Opinion
3:21-cv-00208-AC
08-23-2021
ARTISAN AND TRUCKERS CASUALTY COMPANY, a foreign insurer; Plaintiff, v. VENDORS ARE WE, LLC, an Oregon corporation, and SETH SAIDMAN, an individual, Defendants.
FINDINGS AND RECOMMENDATION
JOHN V. ACOSTA, UNITED STATES MAGISTRATE JUDGE
Artisan and Truckers Casualty Company ("Progressive") brings this declaratory coverage action against Vendors Are We, LLC ("Vendors") and Seth Saidman ("Saidman") (collectively, "Defendants"). Progressive seeks a determination that it has no duty to defend or indemnify Vendors or Saidman under a commercial automobile insurance policy it issued with respect to claims that may be brought by the Estate of Edmond Jones (the "Estate") against Vendors or Saidman. Progressive now moves for entry of default judgment against Defendants. The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332. For the reasons that follow, Progressive's motion should be granted.
Background
Progressive is a foreign surplus lines insurance company that issued a commercial automobile liability policy, No. 00466649-001 (the "Policy") to Vendors, in effect from September 1, 2019, to March 1, 2020. (Compl. ¶ 1.) Vendors, an Oregon company, is a catering business that sells food and other items at festivals and events. (Compl. ¶¶ 3, 9.) Saidman is an owner or member of Vendors. (Compl. ¶4.) In September 2019, Saidman flew from Oregon to Reno, Nevada, to investigate potential business opportunities for Vendors in the area. (Compl. ¶ 11.) Saidman rented a 2020 Kia Sorento at the Reno airport for use on his business trip. (Compl. ¶ 12.) On September 28, 2019, Saidman was driving in Virginia City, Nevada when Saidman was sideswiped by a motorcycle operated by Edmond Jones. (Compl. ¶ 13.) Jones sustained fatal injuries in the accident. (Compl. ¶ 14.) Saidman reported the accident to Progressive on September 29, 2019. (Compl. ¶ 16.) In January 2021, counsel for the Estate informed Progressive that it intended to proceed with litigation against Vendors and/or Saidman for claims arising out of the accident. (Compl. ¶ 15; Decl. Lyan S. Tabak ¶ 7, ECF No. 15.)
Progressive instituted this action on February 8, 2021, against Vendors, Saidman, and the Estate. Progressive asserts that the Policy issued to Vendors does not cover the Kia Sorento rental vehicle Saidman was driving at the time of the accident. Progressive alleges that the Kia Sorento driven by Saidman during the accident is not an "insured auto" or "temporary substitute auto" under the Policy. (Compl. ¶¶ 33-38.) Based on the above allegations Progressive seeks relief in the form of a declaratory judgment pursuant to 28 U.S.C. § 2201 that it has no duty to defend or indemnify Vendors or Saidman. (Compl. ¶¶ 37-38.)
Progressive's Complaint and summons were served via personal service at Vendors and Saidman's place of business on February 22, 2021. (ECF Nos. 5, 6.) Defendants have not filed an answer or otherwise appeared in this action. Progressive moved for entry of default, which the court entered on March 16, 2021. (ECF Nos. 7, 8.) On April 12, 2021, Progressive voluntarily dismissed the Estate from this action pursuant to Federal Rule of Civil Procedure ("Rule") 4l(a)(l)(A)(i). Progressive now seeks entry of default judgment declaring that it has no duty to defend or indemnify Vendors or Saidman pursuant to the Policy in any potential action by the Estate against Vendors or Saidman.
Legal Standards
Under Rule 55(a), the clerk of court is required to enter an order of default if a party against whom affirmative relief is sought has failed timely to plead or otherwise defend an action. See Fed. R. Civ. P. 55(a) ("When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default."). Upon the entry of default, the court accepts "the well-pleaded factual allegations" of the complaint "as true." DIRECTV, Inc. v. Boa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (quotation omitted); Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). "The court, however, does not accept as admitted facts that are not well-pleaded, conclusions of law, or facts relating to the amount of damages." Fathers & Daughters Nevada, LLC v. Brown, Case No. 3:16-cv-927-SI, 2017 WL 2378358, at *l (D. Or. June 1, 2017); DIRECTV, 503 F.3d at 854; see also Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 702 (9th Cir. 2008) ("The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.") (internal quotation omitted). Where the plaintiffs claim is not for a certain sum or a sum that can be made certain by computation, the court may conduct hearings to effectuate a judgment as needed to conduct an accounting, ascertain damages, establish the truth of any allegation by evidence, or investigate any other matter. Fed.R.Civ.P. 55(b)(2)(A-D).
