Philadelphia Indemnity Insurance Company v. Dallaswhite Corporation ( 2024 )

1 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 2 3 Philadelphia Indemnity Insurance Company, Case No. 2:23-cv-01074-CDS-DJA 4 Plaintiff Order Denying Defendant’s Motion to Dismiss 5 v. 6 Dallaswhite Corporation, [ECF No. 9] 7 Defendant 8 9 This is a subrogation action between plaintiff Philadelphia Indemnity Insurance 10 Company (PIIC) and defendant Dallaswhite Corporation. Dallaswhite moved to dismiss the 11 complaint, arguing that PIIC’s claims are barred because its subrogation rights were 12 extinguished in a settlement agreement signed by its subrogee prior to the filing of the 13 complaint. ECF No. 9. The motion is fully briefed. ECF Nos. 14, 15. Because I take judicial notice 14 of a document outside the four corners of the complaint (the settlement agreement), I convert 15 the motion to a motion for summary judgment under Rule 12(d). For the following reasons, the 16 motion for summary judgment is denied. 17 I. Background 18 PIIC provided insurance coverage to the Homeowners Association (HOA) for properties 19 located in downtown Las Vegas. ECF No. 1 at ¶ 2. The HOA hired Dallaswhite to repair damage 20 to the 2011 Tower Street property following a fire in June 2022. Id. at ¶ 8. The HOA subsequently 21 experienced flood damage after a heavy rainstorm. Id. at ¶ 11. The HOA alleged that the damage 22 was caused by Dallaswhite leaving fire debris and construction materials on the site during its 23 repairs which blocked a storm drain and caused unprecedented drainage problems. Id. at ¶¶ 9– 24 12. 25 26 1 On July 6, 2023, Dallaswhite and the HOA entered into a Settlement and Release 2 Agreement, of which Dallaswhite requests I take judicial notice. See ECF No. 11; see also 3 Whiteway Decl., ECF No. 10 at ¶ 3.1 Paragraph 3 of the Release states as follows: 4 3. Release of Claims. Except for the obligations created by this Agreement, each of 5 the Parties, , directors, 6 shareholders, officers, employees, agents, representatives, members, managers, 7 partners, parents, subsidiaries, principals, predecessors, successors, affiliates, and 8 attorneys, hereby release and forever discharge the other Party and the other 9 Party’s respective insurers, directors, shareholders, officers, employees, agents, 10 representatives, members, managers, partners, parents, subsidiaries, principals, 11 predecessors, successors in interest, affiliates, and attorneys from all claims, 12 demands, liens, actions, suits, causes of action, obligations, controversies, debts, 13 costs, attorneys’ fees, expenses, damages, judgments, orders and liabilities of every 14 kind or nature, in law, equity or otherwise, whether known or unknown, 15 suspected or unsuspected, in any way relating to the Property, or the Settled 16 Claims (collectively, the “ ”). 17 See Settlement Agreement, ECF No. 10-1 at ¶ 3 (emphasis added). PIIC filed its complaint 18 on July 12, 2023, after the agreement was signed. ECF No. 1. 19 II. Discussion 20 Dallaswhite argues that PIIC is limited to the rights of the HOA and, because the HOA 21 discharged its and its insurer’s claims against Dallaswhite, PIIC cannot assert any rights against 22 Dallaswhite and thus the complaint must be dismissed. ECF No. 9 at 5. PIIC responds that its 23 rights are not extinguished because Dallaswhite was on notice of its subrogation claim prior to 24 signing the settlement agreement. ECF No. 14 at 7–10. 25 26 1 Brian Whiteway is the president of Dallaswhite. Whiteway Decl., ECF No. 10 at ¶ 1. 1 Subrogation is a common law doctrine based in equity that permits an insurer to take 2 the place of the insured to pursue recovery from third-party tortfeasors responsible for the 3 insured’s loss. Mort v. United States, 86 F.3d 890, 893–94 (9th Cir. 1996) (citing Han v. United States, 4 944 F.2d 526, 529 (9th Cir. 1991)). As the party who pays the insured’s loss, the insurer (the 5 subrogee) “stands in the shoes” of the insured (the subrogor) and succeeds to the insured’s 6 rights and remedies. See Am. Sur. Co. of New York v. Bethlehem Nat. Bank of Bethlehem, Pa., 314 U.S. 314, 7 317 (1941); In re Hamada, 291 F.3d 645, 649 (9th Cir. 2002). An important limit to the right of 8 subrogation is that it is a purely derivative right—meaning that the subrogee succeeds to rights 9 no greater than those of the subrogor. United States v. California, 507 U.S. 746, 756 (1993); Fed. Ins. 10 Co. v. Union Pac. R. Co., 651 F.3d 1175, 1177 n.1 (9th Cir. 2011). 