American National Property and Casualty Company v. Washington ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 AMERICAN NATIONAL PROPERTY AND ) Case No.: 1:20-cv-1591 AWI JLT CASUALTY COMPANY, ) 12 ) ORDER GRANTING PLAINTIFF’S REQUEST Plaintiff, ) FOR CLARIFICATION (Doc. 21) AND 13 ) WITHDRAWING THE FINDINGS AND v. ) RECOMMENDATIONS DATED APRIL 26, 2021 14 ) GEORGE WASHINGTON, et al., ) AMENDED FINDINGS AND 15 ) RECOMMENDATIONS GRANTING Defendants. ) PLAINTIFF’S MOTION FOR DEFAULT 16 ) JUDGMENT ) (Doc. 17) 17 ) 18 American National Property and Casualty Company asserts that under a homeowner’s insurance 19 policy, the company was not obligated to defend George and Juanita Washington—or their business 20 Kool Line Express—in a civil action pending in Kern County Superior Court. (See generally Doc. 1.) 21 Because Defendants have not responded to the allegations in the complaint, Plaintiff now seeks default 22 judgment. (Doc. 17.) 23 The Court found the matter suitable for decision without oral argument. Therefore, the motion 24 was taken under submission pursuant to Local Rule 230(g) and General Order 618. (Doc. 19 at 1.) For 25 the following reasons, the Court recommends the motion for default judgment be GRANTED.1 26 27 1 On April 6, 2021, the Court issued Findings and Recommendations to grant Plaintiff’s motion for default judgment. (Doc. 19.) On June 8, 2021, Plaintiff filed a request for clarification related to its obligations under the 28 insurance policies (Doc. 21), which is GRANTED. The prior recommendations are WITHDRAWN. 1 I. Procedural History 2 On October 17, 2019, an action was filed in Kern County Superior Court, Case No. BCV-19- 3 102967 “against Mr. Washington individually and against Mr. and Mrs. Washington as a married 4 couple doing business as Kool Line Express.” (Doc. 1 at 3, ¶ 9.) American National Property and 5 Casualty Company (“ANPAC”) initiated this action by filing a complaint on November 12, 2020, 6 seeking an order that the claims alleged in the underlying state court action “are not covered under any 7 of the Policies” and “[a] monetary judgment for the amount of all fees and costs that [Plaintiff] incurs 8 to defend Mr. Washington and Mrs. Washington in the Underlying Action.” (See id. at 10.) 9 The Court issued the summons on November 24, 2020. (Doc. 4.) Though Defendants were 10 properly served with the summons and complaint, they failed to respond to the complaint within the 11 time prescribed by the Federal Rules of Civil Procedure. Upon application of Plaintiff, default was 12 entered against the Defendants on February 2, 2021. (Docs. 12, 13.) ANPAC filed the motion for 13 default judgment now pending before the Court on March 29, 2021. (Doc. 17.) Defendants have 14 neither appeared nor opposed the motion. 15 II. Legal Standards Governing Default Judgment 16 The Federal Rules of Civil Procedure govern the entry of default and default judgment. After 17 default is entered because “a party against whom a judgment for relief is sought has failed to plead or 18 otherwise defend,” the party seeking relief may apply to the court for a default judgment. Fed. R. Civ. 19 P. 55(a)-(b). Upon the entry of default, well-pleaded factual allegations regarding liability are taken as 20 true, but allegations regarding the amount of damages must be proven. Pope v. United States, 323 21 U.S. 1, 22 (1944). In addition, “necessary facts not contained in the pleadings, and claims which are 22 legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of North Am., 980 F.2d 23 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)). 24 Entry of default judgment is within the discretion of the Court. Aldabe v. Aldabe, 616 F.2d 25 1089, 1092 (9th Cir. 1980). The entry of default “does not automatically entitle the plaintiff to a court- 26 ordered judgment. Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1174 (C.D. Cal 2002), accord 27 Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986). The Ninth Circuit determined: 28 Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (1) the possibility of prejudice to the plaintiff, (2) the 1 merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning 2 material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on 3 the merits. 4 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). As a general rule, the issuance of default 5 judgment is disfavored. Id. at 1472. 