"Rule 55 provides that 'after the clerk's entry of default against a defendant, a court may enter default judgment against that defendant.'" Glacier Films (USA), Inc., v. Tenorio, Case No. 3:15-cv-01729-SB, 2016 WL 3766465, at *l (D. Or. June 22, 2016) (quoting FirstBank P.R. v. Jciymo Properties, LLC, 379 Fed.Appx. 166, 170 (3d Cir. 2010)). "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising this discretion, courts in this circuit consider the factors articulated in Eitel v. McCooh 782 F.2d 1470 (9th Cir. 1986). Glacier Films, 2016 WL 3766465, at * 1. The Eitel factors are: (1) the possibility of prejudice to plaintiffs; (2) the merits of plaintiffs' substantive claims; (3) the sufficiency of the operative complaint; (4) the sum of money at stake in the litigation; (5) the possibility of dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy favoring decisions on the merits. Eitel, 782 F.2d at 1471-72. The "starting point" of the court's analysis "is the general rule that default judgments are ordinarily disfavored." Id. at 1472 (citation omitted).
Discussion
I. Appropriateness of Entry of Default Judgment under Eitel
A. First Eitel Factor
The first Eitel factor considers whether the plaintiff would suffer prejudice if default judgment is not entered. PepsiCo, Inc., v. Cat. Security Cans, 238 F.Supp.2d 1172, 1177 (CD. Cal. 2002); Philadelphia Indent Ins. Co. v. United Revolver Club of Sacramento, Inc., Case No. 2:18-cv-2960 KJM DB, 2020 WL 773419, at *l-2 (E.D. Cal. Feb. 18, 2020). Although it is not clear that the Estate has filed any action to date, Progressive could potentially be asked to defend or indemnify Defendants against claims should they be filed in the future. Because Defendants have not defended this action, if default judgment is not entered, Progressive will be denied the right to judicial resolution of the claims. Thus, the court finds this potential prejudice weighs in favor of granting a default judgment. See Aspen Ins. UK Ltd. v. Killarney Constr. Co., Case No. C 11-1294 RS, 2012 WL 1831498, at *2 (N.D. Cal. May 18, 2012) (finding insurer would be prejudiced if default judgment was not entered).
B. Second and Third Eitel Factors
The court considers the merits of Progressive's substantive claims and the sufficiency of the complaint together because of the relatedness of the two inquiries. As part of this inquiry, the court must consider whether the allegations in the complaint are sufficient to state a claim that supports the relief sought. PepsiCo, 238 F.Supp.2d at 1175; Philadelphia Indent, 2020 WL 773419 at *3.
The federal Declaratory Judgment Act permits "any court of the United States . . . [to] declare the rights and other legal relations of any interested party seeking such declaration" "[i]n a case of actual controversy within its jurisdiction." 28 U.S.C. § 2201(a). And, "[a]ny such declaration shall have the force and effect of a final judgment or decree[.]" Id.
Under Oregon law, "the interpretation of an insurance policy is a question of law," and the court's "task it to ascertain the parties' intentions. Coelsch v. State Farm Fire and Casually Co., 298 Or.App. 207, 211 (2019) (citing Hoffman Constr. Co. of Alaska v. Fred S. James & Co., 313 Or. 464, 469 (1992). The court does so by examining the terms and conditions of the insurance policy as interpreted from "the understanding of the ordinary purchaser of insurance." Totten v. New York Life Ins. Co., 298 Or. 765, 771 (1985). If a word or phrase is explicitly defined in the policy, the court applies that definition. Coelsch, 298 Or.App. at 211; Gonzales v. Farmers Ins. Co. of Or., 345 Or. 382, 387 (2008), If the policy does not define a particular term, the court will consider if the term has a plain meaning and is susceptible to only one plausible interpretation. Coelsch, 298 Or.App. at 211. If the term has a plain meaning, the court's analysis ends. Id. If the term is capable of more then one plausible interpretation, the court examines the term in "the particular context in which that term is used in the policy and the broader context of the policy as a whole." Hoffman, 313 Or. at 470. Only if ambiguity remains, the court then will interpret the term's meaning against the insurance company. Hoffman, 313 Or. at 470; Coelsch, 298 Or.App. at 212.
