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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

GREAT AMERICAN INSURANCE 

COMPANY OF NEW YORK,

§

§

§

 Plaintiff, §

§

v. § CIVIL ACTION NO. 3:22-CV-1310-B

§

SPEAR SERVICES LLC, §

§

 Defendant. §

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff Great American Insurance Company of New York (“Great 

American”)’s Motion for Default Judgment (Doc. 19). For the following reasons, the Court 

GRANTS Great American’s Motion and DECLARES any claim arising from Claim Number 

A00136709 is time barred. 

I.

BACKGROUND

This is an insurance case. Great American issued an insurance policy (the “Policy”) to 

Defendant Spear Services, LLC, effective March 29, 2017, to March 29, 2018. Doc. 12, Am. 

Compl., ¶ 8; Doc. 12-1, Patterson Aff., Ex. A. Under the Policy, Great American agreed to insure 

Spear Services’ rented boring and drilling equipment. Doc. 12, Am. Compl., ¶¶ 7–9. The Policy 

also stated that Spear Services could not bring a legal action against Great American “unless [t]he 

action [wa]s brought within two years and one day from the date the cause of action first accrues.” 

Doc. 12-1, Patterson Aff., Ex. A, 24, 39.

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Spear Services rented the equipment on March 29, 2017. On December 26, 2017, Spear 

Services reported to the Johnson County Sheriff’s Department in Johnson County, Texas that the 

insured property had been stolen. Doc. 12, Am. Compl., ¶ 10. Spear Services then filed a claim 

under the Policy for the stolen property. See id. ¶ 11. On December 27, 2017, Great American 

acknowledged receipt of Spear Services’ claim and assigned it claim number A00136709. Id.

However, when Great American attempted to investigate the claim, Spear Services was 

uncooperative. Id. ¶¶ 12–13. 

On May 24, 2018, counsel for Spear Services wrote to Great American, alleging Great 

American’s actions and failure to pay constituted a breach of contract. Id. ¶ 14. But when Great 

American reinitiated its investigation, Spear Services was again uncooperative. Id. ¶¶ 14–16. 

Ultimately, on October 31, 2018, due to Spear Services’ lack of cooperation and communication,

Great American closed the claim file. Id. ¶ 16. 

Great American filed its Original Complaint with the Court on June 16, 2022. Doc. 1, 

Compl. Spear Services was served on June 17, 2022, and failed to answer the Complaint. Doc. 5, 

Aff. Service. The Court then entered an Order to Show Cause because “it appear[ed] that the 

Court lack[ed] jurisdiction over this case.” Doc. 9, Order Show Cause, 2. In response, Great 

American filed an Amended Complaint which clarified its jurisdictional allegations. See Doc. 12, 

Am. Compl., ¶¶ 1–2. Spear Services was again served on November 3, 2022, and failed to answer 

the Amended Complaint. Doc. 16, Aff. Service. Great American moved the Court for an entry of 

default on December 15, 2022. Doc 17, Req. Entry Default. The Clerk entered the default on 

December 15, 2022. Doc. 18, Entry Default. Great American then filed its Motion for Default 

Judgment on January 23, 2023. Doc. 19, Mot. Default J. The Court considers the Motion below.

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II.

LEGAL STANDARD

Federal Rule of Civil Procedure 55 provides for entry of default judgments in federal court. 

According to Rule 55, “[w]hen a party against whom a judgment for affirmative relief is sought has 

failed to plead or otherwise defend, . . . the clerk must enter the party’s default.” Fed. R. Civ. P. 

55(a). Once default has been entered, the Court may enter a default judgment against the 

defaulting defendant upon motion of the plaintiff. Fed. R. Civ. P. 55(b)(2).

However, “[d]efault judgments are a drastic remedy, not favored by the Federal Rules and 

resorted to by courts only in extreme situations.” Sun Bank of Ocala v. Pelican Homestead & Sav. 

Ass’n, 874 F.2d 274, 276 (5th Cir. 1989) (footnote omitted). A party is not entitled to a default 

judgment merely because the defendant is technically in default. Ganther v. Ingle, 75 F.3d 207, 212 

(5th Cir. 1996). Rather, “the entry of default judgment is committed to the discretion of the district 

judge.” Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977). 

