Echelon Property & Casualty Insurance Company v. Allstate Med Trans LLC

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Echelon Property & Casualty Insurance No. CV-19-08295-PCT-DWL Company, 10 ORDER Plaintiff, [11] v. [12] Allstate Med Trans LLC, et al., [13] Defendants. [14] 15 In this action, Plaintiff Echelon Property & Casualty Insurance Company 16 (“Echelon”) seeks a declaration that an insurance policy it issued to Defendant Allstate 17 Med Trans LLC (“Allstate Med”) doesn’t cover a car accident that occurred in July 2017. 18 (Doc. 1.) Although Allstate Med was served with the complaint (Doc. 11), it never 19 answered or otherwise responded. Accordingly, Echelon has filed a motion for default 20 judgment. (Doc. 12.) Specifically, Echelon seeks a judgment that (1) confirms the absence 21 of coverage and (2) includes an award of $3,664.50 in attorneys’ fees and costs. For the 22 following reasons, Echelon’s motion will be granted in part and denied in part. 23 BACKGROUND 24 I. Underlying Facts 25 The following facts are derived from Echelon’s complaint. (Doc. 1.) 26 Echelon issued an insurance policy to Allstate Med. (Id. ¶ 12.) The policy had 27 several exclusions, including an exclusion for “automobile related claims.” (Id. ¶ 16.) This 28 exclusion encompassed any claim for “‘[b]odily injury’ or ‘property damage’ arising out 1 of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or 2 watercraft owned or operated by or rented or loaned to any insured.” (Id.) The policy also 3 included a provision requiring Allstate Med “to notify Echelon as soon as practicable of an 4 occurrence or offense which may result in a claim.” (Id. ¶ 16.) 5 In July 2017, a minivan owned by Allstate Med was involved in a collision. (Id. ¶ 6 17-18.) 7 In June 2019, one of the occupants of the vehicle that was struck by the minivan 8 filed a lawsuit against Allstate Med. (Id. ¶ 20.) Among other things, the lawsuit alleged 9 that the driver of the minivan, who was one of Allstate Med’s employees, was intoxicated 10 at the time of the collision. (Id. ¶ 22.) 11 In September 2019, Echelon was notified for the first time about the collision. (Id. 12 ¶¶ 25, 26.) This notification occurred when Allstate Med’s attorneys delivered a tender for 13 a defense in the lawsuit. (Id. ¶ 25.) In the tender, Allstate Med admitted that the driver 14 was one of its employees and further admitted that the employee was intoxicated at the 15 time of the collision. (Id. ¶ 27.) Additionally, Allstate Med admitted that the minivan “had 16 been removed from its auto policy because it was temporarily out of service and not 17 scheduled or authorized for any rides.” (Id. ¶ 28.) 18 On October 3, 2019, Echelon responded to the tender by informing Allstate Med 19 that it was disclaiming coverage based on, inter alia, the automobile exclusion in the 20 policy. (Id. ¶ 30.) 21 On October 8, 2019, Allstate Med’s attorneys informed Echelon that they disagreed 22 with the determination of non-coverage (without explaining why) and indicated they would 23 pursue an assignment of rights against Echelon. (Id. ¶ 31.) 24 II. Procedural History 25 On October 9, 2019, Echelon initiated this action by filing a complaint. (Doc. 1.) 26 The complaint seeks a declaration of no coverage, as well as costs and attorneys’ fees. (Id. 27 at 5-6.) [28] 1 On December 31, 2019, Echelon sought an extension of time to complete service. 2 (Doc. 9.) That motion was granted. (Doc. 10.) 3 On January 13, 2020, Echelon timely serve Allstate Med. (Doc. 11.) 4 On March 4, 2020, after Allstate Med failed to answer or otherwise respond to the 5 complaint, Echelon applied for entry of a default (Doc. 13) and also filed a motion for 6 default judgment (Doc. 12). 7 On March 6, 2020, the Clerk entered the requested default. (Doc. 15.) 8 ANALYSIS 9 I. Default Judgment Standard 10 The “decision whether to enter a default judgment is a discretionary one.” Aldabe 11 v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The following factors, known as the Eitel 12 factors, may be considered when deciding whether default judgment is appropriate: (1) the 13 possibility of prejudice to the plaintiff, (2) the merits of the claims, (3) the sufficiency of 14 the complaint, (4) the amount of money at stake, (5) the possibility of factual disputes, (6) 15 whether the default was due to excusable neglect, and (7) the policy favoring decisions on 16 the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 17 “[T]he general rule” for default judgment purposes “is that well-pled allegations in 18 the complaint regarding liability are deemed true.” Fair Housing of Marin v. Combs, 285 19 F.3d 899, 906 (9th Cir. 2002). “The district court is not required to make detailed findings 20 of fact.” Id. “However, necessary facts not contained in the pleadings, and claims which 21 are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of N. Am., [22] 980 F.2d 1261, 1267 (9th Cir. 1992). 