GEICO Indemnity Company v. M.M.

1 WO [3] 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE DISTRICT OF ARIZONA [6] 7 GEICO Indemnity Company, et al., No. CV-23-00187-TUC-JCH 8 Plaintiffs, ORDER AND JUDGMENT FOR PLAINTIFFS 9 v. 10 M.M., et al., 11 Defendants. [12] 13 Plaintiffs GEICO Indemnity Company and GEICO Casualty Company (collectively 14 "GEICO") have filed an Application for Default Judgment against Defendants M.M. and 15 R.S. Doc. 18. Defendants did not file a response to the Application for Default Judgment. 16 On GEICO's request, the Court set a hearing under Fed. R. Civ. P. 55(b)(2), (see Doc. 18 17 at 1; Doc. 23), on July 17, 2023. GEICO Indemnity Company et al v. M.M. et al., 4:23-CV18 00187-TUC-JCH (D. Ariz. July 17, 2023). Defendant M.M., through counsel, appeared at 19 the hearing and indicated that he would not challenge the Application. See id. For the 20 reasons stated below, default judgment is appropriate. 21 I. Background 22 GEICO seeks a declaratory judgment that two insurance policies1 it issued do not 23 provide a duty to defend or indemnify against claims and damages sought against 24 Defendant M.M. in an action currently pending in state court, Case No. C20224705 (Pima 25 Cnty. Super. Ct. Date). Complaint, Doc. 1 ("Compl."). The state court action asserts [26] 1 Defendant-Insured M.M. has two relevant insurance policies with GEICO: (1) an Arizona Family 27 Automobile Insurance Policy, policy number xxxx-xx-65-80 (the “Auto Policy”) issued by GEICO Casualty Company; and (2) an Arizona Motorcycle Insurance Policy, policy number xxxx-xx-7128 61 (the “Motorcycle Policy”) issued by GEICO Indemnity Company. Compl. ¶¶ 18–20. 1 negligence claims based on allegations that M.M. caused R.S. to contract a sexually 2 transmitted disease. Compl. ¶ 10. The negligence action further asserts that M.M. and R.S. 3 had consensual unprotected sexual intercourse in M.M.'s home and vehicle, among other 4 locations. Compl. ¶14. On March 20, 2023, M.M. submitted a claim to GEICO seeking 5 third-party bodily injury coverage for the injuries alleged by R.S. Compl. ¶ 31. GEICO 6 contends that R.S.'s alleged injuries do not arise from the "ownership, maintenance, or use 7 of a vehicle" under Arizona law and thus, coverage is precluded under the two insurance 8 policies. Compl. at ¶¶ 34–45. 9 GEICO filed their Complaint on April 20, 2023. See Compl. Plaintiffs effected 10 timely service on both Defendants. Docs. 12, 14. Neither M.M. nor R.S. answered or 11 otherwise defended against GEICO's claims. The Clerk of the Court entered default against 12 each Defendant on June 6, 2023. Docs. 16, 17. 13 II. Jurisdiction 14 Courts have an affirmative duty to determine their jurisdiction over the parties and 15 subject matter when a default judgment is sought against a non-appearing party. In re Tuli, [16] 172 F.3d 707, 712 (9th Cir. 1999). Defendants M.M. and R.S. reside in, and are citizens 17 of, Arizona. Compl. ¶ 8. This action arises from an incident or incidents occurring in 18 Arizona and implicating an Arizona Family Automobile Insurance Policy and an Arizona 19 Motorcycle Insurance Policy. Compl. ¶¶ 19, 20. The record establishes that both 20 Defendants were served with the Complaint. Docs. 12, 14. The Court is satisfied that it has 21 personal jurisdiction over both Defendants. 22 As to subject matter, the parties are diverse as Plaintiffs are foreign insurance 23 companies organized and existing under the laws of Nebraska, with their principal place of 24 business in Maryland, (Compl. ¶ 4), and both Defendants are citizens of Arizona (Compl. 25 ¶ 8). The Court concludes the amount in controversy has been met. The insurance policies 26 at issue, covers a period spanning between September 16, 2021, and September 16, 2022, 27 have a combined $200,000 limit for bodily injury. Doc. 1-2 at 38, 63. See also 28 U.S.C. § 28 1332(a)(1) ("The district courts shall have original jurisdiction of all civil actions where 1 the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and 2 costs, and is between [] citizens of different States"). GEICO asserts, for purposes of 3 diversity jurisdiction, that the amount in controversy exceeds $75,000. Compl. ¶ 7 ("There 4 is complete diversity of citizenship among the parties and the amount in controversy 5 exceeds the sum of $75,000, exclusive of interest and costs.") As such, the Court has 6 subject matter jurisdiction over the instant action. 7 III. Default Judgment Standard 8 District courts have discretion to enter a default judgment under Rule 55(b). Aldabe 9 v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Relevant factors the Court must consider 10 include: (1) the possible prejudice to plaintiff; (2) the merits of the claims; (3) the 11 sufficiency of the complaint; (4) the amount in controversy; (5) the possibility of factual 12 disputes; (6) whether default is due to excusable neglect; and (7) the policy favoring 13 deciding cases on the merits. Eitel v. McCool, 782 F.2d 1470 , 1471–72 (9th Cir. 1986). In 14 evaluating the complaint's merits and sufficiency, the Court must accept as true the 15 complaint's factual allegations, except those pertaining to damages. Geddes v. United Fin. 16 Group, 559 F.2d 557 , 560 (9th Cir. 1977). 