116 F.4th 855
9th Cir.2024Background
- In 2017, Marcus Collins was murdered at a Las Vegas apartment complex; his estate sued the apartment owners (Alhambra Place) for negligence and wrongful death.
- Alhambra Place was insured by James River (primary coverage: $1 million per occurrence) and North River (excess coverage: $10 million per occurrence).
- James River, the primary insurer, rejected initial settlement offers from Collins's estate that were within its policy limits, despite being advised the claim value could exceed $1 million.
- In 2022, after related litigation and increased settlement demands, the parties settled the case for $5 million—James River paid $1 million and North River paid the remaining $4 million.
- North River (excess insurer) sued James River (primary insurer) in federal court, claiming equitable subrogation, breach of duty to settle, and breach of implied covenant of good faith and fair dealing—alleging North River stepped into the insured’s shoes for these claims.
- The district court dismissed North River’s claim, concluding Nevada law did not permit such subrogation where settlement was within the combined policy limits, based on two unpublished Nevada cases.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Nevada law allows an excess insurer to bring an equitable subrogation claim against a primary insurer when the underlying settlement is within the combined policy limits | North River: Should be permitted because, but for North River’s payment, the insured would have had a claim; Nevada recognizes equitable subrogation, and guidance from California law is appropriate | James River: Not permitted under Nevada law, especially where the settlement did not exceed total available insurance; cites unpublished Nevada cases rejecting such claims | 9th Circuit certified the question to the Nevada Supreme Court, finding Nevada law unsettled and noting prior decisions were unpublished and not binding |
Key Cases Cited
In re Fontainebleau Las Vegas Holdings, 128 Nev. 556 (Nev. 2012) (recognizing Nevada’s adoption of the doctrine of equitable subrogation in a variety of situations) First Intercontinental Bank v. Ahn, 798 F.3d 1149 (9th Cir. 2015) (federal courts sitting in diversity apply forum state's choice-of-law rules) Washington Mut. Bank, FA v. Superior Ct., 24 Cal. 4th 906 (Cal. 2001) (California choice-of-law analysis for diversity cases) Chen v. Los Angeles Truck Centers, LLC, 7 Cal. 5th 862 (Cal. 2019) (California’s governmental interest test for choice-of-law)