United States Court of Appeals for the Ninth Circuit

October 6, 2023, Argued and Submitted, Pasadena, California; October 23, 2023, Filed

No. 22-55356, No. 22-55414

BARBARA STEIN, an individual, Plaintiff-Appellee, and STUART STEIN, an individual, Plaintiff, v. FARMERS INSURANCE COMPANY OF ARIZONA, a corporation, Defendant-Appellant, and FARMERS INSURANCE EXCHANGE; et al., Defendants.BARBARA STEIN, an individual, Plaintiff-Appellant, and STUART STEIN, an individual, Plaintiff, v. FARMERS INSURANCE COMPANY OF ARIZONA, a corporation, Defendant-Appellee, and FARMERS INSURANCE EXCHANGE; et al., Defendants.

Notice: PLEASE REFER TO FEDERAL RULES OF APPELLATE PROCEDURE RULE 32.1 GOVERNING THE CITATION TO UNPUBLISHED OPINIONS.

Prior History:  [*1] Appeal from the United States District Court for the Southern District of California. D.C. No. 3:19-cv-00410-DMS-AHG, D.C. No. 3:19-cv-00410-DMS-AHG. Dana M. Sabraw, Chief District Judge, Presiding.

Disposition: AFFIRMED.

Core Terms

injuries, insured, unfounded, bad faith, district court

Case Summary

Overview

HOLDINGS: [1]-Substantial evidence supported that defendant engaged in unfounded delay, where immediately after the accident, plaintiff gave defendant a medical authorization, allowing it to obtain her medical records. Defendant, however, did almost nothing in investigating plaintiff’s injuries for the first five months after the accident.

Outcome

Judgment affirmed.

LexisNexis® Headnotes

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > Trials > Judgment as Matter of Law > Postverdict Judgment

HN1[]  Standards of Review, De Novo Review

The appellate court reviews de novo the district court’s denial of a motion for judgment as a matter of law, construing the evidence in the nonmoving party’s favor. A jury’s verdict must be upheld if it is supported by substantial evidence. Substantial evidence is evidence adequate to support the jury’s conclusion, even if it is also possible to draw a contrary conclusion from the same evidence.

Insurance Law > Liability & Performance Standards > Bad Faith & Extracontractual Liability > Elements of Bad Faith

Insurance Law > Liability & Performance Standards > Bad Faith & Extracontractual Liability > Payment Delays & Denials

Insurance Law > Liability & Performance Standards > Good Faith & Fair Dealing > Payments

HN2[]  Bad Faith & Extracontractual Liability, Elements of Bad Faith

Under New Mexico law, an insurer who fails to pay a first-party claim has acted in bad faith where its reasons for denying or delaying payment of the claim are frivolous or unfounded. Frivolous or unfounded means arbitrary or baseless conduct, lacking any support in the wording of the insurance policy or the circumstances surrounding the claim. Where an insurer fails to make an adequate investigation, its coverage position is unfounded, and it thus may be liable for bad faith denial of a claim.

Business & Corporate Compliance > … > Industry Practices > Unfair Business Practices > Claims Investigations & Practices

Insurance Law > Liability & Performance Standards > Settlements > Good Faith & Fair Dealing

Insurance Law > Liability & Performance Standards > Settlements > Reasonable Basis

HN3[]  Unfair Business Practices, Claims Investigations & Practices

A violation occurs when an insurer knowingly and with such frequency as to indicate a general business practice does not attempt in good faith to effectuate prompt, fair and equitable settlements of an insured’s claims in which liability has become reasonably clear. N.M. Stat. Ann. § 59A-16-20(E).

Civil Procedure > Appeals > Standards of Review > Abuse of Discretion

Civil Procedure > … > Grounds for Relief from Final Judgment, Order or Proceeding > Excusable Mistakes & Neglect > Mistake

Civil Procedure > Judgments > Entry of Judgments > Nunc Pro Tunc Relief

Civil Procedure > Judgments > Relief From Judgments > Altering & Amending Judgments

HN4[]  Standards of Review, Abuse of Discretion

The appellate court reviews for abuse of discretion a district court’s denial of a Fed. R. Civ. P. 60(a) motion. Under Fed. R. Civ. P. 60(a), the district court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment. Fed. R. Civ. P. 60(a). Errors correctable under Fed. R. Civ. P. 60(a) include those where what is written or recorded is not what the court intended to write or record.

Civil Procedure > Appeals > Standards of Review > De Novo Review

Civil Procedure > Remedies > Judgment Interest > Postjudgment Interest

Civil Procedure > Preliminary Considerations > Federal & State Interrelationships > Erie Doctrine

HN5[]  Standards of Review, De Novo Review

The appellate court reviews de novo whether the district court properly applied federal law in awarding postjudgment interest. When the issue is whether to apply a federal statute in a diversity action, the appellate court’s analysis involves a considerably less intricate analysis than that which governs the relatively unguided Erie choice. When the federal law sought to be applied is a congressional statute, the first and chief question for the court’s determination is whether the statute covers the point in dispute. If it does, the court proceeds to inquire whether the statute represents a valid exercise of Congress’ authority under the Constitution. If Congress intended to reach the issue before the court, and if it enacted its intention into law in a manner that abides with the Constitution, that is the end of the matter. A court sitting in diversity must apply a federal statute that controls the issue before the court and that represents a valid exercise of Congress’ constitutional powers.

