CHARLES S. MILLER, JR., Magistrate Judge.
In October 2012, Avery Enterprises, Inc. ("Avery Enterprises") purchased a Beechcraft E35 Bonanza aircraft. Avery Enterprises is an oilfield services company doing work in North Dakota's oilfields that is owned by plaintiff Kevin Avery ("Avery").
Plaintiffs contend that, within several days of acquiring ownership of the aircraft, Avery contacted his insurance broker, Richard Lahr ("Lahr"), to let him know of the purchase and that he wanted insurance on the aircraft. At that time, Lahr was a principal of defendant Lahr Agency, LLC, and a personal friend of Avery. He is now deceased.
When Avery first contacted Lahr about insuring the aircraft, he told Lahr there was no particular hurry because the aircraft needed to be certified and this was not going to be done until the following spring. According to Avery, Lahr responded with words to the effect: "Don't worry about it. I'll take care of it." According to plaintiffs, this conversation took place over a speakerphone. Mrs. Avery, who was listening, recalls Lahr stating: "Don't worry about it. I've got it taken care of."
In March or April of 2013, the aircraft needed to be flown to Mandan, North Dakota for the FAA certification. Avery states he contacted Lahr in advance of the flight to confirm insurance coverage. Lahr purportedly assured him by stating "Don't worry about it. I will take care of it."
At some point, Avery provided Lahr with a serial number or tail number of the aircraft as well as the background of Andrzej Furmanski ("Furmanski"), whom Avery hired as an employee of Avery Enterprises to pilot the aircraft. Also, while the aircraft was hangared in Mandan following the inspection, Lahr went to the hanger and photographed it.
According to plaintiffs, Avery again called Lahr from a pickup in April or May 2013 about the status of insurance on the aircraft while Avery, Mrs. Avery, and Avery's cousin, Jeff Avery, were en route to the airport to fly the plane to Cheyenne, Wyoming. Avery states he initiated the call because he had not yet seen any insurance information and the plane was going to be flown that day. According to Avery, Lahr responded not to worry about it and that he had taken care of it. Mrs. Avery and Jeff Avery overheard the conversation, which was on speaker. Mrs. Avery's recollection of the conversation mirrored that of her husband. Jeff Avery's recollection was similar and he recounted: "During the conversation, Mr. Avery asked Mr. Lahr if the plane was insured. Mr. Lahr told him it was taken care of and the plane had insurance coverage."
Avery acknowledges that he did not know the amount of liability insurance coverage that Lahr would have procured because he left that up to Lahr's good judgment. Lahr, who was a personal friend of Avery, took care of all of the insurance needs for Avery Enterprises and for Avery personally and Avery similarly relied upon Lahr to determine what coverages, including amounts, were appropriate. According to Avery, the yearly premium for the total package of insurance coverages was over $400,000. Avery states he could not immediately discern from his insurance billings whether the aircraft had been insured or not because the monthly premium billing for all coverages was in one large lump sum.
On August 12, 2013, Avery used the aircraft to travel for business purposes from his home in Idaho with an intended destination of Tioga, North Dakota. En route, the aircraft crashed in West Yellowstone, Montana. Furmanski, who was piloting the aircraft, perished. Avery survived the crash but suffered devastating injuries.
On March 14, 2016, plaintiffs commenced an action in this court against the Furmanski Estate for negligence on the part of Furmanski in piloting the aircraft at the time of the crash. While the Estate appeared in the action, it did not actively assert any defenses it may have had to liability nor did it contest the evidence of fault and damages presented to the court in a less than one-day bench trial on September 8, 2017.
On November 15, 2017, the court entered an amended judgment against the Furmanski Estate. Based on the uncontested evidence presented, the court awarded plaintiffs $7,273,069 ($6,473,069 for Mr. Avery and $800,000 for Mrs. Avery on her consortium claim).
Subsequent to the entry of judgment, the Furmanski Estate assigned any claims it might have against the defendant for failing to secure coverage on the aircraft and for making false statements relating to the procurement of insurance in exchange for an agreement on the part of plaintiffs not to execute upon the judgment against the Estate. On December 13, 2017, plaintiffs initiated this action against the defendant asserting only the claims obtained from the Furmanski Estate by way of assignment.
As to the assigned claims, there is no evidence of any communication between Lahr and Furmanski personally. Lahr died on October 7, 2016, prior to the commencement of this action. The only named defendant is the insurance agency of which Lahr was a principal.
Before the court for consideration now are two motions. The first is defendant's motion for summary judgment, which is limited in scope. Upon reviewing the briefs on this motion along with other filings because trial was soon approaching, the court held a conference call with the parties to discuss issues that likely will arise at trial with respect to liability and damages that were not the subject of defendant's motion for summary judgment. This resulted in the court postponing the trial and plaintiffs filing the other motion now pending in which they ask the court to rule in advance of trial on the scope of recoverable damages.
Before turning to the pending motions, it helpful for purposes of what follows to discuss generally the claims being asserted by plaintiffs as well as the damages they are claiming.
The complaint in this case alleges claims of negligence and deceit. The facts pled in the complaint with respect to the negligence claim essentially are that Lahr negligently failed to secure insurance on the aircraft on behalf of Avery Enterprises as requested by Avery. Since the claim being asserted is one purportedly belonging originally to Furmanski, the complaint goes on to allege that Lahr's duty to obtain coverage extended to Furmanski as an employee of Avery Enterprises.
The focus of plaintiffs' deceit claim are the assurances allegedly given by Lahr to Avery that he (Lahr) would secure coverage and later that he had taken care of it. Under North Dakota law, a claim for deceit is statutory. N.D.C.C. § 9-10-03 provides that: "One who willfully deceives another with intent to induce that person to alter that person's position to that person's injury or risk is liable for any damage which that person thereby suffers." Section 9-10-02 makes actionable as deceit several different kinds of deceptive conduct. It reads as follows:
Plaintiffs do not contend in their complaint that Lahr personally assured Furmanski he would secure or had secured insurance coverage. While not entirely clear, it appears plaintiffs have two theories for why that is not required in order to sustain their deceit claim. One is that all that matters is that (1) Lahr tortiously gave false and deceptive assurances to Avery, and (2) this set in motion a series of events resulting in damages to the Furmanski Estate. In other words, this theory of liability appears to be that:
The other theory appears to be that it was foreseeable to Lahr that the assurances he gave Avery would be relied upon by Avery Enterprises and its employees, particularly Furmanski, who was hired to be the aircraft's pilot.
As for damages, plaintiffs claim the amount has already been determined. That is, defendant is liable for the $7,273,069 plus interest judgment entered in the action brought by plaintiffs against the Furmanski Estate.
Defendant disputes both liability and damages. With respect to the latter, defendant claims not only that it is not bound by the prior judgment but also that the recoverable damages, if any, would be limited to the amount of coverage that would have been available had Lahr secured insurance on the aircraft for Avery Enterprises as requested by Avery.
During the conference with the parties, the court, among other things, expressed skepticism with respect to plaintiffs' theory of damages. The attorney for plaintiffs indicated that how the court rules on the scope of damages will have a huge impact on the case—both in terms of the evidence that would need to be presented at trial as well as the size of any recovery—and that it would be beneficial for both parties to know in advance of trial how the court will rule. This was the reason for plaintiffs filing their motion seeking a ruling on the scope of damages.
The only argument made by defendant in its motion for summary judgment with respect to the claim of negligent procurement of insurance is that it is untimely.
North Dakota has a two-year statute of limitations for claims of negligence against licensed insurance producers. Specifically, N.D.C.C. § 26.1-26-51 provides:
Defendant argues that the claim of negligent failure to procure insurance is barred by the two-year statute of limitations based upon undisputable evidence that plaintiffs were aware the aircraft was not insured at least by August 2013. The problem for this argument is that the claims being sued upon are those acquired from the Furmanski Estate.
Plaintiffs have offered affidavit testimony which supports a finding that neither Mrs. Furmanski nor the Estate were aware that a claim of pilot error was going to be asserted against the Estate by the plaintiffs until sometime early in 2016 and that they were otherwise unaware of the lack of insurance on the aircraft prior to that point. Defendant has not presented contrary evidence as to Mrs. Furmanski's or the Estate's actual knowledge. Further, in terms of whether they should have known, the circumstances are such that a reasonable juror could conclude that, even with exercise of reasonable diligence, Mrs. Furmanski and the Estate would not necessarily have acquired the requisite knowledge. Hence, there is at least a fact issue with respect to whether the statute of limitations has run on the negligence claim of the Furmanski Estate assigned to plaintiffs.
Defendant makes several arguments for why there is insufficient evidence to support a claim for deceit. One is that the evidence is insufficient to support the conclusion that, when Lahr allegedly assured Kevin Avery he would take care of insuring the aircraft, he intended not to and that any subsequent failure to follow through on this part was only negligence. Defendant ignores, however, the evidence that Lahr went beyond his initial assurances that he would take of insuring the aircraft and stated it had been take care of. Also, there is the deposition testimony of Lahr's spouse that, prior to his death, Lahr remarked to her that he never would have insured the aircraft. Further, even putting this evidence aside, the court is not now prepared to say that no reasonable juror could conclude that Lahr's repeated assurances he would take care of insuring the aircraft could not at some point themselves rise to the level of deceit.
Another argument made by defendant is that there no evidence that Lahr obtained or gave up anything when he purportedly assured Avery he would take care of insuring the aircraft. Defendant argues Lahr was in the business of selling insurance, so failing to insure the aircraft and thereby not earning a commission was to his detriment. The problem with this argument is that a benefit to the deceiver is not an essential element for a claim of deceit under North Dakota law.
The final argument defendant makes is that plaintiffs have no evidence that Lahr made the purported statements with "the intent to induce Kevin Avery to fly without insurance." To the extent this is material, North Dakota's deceit law as referenced above would not require this specific intent.
Defendant argues that the recoverable damages would be limited to the amount of liability insurance coverage that would have been available if Lahr had secured coverage on the aircraft. Defendant further intimates the amount might be zero if it is demonstrated that the policy Lahr likely would have procured would have excluded coverage altogether for a claim by plaintiffs for negligence on the part of an employee.
Defendant argues it stands to reason that damages would be limited to the insurance coverage that would have been available given the nature of the claims being asserted and that, in any event, this limitation is compelled by N.D.C.C. § 32-03-36, which reads:
The court agrees with defendant. While the North Dakota Supreme Court does not appear to have decided a case directly on point with respect to the circumstances of this case, there is no reason to believe it would not follow what most courts have held to be the measure of damages when the necessary focus (here dictated by statue) is what would have obtained had full performance of the obligation (in this case procurement of insurance) been fulfilled. That is, what an insurer would have had to pay, if anything.
Plaintiffs argue that § 32-03-36 is limited to actions based upon a contract and does not apply to tort actions. However, the text of the statute clearly indicates the contrary. If the section only applied to contract claims, there would been have no reason for it to refer to exemplary or penal damages since they are not recoverable on claims for breach of contract. N.D.C.C. §§ 32-03-09 (measure of damages for breach of contract with no provision for punitive damages), 32-03-35 (damages prescribed by ch. 32-03 exclude exemplary damages unless provided for otherwise), 32-03.2-11 (stating, in part, that punitive damages may be awarded on claims not arising out of contract when the defendant has been guilty of oppression, fraud, or malice (actual or presumed) and replacing now repealed § 32-03-07 that stated the same thing);
Finally, and dispositive here, is that the North Dakota Supreme Court held in
Defendant also argues that it is not bound by the judgment that was entered against the Furmanski Estate since it was not a party. The court again agrees.
First, applying general principles of issue preclusion under North Dakota law, defendant would not be bound by what was decided in the action brought by plaintiffs against the Furmanski Estate, including the judgment, since defendant was neither a party to that action nor in privity with the Furmanski Estate.
Second, the North Dakota Supreme Court in
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The district court in
Relevant now is what the North Dakota Supreme Court held in remanding the case about whether Lerol was bound by the
Given what the North Dakota Supreme Court concluded in
Based on the foregoing, the court
574 N.W.2d at 636-37. In
