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The Frugal Flamingo Quick Stop v. Farm Bureau Mutual Insurance Co.

Court of Appeals of Utah

March 22, 2018

The Frugal Flamingo Quick Stop, Appellant,
v.
Farm Bureau Mutual Insurance Company, Appellee.

          Second District Court, Ogden Department The Honorable Michael D. DiReda No. 110908653

          Brian E. Arnold, Attorney for Appellant

          Paul M. Belnap and Nicholas E. Dudoich, Attorneys for Appellee

          Judge Ryan M. Harris authored this Opinion, in which Judges Gregory K. Orme and Diana Hagen concurred.

          HARRIS, Judge

         ¶1 In this case, we are asked to determine whether the district court properly denied a convenience store's motion to amend its complaint to add claims against its insurance company. The district court denied the motion to amend after concluding that the new claims would be time-barred. The convenience store argues on appeal that the "relation back" doctrine operates to render its new claims timely. We disagree and affirm.

         BACKGROUND

         ¶2 Beginning in 2010, and continuing periodically for some fourteen months, an employee (Employee) allegedly stole cash and merchandise from his employer, The Frugal Flamingo Quick Stop (Store). At the time, Store was insured by Farm Bureau Mutual Insurance Company (Insurance Company) under a policy that included coverage for "employee dishonesty." Pursuant to the terms of that policy, Insurance Company was obligated to pay up to $5, 000 "for loss or damage in any one occurrence" of employee dishonesty.

         ¶3 On November 10, 2011, Store's owner (Owner) notified Insurance Company that Store had suffered over $121, 000 in damages from Employee's repeated thefts. Just five days later, on November 15, 2011, Insurance Company delivered to Owner a check for $5, 000, apparently based on Insurance Company's assumption that Employee's thefts were all part of one "occurrence" and that $5, 000 was the entire policy limit available to Store. The record establishes that Owner received the check at some point in November 2011, but it does not establish what day he received the check or whether he negotiated it. However, it is undisputed that Insurance Company delivered the check to Owner at some point during November 2011.

         ¶4 A few weeks later, on December 7, 2011, Store filed this lawsuit. In its complaint, Store named only one defendant- Employee-and stated claims against Employee for conversion, fraud, and civil conspiracy. At the time, Store did not allege any claims against Insurance Company, or attempt to make Insurance Company a party to the case. For the next two years, the case sat dormant.

         ¶5 Finally, on January 27, 2014, Store filed a motion asking the district court to join Insurance Company as a party to the case. In support of its motion, Store asserted that Insurance Company might be entitled to indemnification and, therefore, Insurance Company should be made a party to the case in order to "preserve its rights against" Employee. At that time, Store had still not stated any claims against Insurance Company, and did not by this motion seek to add any such claims. Store certified that it mailed a copy of its motion to join Insurance Company as a party to Employee's counsel, but does not claim to have mailed the motion to Insurance Company itself. The district court took no immediate action on this unusual motion and, for more than a year, the case again sat dormant.

         ¶6 In June 2015, at a pre-trial conference, Store presented the district court with an "Agreement to Judgment and Settlement, " which indicated that Employee had agreed to the entry of a judgment against him and in favor of Store in the amount of $233, 421.14.[1] A few weeks later, in August 2015, Store finally submitted for decision its January 2014 motion to join Insurance Company as a party, which motion had not drawn any opposition. This time, Store certified that it had mailed a copy of the request to submit not only to Employee, but also to Insurance Company's registered agent. On August 31, 2015, the district court granted Store's apparently unopposed motion. On September 23, 2015, Store served Insurance Company with (1) a copy of the district court's August 31, 2015 order joining it as a party and (2) a copy of Store's original December 7, 2011 complaint against Employee, which contained no claims against Insurance Company.

         ¶7 On December 11, 2015, Insurance Company filed a motion to dismiss, pointing out that Store's complaint did not state any claims against Insurance Company. In response, on January 11, 2016, Store finally moved for leave to amend its complaint to state such claims, and attached a proposed amended complaint containing causes of action against Insurance Company for breach of contract, breach of the covenant of good faith and fair dealing, and bad faith, asserting generally that Insurance Company had improperly denied and/or mishandled Store's insurance claim for reimbursement related to Employee's thefts. Insurance Company opposed amendment, arguing, among other things, that Store's new claims against it were barred by the applicable statute of limitations.

         ¶8 After briefing and oral argument, the district court noted that the operative complaint stated no claims against Insurance Company, and further determined that the new claims in Store's proposed amended complaint accrued in November 2011, when Insurance Company delivered the $5, 000 check to Owner. The district court also determined that Store's motion to amend was untimely and that it had no justification in waiting so long to file its motion to amend. Based on these determinations, the district court granted Insurance Company's motion to dismiss the original complaint (due to the absence of any claims against Insurance Company), and denied Store's motion to amend, ...


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