Civil Procedure > Remedies > Judgment Interest

HN6[]  Remedies, Judgment Interest

28 U.S.C.S. § 1961(a) is constitutional under binding precedent.

Counsel: For BARBARA STEIN, an individual, Plaintiff – Appellant (22-55356, 22-55414): Michael Nello Poli, Attorney, Poli, Moon & Zane, PLLC, Phoenix, AZ; Linda G. Workman, Attorney, DICKS & WORKMAN, APC, San Diego, CA.

For FARMERS INSURANCE COMPANY OF ARIZONA, a corporation, Defendant – Appellee (22-55356, 22-55414): Curt Cutting, Mitchell C. Tilner, Horvitz & Levy, LLP, Burbank, CA; Andrew S. Hollins, Esquire, Attorney, Messner Reeves, LLP, Costa Mesa, CA.

Judges: Before: BYBEE, BENNETT, and MENDOZA, Circuit Judges.

Opinion

MEMORANDUM^*

In this diversity action, a jury found that Farmers Insurance Company of Arizona (“FICA”) breached its contract, engaged in bad faith, and violated New Mexico’s Unfair Insurance Practices Act (“UIPA”) in handling Barbara Stein’s personal injury claim under her auto insurance policy. FICA appeals from the district court’s denial of its motion for directed verdict on the bad faith and UIPA claims. It also appeals from the district court’s denial of its Federal Rule of Civil Procedure (“Rule”) 60(a) motion to correct the judgment. [*2]  Stein cross-appeals from the district court’s decision to apply the federal postjudgment interest rate statute.¹

1. HN1[] We review “de novo the district court’s denial of a motion for judgment as a matter of law,” construing the evidence in the nonmoving party’s favor. Castro v. County of Los Angeles, 833 F.3d 1060, 1066 (9th Cir. 2016) (en banc). “A jury’s verdict must be upheld if it is supported by substantial evidence.” Wallace v. City of San Diego, 479 F.3d 616, 624 (9th Cir. 2007). “Substantial evidence is evidence adequate to support the jury’s conclusion, even if it is also possible to draw a contrary conclusion from the same evidence.” Johnson v. Paradise Valley Unified Sch. Dist., 251 F.3d 1222, 1227 (9th Cir. 2001).

a. FICA argues that substantial evidence does not support the jury’s bad faith finding. HN2[] “Under New Mexico law, an insurer who fails to pay a first-party claim has acted in bad faith where its reasons for denying or delaying payment of the claim are frivolous or unfounded.” Sloan v. State Farm Mut. Auto. Ins. Co., 2004- NMSC 004, 135 N.M. 106, 85 P.3d 230, 236 (N.M. 2004). Frivolous or unfounded means “arbitrary or baseless” conduct, “lacking any support in the wording of the insurance policy or the circumstances surrounding the claim.” Id. at 237. “Where an insurer fails to make an adequate investigation, its coverage position is unfounded, and it thus may be liable for bad faith denial of a claim.” Haygood v. United Servs. Auto. Ass’n, 2019- NMCA 074, 453 P.3d 1235, 1241 (N.M. Ct. App. 2019).

Substantial evidence supports that FICA engaged in unfounded delay. Immediately after [*3]  the accident, Stein gave FICA a medical authorization, allowing it to obtain her medical records. FICA, however, did almost nothing in investigating Stein’s injuries for the first five months after the accident. In April 2019, Stein sent FICA a detailed, twenty-eight-page letter explaining her physical and mental injuries caused by the accident and related medical procedures. FICA made a partial payment in May 2019 and continued its investigation, but it did not conduct an independent medical examination (“IME”) to determine Stein’s injuries caused by the accident until September 2020—nearly two years after the accident. Stein’s insurance claims expert testified that FICA’s delay in investigating Stein’s claim and conducting an IME was unfounded.

Based on this evidence, the jury could have reasonably found that FICA’s two-year-long investigation amounted to an unfounded delay, and thus FICA acted in bad faith.²

Substantial evidence also supports that FICA failed to conduct an adequate investigation, rendering its coverage position unfounded. Stein’s April 2019 letter to FICA claimed that she sustained post-traumatic stress disorder (“PTSD”) and traumatic brain injury (“TBI”) from the [*4]  accident. Although she never provided FICA with medical records supporting these injuries, they were plausible given the circumstances, including: the extremely violent nature of the crash, the resulting bruise on Stein’s head, and Stein’s subsequent vision problems. The evidence at trial showed that the accident caused Stein’s TBI and PTSD.