Progressive argues that it is entitled to a declaration that it owes no duty to defend or indemnify Defendants for any claims that may be asserted by the Estate because the Kia Sorento driven by Saidman during the accident was not an "insured auto" or "temporary substitute auto" under the Policy. (Mot. for Default Jdt. at 7, ECF No. 11.); see also Allstate Ins. Co. v. Morgan, 123 F.Supp.3d 1266, 1273 (D. Or. 2015) (stating that "if the insurer can establish that the insured is precluded from coverage, it has neither the duty to defend nor the duty to indemnify the insured."). Progressive asserts that it initiated a claims investigation upon receipt of the claim by Saidman and determined that no "insured auto" as defined by the Policy was involved in the accident. (Tabak Decl. ¶ 6.) Progressive contends that it instituted this action to have the court determine that there is no coverage available to Defendants under the Policy.
The Policy also provides that Progressive will settle or defend at its option "any claim or lawsuit for damages covered by Part I [Liability To Others]." (Tabak Decl. Ex. C at 6, ECF No. 15-3 at 17.)
Here, the allegations of the Complaint support Progressive's request for a declaration that it owes no duty to defend or indemnify for potential claims by the Estate under the Policy. Reviewing the Policy, it provides coverage for damages, bodily injury, and property damages for which "an insured becomes legally responsible because of an accident arising out of the ownership, maintenance or use of that insured auto." (Tabak Decl. Ex. C at 6, ECF No. 15-3 at 17.) An "insured auto" is defined in the Policy as:
a. Any auto specifically described on the declarations page; or b. An additional auto for Part I - Liability To Others and /or Part II - Damage to Your Auto on the date you become the own if:
(i) you acquire the auto during the policy period shown on the declarations page;
(ii) we insure all autos owned by you that are used in your business;
(iii) no other insurance policy provides coverage for that auto; and
(iv) you tell us within 30 days after you acquire it that you want us to cover it for that coverage.
With respect to Part I - Liability To Others, if we provide coverage for an additionally acquired auto in accordance with this paragraph b., we will provide the same coverage for such additional auto as we provide for any auto shown on the declarations page.
c. Any replacement auto on the you become the owner if:
(i) you acquire the auto during the policy period shown on the declarations page;
(ii) the auto that you acquire replaces one specifically described on the declarations page due to termination of your ownership of the replaced auto or due to mechanical breakdown of, deterioration of, or loss to the replaced auto that renders it permanently inoperable[.](Tabak Decl. Ex. C at 2-3.) The Policy further defines a "temporary substitute auto" as "any auto you do not own while used with the permission of its owner as a temporary substitute for an insured auto that has been withdrawn from normal use due to breakdown, repair, servicing, loss or destruction." (Tabak Decl. Ex. C at 5.)
Progressive also highlights that generally, at the time of purchasing commercial automobile insurance, its insureds have the option to purchase additional coverage for an addition premium, and that when such coverage is elected, it is reflected on the declarations page. (Tabak Decl. ¶ 8.) One option includes the "Any Automobile Legal Liability Endorsement, Form Z442 (01/08)" ("Any Auto Endorsement"), which changes the definition of "insured auto" to include as relevant here "any auto if you are a corporation" or "any auto while used in your business" if you are a sole proprietorship. (Tabak Decl. ¶ 8, Ex. C at 77.) Progressive provides that Vendors did not purchase the Any Auto Endorsement.
