Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00632/USCOURTS-caed-2_05-cv-00632-2/pdf.json

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

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

STEADFAST INSURANCE COMPANY, a

Delaware corporation; and

AMERICAN GUARANTEE AND

LIABILITY INSURANCE COMPANY, a

New York corporation,

Plaintiffs,

v. NO. CIV. S-05-0632 FCD JFM

MEMORANDUM AND ORDER

JAMES DOBBAS, an individual;

PAMELA DOBBAS, an individual;

DONALD DOBBAS, an individual;

PETER MANCINI and LISA

MANCINI, husband and wife;

PETER MANCINI, as Special

Administrator of the ESTATE OF

CLAUDETTE MANCINI, deceased;

LISA MANCINI , as the Guardian

Ad Litem for NASYA MANCINI, a

minor; FALLON TURNER, an

individual; MERRICK TURNER, an

individual, 

Defendants.

___________________________/

AND RELATED COUNTER-CLAIMS

_____________________________/

----oo0oo----

Case 2:05-cv-00632-FCD-JFM Document 63 Filed 01/12/06 Page 1 of 12
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All further references to the “Rules” are to the 1

Federal Rules of Civil Procedure, unless otherwise noted.

Plaintiffs/Counterdefendants will be designated 2

collectively as “plaintiffs.”

Defendants James Dobbas, Pamela Dobbas, and Donald 3

Dobbas are not counterclaimants, and have not filed a response to

plaintiffs’ motion for summary judgment.

Unless otherwise noted, the facts recited herein are 4

undisputed. See Turner Defs.’ Response to Pls.’ Stmt. of

Undisputed Facts, filed Nov. 21, 2005; Fallon Defs.’ Response to

Pls.’ Stmt. of Undisputed Facts, filed Nov. 21, 2005. The Turner

defendants’ and Mancini defendants responsive filing are

identical. Therefore, the court will refer to these documents

collectively as Defs.’ Response to Pls.’ Stmt. of Undisputed

Facts (“SUF”). Where the facts are in dispute, the court

recounts defendants’ version of the facts. See Turner Defs.’

Stmt. Of Disputed Facts, filed November 21, 2005 (“SDF”).

2

This matter is before the court on motion for summary

judgment, pursuant to Rule 56 of the Federal Rules of Civil

Procedure, filed by plaintiffs and counterdefendants Steadfast 1

Insurance Company (“Steadfast”) and American Guarantee and

Liability Insurance (“American”). Defendants and 2

countercomplainants, Peter Mancini, Lisa Mancini, Nasya Mancini

(collectively, “Mancini defendants”), Fallon Turner, and Merrick

Turner (collectively, “Turner defendants”) oppose the motion.3

For the reasons set forth below, plaintiffs’ motion is DENIED.

BACKGROUND4

This claim arises out of a dispute regarding insurance

coverage. The facts giving rise to the claims made by the Turner

and Mancini defendants involve a bodily injury/wrongful death

lawsuit following a collision of the Turner vehicle with an Angus

bull and a subsequent collision of the Turner vehicle with the

Mancini vehicle. (SUF ¶¶ 23-24). The collisions occurred on May

Case 2:05-cv-00632-FCD-JFM Document 63 Filed 01/12/06 Page 2 of 12
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27, 2002. (Id. ¶ 22). The Angus bull belonged to James Dobbas

(“Dobbas”) and had escaped from the pasture owned by Milton

Holstrom (“Holstrom”). (Id. ¶ 22-23). The collisions involved

two fatalities, and four of the vehicles’ occupants were injured. 

(Id. ¶ 25).

The Turner defendants and Mancini defendants filed

complaints against Dobbas, Holstrom, and others in separate

actions. (Id. ¶¶ 26-28). However, they later consolidated their

cases in the United States District Court for the District of

Nevada. (Id. ¶¶ 29-31). Dobbas and Holstrom tendered defense of

the claim to CalFarm. (Pls.’ Stmt. of Undisputed Facts (“UF”),

filed Oct. 31, 2005, ¶ 32). The parties to the claim

subsequently participated in a mediation, and Dobbas’ insurance

carrier offered the one million dollar limit of the policy as

part of the settlement. (SUF ¶ 35). The Turner and Mancini

defendants eventually accepted the one million dollar settlement,

which also included a binding arbitration to determine the issue

of Dobbas’ liability and to apportion the recovery between the

Turners and the Mancinis. (Id. ¶ 41). The parties agreed prior

to arbitration that the arbitration would be binding, with no

right of appeal, and that the Mancinis and Turners would execute

a Covenant Never to Execute against Dobbas’ personal assets. 

