                     NOTICE: NOT FOR OFFICIAL PUBLICATION.
 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                 AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE


     MICHAEL CLINE and HANNA CLINE, husband and wife;
   AMERICAN POLISH CUISINE LLC dba SOUTHBANK GRILL, an
            Arizona legal entity, Plaintiffs/Appellants,

                                        v.

     CONTRACTORS BONDING AND INSURANCE COMPANY,
         a licensed insurance company, Defendant/Appellee.

                             No. 1 CA-CV 15-0437
                               FILED 10-20-2016


           Appeal from the Superior Court in Maricopa County
                          No. CV2013-008019
               The Honorable John Christian Rea, Judge

                                  AFFIRMED


                                   COUNSEL


Warnock, MacKinlay & Carman, PLLC, Scottsdale
By Nathaniel Preston, Krista M. Carman
Counsel for Plaintiffs/Appellants

Kunz Plitt Hyland & Demlong, Phoenix
By Timothy R. Hyland, Connie T. Gould
Counsel for Defendant/Appellee
                            CLINE et al. v. CBIC
                            Decision of the Court



                       MEMORANDUM DECISION

Judge Randall M. Howe delivered the decision of the Court, in which
Presiding Judge Kenton D. Jones and Judge Don Kessler joined.


H O W E, Judge:

¶1           Appellants Southbank Grill (“Southbank”) and Michael and
Hanna Cline appeal the trial court’s granting summary judgment in favor
of Contractors Bonding and Insurance Company (“CBIC”) for claims of
consumer fraud and reasonable expectations. For the following reasons, we
affirm.

                 FACTS AND PROCEDURAL HISTORY

¶2             In 2008, Southbank reached out to an insurance agency to help
it obtain the liability insurance that its landlord required for its restaurant.
The agency looked to obtain that insurance from CBIC, which included in
the insurance application a two-page “Restaurant/Liquor Questionnaire”
for Southbank to complete. The questionnaire addressed a vast range of
matters related to the restaurant’s business, including property
information, clientele information, and the restaurant’s practices for alcohol
service. The questionnaire advised that CBIC relied on the information
provided and that the application’s submission was to “induce CBIC to
issue insurance” to the applicant. Southbank completed the application and
CBIC subsequently provided a quote for a commercial general liability
insurance policy, which specifically noted that liquor liability was excluded
in the proposed coverage. Southbank accepted the policy.

¶3            Two years later, Southbank again needed liability insurance
and sought the assistance from the same insurance agency. As it did in 2008,
the agency turned to CBIC, which sent the same restaurant and liquor
questionnaire with its application. CBIC ultimately issued the commercial
general liability policy to Southbank, which the policy classified as a
“restaurant-alc < 30% w/tbl sv,” apparently meaning a restaurant that
makes less than 30 percent of its revenue from table service of alcohol. On
the sixty-eighth page of the insurance policy packet—but the first page of
the exclusions section—the policy contained a liquor liability exclusion.
This exclusion declined coverage for bodily injury “for which any insured
may be held liable for any reason if . . . causing or contributing to the


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                           CLINE et al. v. CBIC
                           Decision of the Court

intoxication of any person.” Although CBIC provided the insurance agency
an acknowledgment form for the denial of liquor liability coverage, it did
not require that the insured see or sign the form.

¶4            In November 2011, Southbank allegedly overserved one of its
patrons, who was then involved in a car accident injuring Michael Cline.
Cline and his wife subsequently sued the restaurant for nearly $1.5 million
in damages. Southbank, in turn, tendered the lawsuit to CBIC and
requested coverage. CBIC declined coverage because the insurance policy
excluded liquor liability coverage and the lawsuit related to an injury
caused by alleged over-service of alcohol. As a result, Southbank entered
into a stipulated judgment in favor of the Clines for over $3.5 million,
agreeing to assign its rights to pursue claims against the insurance agency,
its individual insurance agent, and CBIC relating to the lack of liquor
liability coverage to the Clines. Southbank was then forced to close the
restaurant.

