McVay vs Allied World Assurance Company Inc et al, No. 3:2013cv00359 - Document 42 (D. Nev. 2014)

Court Description: ORDER granting defendants' 15 and 22 motions to dismiss; denying plaintiff's request for leave to amend; and dismissing this action. The clerk shall enter judgment accordingly. Signed by Judge Howard D. McKibben on 4/18/2014. (Copies have been distributed pursuant to the NEF - KR)
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McVay vs Allied World Assurance Company Inc et al Doc. 42 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 DISTRICT OF NEVADA 10 11 12 13 14 15 16 ) ) ) Plaintiff, ) ) vs. ) ALLIED WORLD ASSURANCE COMPANY, ) ) INC., and YORK RISK SERVICES ) GROUP, INC., et al., ) ) Defendants. _________________________________ ) BECKY MCVAY, 3:13-cv-00359-HDM-WGC ORDER 17 Before the court are the defendants’ motions to dismiss for 18 failure to state a claim (#15, #22). Plaintiff has opposed the 19 motions (#16, #30, #33), and defendants have replied (#19, #35). 20 Facts 21 In August 2009, plaintiff slipped and fell in a gas station 22 convenience store owned by the Fallon Tribal Development 23 Corporation (“FTDC”), which is an entity of the Fallon Paiute24 Shoshone Indian Tribe (“Tribe”).1 25 26 27 28 1 Plaintiff filed a complaint against FTDC in tribal court, which was dismissed on sovereign immunity grounds. Plaintiff subsequently filed a motion to amend her complaint, which was heard by the tribal court in July 2012. The result of that hearing is not clear from this record. 1 1 The Tribe is covered by an insurance policy issued by 2 defendant Allied and administered by defendant York. 3 “Sovereign Nation Commercial Insurance Policy” covers many things, 4 including “all sums for which the ‘Insured’ shall be legally 5 obligated to pay by reason of liability imposed upon the ‘Insured’ 6 by law . . . for damages . . . and expenses . . . on account of 7 ‘personal injuries’ and/or ‘property damage’ arising out of any 8 ‘occurrence’ happening during the period of this policy.” 9 Mot. Dismiss Ex. A (Policy at 9)). 10 The (Allied Plaintiff sent defendants a formal written demand on November 11 10, 2010, which was verbally denied on the grounds of the insured’s 12 sovereign immunity. 13 in writing on the grounds that adequate warning existed and no 14 other accidents had occurred on the premises. 15 On June 22, 2011, defendants denied the claim Because she believes she cannot recover from the Tribe, 16 plaintiff now seeks in this litigation to recover from its insurer 17 Allied. 18 Standard 19 In considering a motion to dismiss under Rule 12(b)(6), the 20 court must accept as true all material allegations in the complaint 21 as well as all reasonable inferences that may be drawn from such 22 allegations. 23 2000). 24 the light most favorable to the nonmoving party. 25 States, 234 F.3d 428, 435 (9th Cir. 2000). 26 conclusions are not entitled to the presumption of truth. 27 v. Iqbal, 556 U.S. 662, 679 (2009). 28 LSO, Ltd. v. Stroh, 205 F.3d 1146, 1150 n.2 (9th Cir. The allegations of the complaint also must be construed in Shwarz v. United However, legal Ashcroft “Under the notice pleading standard of the Federal Rules, 2 1 plaintiffs are only required to give a ‘short and plain statement’ 2 of their claims in the complaint.” 3 1061, 1071 (9th Cir. 2009) (quoting Diaz v. Int’l Longshore & 4 Warehouse Union, Local 13, 474 F.3d 1202, 1205 (9th Cir. 2007)). 5 While this rule “does not require ‘detailed factual allegations,’ . 6 . . it demands more than an unadorned, the-defendant-unlawfully- 7 harmed-me accusation.” 8 Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). 9 complaint “must contain sufficient factual matter . . . to state a Paulsen v. CNF, Inc., 559 F.3d Iqbal, 556 U.S. at 678 (citing Bell Thus, a 10 claim to relief that is plausible on its face.” 11 facial plausibility when the plaintiff pleads factual content that 12 allows the court to draw the reasonable inference that the 13 defendant is liable for the misconduct alleged.” 14 plausibility standard demands “more than a sheer possibility that a 15 defendant has acted unlawfully.” 