FICA, however, conducted no investigation into these injuries. Indeed, the doctor it hired to conduct the IME only evaluated Stein’s “orthopedic abnormalities” and was not qualified to evaluate PTSD or behavioral health. FICA also admitted that it had no written information suggesting that these injuries were preexisting. Thus, the jury could also have found that FICA acted in bad faith because it had no basis for excluding these injuries from its coverage determination.

b. FICA argues that there was insufficient evidence to support a UIPA violation. HN3[] As relevant here, a violation occurs when an insurer “knowingly . . . [and] with such frequency as to indicate a general business practice” does “not attempt[] in good faith to effectuate prompt, fair and equitable settlements of an insured’s claims in which liability has become reasonably clear.” N.M. Stat. Ann. § 59A-16-20(E).

 [*5] Viewing the evidence in Stein’s favor, the jury could have concluded that FICA had a general business practice of failing to effectuate prompt, fair, and equitable settlements. FICA’s claims adjuster testified that he has worked for FICA for twenty-seven years and adjusted thousands of liability claims. He explained that he generally calculates a dollar-value range for claims, and his “custom and practice” is to start negotiations at the “low end of the range.” He also testified that sometimes he does not pay out a claim for ten or fifteen years. And he may withhold payment until an insured is ready to settle and sign a release, even if the insured suffers severe injuries like brain damage, the insured believes that FICA’s offer is too low, and the insured is under financial pressure.

Based on this evidence, the jury could have reasonably found that FICA’s settlement practices—starting at the low end of its calculated dollar-value range and withholding payment for over a decade, even for insureds who suffer severe injuries and are under extreme financial stress—showed that, even when liability is reasonably clear, FICA waits out its insureds to obtain a release rather than trying to [*6]  achieve a prompt and fair settlement in violation of the UIPA.

2. The district court denied FICA’s Rule 60(a) motion to alter the judgment’s damages award by subtracting FICA’s post-verdict payment to Stein. HN4[] We review for abuse of discretion a district court’s denial of a Rule 60(a) motion. See Blanton v. Anzalone, 813 F.2d 1574, 1577 (9th Cir. 1987). Under Rule 60(a), the district court “may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment.” Fed. R. Civ. P. 60(a). “Errors correctable under Rule 60(a) include those where what is written or recorded is not what the court intended to write or record.” Blanton, 813 F.2d at 1577.

The record shows that Stein’s proposed judgment reflected a damages amount that did not deduct the post-verdict payment, and FICA expressly agreed with Stein’s damages calculation. The district court therefore reasonably determined that no mistake had been made because, consistent with the parties’ filings, the court intended to enter the damages amount reflected in the judgment.³

3. HN5[] We review de novo whether the district court properly applied federal law in awarding postjudgment interest. See In re Cnty. of Orange, 784 F.3d 520, 525 n.3 (9th Cir. 2015). When, as here, the issue is whether to apply a federal statute in a diversity action, our analysis “involves a considerably less intricate analysis [*7]  than that which governs the ‘relatively unguided Erie choice.'” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 26, 108 S. Ct. 2239, 101 L. Ed. 2d 22 (1988) (quoting Hanna v. Plumer, 380 U.S. 460, 471, 85 S. Ct. 1136, 14 L. Ed. 2d 8 (1965)).⁴ “[W]hen the federal law sought to be applied is a congressional statute, the first and chief question for the . . . court’s determination is whether . . . the statute covers the point in dispute.” Id. at 26. If it does, the court “proceeds to inquire whether the statute represents a valid exercise of Congress’ authority under the Constitution.” Id. at 27. “If Congress intended to reach the issue before the [court], and if it enacted its intention into law in a manner that abides with the Constitution, that is the end of the matter . . . .” Id. A court “sitting in diversity must apply a federal statute that controls the issue before the court and that represents a valid exercise of Congress’ constitutional powers.” Id.

The federal postjudgment interest rate statute, 28 U.S.C. § 1961(a), covers the dispute. HN6[] The statute is constitutional under binding precedent. See Northrop Corp. v. Triad Int’l Marketing S.A., 842 F.2d 1154, 1156 (9th Cir. 1988). Thus, the district court properly applied § 1961(a). See Stewart Org., 487 U.S. at 27.

AFFIRMED.

End of Document

---

^* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

¹ Stein’s request for attorneys’ fees included in her brief (Dkt. No. 28) is denied without prejudice to her filing a separate motion that complies with 9th Cir. R. 39-1.6. Each party shall bear its own costs on appeal.

² FICA argues that the COVID-19 pandemic caused part of the delay. We do not doubt that, but the jury was apprised of the relevant facts, and, as noted, the evidence supports the jury’s finding.

³ During oral argument, Stein’s counsel made an enforceable judicial admission that Stein would never seek to double recover the post-verdict payment. Oral Arg. at 31:10-31:35. Thus, even aside from our finding that the district court did not err in denying the motion, we also fail to see any possible future harm to FICA.

⁴ Stein’s arguments rest on the incorrect premise that we must conduct an Erie analysis.

United States District Court, N.D. Illinois, Eastern Division.

SYNY LOGISTICS, INC., Plaintiff,

v.

GREAT LAKES INSURANCE SE, Defendant.

