-GWF Vignola et al v. Gilman et al, No. 2:2010cv02099 - Document 20 (D. Nev. 2011)
Court Description: ORDER Granting 11 Defendant Mutual of Enumclaw's Motion to Dismiss. Signed by Judge Philip M. Pro on 4/13/11. (Copies have been distributed pursuant to the NEF - EDS)
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-GWF Vignola et al v. Gilman et al Doc. 20 1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 6 7 8 9 10 11 12 13 14 15 16 17 *** ) LOUIS VIGNOLA, individually; ) TAMARA HARLESS, as Special ) Administrator for the Estate of NANCY ) MARIE OUELLET; LOUIS VIGNOLA as ) Guardian ad Litem for CAROLYN ) VIGNOLA, a minor; and LOUIS ) VIGNOLA as Guardian ad Litem for ) GABRIEL VIGNOLA, a minor, ) ) Plaintiffs, ) ) v. ) ) CHARLES ALFRED GILMAN, JR.; ) AUTO-OWNERS INSURANCE ) COMPANY; and MUTUAL OF ) ENUMCLAW INSURANCE COMPANY, ) ) Defendants. ) ) 2:10-cv-02099-PMP-GWF ORDER Presently before the Court is Defendant Mutual of Enumclaw Insurance 18 Company’s Motion to Dismiss (Doc. #11), filed on February 7, 2011. Plaintiffs filed a 19 Response (Doc. #14) on February 17, 2011. Defendant Mutual of Enumclaw Insurance 20 Company filed a Reply (Doc. #19) on February 28, 2011. 21 I. BACKGROUND 22 This case stems from a tragic motorcycle–automobile accident on June 22, 2010. 23 (Notice of Removal (Doc. #1), Ex. A [“Compl.”] at ¶ 7.) Nancy Marie Ouellet (“Ouellet”) 24 was operating her motorcycle on US 93 when Defendant Charles Gilman’s (“Gilman”) 25 automobile struck her motorcycle. (Id.) As a result of the collision, Ouellet suffered 26 serious injuries and died. (Id.) Ouellet maintained a motorcycle insurance policy through Dockets.Justia.com 1 Defendant Auto-Owners Insurance Company (“Auto-Owners”). (Id. at ¶ 17.) Defendant 2 Gilman maintained an automobile insurance policy through Defendant Mutual of 3 Enumclaw Insurance Company (“Enumclaw”). (Id. at ¶ 37.) 4 Plaintiffs Louis Vignola, Carolyn Vignola, and Gabriel Vignola are Ouellet’s 5 heirs, and Plaintiff Tamara Harless is the Special Administrator of Ouellet’s estate. (Id. at 6 ¶¶ 2-3, 8-10.) Plaintiffs filed a claim with Defendant Auto-Owners requesting the policy 7 limits for under-insured motorist coverage under Ouellet’s insurance policy. (Id. at ¶ 18.) 8 Additionally, counsel for Plaintiffs sent a demand letter to Defendant Enumclaw requesting 9 the policy limits for bodily injury coverage under Defendant Gilman’s auto-insurance 10 11 policy, however Plaintiffs did not receive payment under the policy. (Id. at ¶¶ 39, 52.) On November 2, 2010, Plaintiffs filed the present Complaint in the Eighth 12 Judicial District Court of Clark County, Nevada, alleging claims of wrongful death, 13 negligence, and loss of consortium against Defendant Gilman. (Id. at ¶¶ 11-14.) Plaintiffs’ 14 Complaint alleges Defendant Auto-Owners acted in bad faith by refusing to promptly settle 15 their claims. (Id. at ¶¶ 18-30.) Additionally, Plaintiffs’ Complaint asserts a bad faith claim 16 against Defendant Enumclaw for failing to reasonably and promptly settle their claims. (Id. 17 at ¶ 80.) Plaintiffs’ Complaint also seeks a declaratory judgment that Defendant Enumclaw 18 is obligated to indemnify Defendant Gilman for any damages awarded to Plaintiffs in 19 excess of the applicable policy limits. (Id.) Plaintiffs seek damages, payment under the 20 insurance policies, plus attorney’s fees and costs. (Id.) 21 Defendant Auto-Owners removed the case to this Court on December 2, 2010. 22 (Notice of Removal (Doc. #1).) Defendant Enumclaw now moves to dismiss Plaintiffs’ 23 claims, arguing Plaintiffs are third party claimants under the insurance policy and thus lack 24 standing to bring a claim for bad faith refusal to settle. Defendant Enumclaw also argues 25 Plaintiffs’ request for declaratory relief is not ripe because they have no protectable legal 26 interest in the insurance contract where they have not first obtained a tort judgment against 2 1 Defendant Gilman.1 In response, Plaintiffs ask the Court to recognize a cause of action for third party 2 3 bad faith. Additionally, Plaintiffs rely on a recent decision of this Court to argue their 4 Complaint states an actual case or controversy ripe for declaratory relief. Plaintiffs also 5 argue their request for declaratory relief is ripe because they have a legally protectable 6 interest in the liability of Defendant Enumclaw, the limits of Gilman’s policy, and the 7 alleged acts of bad faith. Defendant Enumclaw replies that Plaintiffs have not established the right of third 8 9 parties to file claims for bad faith refusal to settle. Additionally, Defendant Enumclaw 10 argues that recognizing Plaintiffs’ bad faith claim would require the Court to overrule 11 established Nevada case law. Defendant Enumclaw further argues that under applicable 12 case law, Plaintiffs are barred from maintaining a declaratory relief action prior to obtaining 13 a tort judgment against Defendant Gilman, and thus have not presented a claim ripe for 14 declaratory relief. 15 II. LEGAL STANDARD Federal courts hearing cases pursuant to diversity jurisdiction apply federal 16 17 procedural law and state substantive law. Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 18 415, 427 (1996). In considering a motion to dismiss, courts “must construe the complaint in 19 the light most favorable to the plaintiff and must accept all well-pleaded factual allegations 20 as true.” Saiperas v. Mont. State Comp. Ins. Fund, 480 F.3d 1001, 1003 (9th Cir. 2007) 21 (quotation omitted). Dismissal of a claim is proper where no cognizable legal theory exists 22 or where the plaintiff has alleged facts insufficient to support a cognizable legal theory. Id. 23 Additionally, if the complaint fails to assert facts sufficient to confer standing, dismissal is 24 25 26 1 Defendant Enumclaw also requests an award of reasonable attorney’s fees and costs incurred. Defendant Enumclaw did not provide supporting case law for its request, and therefore Defendant Enumclaw’s request for attorney’s fees is hereby denied. 3 1 proper. Sacks v. Office of Foreign Assets Control, 466 F.3d 764, 771 (9th Cir. 2006). 2 III. DISCUSSION 3 A. Bad Faith 4 State substantive law determines whether Plaintiffs allege facts sufficient to 5 support a claim of bad faith. Conestoga Servs. Corp. v. Executive Risk Indem., Inc., 312 6 F.3d 976, 980-81 (9th Cir. 2002). In Nevada, liability for bad faith is strictly tied to the 7 implied covenant of good faith and fair dealing created by the contractual relationship 8 between the insured and the insurer. United Fire Ins. Co. v. McClelland, 780 P.2d 193, 197 9 (Nev. 1989). An insurer’s duty to negotiate settlements in good faith arises directly from 10 the insurance contract. Allstate Ins. Co. v. Miller, 212 P.3d 318, 330 (Nev. 2009). 11 Therefore, a party who lacks a contractual relationship with an insurer does not have 12 standing to bring a claim of bad faith. Gunny v. Allstate Ins. Co., 830 P.2d 1335, 1335-36 13 (Nev. 1992). In Nevada, “[w]here no contract relationship exists, no recovery for bad faith 14 is allowed.” McClelland, 780 P.2d at 197. Other states may recognize a duty to negotiate 15 in good faith between insurers and third parties, however, Nevada does not recognize such a 16 duty. Tweet v. Webster, 610 F. Supp. 104, 105 (D. Nev. 1985); see also Bergerud v. 17 Progressive Cas. Ins., 453 F. Supp. 2d 1241, 1247 (D. Nev. 2006). The Nevada Supreme Court has suggested that in the absence of a contractual 18 19 relationship, a third party may have standing to bring a claim of bad faith if it is a specific 20 intended beneficiary under the policy or has relied to its detriment on actions or 21 representations made by the insurer. Gunny, 830 P.2d at 1336. Therefore, a contractual 22 relationship is required to assert a claim of bad faith unless a third party is a specific 23 intended beneficiary to the insurance contract or alleges it relied to its detriment on 24 /// 25 /// 26 /// 4 1 representations made by the insurer. Gunny, 830 P.2d at 1335-36.2 2 Plaintiffs’ Complaint fails to allege the existence of a contractual relationship 3 between Plaintiffs and Defendant Enumclaw. Plaintiffs are third party claimants against 4 Defendant Gilman’s insurance policy, and Plaintiffs do not allege they are specific intended 5 beneficiaries or that they detrimentally relied on representations made by Defendant 6 Enumclaw. Under Nevada law, Plaintiffs do not have standing to bring a claim of bad faith 7 against Defendant Enumclaw because they fail to allege the requisite contractual 8 relationship. The Court therefore, will grant Defendant Enumclaw’s Motion to Dismiss 9 without prejudice as to Plaintiffs’ bad faith claim against Defendant Enumclaw. 