16 if it offers only labels and conclusions, a formulaic recitation of 17 the elements of a cause of action, or “naked assertions devoid of 18 further factual enhancement.” 19 Id. Id. Id. “A claim has The A pleading is insufficient Id. (internal punctuation omitted). Neither party disputes that the policy may be considered by 20 this court in deciding the motions to dismiss. 21 agree that Nevada law applies. 22 Analysis 23 The parties also Plaintiff’s amended complaint (#12) alleges that: (1) FTDC was 24 negligent; (2) plaintiff is entitled to recover for the injuries 25 she suffered as a result of FTDC’s negligence; (3) plaintiff was a 26 third-party beneficiary of the contract between Allied and FTDC; 27 (4) Allied breached the contract when it denied plaintiff’s claim; 28 and (5) York is liable to plaintiff as the third-party 3 1 administrator. Plaintiff asserts both breach of contract and 2 breach of the implied covenant of good faith and fair dealing. 3 A. Breach of Contract 4 Defendants argue that as a prejudgment tort claimant and 5 nonparty to the contract of insurance, plaintiff cannot pursue a 6 direct action against them. 7 In Nevada, a “plaintiff suing a defendant for an alleged tort” 8 cannot “bring an action for declaratory judgment against the 9 defendant’s insurance company regarding insurance coverage before 10 obtaining a judgment against the defendant.” 11 Progressive Cas. Ins. Co., 908 P.2d 724, 726 (Nev. 1996). 12 Plaintiff argues Knittle is not controlling because she has no 13 active complaint against the tortfeasor and cannot pursue one due 14 to its claim of sovereign immunity. 15 plaintiff who was pursuing a case against the tortfeasor but had 16 not yet obtained judgment, that fact is not dispositive of this 17 case. 18 19 20 21 22 23 24 Knittle v. While Knittle involved a First, Knittle cited with approval the following from Farmers Ins. Exch. v. Dist. Court, 862 P.2d 944 (Col. 1993): [N]o legally protected right or cognizable interest [is] at stake unless and until [plaintiff] has established [the defendant’s] liability. Her rights are contingent on her successful litigation of the personal injury suit. When the rights of the plaintiff are contingent on the happening of some event which cannot be forecast and which may never take place, a court cannot provide discretionary relief. 25 Importantly, the court held that a plaintiff would have a claim 26 against the insurer only after establishing the tortfeasor’s 27 liability – an event that “may never take place.” 28 4 If true that 1 FTDC is insulated from liability by sovereign immunity, plaintiff 2 will never be able to establish her claim against FTDC. 3 not protected by sovereign immunity, plaintiff must pursue a claim 4 against FTDC before she can seek any relief from the insurer. 5 either case, plaintiff’s claims against the insurer cannot be 6 maintained. If FTDC is In 7 In addition, in Nevada, third parties cannot bring bad faith 8 claims against a tortfeasor’s insurance company because they have 9 no contractual relationship with the insurer – regardless of 10 whether there is a pending tort action against the tortfeasor. 11 Gunny v. Allstate Ins. Co., 830 P.2d 1335, 1336 (Nev. 1992); see 12 also Tweet v. Webster, 610 F. Supp. 104, 105 (D. Nev. 1985) (noting 13 that Nevada does not recognize a duty to negotiate in good faith 14 running from an insurer to a third party). 15 third-party claimant also may not sue the insurer for “breach of 16 contract.” 17 held that in Nevada, “third-party claimants . . . who are injured 18 by an insured lack standing to sue the insured party’s insurance 19 company directly.” 20 116, 117 (9th Cir. 2007) (unpublished disposition) (citing Gunny, 21 830 P.2d at 1335-36). 22 obtained a judgment against the tortfeasor and was seeking an order 23 requiring the tortfeasor’s insurance to pay the judgment. 24 then, the Ninth Circuit held the plaintiff had no right under 25 Nevada law to recover against the tortfeasor’s insurer. 