Case No. 22-cv-764

|

Signed September 30, 2023

Attorneys and Law Firms

Tami J. Diamond, Kurt E. Vragel, Jr., Tomasz Koziol, Kurt E. Vragel, Jr., PC, Glenview, IL, for Plaintiff.

Secon Michael J. O’malley, Wilson Elser Moskowitz Edelman & Dicker LLP, Chicago, IL, John Christopher Ricci, BatesCarey LLP, Chicago, IL, Matthew L. McBride, III, McBride Law Offices PC, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Steven C. Seeger, United States District Judge

*1 SYNY Logistics, Inc., a large interstate trucking company, bought an insurance policy from Great Lakes Insurance SE. The policy covered drivers as they hauled freight across the country. But the policy did not cover anyone and everyone who got in the cab and got behind the wheel. The policy required drivers to have one year of driving experience.

One day, Brent Granville, a driver for the company, hopped into his big rig with a set of keys. He started the engine and went trucking with 354 days of experience under his belt. That’s close to a year of experience, but it’s not a year. Unfortunately, he crashed.

The accident sparked a dispute between the trucking company and the insurance company. SYNY later filed this declaratory judgment action, seeking coverage for the accident. Great Lakes, in turn, filed a counterclaim about the lack of coverage. The insurance company then moved for summary judgment, arguing that there is no coverage because the driver did not have the experience required by the policy.

The Court grants Great Lakes’s motion. When it comes to coverage, the policy is not in for a penny, in for a pound. It’s miss by an inch, miss by a mile. Granville got 97% of the way toward satisfying the one-year requirement. So, he’s 100% short and is entitled to 0% coverage.

Background

SYNY Logistics, Inc. calls itself the “greatest logistic[s] company” in America. See Our Services, SYNY Logistics Inc., https://synylogistics.com/our-services/ (last accessed Sept. 26, 2023). It boasts more than 1,000 trucks in 120 cities. Id.

Brent Granville drove one of those trucks, a 2016 White Western Star, Model 5700 XE.¹ See Cplt., at ¶ 9 (Dckt. No. 1-1); see also Pl’s. Obj. to Def.’s Rule 56 Statement, at 2, ¶¶ 1–2 (Dckt. No. 38). After nine months on the job, he had a bad day at work. Id. at 2, 7, ¶¶ 2, 17. On January 26, 2021, Granville got into his truck, and got in an accident. Id. at 7, ¶ 17.

The Court does not know details about what happened, where it happened, or how it happened. But the accident left the truck in bad shape. A towing company dragged the truck away. The repair and towing costs exceeded $68,000. Fortunately, there is nothing in the complaint suggesting that Granville suffered a personal injury.

SYNY filed a claim with its automobile insurance company, Great Lakes Insurance SE. Id. at 7, ¶ 18. Great Lakes wanted experienced hands on the wheel. The policy expressly required drivers to have a certain level of driving experience.

Basically, drivers needed to “have” at least one year of driving experience. That experience needed to be recent, too. The driving experience needed to take place within two years. Specifically, the policy provided as follows:

*2 [T]his Insurance shall not indemnify [SYNY] for loss or damage to any Automobile … unless the Automobile is operated by … a driver who at inception of this Policy or at the date of hire, whichever is the later, provides documented evidence of an MRV no older than three months showing that they: …

2) Have experience as follows:

a) a minimum of two (2) years continuous driving experience, within thirty-six (36) months of the policy inception date or date of hire, whichever is the later, driving equipment similar to or driving trucks transporting cargo similar to that insured under this Policy; OR

b) a minimum of (1) years continuous driving experience, within twenty-four (24) months of the policy inception date or date of hire, whichever is the later, driving equipment similar to or driving trucks transporting cargo similar to that insured under this Policy providing there are no violations and no at fault accidents.

See Certificate of Insurance, Ex. A to Counterclaim (Dckt. No. 9-1, at 29 of 34) (emphasis omitted).

The second option (option b) is relevant here. See SYNY’s Resp., at 4–5 (Dckt. No. 37). The key dates are when Granville began driving, when the company hired him, and when the policy began.

Granville got his commercial license on September 5, 2019. See Pl’s. Obj. to Def.’s Rule 56 Statement, at 8, ¶ 4. (Dckt. No. 38). SYNY hired him on April 19, 2020. Id. at 2, ¶ 2. The policy started on August 24, 2020. Id. at 2, ¶ 3. He got into the accident on January 26, 2021. Id. at 2 ¶ 9. In other words, Granville got his license, and then he was hired, and then the policy started. And then he crashed.

Great Lakes denied the claim. Id. at 7, ¶ 19. Great Lakes believes that the policy does not cover Granville because he did not have one year of continuous experience on the policy’s start date. Id. at 3–4, ¶¶ 5–7.

SYNY disagrees. It thinks the policy covers Granville because he could earn his one-year experience milestone “within” 24 months of the policy’s start date. See SYNY’s Resp., at 5 (Dckt. No. 37). In other words, as the company sees it, the clock started ticking when Granville got his license on September 5, 2019, and he would hit the one-year mark “within” 24 months of August 24, 2020 (the policy’s start date). See id.