(Id. ¶¶ 42-43). The parties further agreed that Dobbas would

turn over his rights, title, and interest, in a cause of actions

against Fred Vitas (“Vitas”) and Vitas Insurance Agency (“VIA”)

for negligence and breach of contract to the Turners and the

Mancinis. The binding arbitration was also to serve the purpose

of giving legal effect to the claims so that the Mancinis and

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Turners could pursue the action against Vitas and VIA.

The arbitration was held on February 25, 2004. (SUF ¶¶ 49,

52). The Mancinis and Turners presented six live witnesses, one

witness by deposition testimony, and 27 exhibits. (Id. ¶¶ 52-

53). They also presented expert testimony. (Id. ¶ 54). Dobbas

presented two witnesses. (Id. ¶ 55). In March 2004, the

arbitrator issued a five million dollar award against Dobbas –

three million in favor of the Turners and two million in favor of

the Mancinis. (Id. ¶ 56). 

On May 7, 2004, counsel for Dobbas wrote to counsel for the

Turners and counsel for the Mancinis, informing them that two

additional insurance policies were located of which all parties

were previously unaware. (Id. ¶ 59). The two policies were

issued by plaintiffs Steadfast and American. (Id.) In May 2004,

plaintiffs first received notice of the 2002 collision through

service of a cross-claim filed by Cal-Farm in a related action

brought by James and Pamela Dobbas against Vitas and VIA in May

2003. (Id. ¶¶ 60-63). Steadfast acknowledged receipt of the

claims and reserved all rights by a letter dated May 14, 2004. 

(Id. ¶ 64). On March 30, 2005, plaintiffs filed a complaint in

this court, seeking declaratory and equitable relief against all

defendants. 

On October 31, 2005, plaintiffs filed a motion for summary

judgment, or in that alternative, summary adjudication, on the

issue of notice. Plaintiffs contend that they are entitled to

summary judgment because they were prejudiced by Dobbas’ failure

to give notice of the claim, and therefore, their policy

obligations to defendants are now completely excused. 

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STANDARD

The Federal Rules of Civil Procedure provide for summary

adjudication when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.” Fed. R. Civ. P. 56(c). One of the

principal purposes of the rule is to dispose of factually

unsupported claims or defenses. Celotex Corp. v. Catrett, 477

U.S. 317 (1986).

In considering a motion for summary judgment, the court must

examine all the evidence in the light most favorable to the

non-moving party. United States v. Diebold, Inc., 369 U.S. 654,

655 (1962). Where the moving party will have the burden of proof

on an issue at trial, it must affirmatively demonstrate that no

reasonable trier of fact could find other than for the moving

party. See Celotex, 477 U.S. at 323-24. If the moving party

does not bear the burden of proof at trial, he or she may

discharge his burden of showing that no genuine issue of material

fact remains by demonstrating that “there is an absence of

evidence to support the non-moving party’s case.” Celotex, 477

U.S. at 325. Once the moving party meets the requirements of

Rule 56 by showing there is an absence of evidence to support the

non-moving party’s case, the burden shifts to the party resisting

the motion, who “must set forth specific facts showing that there

is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 256 (1986). Genuine factual issues must exist that

“can be resolved only by a finder of fact, because they may

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reasonably be resolved in favor of either party.” Id. at 250. 

In judging evidence at the summary judgment stage, the court does

not make credibility determinations or weigh conflicting

evidence. See T.W. Elec. v. Pacific Elec. Contractors Ass’n, 809

F.2d 626, 630-31 (9th Cir. 1987) (citing Matsushita Elec. Indus.

Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The

evidence presented by the parties must be admissible. Fed. R.

Civ. P. 56(e). Conclusory, speculative testimony in affidavits

and moving papers is insufficient to raise genuine issues of fact

and defeat summary judgment. See Falls Riverway Realty, Inc. v.

City of Niagara Falls, 754 F.2d 49, 57 (2d Cir. 1985); Thornhill

Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

ANALYSIS

Plaintiffs contend that they owe defendants no obligations

under the insurance policies at issue because James Dobbas failed

to give plaintiffs timely notice as required under the policy. 

Both the Steadfast and American policies require that the insured

must ensure that the insurer is notified promptly of an

occurrence or offense which may result in damages covered by the

policy. (SUF ¶¶ 6, 12). Both policies also state that there

will be no right of action against the insurer if the insured

does not comply with all conditions of the policy. (Id. ¶¶ 7,

13).

The law is well settled in California that “breach by an

insured of a . . . notice clause may not be asserted by an

insurer unless the insurer was substantially prejudiced thereby.” 

Northwestern Title Sec. Co. v. Flack, 6 Cal. App. 3d 134, 141

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Defendants object to plaintiffs’ evidence regarding 5

these steps as “speculation as to what the moving parties ‘would

have done.’” It is not necessary for the court to rule on the

admissibility of such evidence for purposes of this motion. 

7

(1970); see Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal.

App. 4th 715, 760-61 (1993). Prejudice is ordinarily a question

of fact. Northwestern Title Sec. Co., 6 Cal. App. 3d at 141. 

Prejudice does not exist as a matter of law merely from the fact

of delay alone nor can any presumption or inference of prejudice

be drawn from the mere fact of delay. Id. The burden of proving

prejudicial breach is on the insurer, and the insurer must show

actual prejudice, not the mere possibility of prejudice, in order

to meet its burden. Id. The insurer “must establish at the very

least that if the [] clause had not been breached there was a

substantial likelihood the trier of fact would have found in the

insured’s favor.” Billington v. Interinsurance Exch. Of S. Cal.,

71 Cal. 2d 728, 737 (1969). The California Supreme Court has

explained that under the notice-prejudice rule, “prejudice is not

shown by displaying end results; the probability that such

results could or would have been avoided absent the claimed

default or error must also be explored.” Clemmer v. Hartford

Ins. Co., 22 Cal 3d. 865, 883 n.12 (1978).

Plaintiffs present evidence that they would have taken five

steps to protect their rights and the rights of the insured: (1)

they would have accepted the tender subject to a reservation of

rights pending the resolution of the claim (SUF ¶ 71) ; (2) they 5

would have requested that Dobbas seek allocation of fault and/or

a cross claim against Holstrom (Id. ¶ 73); (3) they would not

have agreed to binding arbitration and would have preserved the

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Defendants present evidence that Dobbas did present 6

expert testimony at the arbitration.

8

right to appeal (Id. ¶ 74); (4) they would have requested that

the Insured present expert witness testimony to rebut the

opinions of the Turner’s and Mancini’s expert’ (SUF ¶ 78); and

(5) they would they would have been sought a negotiated

settlement for much less than five million dollars. (SUF ¶ 82).

However, while plaintiffs present evidence of what they

would have done if they had notice of the claim, plaintiffs do

not present evidence that, if these steps had been taken, it was

substantially likely that the arbitrator would have found for the

insured. Nor do plaintiffs present evidence that the matter

would have settled for considerably less than five million

dollars if they had been informed earlier. Plaintiffs bear the

burden of presenting evidence of actual prejudice due to the lack

of notice. Northwestern Title Sec. Co., 6 Cal. App. 3d at 141. 

Plaintiffs have presented no evidence that the result of the

underlying insurance dispute would have differed, either through

a different result reached on the merits by the arbitrator or

through a lesser settlement amount, if plaintiffs had (1)

accepted tender; (2) requested that Dobbas seek allocation of

fault or file a cross-claim; (3) not agreed to binding

arbitration; (4) presented expert testimony; or (5) sought 6

settlement for less that five million dollars. Rather,

plaintiffs seek the court to infer actual prejudice from the

circumstances of the case, specifically from the agreement by the

insured to enter into binding arbitration without giving the

insurers notice or opportunity to defend. 

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These circumstances demonstrate a possibility of prejudice

to the plaintiffs. However, the court cannot infer prejudice

from a negative end result. See Clemmer, 22 Cal 3d. at 883 n.12. 

Nor can the court infer actual prejudice from the speculation of

plaintiffs that the results of the arbitration or a potential

settlement would have been different if they had taken the steps

proffered by plaintiffs. There is no evidence of actual

prejudice to plaintiffs. Because plaintiffs have failed to meet

the requirements of Rule 56 by presenting evidence of prejudice,

the burden does not shift to the defendants to present evidence

to the contrary. See Celotex, 477 U.S. at 325. Thus, the court

cannot find that plaintiffs were prejudiced as a matter of law. 

Therefore, summary judgment cannot be granted. 