Courts have developed a three-part analysis to guide this discretion. See, e.g., United States 

v. 1998 Freightliner Vin #: 1FUYCZYB3WP886986, 548 F. Supp. 2d 381, 384 (W.D. Tex. 2008). 

First, courts consider whether the entry of default judgment is procedurally warranted. See Lindsey 

v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998). The factors relevant to this inquiry include

[1] whether material issues of fact are at issue, [2] whether there has been 

substantial prejudice, [3] whether the grounds for default are clearly established, 

[4] whether the default was caused by a good faith mistake or excusable neglect, 

[5] the harshness of a default judgment, and [6] whether the court would think 

itself obliged to set aside the default on the defendant’s motion. 

Id.

Second, courts assess the substantive merits of the plaintiff’s claims and determine whether 

there is a sufficient basis in the pleadings for the judgment. See Nishimatsu Constr. Co. v. Hous. 

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Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (noting that “default is not treated as an absolute 

confession by the defendant of his liability and of the plaintiff’s right to recover”). In doing so, the 

Court assumes that due to its default, the defendant admits all well-pleaded facts in the plaintiff’s 

complaint. Id. However, “[t]he defendant is not held to admit facts that are not well-pleaded or to 

admit conclusions of law.” Id.

Third, courts determine what form of relief, if any, the plaintiffs should receive. Ins. Co. of 

the W. v. H&G Contractors, Inc., 2011 WL 4738197, at *4 (S.D. Tex. Oct. 5, 2011) (“A defendant’s 

default concedes the truth of the allegations of the Complaint concerning the defendant’s liability, 

but not damages.”). Normally, damages are not to be awarded without a hearing or a demonstration 

by detailed affidavits establishing the necessary facts. See United Artists Corp. v. Freeman, 605 F.2d 

854, 857 (5th Cir. 1979). However, if the amount of damages can be determined with 

mathematical calculation by reference to the pleadings and supporting documents, a hearing is 

unnecessary. James v. Frame, 6 F.3d 307, 310 (5th Cir. 1993). 

III.

ANALYSIS

The Court first considers whether it has jurisdiction to issue Great American declaratory 

relief. Then, applying the three-part analysis, the Court concludes that a default judgment is 

procedurally warranted and supported by a sufficient factual basis in Great American’s Complaint.

A. The Court Possesses Jurisdiction over This Matter

The Court first considers whether it has jurisdiction over Great American’s claims. Great 

American seeks a default judgment against Spear Services declaring the parties’ legal obligations 

under the Policy. Doc. 12, Am. Compl., ¶ 22. The Federal Declaratory Judgment Act authorizes 

federal courts to “declare the rights and other legal relations of any interested party seeking such 

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declaration.” 28 U.S.C. § 2201(a). However, a court may not issue a declaratory judgment unless 

there is “a case of actual controversy within [the court’s] jurisdiction.” Id. Accordingly, the Court 

must determine if it has subject-matter jurisdiction and whether an actual controversy exists. 

The Federal Declaratory Judgment Act is “merely a procedural device for hearing 

declaratory judgments in federal court.” Certain Underwriters at Lloyd’s London v. C.A. Turner 

Const. Co., 941 F. Supp. 623, 625 (S.D. Tex. 1996) (citing Skelly Oil Co. v. Phillips Petroleum Co., 

339 U.S. 667, 671–72 (1950)). It “creates no independent basis for federal jurisdiction.” Id. Thus, 

Great American must satisfy the requirements of jurisdiction by either (1) stating an independent 

federal claim or (2) properly pleading diversity jurisdiction.

Great American alleges diversity jurisdiction exists in this case. Diversity jurisdiction 

requires complete diversity and an amount in controversy over $75,000. 28 U.S.C. § 1332(a); 

McLaughlin v. Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004). “Complete diversity requires 

that all persons on one side of the controversy be citizens of different states than all persons on the 

other side.” Settlement Funding, L.L.C. v. Rapid Settlements, Ltd., 851 F.3d 530, 536 (5th Cir. 2017)

(internal alterations omitted). Here, Great American has alleged that it is a citizen of New York 

and Ohio, and Spear Services is a citizen of Oklahoma and Colorado. Doc. 12, Am. Compl., ¶¶ 1–

2. Great American has also alleged that the amount in controversy exceeds $75,000. Id. ¶ 3. Thus, 

the Court finds it has diversity jurisdiction over this matter. 