SYNY sued Great Lakes in the Circuit Court of Cook County. See Cplt. (Dckt. No. 1-1). It brought three counts. First, SYNY asked for a declaratory judgment that the policy covers Granville’s accident. Id. at ¶¶ 14–16. Next, it claimed that Great Lakes breached the policy by denying coverage. Id. at ¶¶ 17–21. Finally, SYNY claimed that Great Lakes violated section 155 of Illinois’s insurance code by denying SYNY’s claim vexatiously. Id. at ¶¶ 22–24.

Great Lakes – a societas europaea (more on that in a minute) – removed the case. See Notice of Removal (Dckt. No. 1). It also filed a counterclaim for a declaratory judgment that the policy does not cover SYNY’s claim. See Counterclaim, at 10 (Dckt. No. 9). Then Great Lakes moved for summary judgment. (Dckt. No. 33).

Legal Standard

Great Lakes is entitled to summary judgment if it shows that there is “no genuine dispute as to any material fact” and it is “entitled to judgment as a matter of law.” See Jaranowski v. Ind. Harbor Belt R.R. Co., 72 F.4th 744, 749 (7th Cir. 2023) (citation omitted). To decide the motion, this Court views the evidence and draws all reasonable inferences in SYNY’s favor as the non-moving party. Id.

Analysis

*3 This Court starts with the first step in every case: establishing jurisdiction. The Court must button down jurisdiction even if the parties do not raise it. See Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 453 (1900) (“[Jurisdiction is a] question the court is bound to ask and answer for itself, even when not otherwise suggested[.]”).

I. Jurisdiction

Federal courts hear cases from a limited menu. “They possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

Diversity cases are on the menu. District courts have jurisdiction over civil actions when the amount in controversy exceeds $75,000 and the suit is between “citizens of a State” and “citizens or subjects of a foreign state.”² See 28 U.S.C. § 1332(a)(2).

The diversity statute requires complete diversity. See Page v. Democratic Nat’l Comm., 2 F.4th 630, 636 (7th Cir. 2021). A plaintiff and defendant cannot share citizenship of the same state. Id. So, this Court must determine the citizenship of SYNY and Great Lakes.

SYNY’s citizenship is straightforward. SYNY is a corporation. See Cplt., at ¶ 1 (Dckt. No. 1-1). A corporation is a citizen of its state of incorporation and its principal place of business. See West v. Louisville Gas & Elec. Co., 951 F.3d 827, 830 (7th Cir. 2020). SYNY is incorporated in Illinois, and its principal place of business is in Illinois. See Cplt., at ¶ 1. So, SYNY is an Illinois citizen.

Great Lakes’s citizenship is more complicated. Despite the Midwestern-sounding name, Great Lakes is from mid-continental Europe. Great Lakes is a foreign entity – the “SE” on the end of its name stands for societas europaea. See Notice of Removal, at ¶ 9 (Dckt. No. 1). To determine a foreign business’s citizenship, Seventh Circuit courts decide “what U.S.-recognized entity the foreign entity most resembles.” See 15A James W. Moore et al., Moore’s Federal Practice § 102.75 (3d ed. 2023); BouMatic, LLC v. Idento Operations, BV, 759 F.3d 790, 791 (7th Cir. 2014).

At that point, courts analyze the entity under the citizenship rules that apply to its American twin. See, e.g., Fellowes, Inc. v. Changzhou Xinrui Fellowes Office Equip. Co., 759 F.3d 787, 789–90 (7th Cir. 2014) (“Having held … that an American LLC has the citizenship of every member-investor, we are not about to establish a different rule for functionally identical entities established under other nations’ laws.”); BouMatic, 759 F.3d at 791 (holding that a Netherlands entity resembled a U.S. close corporation and treating it as such).

*4 Sometimes figuring out the citizenship of an entity from the other side of an ocean is “difficult.” See Fellowes, 759 F.3d at 788. It can be hard to figure out if a pear is more like an apple or an orange. But the Seventh Circuit has laid down guideposts.

A foreign entity is the functional equivalent of an American corporation when it has “perpetual existence,” is governed by a Board of Directors, issues tradable shares, and is treated “independent of its equity investors.” See Lear Corp. v. Johnson Elec. Holdings Ltd., 353 F.3d 580, 583 (7th Cir. 2003); see also Superl Sequoia Ltd. v. Carlson Co., Inc., 615 F.3d 831, 832 (7th Cir. 2010) (citation omitted).

This Court knows of only one case directly deciding whether a societas europaea is a corporation for diversity purposes.³ See SNC-Lavalin Constructors Inc. v. Tokio Marine Kiln Ins. Ltd., 2021 WL 2550505, at *8 (D. Md. 2021). That court – although writing from Maryland – applied the Seventh Circuit’s framework. Id. (“[T]he Court will apply the Seventh and Eighth Circuits’ comparison test to decide whether Starstone Insurance SE is equivalent to a U.S. corporation for the purposes of diversity jurisdiction.”). It held that SEs are comparable to U.S. corporations for diversity purposes. Id. at *9.

