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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

PHILIP RUDOLPH JOHNSON,

Plaintiff,

v.

AMERICAN CASUALTY COMPANY OF

READING PA, a Pennsylvania

Corporation, DOES 1-100,

Defendants. 

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Case No. 09-2125 SC

ORDER GRANTING

DEFENDANT'S MOTION

FOR SUMMARY JUDGMENT

I. INTRODUCTION

This matter comes before the Court on the Motion for Summary

Judgment ("Motion") filed by Defendant American Casualty Company

of Reading PA ("Defendant" or "American Casualty"). Docket No.

25. Plaintiff Philip Rudolph Johnson ("Plaintiff" or "Johnson")

filed an Opposition. Docket No. 28. Defendant submitted a Reply. 

Docket No. 30. For the reasons stated herein, the Motion is

GRANTED.

II. BACKGROUND

A. Factual Background

The following facts are not in dispute. On April 8, 2005,

Plaintiff was involved in a motor vehicle accident that caused him

injuries. Am. Compl. ¶ 7. The accident occurred on Highway 50 in

El Dorado County in California, when John Ryan ("Ryan") lost

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1 Jon Kardassakis, a partner with Lewis Brisbois Bisgaard &

Smith, LLP, counsel for Defendant American Casualty, filed a

declaration attesting to the truth and accuracy of Defendant's

exhibits. Docket No. 25-3. The exhibits are filed as Docket Nos.

25-4 to 25-8. 

2 Allan ("Chip") Larkin, a Claims Consultant in the Major

Case Unit of Continental Casualty Company, filed a declaration in

support of Defendant's Motion. Docket No. 25-1.

2

control of the 2002 GMC Sierra he was driving, and collided headon with Plaintiff's vehicle. Id. ¶ 8.

On March 17, 2007, Johnson sued Ryan seeking damages as a

result of the accident in the Superior Court for the County of El

Dorado. Id. ¶ 13 (the "tort action"). Ryan tendered his defense

to American Casualty, but the insurance company refused to defend

or indemnify Ryan. Kardassakis Decl.1 Ex. 5 ("May 11, 2007

Letter"); Larkin Decl.2 ¶ 12. American Casualty made a payment in

connection with property damage to the 2002 GMC Sierra. Docket

No. 24 ("Answer to Am. Compl.") ¶ 10. Johnson and Ryan stipulated

to the entry of judgment in favor of Johnson and against Ryan in

the amount of $750,000. Kardassakis Decl. Ex. 2 ("Settlement

Agreement"). Ryan assigned to Johnson all rights, claims, and

causes of action that Ryan had against American Casualty relating

to the insurance policy or American Casualty's refusal to defend

Ryan. Id. ¶ 2. Ryan carried an automobile liability policy with

California State Automobile Association ("CSAA"), with a policy

limit of $100,000, which CSAA agreed to pay to Plaintiff following

a finding that the settlement was made in good faith. Id. ¶ 3.

B. Procedural Background

On April 7, 2009, Johnson filed suit against American

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Casualty in the Superior Court for the County of Alameda. See

Docket No. 1 ("Notice of Removal") ¶ 1. American Casualty removed

the case to this Court. See Notice of Removal. On September 11,

2009, Plaintiff filed an Amended Complaint, which consists of four

causes of action: (1) breach of contract; (2) bad faith; (3)

direct action against insurance carrier pursuant to Insurance Code

section 11580; (4) estoppel, reasonable expectations and waiver. 

Docket No. 22 ("Am. Compl.") ¶¶ 19-39. Defendant filed an Answer

on October 9, 2009. See Answer to Am. Compl. Defendant now moves

for summary judgment in its favor as to all causes of action. 

Mot. at 1. 

III. LEGAL STANDARD

Entry of summary judgment is proper "if the pleadings, the

discovery and disclosure materials on file, and any affidavits

show that there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law." Fed.