¶5             In August 2013, the Clines and Southbank sued the insurance
agency, the insurance agent, and CBIC for insurance producer negligence,
negligent misrepresentation, consumer fraud, and reasonable expectations.
Southbank alleged, among other things, that CBIC deceptively called the
insurance policy it provided a “commercial general liability coverage,”
when it actually excluded liquor liability—a large part of the restaurant’s
risk—and created an expectation of liquor liability coverage by soliciting
information about its practices for alcohol service on the application.
During discovery, Southbank’s principals stated that neither had any direct
communication with CBIC during the entire procurement process. One
principal further stated that she did not “even look at the front page of the
policy” when Southbank received it, but that if she had read the liquor
liability exclusion, she would have understood that it meant CBIC would
not provide coverage for related risks. However, the principal asserted that
she did not know separate liquor liability existed or was required. Instead,
she stated that she believed a general liability insurance policy covered all
risks Southbank was exposed to. Had she known about the need for
separate liquor liability, she stated, she would have purchased it.

¶6            CBIC moved for summary judgment on all counts against it,
arguing that Southbank could not show the elements necessary to sustain
any of the claims. Regarding consumer fraud, CBIC argued that it did not
make any misrepresentations to Southbank because Southbank and CBIC
never communicated directly. CBIC also urged that even if CBIC
represented something to Southbank, the fact that Southbank failed to even
review the policy upon receipt precluded the argument that it relied on


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                           CLINE et al. v. CBIC
                           Decision of the Court

anything related to the coverage it provided. Further, CBIC argued, because
Southbank’s principal testified that she understood the meaning of the
liability exclusion when she read it, Southbank could not argue that the
policy expressly or impliedly guaranteed indemnity for the risk of selling
alcohol at its restaurant.

¶7             Regarding Southbank’s claim under the doctrine of
reasonable expectations, CBIC similarly argued that the claim could not
survive because it did not make any representations to Southbank. CBIC
argued that Southbank’s expectation was based solely on its erroneous
assumption that the policy included coverage against all risks, which was
insufficient to sustain the claim. For all claims, CBIC submitted that because
the insurance agency and agent were not agents of CBIC but instead
Southbank’s brokers, their failure to adequately inform Southbank of the
liquor liability requirement or that their policy excluded it could not be
imputed to it.

¶8            Although Southbank conceded that no genuine dispute of
material fact existed to sustain the negligent misrepresentation claim, it
argued that such a dispute did exist regarding consumer fraud and
reasonable expectations. For both claims, Southbank argued that several of
CBIC’s actions misled it to believe that the restaurant was indemnified from
all risks—including liquor-related ones—and created a reasonable
expectation of that. Specifically, Southbank argued that the questionnaire
included in the application solicited detailed information about
Southbank’s practices for alcohol service that would cause a reasonable
consumer to assume that CBIC would be providing coverage for risks
related to that information. Further, Southbank argued that by calling the
insurance policy a “commercial general liability policy,” CBIC
misrepresented and falsely promised that all applicable liability concerns
were covered. In addition, Southbank posited that CBIC engaged in
concealment of a material fact because it “buried” the liquor liability
exclusion on the sixty-eighth page of a nearly one-hundred-page policy,
where other exclusions were more conspicuously noted. Southbank argued
finally that having a form to acknowledge the declination of certain
coverage but not actually requiring that it be signed constituted an unfair
practice.

¶9           After taking the matter under advisement, the trial court
granted the motion for summary judgment and entered judgment in CBIC’s
favor pursuant to Arizona Rule of Civil Procedure 54(b). Southbank then
moved for reconsideration, which the trial court denied. Southbank timely
appealed.


