Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-02342/USCOURTS-casd-3_08-cv-02342-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

BRADLEY D. AUSMUS; ELIZABETH

A. AUSMUS,

 Plaintiffs,

CASE NO. 08-CV-2342 L (LSP)

ORDER DENYING MOTION TO

ALTER ORDER OF DISMISSAL

AND VACATE JUDGMENT [doc.

#15]

vs.

LEXINGTON INSURANCE

COMPANY; AMERICAN

INTERNATIONAL GROUP, INC.;

DOES 1 through 100, inclusive,

 Defendants.

__________________________________

Defendants filed a motion to dismiss the above-captioned case. After full briefing,

the Court granted defendants’ motion with prejudice. The Court found and concluded, as a

matter of law, that American Coatings’s surplus line policy was not covered by California

Insurance Code § 678.1(c), and because the exclusion was clear and conspicuous, the

policy Lexington issued did not cover damage arising out of work completed by American

Coatings before April 1, 2001. Therefore, the damage to plaintiffs’ residence was excluded

from coverage under the policy and plaintiffs’ complaint lacked a cognizable legal theory. 

(Order filed April 22, 2009.) Because the complaint was dismissed with prejudice,

judgment was entered on April 23, 2009.

On May 5, 2009, plaintiffs filed the present motion to vacate the judgment and alter

the order of dismissal. [doc. #15] Plaintiffs filed a notice of appeal on May 26, 2009. The

Case 3:08-cv-02342-L-LSP Document 22 Filed 07/15/09 Page 1 of 5
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1 In the underlying action, American Coatings requested a defense under the insurance

policy at issue here. Defendants appointed their in-house attorneys to represent American Coatings.

Subsequently, defendants withdrew the attorneys representation based on the exclusion in the policy.

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motion has been fully briefed. For the reasons set forth below, plaintiffs’ motion is denied.

Background

On February 1, 2001, Lexington issued a comprehensive insurance policy to

American Coatings covering work performed by American Coatings with no date

restrictions. The policy was renewed April 1, 2002 and again on April 1, 2003 – each time

with no date restrictions on covered work. On April 1, 2004, Lexington once again

renewed American Coatings’s policy but this new policy contained an endorsement entitled

“Exclusion - Designated Work.” The endorsement stated that the insurance did not apply

to property damage arising out of American Coatings’s work completed prior to April 1,

2001. The following year, on April 1, 2005, Lexington issued another renewal policy

containing the endorsement limiting the time period for covered work. 

In an underlying state court action, American Coatings settled the litigation brought

by plaintiffs. The settlement agreement provided for an entry of judgment against

American Coatings and further included an assignment to plaintiffs by American Coatings

of its rights and causes of action against Lexington and AIG.1

In the present action, plaintiffs alleged causes of action against defendants for

breach of contract, breach of the implied covenant of good faith and fair dealing asserting

that Lexington failed to adequately notify American Coatings of the reduction in coverage

in the April 1, 2004 policy as required by California Insurance Code § 678.1(c) and the

exclusionary endorsement was not clear and understandable. 

Motion to Vacate Judgment and Alter Order of Dismissal

Plaintiffs state in their Rule 59(e) motion that they “do not take issue with or seek to

re-argue the Court’s ruling” of dismissal on the grounds stated. (Mtn. Memo at 2.) Instead,

plaintiffs contend that in its Order the Court failed to address their argument that as a

matter of public policy, “Lexington was required to provide clear, conspicuous notice in an

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expected place of any reduction in coverage on a renewal of any existing policy, and absent

such notice, its attempt to reduce coverage was ineffective.” Id.

Reconsideration under Rule 59(e) is appropriate "if the district court (1) is presented

with newly discovered evidence, (2) committed clear error or the initial decision was

manifestly unjust, or (3) if there is an intervening change in the controlling law." School

Dist. No. 1J, Multnomah County, Oregon v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir.

1993). A Rule 59(e) motion "should not be granted absent highly unusual circumstances." 