10 B. Declaratory Relief 11 In a diversity action, federal law determines whether the parties have presented a 12 controversy ripe for judicial review under the Declaratory Judgment Act. Hunt v. State 13 Farm Mut. Auto. Ins. Co., 655 F. Supp. 284, 286 (D. Nev. 1987). State substantive law 14 regarding the parties’ rights applies when it is relevant to the Court’s ripeness analysis. Id. 15 A federal court may grant declaratory relief “[i]n a case of actual controversy within its 16 jurisdiction . . . .” 28 U.S.C. § 2201(a). Accordingly, a district court must determine at the 17 outset whether the parties have presented an actual case or controversy within the court’s 18 jurisdiction. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2005). A case 19 or controversy is ripe if the court finds “a substantial controversy, between parties having 20 adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a 21 declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) 22 23 24 25 26 2 Additionally, this Court recognized that Nevada may extend the implied covenant of good faith and fair dealing to non-contracting parties who are defined as “insureds” under the applicable policy language. See Bergerud, 453 F. Supp. 2d at 1249. Thus, a non-contracting party who is defined as an insured under the relevant policy could state a claim against the insurer for bad faith refusal to settle. Plaintiffs do not allege they are defined as insureds under Defendant Gilman’s insurance policy. Therefore, the reasoning in Bergerud is not applicable to the facts of this case. 5 1 (quotation omitted). Therefore, a court cannot grant declaratory relief if the dispute 2 between the parties is hypothetical or the rights at issue are merely speculative. Hunt, 655 3 F. Supp. at 286. The parties must present a dispute that is “definite and concrete.” 4 MedImmune, 549 U.S. at 127 (quotation omitted). 5 Under Nevada law, declaratory relief between an insured and his insurer may be 6 granted prior to a final tort judgment. El Capitan Club v. Fireman’s Fund Ins. Co., 506 P.2d 7 426, 429 (Nev. 1973). Declaratory relief is proper between an insured and his insurer once 8 the insured has made a demand for the insurance company to pay a claim or defend a 9 lawsuit. Knittle v. Progressive Cas. Ins. Co., 908 P.2d 724, 726 (Nev. 1996). Additionally, 10 declaratory relief between an insured and his insurer may be proper where it is clear an 11 early resolution of the question of coverage will be advantageous to all parties. El Capitan 12 Club, 506 P.2d at 429. 13 In contrast, under Nevada law, declaratory relief between a third party claimant 14 and an insurer is proper only after the third party obtains a tort judgment against the 15 tortfeasor. Knittle, 908 P.2d at 726. The rights of a tort claimant against a tortfeasor’s 16 insurer do not mature until the tort claimant obtains a judgment against the tortfeasor. 17 Roberts v. Farmers Ins. Co., 533 P.2d 158, 159 (Nev. 1975). Thus, a plaintiff has “no 18 legally protectable interest” in an action for declaratory relief until she establishes liability 19 of the tort defendant. Knittle, 908 P.2d at 725-26. Prior to obtaining a tort judgment 20 against the tortfeasor, a plaintiff’s rights against the tortfeasor’s insurer are speculative and 21 not ripe for declaratory relief. Id. at 726. 