Rood v. Liberty Insurance Underwriters, Inc.
2:16-cv-02586
D. Nev.Jul 6, 2017Background
- Rood invested nearly $1 million in a loan for a real-estate development after relying on an appraisal valuing the property at over $5 million; other appraisals valued it under $3 million.
- The development failed; Rood sued the appraisers and obtained a $647,000 judgment against appraiser Jack Gillespie.
- Gillespie had a professional-liability policy with Liberty; Liberty refused to defend/pay citing two policy exclusions (Exclusion L and Exclusion N).
- Gillespie assigned his rights against Liberty to Rood, who then sued Liberty for breach of contract, bad faith, and unfair-claims practices.
- Liberty moved to dismiss all claims, arguing the policy exclusions bar coverage as a matter of law, the bad-faith tort claim is time-barred, and the unfair-practices claim is insufficient (and unopposed).
- The court denied dismissal of the breach claim (insufficient record to determine applicability of exclusions) and dismissed the bad-faith and unfair-practices claims (statute of limitations and failure to oppose/insufficient allegations).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Liberty’s policy exclusions bar coverage for Gillespie’s appraisal (breach of contract) | Rood (as assignee) alleges coverage exists because the exclusions do not clearly apply to the facts | Liberty contends Exclusion L (no coverage for appraisals used to solicit investors for certain real-estate entities) and Exclusion N (no coverage for vacant land slated for large multi-unit residential development) apply | Denied dismissal: factual gaps/ambiguities (Hallock’s status and development type) preclude ruling the exclusions apply at pleading stage |
| Whether Rood’s bad-faith tort claim is timely | Rood characterizes his claim as contract- or tort-based but urges relief despite delay | Liberty argues bad-faith tort is governed by Nevada’s 4‑year statute; Liberty denied coverage in June 2012 and suit was filed in Nov. 2016 | Dismissed: claim is tort-based and barred by Nevada’s four-year statute of limitations |
| Whether Rood states a viable unfair-claims-practices claim | Rood asserted an unfair-practices claim based on Liberty’s handling of the claim | Liberty moved to dismiss for failure to plead and because Rood did not oppose the motion | Dismissed: Rood failed to oppose (local-rule consent) and pleadings lack specific facts plausibly alleging unreasonable handling |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must contain plausible factual allegations)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for plausibility and rejecting conclusory allegations)
- Century Sur. Co. v. Casino W., Inc., 329 P.3d 614 (Nev. 2014) (insurance-contract interpretation principles)
- Powell v. Liberty Mut. Fire Ins. Co., 252 P.3d 668 (Nev. 2011) (plain-meaning rule for unambiguous policy terms)
- Grand Hotel Gift Shop v. Granite State Ins. Co., 839 P.2d 599 (Nev. 1992) (ambiguities in insurance policies construed for insured)
- United Nat’l Ins. Co. v. Frontier Ins. Co., 99 P.3d 1153 (Nev. 2004) (reasonable expectations governs policy ambiguity analysis)
- United States v. Ritchie, 342 F.3d 903 (9th Cir. 2003) (incorporation-by-reference at dismissal stage)
- Davis v. State Farm Fire & Cas. Co., 545 F. Supp. 370 (D. Nev. 1982) (Nevada law: insurer’s duty of good faith is an obligation imposed by law; four-year statute applies)