Alex Jones v. St. Paul Fire & Marine Ins. ( 2017 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 12 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ALEX JONES; KEN JONES; JO ANNE No. 15-35856
JONES,
D.C. No. 2:15-cv-00531-MJP
Plaintiffs-Appellants,
v.
ST. PAUL FIRE & MARINE INSURANCE MEMORANDUM*
COMPANY, DBA Travelers;
WASHINGTON RURAL COUNTIES
INSURANCE PROGRAM; CANFIELD &
ASSOCIATES,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, District Judge, Presiding
ESTATE OF FELIPE VARGAS, No. 16-35160
Plaintiff-Appellant, D.C. No. 2:15-cv-00555-TSZ
v.
ST. PAUL FIRE & MARINE INSURANCE
COMPANY, DBA Travelers;
WASHINGTON RURAL COUNTIES
INSURANCE PROGRAM,
Defendants-Appellees.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, District Judge, Presiding
Submitted December 7, 2017**
Seattle, Washington
Before: O’SCANNLAIN, TALLMAN, and WATFORD, Circuit Judges.
Alex Jones, Ken Jones, and Jo Anne Jones (collectively “Jones”) and the
Estate of Felipe Vargas (“Vargas”) appeal from the district court’s grants of
summary judgment in their lawsuits against St. Paul Fire & Marine Insurance
Company (“St. Paul”) and the Washington Rural Counties Insurance Program
(“WRCIP”).1 Because the facts are known to the parties, we repeat them only as
necessary to explain our decision.
I
We agree with the district court that WRCIP—the non-diverse defendant—
was fraudulently joined. The district court therefore properly dismissed WRCIP
and exercised diversity jurisdiction over the remaining claims against St. Paul.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
1
Jones also filed suit against Canfield & Associates (“Canfield”), the third-
party administrator responsible for WRCIP’s day-to-day administration. Because
our analysis of the claims against WRCIP also governs the claims against Canfield,
we do not treat them separately.
2
“Joinder of a non-diverse defendant is deemed fraudulent, and the defendant’s
presence in the lawsuit is ignored for purposes of determining diversity, if the
plaintiff fails to state a cause of action against a resident defendant, and the failure
is obvious according to the settled rules of the state.” Morris v. Princess Cruises,
Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (internal quotation and editorial marks
omitted). A defendant seeking to dismiss a non-diverse party as fraudulently
joined “is entitled to present the facts showing the joinder to be fraudulent.” Id.(internal quotation marks omitted).
A
Jones and Vargas failed to state breach of contract claims against WRCIP
because they failed to identify any contractual duties it breached. Even assuming
that they may bring claims as third-party beneficiaries of WRCIP’s contract with
St. Paul, the only contractual duty they allege that WRCIP breached is its failure to
pay a portion of its self-insured retention for their benefit. Such argument has been
forfeited because Jones and Vargas failed to present it before the district court. See
Tibble v. Edison Int’l, 843 F.3d 1187, 1193 (9th Cir. 2016) (en banc) (“Generally,
we do not entertain arguments on appeal that were not presented or developed
before the district court.” (internal quotation and editorial marks omitted)).
Even were the argument not forfeited, it has no merit. The only authority
Jones and Vargas cite for the proposition that WRCIP owes any share of its self-
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insured retention to them is a California intermediate appellate decision holding
that an insurer must treat its co-insureds equally when paying out coverage. See
Shell Oil Co. v. Nat’l Union Fire Ins. Co., 52 Cal. Rptr. 2d 580 (Cal. Ct. App.
1996). But that case is inapplicable because WRCIP is not an insurer but an
insured, and it satisfied its duties under its contract with St. Paul when it paid the
self-insured retention. Any dispute that Jones and Vargas have over insurance
coverage is therefore with St. Paul and not with WRCIP.
B
Jones and Vargas also failed to state other causes of action against WRCIP
because they have not plausibly alleged that WRCIP owed them any extra-
contractual duties. They acknowledge that the district court was correct in ruling
that WRCIP is exempted by Washington statute from the definition of “insurer,” so
it does not owe an insurer’s statutory duties. See Wash. Rev. Code § 48.01.050.
Jones’s and Vargas’s alternative bases for extra-contractual duties are
unpersuasive. WRCIP owes them no common-law fiduciary duties because neither
of them (nor their public defense attorneys) “occupie[d] such a relation to” WRCIP
“as to justify [them] in expecting that [their] interests will be cared for.”
Liebergesell v. Evans, 613 P.2d 1170, 1175 (Wash. 1980) (internal quotation
marks omitted). Jones and Vargas also rely on a general preambulatory provision
of Washington’s insurance code to suggest that WRCIP owes them duties of good
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faith related to the general business of insurance. See Wash. Rev. Code
§ 48.01.030. But under Washington law, self-insurance and the payment of self-
insured retentions are not insurance, see Bordeaux, Inc. v. Am. Safety Ins. Co., 186
P.3d 1188, 1191–92 (Wash. Ct. App. 2008), so there is no reason to imply duties
on WRCIP from Washington’s insurance law. Even if there were, Jones and
Vargas have failed to plead any failure by WRCIP to act in good faith because it
paid its self-insured retention, at which point any coverage duties fell to St. Paul.
II
The district court’s grant of summary judgment was also correct because
Jones’s and Vargas’s public defense attorneys were not covered as “appointed
officials” under the insurance policies issued by St. Paul. “Undefined terms in an
insurance contract must be given their plain, ordinary, and popular meaning.”
Panorama Vill. Condo. Owners Ass’n Bd. of Directors v. Allstate Ins. Co., 26 P.3d
910, 915 (Wash. 2001) (internal quotation marks omitted). We do not believe the
plain meaning of “officials” includes independent contractors providing legal
defense services under contract with a government entity.
Even if it were plausible that such independent contractors could be included
within the ordinary meaning of “official,” additional evidence makes clear that
they are not in the context of the specific insurance policies at issue. The
definition of “volunteer worker” in those policies expressly distinguishes between
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“elected or appointed officials” and “independent contractor[s]” as distinct
categories. Moreover, the contracts that Jones’s and Vargas’s public defense
attorneys entered with Grant County provided that “[n]o officer, employee, or
agent . . . of the COUNTY shall have any personal and/or financial interest . . . in
this Contract,” and the attorneys “agree[d] to indemnify, defend and hold the
COUNTY [and] its elected and appointed officers . . . harmless from and against
any . . . liability.” The contracts also required the attorneys to procure their own
legal malpractice insurance. Such contractual provisions are strong evidence that
neither Grant County nor the public defense attorneys themselves believed that the
attorneys were appointed officials. We will not contort the meaning of those
words years after the fact to upset those expectations.2
AFFIRMED.
2
Vargas also argues that he should be able to garnish Grant County’s
insurance policy because, he says, he won a judgment against his public defense
attorney in that attorney’s official capacity. But Vargas previously settled with the
County and released it of “any and all manner of claims, demands, liabilities[,] or
suits . . . which [he] may have had.” Because “an official-capacity suit is, in all
respects other than name, to be treated as a suit against the [government] entity,”
Kentucky v. Graham, 473 U.S. 159, 166 (1985), Vargas’s release of Grant County
also covers any liability for official-capacity claims against its supposed agents.
6