6 III. Factual Allegations and Evidence 7 The Court accepts the factual assertions as true, because default has been entered against 8 Defendant. See Pope, 323 U.S. at 22. With the motion now pending, ANPAC has also presented 9 evidence, including in declaratory form and exhibits, which support the allegations in the complaint.2 10 On October 17, 2019, Michael Edward Keen, Jr. filed a complaint in Kern County Superior 11 Court against George Washington, individually, and the Washingtons “as married couple doing 12 business as Kool Line Express.” (Doc. 1 at 2-3, ¶ 7; see also Doc. 17-3 at 5.) In the complaint. Keen 13 alleged his mother, Crystal Lynn Pearigen, was attacked and killed on June 16, 2019, by two dogs 14 after they escaped through an opening in the perimeter fence surrounding the premises of Kool Line 15 Express located at 2523 Gilmore Avenue in Bakersfield, California. (Id. at 4, ¶ 10; see also Doc. 17-3 16 at 6.) Keen state claims for “general negligence” and “intentional tort” on an individual basis and as 17 successor-in-interest to Pearigen. (Id. at 3, ¶ 9; Doc. 17-3 at 6-8.) 18 ANPAC asserts the “dogs were owned by one or more of the Underlying Defendants and were 19 exclusively kept at [Kool Line Express] for the explicit purpose of protecting the Business Property 20 and its contents.” (Doc. 1 at 4, ¶ 11.) In the state court action, Keen alleges the defendants “knew 21 about but failed to secure the opening in the perimeter fence, and thus the subject dogs were allowed to 22 leave and re-enter the Business Property.” (Id., ¶ 12.) Further, Keen asserts the defendants “were 23 24 2 Plaintiff requests that the Court take judicial notice of the complaint filed in Michael Edward Keen, Jr., individually, and as successor-in-interest to Crystal Lynn Pearigen v. George Washington, et al., Case No. BCV-19- 25 102967. (Doc. 17-3 at 2.) The Court may take judicial notice of a fact that "is not subject to reasonable dispute because it (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from 26 sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201. The records of court proceedings cannot reasonably be questioned, and judicial notice may be taken of a court’s record and docket. Mullis v. United States Bank. Ct., 27 828 F.2d 1385, 1388 n.9 (9th Cir. 1987); Valerio v. Boise Cascade Corp., 80 F.R.D. 626, 635 n. 1 (N.D.Cal.1978), aff'd 645 F.2d 699 (9th Cir. 1981); see also Rodic v. Thistledown Racing Club, Inc., 615 F.2d 736, 738 (6th. Cir. 1980). Accordingly, 28 the Court takes judicial notice of the filing of the complaint and claims presented. 1 careless in handling the subject dogs, and … knew or should have known that the dogs had a vicious 2 propensity to attack people and were of breeds that have aggressive tendencies, and that members of 3 the general public were at risk of harm from them.” (Id. at 13.) Thus, Keen asserts the defendants 4 “are at fault for and/or are strictly liable for Ms. Pearigen’s death” and “liable for an intentional tort 5 based on his claims that they acted with conscious, knowing, willful, and/or reckless disregard for the 6 rights and safety of others.” (Id., ¶¶ 14-15.) 7 At the time of the incident underlying the state court complaint, the Washingtons maintained a 8 homeowners policy with ANPAC, doing business as Pacific Property and Casualty Company. (Doc. 1 9 at 5, ¶ 16.) ANPAC reports that in Homeowners Policy No. 04-X-W8066-9, the only insured property 10 was located at 3608 Tori Lorene Avenue in Bakersfield, California. (Id.) Plaintiff reports “ANPAC, 11 doing business as Pacific Property and Casualty Company, also issued two rental-owners policies to 12 Mr. Washington: number 04-K-34000P-6, in effect from November 20, 2018 to November 20, 2019, 13 and number 04-K-U987384, in effect from October 1, 2018 to October 1, 2019.” (Id. at 6, ¶ 22.) The 14 Rental-Owners Policies addressed properties located at 138 Milham Drive and 2162 Normal Avenue in 15 Bakersfield, California. (Id.) 16 Under the Homeowners Policy, the Washingtons were provided coverage for “bodily injury 17 that an insured is legally obligated to pay resulting from a covered occurrence.” (Doc. 1 at 5, ¶ 16, 18 internal quotation marks omitted.) “The Homeowners Policy contain[ed] an exclusion that states [the] 19 insurance coverage shall not apply to bodily injury ‘arising out of business pursuits of any insured or 20 the rental or holding for rental of any part of any premises by an insured.’” (Id., ¶ 18; see also Doc. 21 17-2 at 63, Section II- Exclusions, ¶ 1(b).) In addition, the Homeowners Policy indicated “coverage 22 shall not apply to bodily injury ‘arising out of the use of any location which is not an insured location 23 and which is owned by or leased to any insured.’” (Id., ¶ 19; see also Doc. 17-2 at 63, Section II- 24 Exclusions, ¶ 1(g).) 