26 See Logically, then, a In fact, an unpublished Ninth Circuit opinion broadly Kinzler v. Calvert Ins. Co., 255 Fed. App’x In Kinzler, the plaintiff had actually Even Plaintiff has not cited any case in which a person was allowed 27 to directly proceed against their tortfeasor’s insurer. 28 Nevertheless, she advances several unpersuasive arguments in 5 1 2 support of her claim. First, plaintiff argues that public policy and common sense 3 dictate that insurance companies pay for injuries suffered by 4 victims of tribal torts. 5 sovereign immunity, and because federal law requires tribes to have 6 liability insurance, there would be no purpose of having liability 7 insurance if the tribe’s insurer was not required to pay for 8 injuries caused by the tribe, its entities or its representatives. 9 Plaintiff bases her argument on 25 U.S.C. § 450f(c), which is 10 part of the Indian Self-Determination and Education Assistance Act 11 (“ISDEAA”). 12 federal government’s trust duties to them, such as law enforcement, 13 health services, and schooling. 14 (Cohen’s Handbook of Federal Indian Law, § 22.02[1], at 1386-87 15 (2012 ed.)))). 16 contracts,” which are defined as contracts, grants, or cooperative 17 agreements “between a tribal organization and the appropriate 18 Secretary for the planning, conduct and administration of programs 19 and services which are otherwise provided to Indian tribes and 20 their members pursuant to Federal law.” 21 Section 450f(c) requires the government to purchase liability 22 insurance for all activities of tribes carrying out self- 23 determination contracts. 24 carried out as part of a self-determination contract. 25 450f(c) (“[T]he Secretary shall be responsible for obtaining or 26 providing liability insurance or equivalent coverage, on the most 27 cost-effective basis, for Indian tribes, tribal organizations, and 28 tribal contractors carrying out contracts, grant agreements and She contends that because tribes have The ISDEAA allows tribes to take over some of the (Doc. #35 (Allied Reply Ex. A To do so, the tribes enter into “self-determination 25 U.S.C. § 450b(j). This provision applies only to activities 6 Id. § 1 cooperative agreements pursuant to this subchapter.”) (emphasis 2 added) (subchapter refers to the ISDEAA); see also Demontiney v. 3 United States, 255 F.3d 801, 813 (9th Cir. 2001) (“Any effect of § 4 450f(c) is limited by the section to ‘contracts . . . pursuant to 5 this subchapter.”). 6 in this subchapter shall be construed as . . . affecting, 7 modifying, diminishing, or otherwise impairing the sovereign 8 immunity from suit enjoyed by an Indian tribe.” 9 450n(1). Claims based on tribal activities taken pursuant to a Further, the ISDEAA provides that “[n]othing 25 U.S.C.A. § 10 self-determination contract are treated as claims against the 11 United States and must be pursued under the Federal Tort Claims 12 Act. 13 Cohen’s Handbook of Federal Indian Law, § 22.02[4][a], at 1391. 14 Defendants argues that the Tribe has a number of self- 15 determination contracts and the policy covers those services as 16 well as other aspects of the Tribe’s operations that do not fall 17 under the ISDEAA. 18 activities of the FTDC are not funded by self-determination 19 contracts because the government has no trust duties to provide 20 business services to the tribe. 21 FTDC’s conduct in this case is pursuant to a self-determination 22 contract. 23 application. 24 the purpose of § 450f is to provide an avenue of civil relief for 25 injured claimants. 26 “Indian Tribal Tort Claims and Risk Management Act of 1998,” which 27 is a note to § 450f. 28 act clearly shows a concern for victims of tribal torts, it Id. § 450f(d); Pub. L. No. 101-512, § 314 (note to § 450f); Additionally, defendants assert that the Plaintiff has not alleged that the However, she argues that the provision has a broader Plaintiff maintains that “legislative history” shows The legislative history plaintiff cites is the Pub. L. No. 105-277, § 101(e). 7 While that 1 requires only a study of the liability insurance available to 2 tribes and annual reports to Congress containing “legislative 3 recommendations that the Secretary determines to . . . otherwise 4 achieve the purpose of providing relief to persons who are injured 5 as a result of official action of a tribal government.” 