Court Opinion

ID: 4232637
Source: CourtListenerOpinion
Date Created: 2017-12-27 18:00:28.433131+00
Date Added: 2024-06-11T14:43:08.933206
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

 JAMES NALDER, Guardian                      No. 13-17441
 Ad Litem on behalf of
 Cheyanne Nalder; GARY                       D.C. No.
 LEWIS, individually,                2:09-cv-01348-RCJ-GWF
       Plaintiffs-Appellants,

                v.                     ORDER CERTIFYING
                                        QUESTION TO THE
 UNITED AUTOMOBILE                     NEVADA SUPREME
 INSURANCE COMPANY,                         COURT
       Defendant-Appellee.

        Appeal from the United States District Court
                 for the District of Nevada
        Robert Clive Jones, District Judge, Presiding

            Argued and Submitted January 6, 2016
                 San Francisco, California

                     Filed December 27, 2017

            Before: Diarmuid F. O’Scannlain and
            William A. Fletcher, Circuit Judges.*

   *
     This case was submitted to a panel that included Judge Kozinski,
who recently retired.
2              NALDER V. UNITED AUTO INS. CO.

                            SUMMARY**

       Certified Question to Nevada Supreme Court

   The panel certified the following question of law to the
Nevada Supreme Court:

         Under Nevada law, if a plaintiff has filed suit
         against an insurer seeking damages based on
         a separate judgment against its insured, does
         the insurer’s liability expire when the statute
         of limitations on the judgment runs,
         notwithstanding that the suit was filed within
         the six-year life of the judgment?

                               ORDER

    Pursuant to Rule 5 of the Nevada Rules of Appellate
Procedure, we certify to the Nevada Supreme Court the
question of law set forth in Part II of this order. The answer
to this question may be determinative of the cause pending
before this court, and there is no controlling precedent in the
decisions of the Nevada Supreme Court or the Nevada Court
of Appeals.

    Further proceedings in this court are stayed pending
receipt of an answer to the certified question. Submission
remains withdrawn pending further order. The parties shall
notify the Clerk of this court within one week after the

    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
             NALDER V. UNITED AUTO INS. CO.                 3

Nevada Supreme Court accepts or rejects the certified
question, and again within one week after the Nevada
Supreme Court renders its opinion.

                              I

    Plaintiffs-appellants, James Nalder, guardian ad litem for
Cheyanne Nalder, and Gary Lewis will be the appellants
before the Nevada Supreme Court. Defendant-appellee,
United Automobile Insurance Company (“UAIC”), a Florida
corporation with its principal place of business in Florida,
will be the respondent.

    The names and addresses of counsel for the parties are as
follows:

   Thomas Christensen, Christensen Law Offices, LLC,
1000 South Valley View Boulevard, Las Vegas, Nevada
89107, and Dennis M. Prince, Eglet Prince, 400 South
Seventh Street, Suite 400, Las Vegas, Nevada 89101, for
appellants.

   Thomas E. Winner, Susan M. Sherrod and Matthew J.
Douglas, Atkin Winner & Sherrod, 1117 South Rancho
Drive, Las Vegas, Nevada 89102, for respondent.

                              II

   The question of law to be answered is:

           Under Nevada law, if a plaintiff has filed
       suit against an insurer seeking damages based
       on a separate judgment against its insured,
       does the insurer’s liability expire when the
4            NALDER V. UNITED AUTO INS. CO.

       statute of limitations on the judgment runs,
       notwithstanding that the suit was filed within
       the six-year life of the judgment?

    The Nevada Supreme Court may rephrase the question as
it deems necessary.

                              III

                               A

    This is the second order in this case certifying a question
to the Nevada Supreme Court. We recount the facts
essentially as in the first order.

    On July 8, 2007, Gary Lewis ran over Cheyanne Nalder.
Lewis had taken out an auto insurance policy with UAIC,
which was renewable on a monthly basis. Before the
accident, Lewis had received a statement instructing him that
his renewal payment was due by June 30, 2007. The
statement also specified that “[t]o avoid lapse in coverage,
payment must be received prior to expiration of your policy.”
The statement listed June 30, 2007, as the policy’s effective
date and July 31, 2007, as its expiration date. Lewis did not
pay to renew his policy until July 10, 2007, two days after the
accident.