23 II. The First, Fifth, Sixth, And Seventh Eitel Factors 24 “In cases like this one, in which Defendants have not participated in the litigation at 25 all, the first, fifth, sixth, and seventh [Eitel] factors are easily addressed.” Zekelman Indus. 26 Inc. v. Marker, 2020 WL 1495210 , *3 (D. Ariz. 2020). 27 The first factor weighs in favor of default judgment. If Echelon’s motion for default 28 judgment were denied, it would be without other recourse. See, e.g., Stillwater Ins. Co. v. 1 Fricker, 2018 WL 2985255 , *1 (D. Ariz. 2018) (first factor weighed in favor of default 2 judgment in declaratory judgment action where insurer sought determination of no 3 coverage); Mesa Underwriters Specialty Ins. Co. v. Paradise Skate, Inc., 2016 WL 4 9045622, *3 (N.D. Cal. 2016) (“There is potential prejudice where denying default 5 judgment would deny an insurer a judicial determination as to whether it has a duty to 6 indemnify and defend the defendant and whether it is entitled to reimbursement of the 7 defense costs in the underlying action. Moreover, an insurer’s continued exposure to 8 liability in an underlying lawsuit amounts to potential prejudice that weighs in favor of 9 default judgment.”) (citations omitted). 10 The fifth and sixth factors weigh in favor of default judgment or are neutral. Due 11 to Allstate Med’s failure to participate, there is no dispute over material facts and no 12 indication that default is due to excusable neglect. 13 The seventh factor generally weighs against default judgment, given that cases 14 “should be decided on their merits whenever reasonably possible.” Eitel, 782 F.2d at 1472 . 15 However, the existence of Rule 55(b) of the Federal Rules of Civil Procedure, which 16 authorizes default judgments, “indicates that this preference, standing alone, is not 17 dispositive.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). 18 Put simply, “the default mechanism is necessary to deal with wholly unresponsive parties 19 who could otherwise cause the justice system to grind to a halt. Defendants who appear to 20 be ‘blowing off’ the complaint should expect neither sympathy nor leniency from the 21 court.” 2 Gensler, Federal Rules of Civil Procedure Rules and Commentary, Rule 55, at 22 119-20 (2020). 23 III. The Fourth Eitel Factor—The Amount Of Money At Stake 24 “Where the plaintiff’s claim is for declaratory relief rather than for money damages, 25 some courts have found that this factor weighs in favor of granting default judgment,” but 26 “[w]here the declaratory relief sought implicates the parties and merits of a separate action, 27 . . . courts have considered the amount at stake in that separate action while weighing 28 the Eitel factors.” Stillwater Insurance, 2018 WL 2985255 at *2. 1 Here, although Echelon is not seeking an award of damages against Allstate Med, 2 the declaratory relief it is seeking is still valuable—it certified in its complaint that diversity 3 jurisdiction exists because the amount in controversy exceeds $75,000. (Doc. 1 ¶ 11.) 4 $75,000 is a substantial sum, so the fourth factor weighs against granting default judgment. 5 IV. The Second And Third Eitel Factors—Merits And Sufficiency 6 That leaves the second and third Eitel factors—the merits of the claim and the 7 sufficiency of the complaint. “These two factors are often analyzed together and require 8 courts to consider whether a plaintiff has stated a claim on which it may recover.” Vietnam 9 Reform Party v. Viet Tan - Vietnam Reform Party, 416 F. Supp. 3d 948 , 962 (N.D. Cal. 10 2019) (internal quotation marks omitted). “Of all the Eitel factors, courts often consider 11 the second and third factors to be the most important.” Id. 12 Here, both factors weigh in favor of granting default judgment. Taken as true, the 13 factual allegations in the complaint establish that the accident fell within the policy’s 14 automobile exclusion. Thus, Echelon is entitled to a determination of no coverage. Cf. 15 Stillwater Insurance, 2018 WL 2985255 *2 (second and third Eitel factors favored default 16 judgment in insurer’s declaratory relief action because complaint established that 17 underlying lawsuit fell within policy’s exclusions). 