R. Civ. P. 56(c). Material facts are those that may affect the

outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986). The court must not weigh the evidence. Id. at

255. Rather, the nonmoving party's evidence must be believed and

"all justifiable inferences are to be drawn in [the nonmovant's]

favor." United Steelworkers of Am. v. Phelps Dodge Corp., 865

F.2d 1539, 1542 (9th Cir. 1989) (en banc) (quoting Anderson, 477

U.S. at 255). Where the party opposing summary judgment bears the

burden of proof on a dispositive issue, it must offer specific

evidence demonstrating a factual basis on which it is entitled to

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3 Nancy Ohlwiler, a Construction Underwriting Consultant

employed by Continental Casualty Co., filed a declaration in

support of Defendant's Motion. Docket No. 25-2. 

4

relief. Anderson, 477 U.S. at 256. The non-moving party must set

forth specific facts, through affidavits or other materials, that

demonstrate disputed material facts. Id.

IV. DISCUSSION

A. The Insurance Contract

Defendant issued a Business Auto insurance policy, policy

number C2074694981 to V&C Construction, Inc. ("V&C Construction"),

with a policy period from 8/24/2004 to 8/24/2005. Kardassakis

Decl. Ex. 1 ("Policy") at 1. V&C Construction is a Nevada company

with an address in Minden, Nevada. Id.; Ohlwiler Decl.3 ¶ 2. The

section entitled "Business Auto Coverage Form" provides that "[w]e

will pay all sums an 'insured' legally must pay as damages because

of 'bodily injury' or 'property damage' to which this insurance

applies, caused by an 'accident' and resulting from the ownership,

maintenance or use of a covered 'auto'." Policy at 18. The

relevant policy provisions define an insured as "[y]ou for any

covered 'auto,", or "[a]nyone else while using with your

permission a covered 'auto' you own, hire or borrow." Id. The

words "you" and "your" refer to the Named Insured. Id. at 17. 

V&C Construction is the named insured. Id. at 1. An endorsement

adds as additional insureds "[a]ny Lessor of a covered 'auto' for

which we are providing any coverage for that covered 'auto'" and

"Cascade Water Trucks, Inc." Id. at 15. 

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4 Neither Plaintiff nor Defendant explain whether California

or Nevada law applies in this case. The Court notes that the

elements for breach of contract are essentially the same under

California and Nevada law. Under Nevada law, the plaintiff must

demonstrate: (1) the existence of a valid contract; (2) a breach by

the defendant; and (3) damages as a result of the breach. Saini v.

Int'l Game Tech., 434 F. Supp. 2d 913, 919-20 (D. Nev. 2006)

(citing Richardson v. Jones, 1 Nev. 405, 405 (1865)).

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B. Breach of Contract

"A cause of action for damages for breach of contract is

comprised of the following elements: (1) the contract, (2)

plaintiff's performance or excuse for nonperformance, (3)

defendant's breach, and (4) the resulting damages to plaintiff."

Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal.

App. 4th 1375, 1391 n. 6 (2004).4 Johnson contends that American

Casualty breached the Policy by refusing to defend and indemnify

"permissive driver John Ryan" in the tort action brought by

Johnson against Ryan. Am. Compl. ¶¶ 19-22. American Casualty

contends it is entitled to summary judgment on Plaintiff's breachof-contract claim because Ryan was not an insured under the

Policy. Mot. at 8-14.

The Court agrees with American Casualty. The Policy provides

that American Casualty "will pay all sums an 'insured' legally

must pay as damages . . . ." Policy at 18. V&C Construction is

the named insured, and insurance coverage extends to "[a]nyone

else while using with your permission a covered 'auto' you own,

hire or borrow." Id. at 1, 18. Here, the Court finds that V&C

Construction did not own the 2002 GMC Sierra at the time of the

accident, and even if it did, V&C Construction did not give Ryan

permission to drive the truck.

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1. Ownership

At one point in time, V&C Construction owned the 2002 GMC

Sierra. Kardassakis Decl. Ex. 6 ("Raymond Van Winkle Dep.") at

9:19-21. American Casualty contends that by the time of the

accident on April 9, 2005, Claudia Van Winkle owned the 2002 GMC

Sierra. Mot. at 11-13. Plaintiff does not explicitly dispute

that ownership of the truck transferred to Claudia Van Winkle, but

instead contends that V&C Construction's insurance coverage did

not terminate with the change in ownership. See Opp'n at 11-15.