This Court sees no reason to land somewhere else. Like American corporations, SEs have “transferable shares, limited liability, and a legal personality independent from its shareholders.” Id. at *8; see also Council Regulation 2157/2001 (EC), preamble, ¶ 13 (“The SE itself must take the form of a company with share capital[.]”); id. art. 1, ¶ 2 (“The capital of an SE shall be divided into shares. No shareholder shall be liable for more than the amount he has subscribed.”); id. art. 1, ¶ 3 (“An SE shall have legal personality.”); id. art. 38 (“[A]n SE shall compromise: … a general meeting of shareholders and … either a supervisory organ and a management organ … or an administrative organ[.]”); Setting up a European Company (SE), Eur. Union, https://europa.eu/youreurope/business/running-business/developing-business/setting-up-european-company/index_en.htm (last accessed Sept. 26, 2023) (“The European Company – also known as SE (Societas Europ[a]ea in Latin) – is a type of public limited-liability company[.]”⁴).

Those features are American corporation hallmarks. See Lear, 353 F.3d at 583. So a societas europaea is a corporation for diversity purposes.⁵

*5 In turn, the Court must determine Great Lakes’s place of incorporation and principal place of business. See West, 951 F.3d at 830. Great Lakes is registered in Germany and its principal place of business is in Munich. See Notice of Removal, at ¶ 9 (Dckt. No. 1). So, Great Lakes is diverse from SYNY (an Illinois citizen). This Court has jurisdiction.

II. The Merits

With jurisdiction in hand, the Court turns to the merits. The key question is whether SYNY satisfied the requirement that the driver must “have” one year of driving experience. The punchline is that Granville had 354 days of experience, so he never got there.

A. The Scope of Coverage

The motion for summary judgment turns on the meaning of the policy. The first step involves pinning down choice of law. See Jupiter Aluminum Corp. v. Home Ins. Co., 225 F.3d 868, 872 (7th Cir. 2000).

The decision is simple. The parties agree that Illinois law applies. See Def.’s Mem., at 4 (Dckt. No. 34) (citing Illinois cases); Pl.’s Resp., at 6 (Dckt. No. 37) (same). So, Illinois law it is. See Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009) (“We honor reasonable choice-of-law stipulations in contract cases[.]”).

Traditional rules of contract interpretation apply to insurance policies. Founders Ins. Co. v. Munoz, 930 N.E.2d 999, 1003 (Ill. 2010). The Court must “give effect to the intention of the parties, as expressed in the policy language.” Id.

The text of the policy defines the scope of coverage, and courts must uphold the plain meaning of the text. “If the language is unambiguous, the provision will be applied as written, unless it contravenes public policy.” Id. at 1003–04. But a policy provision is not “ambiguous simply because the parties disagree.” Id. at 1004. An ambiguity only exists if language “is susceptible to more than one reasonable interpretation.” Id.

The endorsement declared that Great Lakes would not indemnify SYNY for damage unless an “experience[d]” driver operated the vehicle. See Certificate of Insurance, Ex. A to Counterclaim (Dckt. No. 9-1, at 29 of 34) (emphasis omitted). The driver must “have” a certain level of experience. Id. Specifically, the driver must provide “documented evidence” showing that he “ha[s]” the necessary experience “at the inception of th[e] Policy or at the date of hire, whichever is the later.” Id.

The parties agree on the relevant dates. SYNY hired Granville on April 19, 2020. See Pl’s. Obj. to Def.’s Rule 56 Statement, at 2, ¶ 2 (Dckt. No. 38). The policy started on August 24, 2020. Id. at 2, ¶ 3. August 2020 came after April 2020. The policy start date is the later date.

So the question is whether Granville had “a minimum of one (1) years continuous driving experience, within twenty-four (24) months of” August 24, 2020. See Certificate of Insurance, Ex. A to Counterclaim (Dckt. No. 9-1, at 29 of 34) (emphasis omitted).

Granville did not. Granville received his commercial license on September 5, 2019. See Pl’s. Obj. to Def.’s Rule 56 Statement, at 8, ¶ 4 (Dckt. No. 38). The policy started 354 days later. Id. at 2, ¶ 2. He was only nine days away from hitting the 365-day mark. He got 354 feet toward the 365-foot finish line.

That’s close, but no cigar. Granville fell short of notching one year of driving experience under his belt. So the policy did not cover Granville. For want of 9 days, the coverage was lost.

*6 The experience requirement makes sense. After all, Great Lakes was insuring heavy equipment that could cause a lot of damage to a lot of people. So, before signing up for that potential liability, Great Lakes wanted to make sure that the people doing the driving knew what they were doing.

SYNY pushes back. It argues that the policy covers Granville because he obtained his license “within” the 24-month window. See Pl.’s Resp., at 5 (Dckt. No. 37). In other words, SYNY thinks that the policy’s reference to “within” means that Granville had a four-year span to clock one year of experience: “between August 24, 2018 and August 24, 2022.” Id. Put another way, SYNY does not think the policy requires drivers to have one year of experience before the policy starts. See id. at 6–7 (“If Great Lakes required the driver to have a year of experience prior to the inception date or the driver’s date of hire, it should have used the word “prior” and not the word “within[.]”).

