sky High employees who were off the clock, including Sydney Reeve. (CAP Mot. Summ. J. Ex. E (Reeve Dep. 28)). Although Likich had been practicing AIRobics moves, Reeve testified that the trick he had attempted was not part of being an AIRobics instructor. (CAP Mot. Summ. J. Ex. E (Reeve Dep. 26-28, 39-40)). Likich made a claim under the workers' ...