    James Nalder (“Nalder”), Cheyanne’s father, made an
offer to UAIC to settle her claim for $15,000, the policy limit.
UAIC rejected the offer, arguing Lewis was not covered at
the time of the accident because he did not renew the policy
by June 30. UAIC never informed Lewis that Nalder was
willing to settle.
             NALDER V. UNITED AUTO INS. CO.                  5

     Nalder sued Lewis in Nevada state court and obtained a
$3.5 million default judgment. Nalder and Lewis then filed
the instant suit against UAIC in state court, which UAIC
removed to federal court. Nalder and Lewis alleged breach
of contract, breach of the implied covenant of good faith and
fair dealing, bad faith, fraud, and breach of section 686A.310
of the Nevada Revised Statutes. UAIC moved for summary
judgment on the basis that Lewis had no insurance coverage
on the date of the accident. Nalder and Lewis argued that
Lewis was covered on the date of the accident because the
renewal notice was ambiguous as to when payment had to be
received to avoid a lapse in coverage, and that this ambiguity
had to be construed in favor of the insured. The district court
found that the contract could not be reasonably interpreted in
favor of Nalder and Lewis’s argument and granted summary
judgment in favor of UAIC.

    We held that summary judgment “with respect to whether
there was coverage” was improper because the “[p]laintiffs
came forward with facts supporting their tenable legal
position.” Nalder v. United Auto. Ins. Co., 500 F. App’x 701,
702 (9th Cir. 2012). But we affirmed “[t]he portion of the
order granting summary judgment with respect to the
[Nevada] statutory arguments.” Id.

    On remand, the district court granted partial summary
judgment to each party. First, the court found the renewal
statement ambiguous, so it construed this ambiguity against
UAIC by finding that Lewis was covered on the date of the
accident. Second, the court found that UAIC did not act in
bad faith because it had a reasonable basis to dispute
coverage. Third, the court found that UAIC breached its duty
to defend Lewis but awarded no damages “because [Lewis]
did not incur any fees or costs in defending the underlying
6            NALDER V. UNITED AUTO INS. CO.

action” as he took a default judgment. The court ordered
UAIC “to pay Cheyanne Nalder the policy limits on Gary
Lewis’s implied insurance policy at the time of the accident.”
Nalder and Lewis appeal.

                              B

    Nalder and Lewis claim on appeal that they should have
been awarded consequential and compensatory damages
resulting from the Nevada state court judgment because
UAIC breached its duty to defend. Thus, assuming that
UAIC did not act in bad faith but did breach its duty to
defend Lewis, one question before us is how to calculate the
damages that should be awarded. Nalder and Lewis claim
they should have been awarded the amount of the default
judgment ($3.5 million) because, in their view, UAIC’s
failure to defend Lewis was the proximate cause of the
judgment against him. The district court, however, denied
damages because Lewis chose not to defend and thus incurred
no attorneys’ fees or costs. Because there was no clear state
law and the district court’s opinion in this case conflicted
with another decision by the U.S. District Court for the
District of Nevada on the question of whether liability for
breach of the duty to defend included all losses consequential
to an insurer’s breach, we certified that question to the
Nevada Supreme Court in an order dated June 1, 2016. In
that order, we also stayed proceedings in this court pending
resolution of the certified question by the Nevada Supreme
Court.

    After that certified question had been fully briefed before
the Nevada Supreme Court, but before any ruling or oral
argument, UAIC moved this court to dismiss the appeal for
lack of standing. UAIC argues that the six-year life of the
             NALDER V. UNITED AUTO INS. CO.                  7

default judgment had run and that the judgment had not been
renewed, so the judgment is no longer enforceable.
Therefore, UAIC contends, there are no longer any damages
above the policy limit that Nalder and Lewis can seek
because the judgment that forms the basis for those damages
has lapsed. For that reason, UAIC argues that the issue on
appeal is moot because there is no longer any basis to seek
damages above the policy limit, which the district court
already awarded.

    In a notice filed June 13, 2017, the Nevada Supreme
Court stayed consideration of the question already certified in
this case until we ruled on the motion to dismiss now pending
before us.

                              IV

    In support of its motion to dismiss, UAIC argues that
under Nev. Rev. Stat. § 11.190(1)(a), the six-year statute of
limitations during which Nalder could enforce his default
judgment against Lewis expired on August 26, 2014, and
Nalder did not renew the judgment. Therefore, says UAIC,
the default judgment has lapsed, and because it is no longer
enforceable, it no longer constitutes an injury for which
Lewis or Nalder may seek damages from UAIC.