                                      4
                            CLINE et al. v. CBIC
                            Decision of the Court

                               DISCUSSION

¶10            Southbank argues that the trial court erred in granting
summary judgment on the issues of consumer fraud and reasonable
expectations. We review the trial court’s granting of summary judgment de
novo, viewing the evidence and all reasonable inferences in the light most
favorable to the party opposing summary judgment. Murray v. Farmers Ins.
Co. of Ariz., 239 Ariz. 58, 66 ¶ 26, 366 P.3d 117, 125 (App. 2016). Summary
judgment is appropriate when no genuine dispute exists regarding any
material fact and the moving party is entitled to a judgment as a matter of
law. Ariz. R. Civ. P. 56(a). In other words, summary judgment is proper if
the facts produced to support a claim have so little probative value that,
given the amount of evidence required, reasonable people could not agree
with the conclusion advanced. Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802
P.2d 1000, 1008 (1990). Because Southbank has not shown that CBIC made
any promise or material misrepresentation about liquor liability in its
policy, the trial court did not err by granting summary judgment.

¶11            To succeed on a claim of consumer fraud, a party must show
a false promise or misrepresentation made in connection with the sale or
advertisements of merchandise—which includes services—and consequent
and proximate injury resulting from that promise. See A.R.S. §§ 44–1522,
–1521(5); see also Kuehn v. Stanley, 208 Ariz. 124, 129 ¶ 16, 91 P.3d 346, 351
(App. 2004). An injury occurs when a consumer relies, even if
unreasonably, on false or misrepresented information. Kuehn, 208 Ariz. at
129 ¶ 16, 91 P.3d at 351. The test to determine whether a representation is
misleading is whether the least sophisticated reader would be misled,
taking the meaning and impression from all that is reasonably implied.
Madsen v. W. Amer. Mortg. Co., 143 Ariz. 614, 618, 694 P.2d 1228, 1232 (App.
1985).

¶12            Here, no genuine dispute of material facts exists regarding
whether CBIC committed consumer fraud because Southbank has not
alleged that CBIC made a misrepresentation in connection with the sale of
its services. Southbank admitted that it did not communicate with CBIC
during the entire insurance procurement process. Nothing in the record
suggests that CBIC otherwise communicated, orally or in writing, that it
would or did include liquor liability coverage in the policy it issued to
Southbank. That CBIC solicited information about the restaurant’s
operations, including an entire page on its practices for alcohol service, does
not amount to a false promise or misrepresentation. The questionnaire did
only what Southbank purports it did—solicit factual information. It noted
that the information sought would be relied upon by CBIC to “induce” it to


                                      5
                             CLINE et al. v. CBIC
                             Decision of the Court

issue an insurance policy to the applicant. Indeed, insurers rely on the
information provided on its applications in deciding whether to accept a
risk. Cf. A.R.S. § 20–1109 (recognizing an insurer’s ability to not accept a
risk after reviewing an application and allowing the insurer to deny
coverage if it can prove that acceptance was based on false information
provided by an insured in certain situations). The questionnaire did not
bind CBIC to provide liability coverage for everything encompassed by the
responses; to find otherwise would defeat the purpose of an application.

¶13            Southbank’s claim that CBIC concealed a material fact and
otherwise engaged in misleading unfair practices also fails. First, one of
Southbank’s principals admitted that when Southbank received the policy
from CBIC, she did not even look at the first page, much less read its
entirety. Thus, whether the liquor liability exclusion was on the first or last
page of the insurance packet would not have mattered because she would
not have seen it. Second, if Southbank had read the policy, it could not
argue that the exclusion was concealed because it was clearly noted on the
first page of the “exclusions” section of the general liability policy.
Additionally, the principal admitted that if she had read the exclusion, she
would have understood that it meant that CBIC would not be liable for risks
relating to alcohol. Similarly, because Southbank did not read the policy, its
argument        that    classifying   the     restaurant      as     one     with
“alc < 30% tbl sv” led it to reasonably believe that the policy insured against
liquor liability is unavailing because it did not see the classification. Finally,
the policy’s designation as a “commercial general liability policy” does not
create the impression that all potential liabilities are covered. Accordingly,
because Southbank failed to show that CBIC made any representations to
it, much less misrepresentations, the trial court did not err in granting
summary judgment.1

¶14          Southbank also argues that the trial court erred by granting
summary judgment in CBIC’s favor for the reasonable expectations claim.
The reasonable expectations doctrine relieves an insured from certain
agreement provisions that “he did not negotiate, probably did not read, and
probably would not have understood had he read them,” if the drafter had
reason to believe the insured would have rejected the agreement if the
insured had known about the term. State Farm Fire & Cas. Ins. Co. v.
Grabowski, 214 Ariz. 188, 192 ¶ 14, 150 P.3d 275, 279 (App. 2007). But the

1      Because we conclude that CBIC did not make any representations to
Southbank that the issued policy protected it against liquor liability, we
need not address CBIC’s argument that the insurance agency had actual
notice of the exclusion, which was imputed to Southbank.