389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999). A motion to

reconsider is not another opportunity for the losing party to make its strongest case, reassert

arguments, or revamp previously unmeritorious arguments. Reconsideration motions do

not give parties a "second bite at the apple." Neither are they devices permitting the

unsuccessful party to "rehash" arguments previously presented. Motions to reconsider are

not justified on the basis of new evidence which could have been discovered prior to the

court’s ruling. Finally, "‘after thoughts’ or ‘shifting of ground’ do not constitute an

appropriate basis for reconsideration." United States v. Navarro, 972 F. Supp. 1296, 1299

(E.D. Cal. 1999), rev’d on other grounds , 160 F.3d 1254 (9th Cir. 1998) (internal citations

omitted); accord United States v. Westlands Water Dist., 134 F. Supp. 2d 1111, 1130 (E.D.

Cal. 2001); see also Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985) (holding

that a motion for reconsideration under Rule 59(e) was properly denied because "it

presented no arguments that had not already been raised in opposition to summary

judgment"); Costello v. United States Gov’t, 765 F. Supp. 1003, 1009 (C.D. Cal. 1991)

("courts avoid considering Rule 59(e) motions where the grounds for amendment are

restricted to either repetitive contentions of matters which were before the court on its prior

consideration or contentions which might have been raised prior to the challenged

judgment"). This rule reflects the courts’ "concern[] for preserving dwindling resources

and promoting judicial efficiency." Costello, 765 F. Supp. at 1009. 

As noted above, plaintiffs contend the Court failed to address a separate basis for

defendants’ liability, i.e., that California’s public policy required Lexington to provide

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notice of any reduction in coverage on renewal of existing policies. (Mtn. Memo at 5.) 

Defendants argue, however, that plaintiffs did not raise any public policy argument in their

opposition to the motion to dismiss. Also, defendants assert that the Court nevertheless

addressed California’s public policy in its decision by applying California statutory law. 

Plaintiffs contend that they raised the public policy issue on pages 8 and 9 in their

opposition to defendants’ motion to dismiss. In essence, plaintiffs argue that a mere

quotation from a case, specifically Fields v. Blue Shield of California, 163 Cal. App. 3d

570, 578 (1985), in its opposition to the motion to dismiss was sufficient to raise the issue

of defendants’ liability based on a violation of public policy. There is no legal support for

such a proposition. It is an even less persuasive argument here because the quoted

language from Fields in plaintiffs’ present motion is not the same as that found in their

opposition to the motion to dismiss. In their motion to vacate, plaintiffs offer an extended

quotation from Fields that was not included in their opposition to defendants’ motion to

dismiss. Plaintiffs’ opposition to the motion to dismiss lacks the following language from

Fields that they now rely upon: 

It is a long-standing general principle applicable to insurance policies that an

insurance company in an earlier policy when a renewal policy is issued but the

insured is not notified of the specific reduction in coverage. . . . [A]n insurer

when renewing a policy may not change the terms of the policy, without first

notifying the insured. 

(Mtn. Memo at 6.) 

It is worth repeating, this portion of the Fields quote does not appear in plaintiffs’

opposition to the motion to dismiss. (See plaintiffs’ opposition to motion to dismiss, docket

no. 5.) For plaintiffs to argue that two omitted sentences from a case quote should serve to

raise a distinct legal claim for liability is beyond disingenuous. But even if plaintiffs had

included the two sentences from Fields that they now rely upon, they offered no discussion

whatsoever about a violation of public policy in their opposition to defendants’ motion to

dismiss. In this circumstance, plaintiffs’ silence reflects their failure to put the issue of

defendants’ alleged liability based on a public policy violation before the Court. As a

result, plaintiffs may not raise this new issue in a motion for reconsideration.

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 If plaintiffs believed they had a good faith argument concerning a violation of public

policy, they could have raised the issue in their opposition to defendants’ motion to dismiss

but did not do so. This “after thought” or “shifting of ground” cannot “constitute an

appropriate basis for reconsideration." Navarro, 972 F. Supp. at 1299. 

Because plaintiffs have failed to demonstrate entitlement to reconsideration under any

of the Rule 59(e) factors, their motion to vacate the judgment and alter the order of

dismissal is DENIED.

IT IS SO ORDERED.

DATED: July 15, 2009

M. James Lorenz

United States District Court Judge

COPY TO:

HON. LEO S. PAPAS

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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