18 V. Balancing The Factors 19 Having considered all of the Eitel factors, the Court concludes that default judgment 20 is appropriate. 21 VI. Attorneys’ Fees And Costs 22 Echelon also requests attorneys’ fees and costs “pursuant to Federal Rule of Civil 23 Procedure 54(d)(2), Local Rule of Federal Civil Procedure 54.2, and A.R.S. § 12-341.01.” 24 (Doc. 12 at 2.) 25 As an initial matter, the only one of these provisions that might provide a substantive 26 entitlement to attorneys’ fees is A.R.S. § 12-341.01. The other provisions set forth the 27 procedures governing requests for attorneys’ fees—they do not, on their own, entitle a 28 prevailing party to recover such fees. 1 A.R.S. § 12-341.01(A) provides in relevant part that, “[i]n any contested action 2 arising out of a contract, express or implied, the court may award the successful party 3 reasonable attorney fees.” Here, Echelon is clearly the successful party, and although 4 Echelon did not provide any briefing concerning whether this lawsuit qualifies as an 5 “action arising out of a contract,” the law makes clear that it does. See, e.g., Nat. Union 6 Fire Ins. Co. of Pittsburgh, Pa. v. Aero Jet Servs., LLC, 2012 WL 510490 , *1-4 (D. Ariz. 7 2012) (canvassing Arizona law before concluding that a “successful party in an insurance 8 declaratory relief action” may seek fees under A.R.S. § 12-341.01(A)); John Deere Ins. 9 Co. v. W. Am. Ins. Grp., 854 P.2d 1201, 1204-05 (Ariz. Ct. App. 1993) (awarding fees 10 under A.R.S. § 12-341.01 to insurer who initiated and prevailed in declaratory relief 11 action). 12 Nevertheless, A.R.S. § 12-341.01(A) does not compel an award of attorneys’ fees 13 to the prevailing party in every contract action. “The legislature used the phrase ‘may 14 award’ . . . . The natural import of this phrase is to vest discretion in the trial court to 15 determine the circumstances appropriate for the award of fees.” Associated Indem. Corp. 16 v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). The factors Arizona courts have identified 17 as “useful” in determining whether to award fees pursuant to A.R.S. § 12-341.01(A) 18 include (1) the merits of the claim or defense of the unsuccessful party; (2) whether the 19 litigation could have been avoided or settled; (3) whether assessing fees would cause 20 extreme hardship; (4) whether the successful party prevailed with respect to all relief 21 sought; (5) whether the legal question was novel or had been previously adjudicated; and 22 (6) whether an award would discourage other parties with tenable claims or defenses from 23 litigating them.” Id. 24 Here, the Court’s analysis is hamstrung by the fact that Echelon did not provide any 25 briefing or evidence concerning these factors. Instead, it simply submitted an itemization 26 of its fees and rates (Doc. 12-3) and an attorney declaration verifying that the listed time 27 entries “were reasonabl[y] necessary for the successful defense of this matter” (Doc. 12-2 28 ¶ 12). This is problematic because, among other things, it’s not clear to the Court that litigation was actually necessary. Although the complaint mentions some back-and-forth || between the parties’ counsel that preceded Echelon’s decision to file suit, which culminated 3 || with Allstate Med’s counsel voicing an intention to seek an assignment of rights (Doc. | 4 30-31), the absence of detail makes it impossible to evaluate whether Echelon truly || needed to rush into federal court the very next day to file this lawsuit. Perhaps that step || was justified, but Echelon hasn’t met its burden of establishing justification on the current record. Thus, the Court will, in its discretion, deny Echelon’s request for attorneys’ fees 8 || under A.R.S. § 12-341.01(A). 9 Finally, although the declaration from Echelon’s attorney explains that Echelon is 10|| seeking $3,064 in attorneys’ fees and $600.50 in “costs” (Doc. 12-2 4 14), it is unclear where the “costs” figure comes from. The enclosed billing records (Doc. 12-3) only seem || to identify attorneys’ fees. In any event, to the extent Echelon wishes to submit a bill of 13 || costs under Rule 54(d)(1) and LRCiv 54.1(a) after entry of judgment, it may do so. 14 Accordingly, 15 IT IS ORDERED that Echelon’s motion for default judgment (Doc. 12) is granted in part and denied in part. A separate judgment will issue, after which the Clerk of Court || shall terminate this action. 18 Dated this 15th day of June, 2020. [19] 20 Lm ee” 21 f t _o———— Dominic W. Lanza 972 United States District Judge [28] _7-