25 Under the Rental-Owners Policies, Mr. Washington was “provide[d] coverage for liability for 26 ‘bodily injury’ and ‘personal injury’ caused by an ‘occurrence’ and which arises from the ownership, 27 maintenance, or use of the ‘insured premises,’ as defined by the Rental-Owners Policies.” (Doc. 1 at 28 6, ¶ 22.) “In the Rental-Owners Policies the ‘insured premises’ are defined to mean the Rental 1 Properties, one or two family premises for which ownership or control is acquired and for which there 2 is a reported intention to insure under the policy, and the ways immediately adjoining insured 3 premises.” (Id., ¶ 23.) 4 “ANPAC agreed to defend [both] Mr. Washington and Mrs. Washington individually in the 5 Underlying Action under the Homeowners Policy under a reservation of rights and offered to provide 6 them with independent counsel under Civil Code § 2860.” (Doc. 1 at 5, ¶ 20.) “ANPAC disclaimed 7 coverage” for Kool Line Express, which was not an insured under the Homeowners Poolicy. (Id. at 6, 8 ¶ 21.) In addition, ANPAC disclaimed coverage for Mr. Washington under the Rental-Owners 9 Policies. (Id., ¶ 23.) 10 ANPAC now argues “there is no coverage under the Homeowners Policy for the Underlying 11 Action” for the Washingtons because (1) “[t]he Underlying Injury arose out of one or more of the 12 Underlying Defendants' business pursuits, since the subject dogs were exclusively kept at the Business 13 Property for the explicit purpose of protecting the Business Property and its contents”; and (2) “[t]he 14 Underlying Injury arose out of the use of the Business Property, which is not an insured location and 15 which is owned by or leased to one or more of the Underlying Defendants.” (Doc. 1 at 8, ¶ 38.) 16 IV. Discussion and Analysis 17 Applying the factors articulated by the Ninth Circuit in Eitel, the Court finds the factors weigh 18 in favor of granting the motion for default judgment. 19 A. Prejudice to Plaintiff 20 The first factor considers whether a plaintiff would suffer prejudice if default judgment is not 21 entered, and potential prejudice to the plaintiff weighs in favor of granting a default judgment. See 22 Pepsico, Inc., 238 F. Supp. 2d at 1177. Generally, where default has been entered against a defendant, 23 a plaintiff has no other means by which to recover damages. Id.; see also Microsoft Corp. v. Nop, 549 24 F. Supp.2d 1233, 1236-37 (E.D. Cal. 2008) (“Plaintiff will be prejudiced if default judgment is denied 25 because plaintiff will be without other recourse for recovery”). 26 Because ANPAC has no other means to address its obligations under the identified policies, the 27 Court finds Plaintiff would be prejudiced if default judgment is not granted. See Burlington Ins. Co. v. 28 Diamond Partners, Inc., 2011 WL 284490, at *3 (E.D. Cal. Jan. 25, 2011) (finding prejudice where an 1 insurance company “would be denied a judicial determination as to whether there is a duty to 2 indemnify and defend… and whether it is entitled to reimbursement for the cost of defense”); Mesa 3 Underwriters Specialty Ins. Co. v. Paradise Skate, Inc., 2016 WL 9045622, at *3 (N.D. Cal. April 11, 4 2016) (“There is potential prejudice where denying default judgment would deny an insurer a judicial 5 determination as to whether it has a duty to indemnify and defend the defendant and whether it is 6 entitled to reimbursement of the defense costs in the underlying action.”). Consequently, the Court 7 finds this factor weighs in favor of the entry of default judgment. 8 B. Merits of Plaintiff’s claims and the sufficiency of the complaint 9 Given the kinship of these factors, the Court considers the merits of Plaintiff’s claims and the 10 sufficiency of the complaint together. See Yelp Inc. v. Catron, 70 F. Supp. 3d 1082, 1098 (N.D. Cal. 11 2014) (“For ease of analysis, the merits of Plaintiffs substantive claims and sufficiency of the complaint 12 are considered together”); see also Premier Pool Mgmt. Corp. v. Lusk, 2012 WL 15932060, at *5 (E.D. 13 Cal. May 4, 2012). The Ninth Circuit has suggested that, when combined, the factors require a plaintiff 14 to “state a claim on which the plaintiff may recover.” Pepsico, Inc., 238 F. Supp. 2d at 1175. 15 1. Claim for declaratory relief 16 The Declaratory Judgment Act allows a federal court to “declare the rights and other legal 17 relations” of parties to a “case of actual controversy.” 