17 IV. Analysis 18 A. The First, Fifth, Sixth, and Seventh Eitel Factors 19 The first, fifth, sixth, and seventh factors weigh in favor of default judgment cases 20 where the defendants have not participated in the litigation. Zekelman Indus. Inc. v. 21 Marker, No. CV-19-02109-PHX-DWL, 2020 WL 1495210 , at *3–4 (D. Ariz. Mar. 27, 22 2020) ("In cases like this one, in which Defendants have not participated in the litigation 23 at all, the first, fifth, sixth, and seventh factors are easily addressed."). Here, the first, fifth, 24 sixth, and seventh factors support default judgment. 25 The first factor, which considers the possibility of prejudice to the plaintiff, weighs 26 in GEICO's favor because it has no recourse absent a default judgment. See PepsiCo, Inc. 27 v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). 28 The fifth factor considers the possibility of factual disputes. GEICO's Complaint 1 seeks a declaratory resolution of a legal question that does not depend on resolving disputed 2 facts. See Doc. 18 at 7. This factor also weighs in GEICO's favor. 3 The sixth factor considers whether default was due to excusable neglect. GEICO 4 properly served both Defendants in this action. Docs. 12, 14. Thus, Defendants' failure to 5 answer and the resulting default likely did not result from excusable neglect. As such, this 6 factor supports default judgment. 7 Lastly, the seventh factor—which considers the policy favoring decisions on the 8 merits—would typically weigh against an entry of default judgment. Eitel, 782 F.2d at 9 1472. The mere existence of Rule 55(b), however, "indicates that this preference, standing 10 alone, is not dispositive." PepsiCo, 238 F. Supp. 2d at 1177 . Because the Court is 11 compelled to accept the truth of GEICO's factual allegations, and five other Eitel factors 12 favor default judgment, this final factor is neutral. 13 B. Second and Third Eitel Factors 14 The second and third Eitel factors consider the claim's merits and the Complaint's 15 sufficiency. Eitel, 782 F.2d at 1471 . Courts frequently consider these to be the two most 16 important factors. Zekelman Indus. Inc., 2020 WL 1495210 , at *5. The second and third 17 factors are generally thought to require the plaintiff to state a claim. PepsiCo, 238 F. Supp. 18 2d at 1175. 19 GEICO seeks relief under the Declaratory Judgment Act, 28 U.S.C. § 2201 . Compl. 20 ¶¶ 1–2. The Act provides that in a case of actual controversy within its jurisdiction, a 21 federal court "may declare the rights and other legal relations of any interested party 22 seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. 23 § 2201(a). 24 The merits of GEICO's Complaint are clear and not reasonably subject to dispute. 25 Here, the Auto Policy covers bodily injuries arising "out of the ownership, maintenance or 26 use of the owned auto or a non-owned auto." Compl. ¶ 35. Similarly, the Motorcycle Policy 27 covers bodily injuries "arising out of the ownership, maintenance or use of an owned 28 vehicle or a non-owned vehicle." Compl. ¶ 36. 1 Arizona law construes the phrase "arising out of the ownership, maintenance or use" 2 of a motor vehicle to require "a causal relationship between the injury and ownership, 3 maintenance or use of the car." Love v. Farmers Ins. Group, 121 Ariz. 71, 74 (App. 1978). 4 Generally, coverage exists only when the vehicle's use is related to its intrinsic nature "as 5 a means of transport." Benevides v. Ariz. Prop. & Cas. Ins. Guar. Fund, 184 Ariz. 610 , 613 6 (App. 1995). The requisite connection can also exist in cases that involve injury caused by 7 other uses of a vehicle, such as to carry cargo, that do not directly involve driving. See 8 Morari v. Atl. Mut. Fire Ins. Co., 105 Ariz. 537, 540 , 468 P.2d 564, 567 (1970) (gunshot 9 wound caused by negligent removal of loaded gun from truck's cargo); Farmers Ins. Co. 10 of Ariz. v. Till, 170 Ariz. 429, 432 , 825 P.2d 954, 957 (App. 1991) (failure to secure window 11 separating truck from camper resulted in dog attacking passenger). Conversely, an injury 12 does not necessarily arise out of the use of a vehicle simply because it occurs inside the 13 vehicle or at the hands of someone using a vehicle. See Ruiz v. Farmers Ins. Co. of Ariz., [14] 177 Ariz. 101 , 103–04 (1993) (holding that injuries sustained in a car-to-car shooting did 15 not arise out of the use of a vehicle where passenger needed to show that the uninsured 16 vehicle caused and produced her injury, not that it merely facilitated her injury). 