6 § 450f note, § 704, Pub L. 105-277. 7 tribes must obtain liability coverage for all their activities. 8 The note orders only a study and no definitive relief for those 9 victims. 25 U.S.C. Nothing in the note suggests Moreover, even if the tribe’s activities in this case are 10 covered by § 450f, plaintiff’s claim must be treated as one against 11 the United States and pursued under the FTCA. 12 Second, plaintiff argues that defendants improperly invoked 13 sovereign immunity under the insurance contract, and that 14 defendants should not be allowed to use such “fraudulent acts” to 15 avoid their liability to her. 16 Wohlers v. Bartgis, 969 P.2d 949 (Nev. 1998) for her position. 17 seems to contend that Wohlers stands for the proposition that an 18 insurer may not use its own fraudulent acts to avoid liability for 19 bad faith. 20 failure to timely obtain written approval from the Tribe before 21 invoking sovereign immunity as required by the insurance contract. 22 Plaintiff lacks standing to enforce the parties’ contract because 23 she is not a party to it, nor is she (as will be seen shortly) an 24 insured or a specific intended beneficiary of the policy. 25 Moreover, defendants’ alleged failure to strictly comply with 26 notification processes of their contract does not amount to a 27 fraudulent act. 28 Plaintiff relies on Albert H. She The “fraudulent act” plaintiff points to is defendants’ Finally, plaintiff argues that she can pursue her claims 8 1 against defendants under the contract because she is either (1) a 2 named insured or (2) a specific intended beneficiary of the 3 contract. i. Named Insured 4 An insured may be able to sue an insurer for bad faith denial 5 6 of her own benefits, even if she’s not the contracting party. 7 Bergerud v. Progressive Cas. Ins., 453 F. Supp. 2d 1241, 1249 (D. 8 Nev. 2006) (Pro, J.). The policy here defines insured to include: 9 Any official, executive officer or director, trustee, member, partner, employee, intern or volunteer of the Named Insured while acting within the scope of his or her duties as such, and any person, organization, trustee or estate to whom the Named Insured is obligated by virtue of a written contract or oral agreement to provide insurance such as is afforded by this policy, but only in respect to liability for “personal injuries” or “property damage” caused, in whole or in part, by the Named Insured’s acts or omissions or the acts or omissions of those acting on the Named Insured’s behalf, in the performance of the Named Insured’s ongoing operations or in connection with premises owned by or rented to the Named Insured. 10 11 12 13 14 15 16 17 18 19 See (Allied Mot. Dismiss Ex. A (Policy at 8)). Plaintiff argues that she is a person to whom the Tribe must 20 21 provide insurance under a “written contract.” 22 contract” she refers to is the “Indian Self-Determination 23 Contract.” 24 any such contract exists that covers the tribe’s activities in this 25 case. 26 27 28 The “written As previously discussed, there has been no showing that ii. Specific Intended Beneficiary “Whether an individual is an intended third-party beneficiary . . . depends on the parties’ intent, ‘gleaned from reading the 9 1 contract as a whole in light of the circumstances under which it 2 was entered.” 3 599, 605 (Nev. 2005); see also Robert Dillon Framing, Inc. v. 4 Canyon Villas Apartment Corp., 2013 WL 3984885 (Nev. Apr. 17, 2013) 5 (unpublished disposition) (“An intended third-party beneficiary 6 must show that the parties to the contract clearly intended to 7 benefit him. . . . Third-party beneficiary status requires more 8 than the receipt of incidental benefits.”). 9 Canfora v. Coast Hotels & Casinos, Inc., 121 P.3d Plaintiff has alleged no facts and has pointed to nothing in 10 the contract itself showing that it was the parties’ intent that 11 victims of the insured be specific intended beneficiaries under the 12 contract. 13 beneficiary because federal law requires tribes to have general 14 liability insurance. 15 argument is without merit. 16 Plaintiff has not identified any other federal law requiring tribes 17 to obtain general liability insurance for all their activities, or 18 – more importantly – requiring those insurance companies to cover 19 all claims based on those activities regardless of the Tribe’s 20 underlying sovereign immunity. 21 intended beneficiary of the contract and is, at most, an 22 “incidental beneficiary,” because the Tribe, “like all parties 23 purchasing [general liability insurance] coverage did so to protect 24 itself against potential liability, rather than with any specific 25 intent to benefit an unknown class of individuals that it might 26 injure in the future.” 27 beneficiaries may not proceed directly against insurance companies 28 for breach of contract or bad faith. Rather, she argues that she is a specific intended For the reasons already discussed, that The ISDEAA does not apply in this case. Thus, plaintiff is not a specific Kinzler, 255 Fed. App’x at 117. 10 Incidental United Fire Ins. Co. v. 1 McClelland, 780 P.2d 193, 197-98 (Nev. 1989). Accordingly, 2 plaintiff’s breach of contract claim against both Allied and York 3 should be dismissed. 4 B. Breach of the Covenant of Good Faith and Fair Dealing 5 In Nevada, “liability for bad faith is strictly tied to the 6 implied-in-law covenant of good faith and fair dealing arising out 7 of an underlying contractual relationship. 8 relationship exists, no recovery for bad faith is allowed.” 9 McClelland, 780 P.2d at 197. When no contractual As discussed above, third parties 10 cannot bring bad faith claims against a tortfeasor’s insurance 11 company because they have no contractual relationship with the 12 insurer. 13 While a plaintiff might be able to sue an insurer for bad faith 14 denial of her own benefits if she is an insured or specific 15 intended beneficiary of the policy, Bergerud, 453 F. Supp. 2d at 16 1249; Vignola v. Gilman, 804 F. Supp. 2d 1072, 1076 (D. Nev. 2011) 17 (Pro, J.), plaintiff is neither. 18 to assert a bad faith claim against the tortfeasor’s insurer where 19 it “relied to its detriment on actions or representations made by 20 the insurer,” Vignola, 804 F. Supp. 2d at 1076, plaintiff has 21 alleged no facts – in her complaint or her opposition – indicating 22 she relied to her detriment on actions or representations of the 23 defendants. 24 gas station having liability insurance. 25 not established any basis for allowing her to proceed against the 26 defendants on the theory of bad faith. 27 II. Amendment 28 Gunny, 830 P.2d at 1336; Tweet, 610 F. Supp. at 105. While a third party might be able She argues only that she subconsciously relied on the Accordingly, plaintiff has Plaintiff seeks leave to amend her complaint if the motion to 11 1 2 dismiss is granted. Under Federal Rule of Civil Procedure 15(a)(2), “the court 3 should freely give leave [to amend] when justice so requires.” 4 However, leave to amend is not to be granted automatically.” 5 W. States Wholesale Natural Gas Antitrust Litig., 715 F.3d 716, 738 6 (9th Cir. 2013). 7 to assess whether to grant leave to amend: (1) bad faith, (2) undue 8 delay, (3) prejudice to the opposing party, (4) futility of 9 amendment; and (5) whether plaintiff has previously amended his 10 complaint.” In re The court “considers the following five factors Id. (internal punctuation omitted). 11 The court concludes that any such amendment would be futile. 12 Accordingly, plaintiff’s request for leave to amend her complaint 13 is denied.. 14 Conclusion 15 Because the plaintiff has not obtained a judgment against 16 FTDC, she is not a named insured or specific intended beneficiary 17 of the contract, and she has not alleged any acts or 18 representations of the insurer that caused her to act in reliance 19 on them, the defendants’ motions to dismiss (#15, #22) are GRANTED. 20 Plaintiff’s request for leave to amend is DENIED, and this action 21 is hereby DISMISSED. 22 accordingly. The clerk of the court shall enter judgment 23 IT IS SO ORDERED. 24 DATED: This 18th day of April, 2014. 25 26 ____________________________ UNITED STATES DISTRICT JUDGE 27 28 12