The evidence supports American Casualty's contention that

Claudia Van Winkle owned the truck at the time of the accident on

April 9, 2005. On June 9, 2004, a Nevada court approved the

Marital Settlement Agreement between Raymond Van Winkle and

Claudia Van Winkle, dated May 12, 2004 and May 20, 2004. 

Kardassakis Decl. Ex. 3 ("Findings of Fact, Conclusions of Law and

Decree of Divorce") at 77. As part of the settlement agreement,

the 2002 GMC Sierra was assigned to Claudia Van Winkle. Id. at

97; Raymond Van Winkle Dep. at 9:4-24. When the loan for the

truck was paid off by January 5, 2005, and when GMAC sent title to

Raymond Van Winkle, he immediately signed title over to Claudia

Van Winkle. Raymond Van Winkle Dep. at 13:1-13; Kardassakis Decl.

Ex. 7 ("Claudia Van Winkle Dep.") at 12:17-21, 35:3-23. He mailed

the executed Certificate of Title to his ex-wife, who received it

around January 20, 2005. Raymond Van Winkle Dep. at 13:1-13;

Claudia Van Winkle Dep. at 35:1-7. When she received the

Certificate of Title, she did not immediately register it with the

Nevada Department of Motor Vehicles, see Claudia Van Winkle Dep.

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at 12:17-13:5, but she was in possession of the truck at that

time, see Claudia Van Winkle Dep. at 42:22-24.

Under Nevada law, "'[o]wner' means a person who holds the

legal title of a vehicle and whose name appears on the certificate

of title . . . ." N.R.S. 482.085. In Bly v. Mid-Century

Insurance Company, the Supreme Court of Nevada held that a

motorcycle buyer, who received physical possession and control of

the motorcycle was the owner of the motorcycle, even though the

seller did not execute the certificate of title. 698 P.2d 877,

879 (Nev. 1985). Here, the case for finding that Claudia Van

Winkle is the owner of the 2002 GMC Sierra is even stronger

because Claudia Van Winkle received the executed Certificate of

Title in January 2005. See Raymond Van Winkle Dep. at 13:1-13;

Claudia Van Winkle Dep. at 35:1-7. Based on her receipt of the

Certificate of Title, the terms of the 2004 marital settlement

agreement, and her physical possession of the truck, the Court

finds that Claudia Van Winkle owned the 2002 GMC Sierra at the

time of the accident on April 8, 2005. 

2. Permission

Even if ownership had not transferred to Claudia Van Winkle,

the Court would still find that there has been no breach of

contract. The Policy defines as an insured "[a]nyone else while

using with your permission a covered 'auto' you own, hire or

borrow." Policy at 18. Here, there is no evidence that Ryan had

the permission of the named insured to drive the truck. It was

Claudia Van Winkle who gave Ryan permission to use the vehicle. 

Claudia Van Winkle Dep. at 6:20-23; Kardassakis Decl. Ex. 8 ("John

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Ryan Dep.") at 8:19-22, 12:10-11. Since the time of her

separation with Raymond Van Winkle, she had not been doing any

work for V&C Construction. Claudia Van Winkle Dep. at 38:16-22. 

Raymond Van Winkle, President of V&C Construction, did not give

Ryan permission to drive the 2002 GMC Sierra before the accident. 

Raymond Van Winkle Dep. at 13:17-24. In Nelson v. Planet

Insurance Company, the Supreme Court of Nevada held that an

insurance company had no obligation to extend coverage to a driver

who was not given permission to drive by the named insured. 906

P.2d 703, 706 (Nev. 1995). Similarly, here, Ryan did not have

permission of the named insured to drive the 2002 GMC Sierra. 

Plaintiff contends that attempts to limit the scope of

permissive user coverage are impermissible under both Nevada and

California law. Opp'n at 16. The cases cited by Plaintiff do not

support this contention. In United States Fidelity and Guaranty

Company v. Fisher, the Supreme Court of Nevada held that:

if a person is given permission by an insured

owner to use a motor vehicle in the first

instance, any subsequent use while the vehicle

remains in the person's possession is a

permissive use within the terms of a standard

automobile liability insurance policy.