The Court next considers whether an actual controversy exists. An actual controversy 

exists “where a substantial controversy of sufficient immediacy and reality exists between parties 

having adverse legal interests.” Shields v. Norton, 289 F.3d 832, 835 (5th Cir. 2002) (internal 

quotation omitted). “[A] ‘specific and concrete’ threat of litigation can establish a justiciable 

controversy.” RLI Ins. Co. v. 2 G Energy Sys., LLC, 581 F. Supp. 3d 817, 824 (W.D. Tex. 2020) 

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(quoting Lower Colo. River Auth. v. Papalote Creek II, L.L.C., 858 F.3d 916, 924 (5th Cir. 2017)).

Here, Great American has alleged it and Spear Services disagreed over the applicable coverage of 

the Policy, and Spear Services accused Great American of “breach of contract along with violations 

of the Texas Insurance Code and Deceptive Trade Practices Act.” Doc. 12, Am. Compl., ¶¶ 14–

15. These statements demonstrate a substantial controversy exists between the parties and thus, 

the Court concludes an actual controversy exists. See RLI Ins. Co., 581 F. Supp. at 824.

B. An Entry of Default Judgment Is Procedurally Warranted 

The Court next turns to whether a default judgment is procedurally warranted. After 

reviewing Great American’s Motion in light of the Lindsey factors, the Court finds that default 

judgment is procedurally warranted. First, Spear Services has not filed any responsive pleadings. 

Consequently, there are no material facts in dispute. See Lindsey, 161 F.3d at 893; Nishimatsu

Constr., 515 F.2d at 1206 (noting that “[t]he defendant, by his default, admits the plaintiff’s well

pleaded allegations of fact”). Second, Spear Service’s “failure to respond threatens to bring the 

adversary process to a halt, effectively prejudicing [Great American’s] interests.” See Ins. Co. of the 

W., 2011 WL 4738197, at *3 (citing Lindsey, 161 F.3d at 893). Third, there is no evidence before 

the Court to indicate that Spear Service’s silence is the result of a “good faith mistake or excusable 

neglect.” See Lindsey, 161 F.3d at 893. Fourth, there is no indication of excusable neglect, as Spear 

Service has failed to answer or otherwise respond to Great American’s complaint, amended 

complaint, or Motion since being served with the complaint over eight months ago and the 

amended complaint over five months ago. See id. Fifth, Great American only seeks a declaration 

of the parties’ legal rights, mitigating the harshness of a default judgment. See id. Finally, the Court 

is not aware of any facts that would give rise to good cause to set aside the default if challenged by 

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Spear Services. See Lindsey, 161 F.3d at 893. Thus, Great American has met the procedural 

requirements for default judgment.

C. There Is a Sufficient Basis for Judgment in the Pleadings

In light of the entry of default, Spear Services is deemed to have admitted the well-pleaded 

allegations in Great American’s Amended Complaint. See Nishimatsu, 515 F.2d at 1206. However, 

Spear Services “is not held to admit facts that are not well-pleaded or to admit conclusions of law.” 

See id. Thus, the Court must review the pleadings to determine whether they provide a sufficient 

basis for Great American’s claim for relief. Id. In conducting this analysis, the Court draws 

“meaning from the case law on Rule 8,” requiring “a pleading to contain ‘a short and plain 

statement of the claim showing that the pleader is entitled to relief.’” Wooten v. McDonald Transit 

Assocs., Inc., 788 F.3d 490, 498 (5th Cir. 2015) (quoting Fed. R. Civ. P. 8(a)(2)). “The purpose of 

this requirement is to give the defendant fair notice of what the . . . claim is and the grounds upon 

which it rests.” Id. (internal quotations omitted) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 

555 (2007)).

