Liberty Insurance Underwriters Inc. v. Scudier
2013 U.S. Dist. LEXIS 97881
D. Nev.2013Background
- Plaintiff Liberty Insurance Underwriters issued two excess "follow-form" liability policies that follow the terms of underlying Discover commercial general liability policies. The association (Victory Village / B & R) claim insured status under those policies.
- Patrick Dillon (a minor) sued William Scudier (former maintenance supervisor) and the association for repeated sexual abuse and related torts; Dillon alleged abuse occurred when he was 12–13 and included repeated oral and anal sex and confinement. Scudier pled guilty to related criminal counts.
- Discover (the primary insurer) previously obtained summary judgment in federal court concluding its policies did not cover Scudier’s conduct. That ruling is referenced by the court here.
- Liberty filed this declaratory-judgment action seeking a declaration it has no duty to defend or indemnify Scudier. Scudier was served but did not respond; default was entered against him. Dillon opposed summary judgment and moved to stay pending appeal of the state-court summary judgment against the association.
- The central legal question was whether Scudier qualifies as an "insured" under the policies (i.e., whether the molestation was within the scope of his employment) and thus whether Liberty has a duty to defend or indemnify him.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Scudier is an “insured” under the Liberty/Discover policies | Scudier was not acting within the scope of employment and thus is not an insured under the policies | Dillon argued potential coverage exists and sought a stay pending appeal affecting association’s rights | Court: Scudier’s sexual acts were independent personal conduct, not within scope of employment; Scudier is not an insured as a matter of law; no duty to defend or indemnify. |
| Whether Liberty has a duty to defend based on the underlying complaint (complaint rule) | No potential for coverage because underlying allegations show non-employment, so no duty to defend | Dillon argued issues affecting association and appeal could be relevant | Court: Under Nevada/complaint-rule analysis, there is no potential for coverage for Scudier; duty to defend does not arise. |
| Whether to stay the declaratory action pending the association’s appeal | Liberty opposed a stay; sought immediate resolution as to Scudier | Dillon sought stay under NRS § 30.130 and Erie principles to protect nonparties (association) | Court: Denied stay — NRS § 30.130 is procedural, association not a party, this ruling affects only Scudier’s coverage. |
| Whether to enter default judgment against Scudier for failure to respond | Liberty requested default and default judgment | No response from Scudier; incarceration not shown to excuse default | Court: Default judgment granted after applying Eitel factors; complaint taken as true for purposes of default. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment burden shifting)
- Waller v. Truck Ins. Exch., 900 P.2d 619 (Cal. 1995) (duty to defend and contract interpretation principles)
- Montrose Chemical Corp. v. Superior Court, 861 P.2d 1153 (Cal. 1993) (duty to defend depends on potential coverage)
- Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986) (factors for default judgment)