22 Plaintiffs rely on AAA Nevada Insurance Company v. Chau, to argue their 23 request for declaratory relief is ripe. No. 2:08-cv-00827-RCJ-LRL, 2010 WL 1756986, at 24 *3 (D. Nev. Apr. 30, 2010). In Chau, the insurer initiated a declaratory relief action against 25 its insured to establish its duties under the insurance contract. Id. at *1. Third party 26 claimants against the insurance policy in question moved for permissive intervention in the 6 1 declaratory relief action between the insured and the insurer. Id. Although the Court 2 initially dismissed the declaratory relief action, upon reconsideration the Court determined 3 an actual case or controversy ripe for declaratory relief existed between the insured and the 4 insurer. Id. at *2-3. Additionally, the Court reversed prior denial of the third parties’ 5 motion to intervene, allowing intervention pursuant to the Court’s discretion under Federal 6 Rule of Civil Procedure 24(b). Id. at *5. The Court permitted the third parties to intervene, 7 even though they could not independently bring a claim against the insurer, because the 8 third parties had a significant interest in the outcome of the declaratory relief action and 9 were the only parties in the declaratory relief action with “a truly adverse interest.” Id. 10 Plaintiffs rely on Chau to argue that third parties have a justiciable claim for 11 declaratory relief against a tortfeasor’s insurer. Plaintiffs argue that an interest sufficient to 12 seek permissive intervention in a declaratory relief action between an insured and an insurer 13 creates a controversy ripe for declaratory relief between a third party and an insurer. 14 Additionally, Plaintiffs rely on Chau to assert they have a legally protectable interest in the 15 instant matter because they have an interest in any controversy regarding the liability of 16 Defendant Enumclaw, the policy limits of Gilman’s coverage, and underlying bad faith 17 claims. Plaintiffs argue their interest in the limits of Gilman’s coverage and Enumclaw’s 18 liability for bad faith creates a justiciable controversy ripe for declaratory relief. 19 The declaratory relief action at issue in Chau was between the insured and the 20 insurer, and the Court found a ripe controversy existed between the insured and the insurer 21 as to the obligations under the insurance contract. Id. at *2-3. Consequently, the Court’s 22 decision does not stand for the proposition that actions by third parties against insurers are 23 ripe for declaratory relief. A court, in its discretion, may grant permissive intervention 24 under Rule 24(b) where a party lacks standing to assert a claim, whereas a court may not 25 grant declaratory relief where a party alleges facts insufficient to confer standing. Perry v. 26 Schwarzenegger, 630 F.3d 898, 906 (9th Cir. 2011); MedImmune, 549 U.S. at 126-27. 7 1 Therefore, an interest to intervene in a declaratory relief action does not necessarily create a 2 ripe controversy for a third party to seek declaratory relief. Perry, 630 F.3d at 906. Under 3 Nevada law, an action between a third party and an insurer is ripe for declaratory relief only 4 after the third party obtains a tort judgment against the tortfeasor. Knittle, 908 P.2d at 726. 5 Even assuming Plaintiffs have an interest sufficient to support permissive intervention 6 under Rule 24(b) in an action between Defendant Gilman and Defendant Enumclaw, they 7 do not at this time have standing in a justiciable controversy ripe for declaratory relief 8 against Defendant Enumclaw. Plaintiffs’ Complaint fails to allege they have obtained a tort judgment against 9 10 Defendant Gilman. Prior to obtaining a tort judgment against Defendant Gilman, Plaintiffs’ 11 rights are speculative as to the liability of Defendant Enumclaw to indemnify Defendant 12 Gilman for any judgment obtained against him by Plaintiffs. Declaratory relief between 13 insureds and insurers may be granted prior to the resolution of an underlying tort suit. 14 However, Plaintiffs do not allege they are an insured party under the contract with 15 Defendant Enumclaw. Under Nevada law, Plaintiffs do not have a claim against Defendant 16 Gilman’s insurance company until they obtain a final judgment against Defendant Gilman. 17 The Court cannot grant declaratory relief in the absence of an actual case or controversy. 18 Therefore, Defendant Enumclaw’s Motion to Dismiss is granted without prejudice as to 19 Plaintiffs’ request for declaratory relief. 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 8 1 2 3 IV. CONCLUSION IT IS THEREFORE ORDERED that Defendant Mutual of Enumclaws’ Motion to Dismiss (Doc #11) is hereby GRANTED. 4 5 DATED: April 13, 2011 6 7 8 _______________________________ PHILIP M. PRO United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 9
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