494 P.2d 549, 552 (Nev. 1972). In this case, however, Ryan did

not have the permission of the named insured, and there is nothing

in Fisher to suggest that permissive user coverage extends beyond

drivers who have the permission of the named insured. 

Similarly, there is nothing in Argonaut Insurance Company v.

Colonial Insurance Company, 70 Cal. App. 3d 608 (Ct. App. 1997) to

indicate that, under California law, insurance coverage should

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extend to users who do not have the permission of the named

insured. Instead, the California Insurance Code only requires

insurance to extend to users who have such permission. See Cal.

Ins. Code § 11580.1(b)(4)("[T]o the same extent that insurance is

afforded to the named insured, to any other person using the motor

vehicle, provided the use is by the named insured or with his or

her permission, express or implied, and within the scope of that

permission . . . ."). Since there is no evidence that Ryan had

the express or implied permission of V&C Construction to drive the

2002 GMC Sierra, the Court finds that American Casualty did not

breach the Policy by refusing to defend or indemnify Ryan. The

Court GRANTS American Casualty's motion for summary judgment in

its favor with respect to Johnson's cause of action for breach of

contract.

C. Bad Faith

Plaintiff alleges that American Casualty breached its

obligation of good faith and fair dealing by refusing to defend

and indemnify Ryan. Am. Compl. ¶¶ 23-26. Under California law,

there are at least two requirements to establish breach of the

implied covenant: "(1) benefits due under the policy must have

been withheld; and (2) the reason for withholding benefits must

have been unreasonable or without proper cause." Love v. Fire

Ins. Exchange, 221 Cal. App. 3d 1136, 1151 (Ct. App. 1990). Here,

the Court has already determined that benefits due under the

Policy were not withheld because American Casualty had no

obligation under the terms of the Policy to defend or indemnify

Ryan. Therefore, Plaintiff's cause of action for bad faith fails

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as a matter of law. See also Kruse v. Bank of America, 202 Cal.

App. 3d 38, 60 (Ct. App. 1988) ("The inherent precondition to such

a tort claim is the existence and breach of an enforceable

contract."). 

Even under Nevada law, tort liability for breach of the

implied covenant of good faith and fair dealing is only

appropriate where the party in the superior or entrusted position

has engaged in grievous or perfidious misconduct." Blanck v.

Hager, 360 F. Supp. 2d 1137, 1152 (D. Nev. 2005)(citation

omitted). Here, the Court finds it was reasonable for American

Casualty to refuse to defend or indemnify Ryan because he was not

driving the truck with the permission of the named insured, V&C

Construction. The Court GRANTS summary judgment in favor of

American Casualty on Plaintiff's bad faith cause of action. 

D. Action under California Insurance Code Section 11580

In his Opposition, Plaintiff concedes that the Policy was not

issued or delivered in California, and that American Casualty is

entitled to summary judgment on Plaintiff's claim asserted in

Count Three of the Amended Complaint. Opp'n at 22-23. 

Accordingly, the Court GRANTS summary judgment in favor of

American Casualty with respect to this cause of action. 

E. Estoppel, Reasonable Expectations, and Waiver

Plaintiff's final cause of action alleges that "American

Casualty is estopped from contesting coverage for the damages

caused by its "permissive insured John Ryan," Am. Compl. ¶ 38, and

that the "actions and conduct of American Casualty and its direct

agent Ms. Ferguson, actions which include but are not limited to

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5 There is no separate cause of action for reasonable

expectations; instead the allegations regarding reasonable

expectations appear to be part of Plaintiff's estoppel claim. See

Am. Comp. ¶¶ 33-38. 

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the continued acceptance of premium, the lack of return of

premium, constitute a waiver of any contention that the 2002 GMC

Sierra was not insured under the policy issued and sold by

American Casualty and agent Ferguson," id. ¶ 39.5

1. Estoppel 

Under California law, "fraud or misrepresentation as to

coverage under a policy or issuance of a policy different in

coverage from that represented to the insured estops the insurer

from reliance on the coverage as stated in the issued policy." 

Hartford Fire Ins. Co. v. Spartan Realty Int'l, Inc., 196 Cal.