SYNY’s argument falls short. It severs “within” from the sentence and yanks it from its context. But a word “in isolation” does not decide a provision’s meaning. See Italia Foods, Inc. v. Sun Tours, Inc., 986 N.E.2d 55, 59 (Ill. 2011) (citation omitted). It is a “fundamental principle” of “language itself” that a word’s meaning is drawn from “context.” Textron Lycoming Reciprocating Engine Div., Avco Corp. v. United Auto., Aerospace and Agric. Implement Workers of Am., 523 U.S. 653, 657 (1998) (Scalia, J.) (citation omitted).

The Court must read “within” alongside the policy’s other words, within its broader linguistic neighborhood. On the policy’s start – August 24, 2020 – Granville needed to “[h]ave” one year of continuous driving experience “within” 24 months of August 24, 2020. See Certificate of Insurance, Ex. A to Counterclaim (Dckt. No. 9-1, at 29 of 34) (emphasis omitted).

“Have” is the present tense. It is not “will have.” It’s “have.” The moment the clock struck midnight on August 24, 2020, Granville needed to “have” the experience. He didn’t.

Viewed in isolation, the word “within” could look forward or backward. For example, imagine if someone asked you on Sunday if you ate a pizza “within” two days of Wednesday. If you ate Giordano’s pizza on Monday, the answer would be “Yes.” If you ate a Lou Malnati’s pizza on Friday, the answer would be “Yes.”

But surrounding text can provide interpretive clues about the meaning of words. Here, the question is not whether a driver will have driving experience within two years. The question is whether the driver has driving experience. The drivers must “have” driving experience when they drive, or else there is no coverage.

A driver does not “have” one year of driving experience “within twenty-four (24) months” if the driver has no driving experience. In effect, the phrase “within twenty-four (24) months” means within the past 24 months.

The requirement of documentation sheds light on the meaning, too. The driver must “provide[ ] documented evidence of an MRV no older than three months showing” the requisite experience, and must do so “at inception of this Policy or at the date of hire, whichever is the later.” It is hard to see how a driver could provide documentation that they “have” experience when the experience is future experience.

*7 A contrary reading is hard to square with the text of the policy. And from a practical standpoint, it makes little sense. Under SYNY’s reading, the policy would cover a driver – even if that driver had no experience at all – as long as the driver gets one year of experience within 24 months. If “within” applied to future experience, the policy would cover drivers who lack experience when they get behind the wheel.

Insurance companies need to know what they’re getting. When it comes to the risks of getting behind the wheel, not all drivers are created equal. Some drivers pose greater risks than others. All else being equal, inexperienced drivers pose greater risks than experienced drivers. And the greater risks from inexperienced drivers mean that insurance coverage costs more. (As an exercise, wait for your teenager to get his or her license, and then open the bill from your insurance company.)

Great Lakes insured SYNY and priced it based on the assumption that drivers would have at least one year of experience. Insuring a fleet of experienced drivers posed a smaller risk of loss to Great Lakes than insuring a fleet of inexperienced drivers. And on the flipside, SYNY paid premiums based on the assumption that its drivers would have at least a year of experience. SYNY cannot expect to pay for a policy at a price for experienced drivers, and then hand the keys to an inexperienced driver and expect coverage.

Pivoting, SYNY argues that this Court must adopt its interpretation because the language is ambiguous and SYNY’s interpretation is “reasonable.” See Pl.’s Resp., at 6–7 (Dckt. No. 37). True, courts construe insurance policies in the face of ambiguity “liberally in favor of coverage” when there is “more than one reasonable interpretation.” See Founders, 930 N.E.2d at 1004. But there is no ambiguity here. And even if one existed, SYNY’s ask is unreasonable.

It is unreasonable to read the requirement of experience to cover future experience. By way of analogy, imagine if a French restaurant advertised that it is looking to hire a sous-chef. The job posting requires one year of experience within two years. No one would think that they can show up for the interview with zero culinary experience. And if they did, it would be a short interview.

SYNY makes one last stand.⁶ It concludes its brief with a paragraph that looks like it belongs in a fact section. See Pl.’s Resp., at 7 (Dckt. No. 37). There is not a legal argument in sight. Id.

SYNY states that “prior to the issuance of the Policy,” and during the application process, SYNY Logistics provided Great Lakes with a list of drivers. Id. The list included Granville. Id. But Great Lakes never “informed” SYNY that Granville was not qualified. Id. Instead, Great Lakes “invoiced” SYNY for premiums. Id.

Maybe SYNY is hinting at a waiver or estoppel argument. Great Lakes anticipated the argument in its opening brief. See Def.’s Mem., at 5–6 (Dckt. No. 34).

But facts dumped into a brief do not make a legal argument. An estoppel or waiver argument should – at the very least – use the words “estoppel” or “waiver.” SYNY’s brief has none. See Pl.’s Resp., at 6–7 (Dckt. No. 37).