Plaintiffs attempt to overcome their evidentiary

shortcomings by citing cases, none of which support their

argument. For example, plaintiffs point to Select Insurance Co.

v. Superior Court of San Diego County to support the proposition

that an insurer may meet its burden of establishing prejudice by

showing that the insurer was deprived of the opportunity to

accept tender of defense, reserve its right to dispute coverage,

and then settle with the third party claimant without giving up

the right to pursue its insured for the amount paid in

settlement. 226 Cal. App. 3d 631, 638 (1990). However, Select

Ins. Co. does not stand for such a proposition. The court in

Select Ins. Co. held that a trial court’s grant of summary

judgment against the insurer was improper under such

circumstances because they created an issue for adjudication

regarding the insurer’s notice defense. Id. at 639. The

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Plaintiffs similarly misinterpret the case of Sequoia 7

Insurance Co. V. Royal Ins. Co. of Am., 971 F.2d 1385, 1394 (9th

Cir. 1992). The Ninth Circuit held that the trial court’s grant

of summary judgment against the insured was improper because a

factual issue remained regarding whether actual prejudice was

suffered. Id. As in Select Ins. Co., the circumstances analyzed

by the court demonstrated a possibility of prejudice, but not

actual prejudice. 

10

circumstances analyzed by the court showed the possibility of

prejudice, but did not demonstrate actual prejudice.7

Plaintiffs also rely on the court’s grant of summary

judgment to the insurer in Earle v. State Farm Fire & Cas. Co.,

935 F. Supp. 1076, 1081-81 (N.D. Cal. 1996) and in Fireman’s Fund

Ins. Co. v. Nat’l Bank for Cooperatives, 849 F. Supp. 1347, 1366-

68 (N.D. Cal. 1994). These cases are distinguishable from

plaintiffs’ case. 

In Earle, the insurer presented evidence that if notice had

been given earlier, the insured’s exposure, as well as its own,

would have been substantially reduced because (1) it would have

paid its own attorneys an hourly rate lower than that paid to

insured’s independent counsel; (2) it would have been allowed to

seek reimbursement of fees and costs; and (3) it would have

submitted a special interrogatory to the jury which was

substantially likely to relieve it of the obligation to pay the

judgment. 935 F. Supp. at 1082. Conversely, plaintiffs have not

offered evidence of such concrete monetary losses or of a

substantial likelihood of a different underlying result in their

case. 

Further, in deciding the issue of prejudice as a matter of

law, the court in Earle focused on the fact that the insured was

aware of the potential for coverage, but did not contact the

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insurer until after trial. Id. at 1081 (citing Felice v. St.

Paul Fire & Marine Ins. Co., 42 Wash. App. 352 (1985)). In

plaintiffs’ case, the May 7, 2004 letter from Dobbas’ counsel

indicates that all parties were previously unaware of the

potential coverage by plaintiffs’ policies. (SUF ¶ 59). 

Assuming that this letter is inadmissible hearsay as defendants

contend, plaintiffs have still not presented evidence that

defendants were aware of the potential coverage. Therefore, the

facts of plaintiffs’ case does not demonstrate the type of

intentional or knowing failure by the insured to notify the

insurer that the court focused on in Earle.

In Fireman’s Fund, the court granted summary judgment to the

insured where notice was given to the insurer long after the

arbitration award was issued. 849 F. Supp. at 1368. However,

the actual prejudice to the insurer in Fireman’s Fund was clear

because no one defended in the arbitration proceeding. Id. 

Plaintiffs attempt to draw an analogy to the present case by

contending that Dobbas failed to resolutely defend because the

Mancinis and Turners had previously agreed never to execute

against Dobbas’ personal assets and because the Mancinis and

Turners had accepted the one million dollar settlement offer from

the defending insurer. However, aside from their assumptions

from the circumstances of the arbitration, plaintiffs present no

evidence of Dobbas’ failure to diligently litigate the claim. 

Further, defendants present evidence that Dobbas “hotly contested

liability” at the arbitration and that both sides “vigorously

argued” the issue of liability. (SDF ¶ 65). Therefore, unlike

Fireman’s Fund, this case does not present the type of clear

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evidence of actual prejudice to the insurer due to a complete

failure to defend at arbitration.

Because plaintiffs have failed to meet their burden of

showing actual prejudice as a result of the delay in notice,

plaintiffs’ motion for summary judgment is DENIED.

IT IS SO ORDERED.

DATED: January 11, 2006.

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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