    In response, Nalder and Lewis do not contest that the six-
year period of the statute of limitations has passed and that
they have failed to renew the judgment, but they argue that
UAIC is wrong that the issue of consequential damages is
mooted. First, they make a procedural argument that a lapse
in the default judgment, if any, may affect the amount of
damages but does not affect liability, so the issue is
inappropriate to address on appeal before the district court
8            NALDER V. UNITED AUTO INS. CO.

has evaluated the effect on damages. Second, they argue that
their suit against UAIC is itself “an action upon” the default
judgment under the terms of Nev. Rev. Stat. § 11.190(1)(a)
and that because it was filed within the six-year life of the
judgment it is timely. In support of this argument, they point
out that UAIC has already paid out more than $90,000 in this
case, which, they say, acknowledges the validity of the
underlying judgment and that this suit is an enforcement
action upon it.

    Neither side can point to Nevada law that definitively
answers the question of whether plaintiffs may still recover
consequential damages based on the default judgment when
six years passed during the pendency of this suit. Nalder and
Lewis reach into the annals of Nevada case law to find an
opinion observing that at common law “a judgment creditor
may enforce his judgment by the process of the court in
which he obtained it, or he may elect to use the judgment, as
an original cause of action, and bring suit thereon, and
prosecute such suit to final judgment.” Mandlebaum v.
Gregovich, 50 P. 849, 851 (Nev. 1897); see also Leven v.
Frey, 168 P.3d 712, 715 (Nev. 2007) (“An action on a
judgment or its renewal must be commenced within six
years.” (emphasis added)). They suggest they are doing just
this, “us[ing] the judgment, as an original cause of action,” to
recover from UAIC. But that precedent does not resolve
whether a suit against an insurer who was not a party to the
default judgment is, under Nevada law, an “action on” that
judgment.

   UAIC does no better. It also points to Leven for the
proposition that the Nevada Supreme Court has strictly
construed the requirements to renew a judgment. See Leven,
168 P.3d at 719. Be that as it may, Nalder and Lewis do not
             NALDER V. UNITED AUTO INS. CO.                   9

rely on any laxity in the renewal requirements and argue
instead that the instant suit is itself a timely action upon the
judgment that obviates any need for renewal. UAIC also
points to Nev. Rev. Stat. § 21.010, which provides that “the
party in whose favor judgment is given may, at any time
before the judgment expires, obtain the issuance of a writ of
execution for its enforcement as prescribed in this chapter.
The writ ceases to be effective when the judgment expires.”
That provision, however, does not resolve this case because
Nalder and Lewis are not enforcing a writ of execution,
which is a direction to a sheriff to satisfy a judgment. See
Nev. Rev. Stat. § 21.020.

     Finally, apart from Nalder and Lewis’s argument that it is
inappropriate to address on appeal the effect of the statute of
limitations on the size of damages they may collect, neither
side squarely addresses whether the expiration of the
judgment in fact reduces the consequential damages for
UAIC’s breach of the duty to defend. Does the judgment’s
expiration during the pendency of the suit reduce the
consequential damages to zero as UAIC implies, or should
the damages be calculated based on when the default
judgment was still enforceable, as it was when the suit was
initiated? Neither side provides Nevada law to answer the
question, nor have we discovered it.

                               V

    It appears to this court that there is no controlling
precedent of the Nevada Supreme Court or the Nevada Court
of Appeals with regard to the issue of Nevada law raised by
the motion to dismiss. We thus request the Nevada Supreme
Court accept and decide the certified question. “The written
opinion of the [Nevada] Supreme Court stating the law
10           NALDER V. UNITED AUTO INS. CO.

governing the question[] certified . . . shall be res judicata as
to the parties.” Nev. R. App. P. 5(h).

    If the Nevada Supreme Court accepts this additional
certified question, it may resolve the two certified questions
in any order it sees fit, because Nalder and Lewis must
prevail on both questions in order to recover consequential
damages based on the default judgment for breach of the duty
to defend.

   The clerk of this court shall forward a copy of this order,
under official seal, to the Nevada Supreme Court, along with
copies of all briefs and excerpts of record that have been filed
with this court.

     IT IS SO ORDERED.

   Respectfully submitted, Diarmuid F. O’Scannlain and
William A. Fletcher, Circuit Judges.

                            _____________________
                            Diarmuid F. O’Scannlain
                            Circuit Judge