App. 3d 1320, 1325 (Ct. App. 1987). 

Here, the Court finds no evidence that American Casualty or

its direct agent Janie Ferguson ("Ferguson") misrepresented the

coverage under the Policy. When Claudia Van Winkle received the

Certificate of Title for the 2002 GMC Sierra from her ex-husband,

she called Ferguson, who told her the truck was still insured

under the V&C Construction Policy. Claudia testified that "I

called Janie. Janie said he [Raymond Van Winkle] didn't cancel

the insurance, so I said, well, then he is fulfilling his

obligation of insurance through September." Claudia Van Winkle

Dep. at 12:19-21. Claudia Van Winkle testified that Ferguson

"said Ray hadn't cancelled the insurance, and I said if he cancels

it, flip it to my private policy." Id. at 15:2-3. At the time of

the accident, Claudia Van Winkle's understanding was that the

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truck was still insured through V&C Construction. Id. at 11:19-

21.

Ferguson's notes from her January 13, 2005 telephone

conversation with Claudia Van Winkle state:

Claudia called to ask about adding '02 Chevy

pickup to personal policy. Started to add, but

said she wasn't going to register until the

registration was due to renew. She said

according to divorce papers V&C would keep

insured and register through September. Told

her we can't add to her personal policy until

it's registered to her. Told her to let me know

when she was ready to reregister.

Kardassakis Decl. Ex. 9 ("Ferguson Dep. I") at 32:23-33:4. At

that time, Ferguson's understanding was that Claudia did not have

ownership of the truck, and Ferguson told Claudia that "she had to

have ownership or insurable interest in the vehicle before we

could add it [to her personal policy]." Id. at 104:7-21.

In the Opposition brief, Plaintiff states that Ferguson

"represented to Ms. Van Winkle that the insurance from American

Casualty would provide coverage even though Ms. Van Winkle was

taking possession of the vehicle from V&C Construction." Opp'n at

11. Plaintiff also alleges that American Casualty's agent made

"assurances . . . that the coverage was in place under the

American Casualty policy." Id. at 15. Plaintiff seems to be

implying that Ferguson misrepresented who would be covered under

the V&C Construction Policy. However, Plaintiff does not cite any

evidence to support this allegation. See Fed. R. Civ. P.

56(e)(2)("When a motion for summary judgment is properly made and

supported, an opposing party may not rely merely on allegations or

denials in its own pleading; rather its response must -- by

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affidavits or as otherwise provided in this rule -- set out

specific facts showing a genuine issue for trial.")

Instead, the evidence from both the depositions of Claudia

Van Winkle and Ferguson indicates that when Claudia Van Winkle

called Ferguson in January 2005, Ferguson confirmed that the 2002

GMC Sierra was still insured under the V&C Construction Policy,

and Ferguson advised Claudia Van Winkle that the truck could not

be added to her personal policy until she registered it in her

name. See Claudia Van Winkle Dep. at 12:17-21; Ferguson Dep. I at

32:23-33:4. There is simply no evidence that Ferguson

misrepresented to Claudia Van Winkle the coverage available under

the Policy. Furthermore, "estoppel requires proof of the

insured's detrimental reliance." Waller, 11 Cal. 4th at 33. 

Here, there is no evidence that the insured, V&C Construction,

detrimentally relied on any misrepresentation of American Casualty

or its agent. 

In his Opposition, Plaintiff relies on Fanucci v. Allstate

Insurance Company, 638 F. Supp. 2d 1125 (N.D. Cal. 2009). Opp'n

at 10-11. This reliance is misplaced. In Fanucci, the Court

rejected Allstate's motion for summary judgment with regard to an

estoppel theory because the insured, Mr. Fanucci, filed a

declaration stating that the insurer's agent had misrepresented to 

him that an umbrella policy would provide uninsured motorist

coverage. Id. at 1131. Here, there is no declaration from

Claudia Van Winkle stating that Ferguson misrepresented the nature

of the insurance coverage that applied to the 2002 GMC Sierra. 

