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Shade v. United States Fidelity and Guaranty Co.5/10/1990
Michael and Priscilla Shade appeal from the trial court's order granting of summary judgment in favor of appellee, finding that coverage did not extend beyond the period set forth in the insurance policy issued to Douglas and Constance Jewell. For the following reasons, we affirm.
FACTS
Michael Shade was severely injured in a motorcycle accident in June 1979. The Shades instituted suit against several defendants on various negligence theories. All defendants prevailed except the Jewells who failed to appear. The Jewells, owners of Jewell's Cycle City, were allegedly negligent in repairing the motorcycle which caused Michael Shade's accident. A $5.5
million default judgment was entered against the Jewells.
The Jewells had obtained a garagekeepers liability insurance policy from appellee, United States Fidelity and Guaranty Company (USF & G), shortly after they purchased Cycle City in April or May 1976. The policy (policy 1) was transferred to the Jewells from the previous owner of Cycle City, Bill Yarbrough. In March 1978, policy 1 expired and USF & G issued a second policy (policy 2) to the Jewells but cancelled it in November 1978 for non-payment of premiums. In January 1979, the Jewells turned Cycle City back to Yarbrough. USF & G issued a garage liability policy (policy 3) to Yarbrough in February 1979. Hesselink handled all of Cycle City's insurance needs until he sold his agency to Mueller Insurance Agency in October 1978.
USF & G refused to defend or indemnify the Jewells against the Shades' claims because the accident occurred outside the periods of coverage. The Jewells did not defend themselves in the case. After a default judgment was entered, the Jewells executed an assignment to the Shades of any potential claims against USF & G in exchange for a covenant not to execute against them personally.
The Shades filed a lawsuit against USF & G in the United States District Court for the District of Arizona. After they amended the complaint to join Hesselink as a defendant, the case was removed from federal court and was assigned to Judge J. Richard Hannah in the Pima County Superior Court. The Shades filed a second amended complaint that joined Mueller Insurance Agency as a defendant. Subsequently, summary judgment was granted dismissing Hesselink and Mueller Insurance from the action because they were not privy to the Shade-Jewell assignment.
A jury trial was held in July 1987. At the conclusion of their case, the Shades moved to amend their complaint for a third time. In addition to previously alleged claims based on policy 3, the policy issued to Yarbrough in February 1979, they sought to include allegations based on policies 1 and 2, the policies covering the Jewells while they operated the business. Judge Hannah granted the motion and simultaneously ordered a mistrial, sua sponte. Appellees then moved for a directed verdict which the court denied.
On retrial, Judge Hannah recused himself from the case, and it was subsequently assigned to Judge Carruth. USF & G moved for summary judgment on the issue of coverage. The court granted the motion and this appeal followed.
ISSUES
The Shades contend that the trial court erred in granting summary judgment because a material issue of fact exists as to whether the Jewells had a reasonable expectation of coverage beyond the stated policy period and whether USF & G was negligent in describing policy terms in the Cycle City policies and in failing to defend the Jewells. The Shades also contend that the trial court abused its discretion in granting summary
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