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Colony Insurance Co. v. Colorado Casualty Insurance Co.

United States District Court, D. Nevada

July 3, 2018

COLONY INSURANCE COMPANY, Plaintiff,
v.
COLORADO CASUALTY INSURANCE COMPANY; DOES 1-10 and ROE CORPORATIONS 1-10, inclusive, Defendants.

          ORDER FINDINGS OF FACT AND CONCLUSIONS OF LAW AFTER COURT TRIAL

          RICHARD F. BOULWARE, II, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This is a suit in equity brought by an excess insurance carrier against a primary insurance carrier for settlement payments related to a motor vehicle accident. Plaintiff Colony was the excess insurance carrier and Defendant Colorado the primary insurance carrier for All Temp Air Conditioning and Heating, Inc. from September 13, 2006 until September 13, 2007. On May 13, 2007, All Temp employee Jack Hodges was involved in a motor vehicle accident while driving an All Temp vehicle, striking another vehicle owned by Jose Bustillos, causing damage to both vehicles and physical injuries to Bustillos. As a result of this accident, Bustillos brought suit against All Temp, its owner Davy Ingram, and Jack Hodges, which eventually resulted in a $1.95 million settlement in early 2011. Defendant Colorado paid its policy limit of $996, 626.19, and Plaintiff Colony paid the remaining amount of $953, 373.81. Plaintiff Colony brings the instant suit in equity seeking costs incurred in relation to the Bustillos action. The Court held a bench trial in this case on January 25-27, 2017 and April 3-4, 2017. The Court rules in favor of the Plaintiff based on the following findings of fact and conclusions of law.

         II. BACKGROUND

         The parties agree that All Temp purchased commercial auto insurance coverage from Defendant Colorado with a $1 million liability limit and commercial liability umbrella insurance coverage from Plaintiff Colony with a $1 million liability limit, covering the policy period from September 13, 2006 to September 13, 2007. They agree that All Temp employee Jack Hodges was involved in a motor vehicle accident with Jose Bustillos on May 13, 2007, while driving a vehicle owned by All Temp. They agree that Defendant Colorado turned down two offers to settle Bustillos' claim within Colorado's $1 million policy limit, before eventually agreeing to settle the claim for $1.95 million.

         The parties disagree as to whether Defendant Colorado conducted a proper investigation of Bustillos' claim, whether Defendant Colorado acted reasonably in attempting to settle the claim, and whether Defendant Colorado acted in bad faith by failing to settle the claim within its policy limit.

         III. JURISDICTION AND VENUE

         This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332, as the parties are citizens of different states and the amount in controversy exceeds $75, 000. Venue is proper because the incident from which this dispute arose occurred within Clark County, Nevada.

         IV. FINDINGS OF FACT

         Federal Rule of Civil Procedure 52(a)(1) requires the Court to “find the facts specially and state its conclusions of law separately.” Fed.R.Civ.P. 52(a)(1). The court must make findings sufficient to indicate the factual basis for its ultimate conclusion. Kelley v. Everglades Drainage District, 319 U.S. 415, 422 (1943). The findings must be “explicit enough to give the appellate court a clear understanding of the basis of the trial court's decision, and to enable it to determine the ground on which the trial court reached its decision.” United States v. Alpine Land & Reservoir Co., 697 F.2d 851, 856 (9th Cir.), cert. denied, 464 U.S. 863 (1983) (citations omitted). Accordingly, following the bench trial and having reviewed all of the evidence and observed all of the witnesses, the Court makes the following findings of fact in this case.

         1. All Temp Air Conditioning & Heating, Inc. (“All Temp”) purchased a “Commercial Package” insurance policy that included commercial auto insurance coverage from Colorado (“the Colorado Policy”), covering the policy period from September 13, 2006 to September 13, 2007. The Colorado Policy provided liability insurance for damages because of bodily injury or property damage caused by an accident and resulting from the ownership, maintenance, or use of a covered automobile, with a liability limit of $1 million for any one accident or loss.

         2. All Temp also purchased Commercial Liability Umbrella insurance from Colony (“the Colony Policy”), covering the policy period from September 13, 2006 to September 13, 2007. The Colony Policy provided excess liability insurance for the “ultimate net loss” to the insured for damages because of bodily injury or property damage caused by an occurrence; occurrence was defined to include an “accident”; the Colony Policy had a liability limit of $1 million for each occurrence.

         3. An All Temp employee, Jack Hodges (“Hodges”), was involved in a vehicle accident in Las Vegas on Sunday, May 13, 2007 at approximately 2:30 pm. He was driving a red Chevy truck owned by All Temp and struck a vehicle owned by Jose Bustillos (“Bustillos”), causing damage to both vehicles and physical injuries to Bustillos. He was driving in the course and scope of his employment and was authorized to be driving the vehicle at the time of the accident.

         4. Hodges was involved in two other motor vehicle accidents during the 24-hour period before the Bustillos accident, while driving vehicles owned by All Temp. Colorado was informed of these other accidents within a week of May 13, 2007.

         5. Colorado paid All Temp for its totaled truck from the May 13, 2007 accident, took title to it, and then sold the truck for salvage in the fall of 2007, failing to preserve it as evidence.

         6. As of June 7, 2007, Colorado had determined that it had no subrogation rights against Hodges' personal automobile insurance because he was driving the All Temp vehicle with permissive use.

         7. Colorado paid Bustillos' property damage claim on July 25, 2007. Colorado paid this claim because Colorado believed that All Temp's liability for ...


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