28 U.S.C. § 2201; Spokane Indian Tribe v. 18 United States, 972 F.2d 1090, 1091 (9th Cir. 1992). The Declaratory Judgment Act requires that a 19 party seeking declaratory relief must allege (1) an actual controversy (2) regarding a matter within 20 federal subject matter jurisdiction. 28 U.S.C. § 2201(a). The Court has the discretion to determine 21 whether to entertain an action for declaratory relief, because the Declaratory Judgment Act “gave the 22 federal courts competence to make a declaration of rights; it did not impose a duty to do so.” Public 23 Affairs Assoc. v. Rickover, 369 U.S. 111, 112 (1962); Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 24 1220, 1223 (9th Cir. 1998). A declaratory relief claim operates “prospectively,” not to redress past 25 wrongs. Britz Fertilizers, Inc. v. Bayer Corp., 665 F.Supp.2d 1142, 1173 (E.D. Cal. 2009). 26 The Ninth Circuit determined that “[d]eclaratory relief is appropriate (1) when the judgment 27 will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will 28 terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the 1 proceeding.” Eureka Fed. Sav. & Loan Assoc. v. American Cas. Co., 873 F.2d 229, 231 (9th Cir. 1989). 2 To determine whether a controversy invokes declaratory relief, the Court must determine whether there 3 is a “substantial controversy, between parties having adverse legal rights, or sufficient immediacy and 4 reality to warrant the issuance of a declaratory judgment.” Maryland Cas. Co. v. Pacific Coal & Oil 5 Co., 312 U.S. 270, 273 (1941). 6 There is a controversy regarding Plaintiff’s obligations under the policies issued to George and 7 Juanita Washington, and whether ANPAC has a duty to defend the Washingtons in the underlying 8 state court action. Second, this Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 9 because there is complete diversity between the parties and the amount in controversy exceeds 10 $75,000. (See Doc. 1 at 2-3, ¶¶ 2-5, 7.) Notably, declaratory relief is often sought in actions between 11 insurers and insureds to determine rights and obligations under an insurance policy. See United States 12 Transp. Indem., 544 F.2d 393, 395 (1976). The facts above support the requested relief, as the events 13 in the underlying action did not occur at a covered location and related to the Washingtons’ business 14 pursuits. Further, Kool Line Express was not a party covered by either the Homeowners Policy or 15 Rental-Owners Policies. 16 2. Claim for reimbursement of costs 17 An insurance company is “entitled to recoup costs expended in defending its insured where, as 18 here, it is later determined that it had no duty to defend.” Atain Specialty Ins. Co. v. River Heights 19 Condos, LLC, 2012 WL 6589227, at *2 (E.D. Cal. Dec. 17, 2012), citing Scottsdale Ins. Co. v. MV 20 Transp., 36 Cal.4th 643, 662 (2005). Accordingly, because the claims in the underlying state court 21 action were not covered under the policies, Plaintiff is entitled to the reimbursement of costs related to 22 its defense of George and Juanita Washington. 23 3. Conclusion 24 Based upon the allegations of the complaint and supporting documentation, the Court finds 25 Plaintiff stated a cognizable claim for declaratory relief and is also reimbursement of costs. Thus, these 26 factors support the entry of default judgment. 27 C. Sum of money at stake 28 In considering this factor, the Court “must consider the amount of money at stake in relation to 1 the seriousness of Defendant’s conduct.” Pepsico, Inc., 238 F.Supp.2d at 1176. Here, Plaintiff 2 predominately seeks declaratory relief through the motion for default judgment and indicates any 3 motion for reimbursement will be brought by separate motion. Thus, the Court finds this factor does 4 not weigh against the entry of default judgment. See Echelon Property & Casualty Ins. Co. v. Allstate 5 Med Trans LLC, 2020 WL 3192432, at *3 (D. Ar. June 15, 2020) (“Where the plaintiff's claim is for 6 declaratory relief rather than money damages, . . . courts have found that this factor weighs in favor of 7 granting default judgment”). 