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Johnson v. RLI Insurance Co.

United States District Court, D. Alaska

January 14, 2013

KEITH C. JOHNSON, Plaintiff,



Order Before the Court are the parties’ cross-motions for summary judgment. The motions have been briefed; oral argument was held on August 20, 2015.[1] The Court has jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332 because the parties are diverse and the Complaint alleges damages greater than $75, 000.[2] For the reasons set forth below, the Court will deny Mr. Johnson’s motion for summary judgment and grant RLI’s cross-motion for summary judgment.


On July 18, 2011, a Chevrolet Suburban driven by Robert Stenehjem, Sr. left the road while returning to Soldotna after a halibut fishing trip. The vehicle had three passengers, one of whom was the plaintiff, Keith Johnson. Robert[3] was killed in the accident, and Mr. Johnson was severely injured.[4]

The men were returning to a cabin in Soldotna that was owned by a limited liability company. The limited liability company, PWC, was formed in 2006 by Robert’s brother John Stenehjem, and two other men, Mike Flaa and Robert Neill.[5] John had been the managing member of the LLC and the signatory on the Articles of Organization for the LLC.[6]

PWC owned two vehicles that were kept at the cabin, a 2000 GMC pickup truck and the 1999 Chevy Suburban.[7] John purchased the Suburban with his own funds on behalf of PWC, but the record is silent regarding whether he was reimbursed by PWC.[8]The parties do not dispute that the Suburban was registered to PWC, and an Allstate insurance policy for the Suburban was issued to PWC (after a correction).[9] The Suburban was the vehicle driven on the halibut fishing trip.

John may have also had his own vehicle at the cabin at the time of the accident, but the record is unclear. The record is also unclear as to whether John had driven the Suburban in the days preceding the accident after the guests had arrived for the fishing trip. The four men in the Suburban at the time of the accident-Robert, Mr. Johnson, and two others-were all John’s guests at the cabin. John was also present at the cabin at the time of the accident but did not go in the Suburban on the halibut fishing trip.[10]

Guests were not to use PWC’s vehicles unless given permission by a member. PWC members had an understanding among them that whoever invited guests to the cabin was the member responsible for giving the guests permission to use PWC’s vehicles, as warranted.[11] However, after the accident John stated in an email, a phone conversation, and an affidavit that he had not given Robert permission to use the Suburban for the halibut fishing trip.[12] John stated that Robert had been given permission by another unspecified member of PWC.[13] Mr. Neill, the only surviving member of PWC, testified at PWC’s 30(b)(6) deposition that he did not know if John had given Robert permission to use the Suburban.[14] Mr. Neill and John were the only PWC members present at the cabin that week.[15]

The RLI umbrella policy at the center of this case was first issued to John when he resided in Alaska in 2003.[16] When John and his wife, Javayne, moved to Arizona, a renewed policy was issued to reflect this change.[17] The policy in effect at the time of the accident listed their Arizona address as their primary residence, and covered two vehicles, neither of which was the Suburban.[18] Mr. Neill testified that John and Javayne continued to spend time at the Soldotna cabin even after they moved to Arizona.[19]

After the accident, Mr. Johnson sued Robert’s estate in North Dakota state court. Allstate (under the policy for the Suburban) and QEB Farmers Union (under Robert’s own personal policy) combined to defend the Estate.[20] Mr. Johnson made a formal demand on RLI on May 15, 2012.[21] After investigating the claim, RLI formally notified Mr. Johnson’s attorney on September 19, 2012 that it would not be responding to Mr. Johnson’s claim.[22] On October 11, 2012, Mr. Johnson’s attorney corresponded with Allstate and shared his opinion that John’s RLI umbrella policy would not provide coverage because “[t]he only arguable claim would be that [John] borrowed the vehicle [from PWC] from time to time.” After surveying the case law, Mr. Johnson’s attorney concluded that the “[t]he definition of ‘borrow’ used by courts interpreting insurance provisions likely does not apply to the case at hand.” He reasoned that “[t]he most likely application of the definition to the policy language is that the insured is currently borrowing the vehicle and has control over the vehicle in the sense that he can then transfer possession of it to third parties.” Based on his review of the facts, “John Stenehjem did not obtain possession of the vehicle prior to Johnson’s use of it.”[23]

RLI prepared an affidavit to which John made changes and signed on January 14, 2013, stating that he had not given Robert (or anyone else) permission to drive the Suburban.[24] RLI prepared an affidavit to which John made changes and, with a denial letter.[25]

Robert’s Estate settled with Mr. Johnson in early 2013.[26]Under the terms of the settlement, the Estate agreed to the entry of judgment in the North Dakota state court in the amount of $2, 293, 237.87, which that court approved on April 2, 2013. The settlement agreement contained clauses providing that the judgment could not be satisfied from any of the Estate’s property. Rather, as part of the settlement agreement, Robert’s Estate assigned any claims it may have had against RLI to Mr. Johnson. Allstate and QEB paid out their policy limits in partial satisfaction of the judgment contemporaneously with the settlement.[27]

On June 28, 2013, Mr. Johnson’s attorney restated his opinion that the RLI policy did not provide coverage, stating in a letter that “[g]iven the [a]ffidavit of Mr. Stenehjem, it is my opinion that RLI is on solid ground and that any claim under that policy would be without merit.”[28] John passed away the following year, in January 2014.[29] He had not been deposed prior to his death. Mr. Johnson filed this case against RLI on April 29, 2014.[30]


Mr. Johnson moves for summary judgment on Counts I and II of the Complaint. Count I requests a declaratory judgment that Robert is covered under the RLI policy and that RLI had a duty to defend the Estate. Count II alleges breach of contract by RLI for failing to defend and indemnify.[31]RLI filed a cross-motion for summary judgment on all of Mr. ...

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