17 Here, R.S.'s injuries did not arise out of the operation or use of the motor vehicle or 18 motorcycle. That a vehicle was the location of some of the alleged sexual conduct 19 underlying the alleged injuries does not render it the cause of her injuries. See Benevides, 20 184 Ariz. at 618 ("No causal link exists when the car is merely the situs of the accident."). 21 See also Rule v. Allstate Fire & Cas. Ins. Co., No. 2 CA-CV 2016-0161, 2017 WL 22 3529108, at *2 (Ariz. Ct. App. Aug. 17, 2017) (collecting Arizona cases demonstrating 23 that an injury does not necessarily arise out of the use of a vehicle simply because it occurs 24 inside the vehicle or at the hands of someone using a vehicle). Thus, the second and third 25 factors favor default judgment. 26 /// 27 /// 28 /// 1 C. Fourth Eitel Factor 2 The amount in controversy factor weighs neutral. Where the underlying claim is for 3 declaratory relief, some courts have found that this factor weighs favorably for granting 4 default judgment. See PepsiCo, 238 F. Supp. 2d at 1177 . If the declaratory relief sought 5 implicates the parties and merits of a separate action, however, courts have considered the 6 amount at stake in that separate action while weighing the Eitel factors. See Helwan Cement 7 S.A.E. v. Tahaya Misr Inv., Inc., No. 2:17-cv-00543-CAS (AFMx), 2017 WL 2468775 , at 8 *5 (C.D. Cal. June 5, 2017) (concluding that this factor weighs against default judgment 9 where an insurance company sought a declaration that it had no duty to defend separate 10 actions for, cumulatively, $925 million). 11 Here, GEICO alleges, for purposes of diversity jurisdiction, that the amount in 12 controversy exceeds $75,000. See Compl. ¶ 7. GEICO has not, however, provided specific 13 information from which the Court can discern the amount of money at stake in the state 14 court action. See Compl. ¶ 17 ("R.S. asserts that her alleged damages qualify the State 15 Court Case for 'Tier 3' under A.R.C.P. Rule 26 .2(c)(3), meaning she seeks $300,000 or 16 more in damages."). The Court concludes that the fourth Eitel factor is neutral. 17 D. Conclusion 18 Five Eitel factors support entering default judgment and two are neutral. The Court 19 grants GEICO's application and enters default judgment. 20 V. Proceeding Anonymously 21 The Court considers whether to permit Defendants to proceed anonymously. The 22 presumption in litigation, which is related to the public's right to open courts and the right 23 of private individuals to confront their accusers, is that parties must use their real names. 24 Doe v. Kamehameha Sch./Bernice Pauahi Bishop Est., 596 F.3d 1036, 1042 (9th Cir. 2010) 25 (citations omitted). The court may permit a party to proceed anonymously, however, when 26 special circumstances justify secrecy, such as, "to protect a person from harassment, injury, 27 ridicule or personal embarrassment." Does I thru XXIII v. Advanced Textile Corp., 214 28 F.3d 1058 , 1067–68 (9th Cir. 2000). Advanced Textile offers three situations where a 1 fictitious name is appropriate: (1) when the party's identification creates a risk of retaliatory 2 physical or mental harm; (2) when a pseudonym is necessary to preserve privacy in a highly 3 sensitive matter; and (3) when a party may, during litigation, be compelled to admit intent 4 to engage in illegal activity. Id. at 1068 . To proceed under a pseudonym, the party's need 5 for anonymity must outweigh prejudice to the opposing party as well as the public's interest 6 in knowing the party's identity. Id. at 1067 . 7 This case involves a highly sensitive matter under the second scenario described in 8 Advanced Textile, specifically, an alleged STD transmission between two consenting adults 9 who had unprotected sex. See Doe v. Mozer, No. 216CV00210KJDVCF, 2016 WL 10 3536857, at *1 (D. Nev. June 27, 2016) (finding use of a fictitious name warranted where 11 plaintiff's sexual health and details of his transmission of a sexually transmitted disease 12 constituted a highly sensitive matter). Moreover, there is no prejudice to GEICO. The Court 13 has previously granted GEICO's ex parte requests to file a copy of the Complaint, and 14 certain Exhibits, under seal with GEICO citing the personal and sensitive nature of the 15 allegations. See Docs. 4, 19. GEICO has also lodged a proposed deanonymized default 16 judgment. See Doc. 22. Although GEICO knows the Defendants' names it has continued 17 to request leave to file documents using acronyms. 18 Lastly, any prejudice against the public's interest in knowing the Defendants' true 19 names is also insignificant where the public is privy to the Court's legal conclusions. See 20 Advanced Textile Corp., 214 F.3d 1068 , citing Doe v. Stegall, 653 F.2d 180, 185 (5th Cir. 21 1981) (explaining party anonymity does not obstruct the public's view of the issues or the 22 Court's performance in resolving them). As such, the Court will continue to use Defendants' 23 acronyms. 24 /// 25 /// 26 /// 27 /// 28 /// 1|| VI. