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Magnus, Inc. v. Diamond State Ins. Co.

United States District Court, D. Kansas

March 31, 2015

MAGNUS, INC., Plaintiff,
v.
DIAMOND STATE INSURANCE COMPANY, Defendant

Page 1047

For Magnus, Inc., Plaintiff: Frederick C. Davis, II, LEAD ATTORNEY, Kenneth H. Jack, Davis & Jack, L.L.C., Wichita, KS.

For Diamond State Insurance Company, Defendant: Bruce Keplinger, John Russell Hicks, LEAD ATTORNEY, Norris & Keplinger, LLC, Overland Park, KS.

Page 1048

MEMORANDUM AND ORDER

KATHRYN H. VRATIL, United States District Judge.

Magnus, Inc. brings suit against Diamond State Insurance Company to recover under insurance policies which Diamond issued to Precision Designed Products (" PDP" ). Specifically, Magnus asserts that Diamond breached its agreement to insure and defend PDP with regard to claims which Magnus brought against PDP in Montgomery County, Kansas, Case No. 2008CV119I.[1] See Pretrial Order (Doc. #49) filed August 25, 2014 at 13-14, ¶ 4. Magnus also asserts that Diamond unjustifiably refused to pay the insurance claim. Id. at 14, ¶ 5. This matter is before the Court on Defendant's Motion For Summary Judgment (Doc. #17) filed July 11, 2011, plaintiff's Motion For Reconsideration Of Denial Of Oral Arguments On Summary Judgment (Doc. #43) filed May 5, 2014 and the Motion Of Plaintiff, Magnus, Inc., For Partial Summary Judgment On The Question Of Insurance Company Liability For Payment Of The State Court Judgment (" Magnus Motion For Partial Summary Judgment" ) (Doc. #51) filed October 3, 2014. On March 24, 2015, the Court held a telephone conference with the attorneys in the case. For reasons stated at the conference and below, the Court overrules Diamond's motion for summary judgment, overrules Magnus's motion for oral argument and sustains in part Magnus's motion for partial summary judgment.

Legal Standards

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show no genuine dispute as to any material fact and that the

Page 1049

moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir. 1993). A factual dispute is " material" only if it " might affect the outcome of the suit under the governing law." Liberty Lobby, 477 U.S. at 248. The inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law. Id. at 251-52. A " genuine" factual dispute requires more than a mere scintilla of evidence. Id. at 252.

The moving party bears the initial burden of showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hicks v. City of Watonga, Okla., 942 F.2d 737, 743 (10th Cir. 1991). Once the moving party meets its burden, the burden shifts to the nonmoving party to demonstrate that genuine issues remain for trial as to those " dispositive matters for which it carries the burden of proof." Applied Genetics Int'l, Inc. v. First Affiliated Secs., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990). And, while the Court views the record in a light most favorable to the party opposing summary judgment, the nonmoving party may not rest on its pleadings but must set forth specific facts. Id. The nonmoving party cannot rely on ignorance of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial. Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988). If the nonmoving party's evidence is merely colorable or is not significantly probative, summary judgment may be granted. Liberty Lobby, 477 U.S. at 250-51.

Facts[2]

The following facts are undisputed.

Mike Sohm is chief executive officer of Magnus, which sells archery products.

Keith Jabben owns and operates PDP, which manufactures arrow components for the archery industry. For each year from September 21, 2001 through September 21, 2005, Diamond State Insurance Company issued PDP a commercial general liability (" CGL" ) insurance policy. The policies contain substantially the same language and provide the same coverage.[3]

In August of 2002, Magnus and PDP entered into an agreement under which Magnus agreed to purchase certain aluminum

Page 1050

broadhead adapters from PDP.[4] The record is rife with genuine issues of material fact whether the agreement required PDP to use a specific grade of aluminum. Magnus contends that PDP agreed to provide adapters made with 7075--T6 aluminum or 6061 aluminum if 7075--T6 aluminum was not readily available. PDP contends that it agreed to initially supply broadheads out of 2011 grade and to look into using 7075 grade in the future, but that it never agreed to supply adapters out of anything other than 2011 grade aluminum. Grade 7075-T6 aluminum is harder than 6061 grade aluminum, and 6061 grade aluminum is harder than 2011 grade aluminum. Whatever the parties' agreement, PDP supplied adapters of 2011 aluminum.[5]

The adapters which PDP supplied to Magnus were permanently glued to broadheads, so that arrow users could screw the broadheads on and off the leading or point ends of arrow shafts.[6] A typical arrow user may attach different broadheads with different types of arrow blades -- depending on the type of game which he or she is hunting -- and/or replace the broadhead with a target point for target practice. Typically, an arrow user can use a common broadhead wrench to remove a broadhead from an arrow. The ability to interchange broadheads is an important functional characteristic of an arrow. In addition, some blades are razor sharp and must be stored separately from the arrow shaft to prevent cutting and stabbing injuries.

On August 30, 2002, PDP issued Magnus its first invoice for the broadhead adapters.[7]

A month later, on September 30, 2002, Magnus informed PDP that it was experiencing problems with the adapters " seizing," i.e. becoming permanently affixed to arrows.[8] ...


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