Instead, the deposition testimony indicates that Ferguson merely

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6 Plaintiff relies on California law only when discussing his

estoppel claim, see Opp'n at 10-11. The Court notes that the

doctrine of equitable estoppel consists of the same elements in

California and Nevada. Compare Southern California Edison Co. v.

Public Utilities Comm'n, 85 Cal. App. 4th 1086, 1110 (Ct. App.

2000) with Breliant v. Preferred Equities Corp., 918 P.2d 314, 321

(Nev. 1996); see also Schneider v. Continental Assur. Co., 885 P.2d

572, 574 (Nev. 1994).

14

confirmed that the truck was insured under the V&C Construction

Policy, and that Claudia Van Winkle would have to register it in

her own name before it could be added to her personal policy. See

Claudia Van Winkle Dep. at 12:17-21; Ferguson Dep. I at 32:23-

33:4. There is no evidence of any misrepresentation by Ferguson

to Claudia Van Winkle regarding the coverage available under the

Policy. See Watson v. U. S. Fidelity & Guaranty Co., 427 F.2d

1355, 1357 (9th Cir. 1970)(no equitable estoppel where

"[d]efendant did not misrepresent the nature of the coverage under

the policy").6 The Court concludes that American Casualty is

entitled to summary judgment in its favor on Plaintiff's estoppel

claim. 

2. Waiver

"Case law is clear that '[w]aiver is the intentional

relinquishment of a known right after knowledge of the facts.' . .

. The burden . . . is on the party claiming a waiver of a right to

prove it by clear and convincing evidence that does not leave the

matter to speculation, and 'doubtful cases will be decided against

a waiver'". Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1,

32 (1995)(citations omitted). 

Here, there is no evidence to support Plaintiff's contention

that American Casualty intentionally relinquished its right to

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7 Thomas P. Burke, attorney for Plaintiff, filed a declaration

attesting to the accuracy of the exhibit filed in support of

Plaintiff's Opposition. Docket No. 28-3. The exhibit is filed as

Docket No. 28-2.

15

refuse to defend or indemnify a driver of the 2002 GMC Sierra not

covered by the Policy. As explained above, there is no evidence

to support the allegation that Ferguson misrepresented to Claudia

Van Winkle who was covered under the V&C Construction Policy. 

After the accident, Ferguson filed a claim report with American

Casualty. Burke Decl.7

 Ex. 1 ("Ferguson Dep. II") at 40:9-16. 

American Casualty paid for damage to the vehicle, id. at 68:5-10,

but refused to defend Ryan in the personal injury suit filed by

Johnson, see May 11, 2007 Letter. Plaintiff also alleges that

American Casualty accepted insurance premiums, and did not return

them. Am. Compl. ¶ 38. Plaintiff has not cited any authority

showing that, by engaging in these actions, American Casualty

intentionally relinquished its right to refuse to defend or

indemnify a driver not covered by the Policy. 

Plaintiff relies on Vigoren v. Transnational Insurance

Company, 482 P.2d 96 (Nev. 1970). Opp'n at 14-15. The Court finds

that the case is distinguishable. In Vigoren, the Supreme Court

of Nevada found that there were genuine issues of material fact

bearing upon waiver because the insured driver asserted that he

fully advised the insurance agent that he had conditionally sold

the car at the time he reinstated his policy. 482 P.2d at 97. 

The court held that the insurance company "may not rely upon the

change of beneficial ownership of the car to defeat coverage if it

had knowledge of the conditional sale when it elected to reinstate

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the policy and receive a premium therefor." Id. Here, there is

no evidence that Claudia Van Winkle told Ferguson that title to

the truck had been transferred to her when she called Ferguson in

January 2005. Ferguson Dep. I at 104:5-105:7. Ferguson merely

confirmed that the truck remained insured under the V&C Policy. 

Id. at 32:23-33:4. Unlike in Vigoren, there is no dispute here

regarding a material fact bearing upon waiver. The Court

concludes that American Casualty is entitled to summary judgment

in its favor on Plaintiff's waiver claim. 

V. CONCLUSION

For the reasons stated above, the Court GRANTS Defendant's

Motion for Summary Judgment. 

IT IS SO ORDERED.

Dated: January 5, 2010

 

UNITED STATES DISTRICT JUDGE

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