Here, Progressive plausibly alleges that a claim was filed under the Policy and that it investigated whether coverage existed for the claim. Further, Plaintiff has plausibly alleged that the rental vehicle driven by Saidman does not qualify as an "insured auto" or as a "temporary substitute auto" under the Policy. Progressive highlights that the Kia Sorento is not identified on the declarations page of the Policy. (Tabak Decl. Ex. C, ECF No. 15-3 at 3-4 (identifying 2006 Chevrolet Express and 2018 Toyota Sienna on the declarations page). Progressive also notes that the Kia Sorento was not owned by Vendors, and it was not being used as a replacement vehicle at the time of the accident. (Tabak Decl. Ex. A at lines 232-34) (citing interview with Saidman who stated that vehicles identified on declarations page were in "perfect" working condition). Thus, Progressive adequately demonstrates that the Kia Sorento does not qualify as either an "insured auto" or as a "temporary substitute auto" under the Policy. See Alain Specialty Ins. Co. v. All New Plumbing, Inc., Case No. 2:18-cv-02746-MCE-KJN, 2019 WL 3543854, at *4 (E.D. Cal. Aug. 5, 2019) ("Because McCall's bodily injury suit is plainly contemplated in the Policy as being excluded, and because the Policy explicitly states that Atain would have no duty to defend where the issue was excluded, the merits of Atain's declaratory judgment action are sound."). Further, Progressive adequately has demonstrated that Vendors did not purchase the Any Auto Endorsement, due the absence of such language on the declarations page. (Tabak Decl. Ex. C, ECF No. 15-3 at 3-8.)
In short, the merits of Progressive's claim for declaratory relief and sufficiency of its pleadings and record presented here favor entry of default judgment under the second and third Eitel factors.
C. Fourth Eitel Factor
Under the fourth factor cited in Eitel, "the court must consider the amount of money at stake in relation to the seriousness of Defendant's conduct." PepsiCo, 238 F.Supp.2d at 1176-77. In this action, Progressive does not seek any monetary damages. Instead, it seeks solely a declaratory judgment that it owes no duty to defend or indemnify Vendors or Saidman for any claims that may be asserted by the Estate. Accordingly, the fourth Eitel factor favors granting default judgment. See PepsiCo, 238 F.Supp.2d at 1177 (finding that the fourth Eitel factor favored granting default judgment when monetaiy damages were not sought).
D. Fifth Eitel Factor
Under the fifth factor, the court considers the possibility of dispute concerning material facts. Here, the court may assume the truth of all well-pleaded facts in the complaint, and the court must apply the definitions provided in the insurance contract. Thus, absence of disputed material facts here weighs in favor of entering a default judgment. See Alain Specialty Ins. , 2016 WL 3354344 at *5 (noting absence of genuine disputes of material fact in insurance policy exclusion supported entry of declaratory judgment).
E. Sixth Eitel Factor
"The sixth Eitel factor considers the possibility that the default resulted from excusable neglect." PepsiCo, 238 F.Supp.2d at 1177. Here, Defendants were properly served with the complaint, as well as Progressive's request for entiy of default, the court's entry of default, Progressive's motion for default judgment, and Progressive's reply. (ECF Nos. 1, 5-7, 10, 13, 16.) Thus, Defendants have had ample notice of Progressive's intent to pursue a default judgment, yet they have not filed any response. Therefore, there is no indication that Defendants' default has resulted from excusable neglect.
F. Seventh Eitel Factor
While cases should be determined on their merits where possible, courts recognize that this factor alone is not enough to prevent entry of a declaratory judgment. See Atain Specialty Ins., 2016 WL 3354344, at *6. Here, Defendants have not appeared in this action, despite being notified on several occasions that default order has been entered and that a default judgment is being sought. Thus, the court finds that the policy of resolving cases on their merits should not prevent entry of default judgment under the facts of this case.
In summary, after considering each of the Eitel factors, the court concludes that they weigh in favor of entry of default judgment against Defendants.
Conclusion
For the reasons stated above, the court recommends that Progressive's Motion for Default Judgment (ECF No. 13) be GRANTED.
Scheduling Order
These Findings and Recommendations will be referred to U.S. District Judge Karin J. Immergut. Objections, if any, are due within fourteen (14) days. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within fourteen (14) days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement.