James Nalder v. United Automobile Insurance Co
878 F.3d 754
| 9th Cir. | 2017Background
- July 8, 2007: Gary Lewis ran over Cheyanne Nalder. Lewis had a UAIC auto policy with a monthly renewal; he paid renewal on July 10, 2007 (two days after the accident).
- Nalder offered to settle for the $15,000 policy limit; UAIC rejected, contending there was no coverage because Lewis failed to renew by the listed renewal date.
- Nalder obtained a $3.5 million default judgment against Lewis in Nevada state court; Nalder and Lewis later sued UAIC alleging breach of contract, bad faith, breach of implied covenant, fraud, and violation of Nev. Rev. Stat. § 686A.310.
- District court ultimately found Lewis was covered (renewal statement ambiguous) and that UAIC breached its duty to defend, but awarded no consequential damages because Lewis took a default and allegedly incurred no defense costs.
- Ninth Circuit previously vacated summary judgment on coverage issues and remanded. On remand, the district court awarded policy limits but denied consequential damages; Ninth Circuit certified to the Nevada Supreme Court the question whether consequential damages for breach of the duty to defend can include losses arising from a default judgment.
- While the Nevada Supreme Court was considering that certified question, UAIC moved to dismiss the appeal for lack of standing, arguing the six-year enforcement period on the default judgment expired during litigation and the judgment lapsed, eliminating any basis for consequential damages above the policy limit. The Ninth Circuit found no controlling Nevada precedent and certified the additional question to the Nevada Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an action against an insurer seeking damages based on a separate judgment is an "action on" that judgment for statute-of-limitations/renewal purposes | Nalder/Lewis: This suit is an action on the judgment (‘‘using the judgment as an original cause of action’’) and was filed within the six-year life of the judgment, so renewal was unnecessary | UAIC: The six-year enforcement period expired and the judgment lapsed; plaintiffs therefore lack an enforceable judgment that could form the basis for consequential damages | Court certified the precise question to the Nevada Supreme Court for authoritative state-law guidance and stayed further proceedings |
| Whether expiration of the underlying default judgment during pendency reduces consequential damages for breach of the duty to defend to zero (mootness/standing) | Nalder/Lewis: Lapse affects only the amount of damages, not liability; alternatively, this suit itself is timely on the judgment | UAIC: When the six-year enforcement period runs without renewal, the judgment is no longer enforceable and plaintiffs have no injury to recover above policy limits, so appeal is moot | Court found no controlling Nevada authority and certified issue to Nevada Supreme Court |
| Scope of damages for insurer’s breach of duty to defend (whether insurer liable for consequential losses from default judgment) | Nalder/Lewis: UAIC’s breach proximately caused the $3.5M default judgment; consequential damages should include the full judgment amount | UAIC: District court awarded policy limits and argued no further damages because judgment lapsed and/or insured chose default, incurring no defense costs | Ninth Circuit previously certified this question to Nevada Supreme Court (separate certification); resolution remains pending |
| Proper forum/procedure for resolution of state-law uncertainties | Nalder/Lewis: Ask district court to assess damages before mooting on appeal | UAIC: Move to dismiss for lack of standing now that judgment lapsed | Ninth Circuit stayed its proceedings and certified the additional statutory-question to the Nevada Supreme Court; directed clerk to transmit record |
Key Cases Cited
- Mandlebaum v. Gregovich, 50 P. 849 (Nev. 1897) (discusses common-law rule that a creditor may enforce a judgment or bring a new action on it)
- Leven v. Frey, 168 P.3d 712 (Nev. 2007) (addresses strict construction of judgment renewal requirements)
- Nalder v. United Auto. Ins. Co., [citation="500 F. App'x 701"] (9th Cir. 2012) (earlier Ninth Circuit disposition vacating summary judgment on coverage and affirming statutory rulings)