                                        6
                            CLINE et al. v. CBIC
                            Decision of the Court

doctrine nonetheless requires more than the insured’s fervent hope that
coverage exists and therefore only applies under certain limited
circumstances. Id.

¶15           A court may decline to enforce an unambiguous boilerplate
term in a standardized insurance contract only in situations where: (1) the
contract terms cannot be understood by an average reasonably intelligent
consumer who might check on his or her rights; (2) the insured did not
receive full and adequate notice of the term in question and the provision
is either unusual, unexpected, or emasculates apparent coverage; (3) some
activity reasonably attributed to the insurer would create an objective
impression of coverage in the mind of a reasonable insured; or (4) some
activity reasonably attributed to the insurer induced a particular insured to
believe that he or she had coverage, although such coverage is expressly
and unambiguously denied in the policy. Gordinier v. Aetna Cas. & Sur. Co.,
154 Ariz. 266, 272–73, 742 P.2d 277, 283–84 (1987).

¶16            Here, no genuine issue of material fact exists to sustain
Southbank’s claim against CBIC under the reasonable expectations
doctrine. Southbank cannot show that it would not have understood the
exclusion if it had read it because its principal admitted that if she had read
the exclusion, she would have understood its implications. Additionally,
the record shows that Southbank and CBIC did not have any
communication during the insurance procurement process. Without
having communicated, Southbank cannot show that CBIC had reason to
believe that Southbank would have rejected the policy based upon the
exclusion. In fact, Southbank’s principal testified that if she knew she
needed separate liquor liability insurance, she would have purchased it, not
that she would have rejected the policy CBIC provided.

¶17           Moreover, Southbank has not established any of the four
situations outlined in Gordinier. First, the policy’s liquor liability exclusion
is not written in such a way that the average reasonably intelligent
consumer may not understand it. The exclusion clearly stated that coverage
would not be provided for bodily injury for which the insured may be held
liable for causing or contributing to the intoxication of a person.
Southbank’s principal stated that she would have understood this liability
exclusion had she read the policy. Second, even if Southbank did not receive
a copy of the insurance quote from its insurance agent, nothing suggests
that the liquor liability exclusion provision was unusual, unexpected, or
emasculating of apparent coverage. See Couch on Insurance 3rd Ed. § 132:56
(stating that commercial general liability insurance policies typically
exclude coverage for injuries arising out of the sale of alcohol). Finally,


                                       7
                           CLINE et al. v. CBIC
                           Decision of the Court

nothing reasonably attributed to CBIC created an objective impression of
coverage or induced Southbank to believe it had liquor liability coverage.
Southbank points only to CBIC’s provision of a restaurant insurance
application and failure to require acknowledgement of the rejection of
liquor-related risks to show an impression of coverage. But the application
itself and the policy ultimately issued do not constitute or include any
promise to provide coverage for the reasons stated above. Thus, the trial
court did not err in granting summary judgment in CBIC’s favor.

¶18           Southbank requests its costs and attorneys’ fees on appeal
pursuant to A.R.S. § 12–341.01. CBIC also requests its costs and attorneys’
fees on appeal pursuant to A.R.S. §§ 12–341 and –341.01. In our discretion,
we deny both requests for fees, but grant CBIC its taxable costs pursuant to
A.R.S. § 12–341 and upon compliance with Arizona Rule of Civil Appellate
Procedure 21.

                              CONCLUSION

¶19          For the foregoing reasons, we affirm.




                         AMY M. WOOD • Clerk of the Court
                         FILED: AA




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