11 Under Nevada law, a release between an insured and a tortfeasor does not extinguish the 12 insured’s carrier’s subrogation rights when the tortfeasor is on notice of the subrogation claim 13 before entering into the release. Davenport v. State Farm Mut. Auto. Ins. Co., 404 P.2d 10, 12–13 (Nev. 14 1965), abrogation on other grounds recognized in Maxwell v. Allstate Ins. Companies, 728 P.2d 812, 813–14 15 (Nev. 1986); accord Intri-Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) 16 (applying California law). 17 PIIC attached to its response a letter dated January 23, 2023, in which Sara Murdock, 18 PIIC’s senior claims examiner, wrote to Dallaswhite, notifying it of the water damage to the 2011 19 Tower Street property and placing it “on notice of this loss, as you have liability in this matter.” 20 1/23/23 Letter, Pl.’s Ex. A, ECF No. 14-1 at 4. PIIC also attached an email dated May 5, 2023, in 21 which Murdock sent requested photos to a representative of Dallaswhite’s insurer, Axis 22 Insurance. 5/5/23 Email, Pl.’s Ex. C, ECF No. 14-1 at 9. In her declaration, Murdock affirms that 23 she received a phone call on May 5 from Dallaswhite’s insurer representative who called “to 24 inquire about the circumstances of PIIC’s subrogation claim against [Dallaswhite]” and that on 25 the call she explained “the circumstances of the loss and why PIIC had placed [Dallaswhite] on 26 notice.” Murdock Decl., ECF No. 14-1 at ¶¶ 8–9. As a result, PIIC contends that “[Dallaswhite] 1 and its insurance carrier2 were both on notice of PIIC’s subrogation claim as of no later than 2 January 23, 2023 and May 5, 2023, respectively.” Id. at ¶ 11. 3 Dallaswhite replies that PIIC’s January 23 letter was insufficient for notice because “the 4 word ‘subrogation’ “does not appear anywhere in the letter[.]” ECF No. 15 at 5–7. It points out 5 that the notice letter in Davenport explicitly mentioned “subrogation” and cites to a California 6 case from 1935 which held a notice letter inadequate where it had “nothing on the face” to say 7 that “any subrogation or assignment had taken place.” ECF No. 15 at 6–7 (citing Bernhard v. 8 Delluaitante, 5 Cal. App. 2d 585, 587 (1935)). Dallaswhite did not reply to PIIC’s argument 9 regarding notice by way of its insurer. 10 Because both parties submit materials outside of the pleadings which are required to 11 resolve this motion to dismiss, I convert it to a motion for summary judgment. See Hamilton 12 Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1207 (9th Cir. 2007); Muthle v. SAP.io, 2019 U.S. 13 Dist. LEXIS 189333, *3–4 (N.D. Cal. Oct. 31, 2019) (“Because the motion to dismiss turns upon 14 facts outside the corners of the complaint, Rule 12(d) provides that the motion should be 15 converted to a motion for summary judgment.”). The court declines at this time to decide 16 whether there was sufficient notice to Dallaswhite on January 23 or whether notice to an insurer 17 is sufficient for notice under Nevada law. Instead, I deny Dallaswhite’s motion for summary 18 judgment because PIIC established a material dispute of fact as to whether there was sufficient 19 notice by introducing evidence that Dallaswhite’s insurer was alerted to the subrogation claim 20 at least as of May 5, 2023—which Dallaswhite neither refuted with evidence nor contrary case 21 law. 22 23 24 2 PIIC acknowledges that Nevada courts have yet to rule on whether a release does not bar a subrogation claim when the tortfeasor’s insurance carrier is on notice of the claim, but cites other jurisdictions which 25 have so held. ECF No. 14 at 9 n.3 (citing Nationwide Mut. Ins. Co. v. Dairyland Ins. Co., 445 S.E.2d 184, 187–88 (W. Va. 1994); Milbank Ins. Co. v. Henry, 441 N.W.2d 143, 146 (Neb. 1989); Home Ins. Co. v. Hertz Corp., 375 26 N.E.2d 115, 118 (Ill. 1978); State Nat. Fire Ins. Co. v. Sykes, 527 So. 2d 589, 591–92 (La. Ct. App. 1988); Vigilant Ins. Co. v. Bowman, 198 S.E.2d 346, 347–48 (Ga. App. 1973)). ITI. Conclusion 2 IT IS THEREFORE ORDERED that Dallaswhite’s motion for summary judgment (titled motion to dismiss) [ECF No. 9] is DENIED. 4 IT IS FURTHER ORDERED that, pursuant to Local Rule 16-5, this matter is referred to the magistrate judge for a settlement conference. “ 6 Dated: February 13, 2024 J, / SLL. 8 aihg— 9 ve tates District Judge 10 ll 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26