Here, Great American seeks a declaratory judgment from the Court stating that “that more 

than two years and one day have elapsed since Spear Services alleged causes of action accrued, 

and, therefore, any and all claims of Spear Services for insurance proceeds arising from the incident 

at issue are now time-barred, as well as all claims by, through, or under Spear Services.” Doc. 19, 

Mot. Default J., 12. 

After reviewing the Amended Complaint, the Court finds that Great American has 

sufficiently pleaded its declaratory judgment claim. In diversity cases, the Court applies the forum 

state’s statute of limitations. Citigroup Inc. v. Fed. Ins. Co., 649 F.3d 367, 373 (5th Cir. 2011). “In 

Texas, the statute of limitations for the breach of an insurance contract action is four years from 

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the day the cause of action accrues.” Id. (citing Tex. Civ. Prac. & Rem. Code § 16.051). “However, 

the parties may contractually agree to shorten the limitations period for a breach of contract claim 

so long as the agreement does not limit the time in which to bring suit to a period shorter than two 

years.” Abedinia v. Lighthouse Prop. Ins. Co., 2021 WL 4898456, at *2 (Tex. App.—Tyler Oct. 20, 

2021, pet. denied) (citing Tex. Civ. Prac. & Rem. Code § 16.070(a)). Any “extra-contractual 

claims” such as misrepresentation or breach of the duty of good faith and fair dealing must be 

brought within two years of the accrual date. Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 

211, 221 (Tex. 2003); see Tex. Ins. Code § 541.162; Tex. Civ. Prac. & Rem. Code § 16.003(a).

“Generally, in first-party insurance cases . . . , limitations begin to run on the date coverage 

is denied.” Smith v. Travelers Cas. Ins. Co. of Am., 932 F.3d 302, 311 (5th Cir. 2019) (internal 

quotations omitted). However, in the event a notice of denial is not sent, courts have also used the 

date the insurer closed the claim as the accrual date. De Jongh v. State Farm Lloyds, 664 F. App’x 

405, 409 (5th Cir. 2016) (applying Texas law).

Here, Great American has shown that any claims Spear Services may have possessed under 

the Policy are time barred. The Policy states Spear Services must bring any breach of contract 

action “within two years and one day from the date the cause of action first accrues.” Doc. 12-1, 

Patterson Aff., Ex. A, 24, 39. Any claim Spear Services had relating to Claim Number A00136709

accrued when Great American closed Spear Services’ claim file on October 31, 2018. Doc. 12, Am. 

Compl., ¶ 16. Thus, any claim for breach of contract, claim under the Texas Insurance Code, or 

any other extra-contractual claims regarding Great American’s actions as to Claim Number 

A00136709 under the Policy must have been brought by November 1, 2020. Any claim brought 

after this date is time barred. 

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D. Great American Is Entitled to Relief 

“The burden is on [Great American] to establish its entitlement to recovery.” See RLI Ins. 

Co., 581 F. Supp. 3d at 826. Great American asks the Court for declaratory judgment declaring 

that “more than two years and one day have elapsed since Spear Services alleged causes of action 

accrued, and, therefore, any and all claims of Spear Services for insurance proceeds arising from 

the incident at issue are now time-barred, as well as all claims by, through, or under Spear Services.”

Doc. 19, Mot. Default J., 12. The Court concludes that such a declaration is appropriate.

IV.

CONCLUSION

Because Great American has met its burden of establishing its right to a declaratory 

judgment, see RLI Ins. Co., 581 F. Supp. 3d at 826, the Court GRANTS Great American’s Motion 

for Default Judgment (Doc. 19). Accordingly, it is ORDERED, ADJUDGED, AND DECREED 

that more than two years and one day have elapsed since any cause of action Spear Services may 

have had regarding Claim Number A00136709 under the Policy accrued. Thus, any and all claims 

for insurance proceeds filed after November 1, 2020, by, through, or under Spear Services, arising 

from Claim Number A00136709 are time barred.

SO ORDERED.

SIGNED: May 4, 2023. 

_________________________________

JANE J. BOYLE

UNITED STATES DISTRICT JUDGE

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