*8 This Court will not build the argument for the parties. SYNY has waived its waiver and estoppel arguments. See Cent. States, Se. & Sw. Areas Pension Fund v. Midwest Motor Express, Inc., 181 F.3d 799, 808 (7th Cir. 1999) (“Arguments not developed in any meaningful way are waived.”); White v. United States, 8 F.4th 547, 552 (7th Cir. 2021) (“[A]rguments that are unsupported by pertinent authority[ ] are waived.”).

A factual dispute does not exist. Great Lakes is entitled to judgment as a matter of law. The policy did not cover Granville’s accident because he did not satisfy the coverage requirements.

B. The Remaining Claims

The remaining claims crumble, for the same reasons.

Consider the breach of contract claim first. For SYNY’s claim to survive, a jury must be able to find (1) the existence of a valid contract; (2) performance by SYNY; (3) breach of contract by Great Lakes; and (4) resulting injury to SYNY. See Henderson-Smith & Assocs., Inc. v. Nahamani Family Servs. Ctr., Inc., 752 N.E.2d 33, 43 (Ill. 2001). SYNY’s theory is that Great Lakes “breached the contract by denying coverage.” See Cplt., at ¶¶ 17–21 (Dckt. No. 1-1).

But a jury could not find a breach. The policy did not cover the accident. So, Great Lakes did not breach the contract by denying the claim.

SYNY’s section 155 claim fails, too. Illinois’s insurance code declares that in a case where an insurance company’s claim-denial is at issue, “and it appears to the court that” the insurance company’s position is “vexatious and unreasonable,” the court can award, among other things, $60,000. See 215 Ill. Comp. Stat. 5/155(1)(b). But for a plaintiff to recover, it must “succeed in the action on the policy.” Hoover v. Cty. Mut. Ins. Co., 975 N.E.2d 638, 647 (Ill. App. Ct. 2012). SYNY lost the policy action. It cannot win here.

Conclusion

The Court grants Great Lakes’s motion for summary judgment on all of SYNY’s claims. Great Lakes also filed a counterclaim for a declaratory judgment that “Great Lakes owes no insurance coverage” in connection with the accident. See Counterclaim, at 10 (Dckt. No. 9). It is the same issue raised in the complaint. The counterclaim is the mirror image of the complaint, pointed in the other direction. The Court sua sponte grants summary judgment in favor of Great Lakes on its counterclaim.

All Citations

Slip Copy, 2023 WL 6388233

Footnotes

1. The 5700 XE has silver screen experience. Optimus Prime disguised himself as a 5700 in Transformers: Age of Extinction (2014). See Bryan Alexander & Chris Woodyard, Big, Mean ‘Transformers’ Truck Goes Green, Lean, USA Today (June 28, 2014), https://www.usatoday.com/story/money/cars/2014/06/28/transformers-truck/11647799/ (last accessed Sept. 28, 2023).  
2. The amount in controversy requirement is satisfied. “The estimate of the dispute’s stakes advanced by the proponent of federal jurisdiction controls unless a recovery that large is legally impossible.” Carroll v. Stryker Corp., 658 F.3d 675, 680 (7th Cir. 2011) (cleaned up). Great Lakes – the federal jurisdiction proponent – said SYNY seeks about $67,000 for vehicle damages and towing costs plus $60,000 in statutory damages for the section 155 claim. See Notice of Removal, at ¶ 15 (Dckt. No. 1); see also Jump v. Schaeffer & Assocs. Ins. Brokerage, Inc., 123 F. App’x 717, 720 (7th Cir. 2005) (adding section 155 damages to an amount in controversy calculation). That’s $127,000 in total – well over the $75,000 threshold.  
3. A Westlaw search for district court references to “societas europaea” returned a whopping ten results. A search for Courts of Appeal references revealed just one. See Pioneer Trail Wind Farm, LLC v. FERC, 798 F.3d 603, 605 (7th Cir. 2015).  
4. That phrasing gave the Court a little pause. When it comes to jurisdiction, the citizenship of a limited liability company is not the same as the citizenship of a corporation. An LLC is a citizen where its members are citizens, but a corporation is a citizen where it is incorporated and where it has its principal place of business. See Belleville Catering Co. v. Champaign Mkt. Place, LLC, 350 F.3d 691, 692 (7th Cir. 2003); Martin v. Living Essentials, LLC, 653 F. App’x 482, 485 (7th Cir. 2016); Thomas v. Guardmark, LLC, 487 F.3d 531, 534 (7th Cir. 2007). Even so, this Court has found no indication that an SE is comparable to a limited liability company under American law.  
5. In the tax world, the IRS treats SEs as corporations. See 26 C.F.R. § 301.7701-2(b)(8).
6. SYNY also argues that Great Lakes’s motion for summary judgment should be denied because Great Lakes improperly cites the Great Lakes general counsel’s declaration. See Plf.’s Resp., at 2–4 (Dckt. No. 37). The Court does not need to address the argument because the Court does not rely on the declaration

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