8 D. Possibility of dispute concerning material facts 9 There is little possibility of dispute concerning material facts because (1) based on the entry of 10 default, the Court accepts factual allegations in the Complaint as true and (2) though properly served, 11 the defendants failed to appear and defend. See Pepsico, Inc., 238 F.Supp.2d at 1177; see also Elektra 12 Entm’t Group, Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005) (“Because all allegations in a 13 well-pleaded complaint are taken as true after the court clerk enters default judgment, there is no 14 likelihood that any genuine issue of material fact exists”). Therefore, this factor does not weigh 15 against default judgment. 16 E. Whether default was due to excusable neglect 17 Generally, the Court will consider whether a defendant’s actions— such as failure to file an 18 answer— is due to excusable neglect. See Eitel, 782 F.2d at 1472. Here, Defendants were served with 19 the summons and complaint on November 16, 2020. (Doc. 4.) In addition, Catherine Hall, counsel for 20 Plaintiff, reports she was contacted by Roger Lampkin, who identified himself as “an attorney 21 representing the Washingtons in connection with the instant action” in February and March 2021. 22 (Doc. 17-1 at 3-4, ¶¶ 11-13.) Thus, it is clear Defendants are aware of the suit, and it is unlikely the 23 failure to respond was the result of excusable neglect. Shanghai Automation Instrument Co., Ltd. v. 24 Kuei, 194 F.Supp.2d 995, 1005 (N.D. Cal. 2001) (finding no excusable neglect because the defendants 25 “were properly served with the Complaint, the notice of entry of default”). Accordingly, this factor 26 does not weigh against default judgment. 27 F. Policy disfavoring default judgment 28 As noted above, default judgments are disfavored because “[c]ases should be decided on their 1 merits whenever reasonably possible.” Eitel, 782 F.2d at 1472. Here, however, the policy underlying 2 the Federal Rules of Civil Procedure favoring decisions on the merits does not weigh against default 3 judgment because the Washingtons’ failure to appear makes a decision on the merits impractical. 4 V. Relief Requested 5 Based upon the foregoing, the Eitel factors weigh in favor of granting default judgment, and the 6 Court turns to the relief requested by Plaintiff. In its Motion, Plaintiff seeks: the Court’s declaration 7 that (1) ANPAC it does not have a duty to defend or indemnify George Washington, Juanita 8 Washington, or Kool Line Express in the underlying action, (2) ANPAC may withdraw from the 9 defense of the Washingtons in the state court action; and (3) ANPAC is entitled to reimbursement of 10 fees and costs incurred in defending in the underlying action. (See generally Doc. 17; Doc. 17-4 at 2.) 11 For the reasons discussed above, the Court finds the entry of default judgment is appropriate and 12 ANPAC is entitled the requested declaratory relief. 13 VI. Findings and Recommendations 14 The Eitel factors weigh in favor of granting default judgment, and the entry of default 15 judgment is within the discretion of the Court. See Aldabe, 616 F.2d at 1092. Based upon the 16 foregoing, the Court RECOMMENDS: 17 1. Plaintiff’s motion for default judgment (Doc. 17) be GRANTED; 18 2. The Court issue judgment finding Plaintiff had no obligation under the Homeowners 19 Policy or Rental-Owners Policy to defend George Washington, Juanita Washington, or 20 Kool Line Express in the underlying state court action, Case No. BCV-19-102967; 21 3. The Court issue judgment finding Plaintiff had no duty to indemnify George 22 Washington, Juanita Washington, or Kool Line Express in the underlying state court 23 action; 24 4. Plaintiff be permitted to withdraw its defense of George Washington and Juanita 25 Washington; and 26 5. Plaintiff be directed to file any motion for reimbursement of fees and costs incurred 27 within 30 days of any order addressing these recommendations. 28 These Findings and Recommendations are submitted to the United States District Judge 1 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Rule 304 of the Local 2 Rules of Practice for the United States District Court, Eastern District of California. Within fourteen 3 days of the date of service of these Findings and Recommendations, any party may file written 4 objections with the court. Such a document should be captioned “Objections to Magistrate Judge’s 5 Findings and Recommendations.” 6 The parties are advised that failure to file objections within the specified time may waive the 7 right to appeal the District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991); Wilkerson v. 8 Wheeler, 772 F.3d 834, 834 (9th Cir. 2014). 9 10 IT IS SO ORDERED. 11 Dated: June 9, 2021 _ /s/ Jennifer L. Thurston 12 CHIEF UNITED STATES MAGISTRATE JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28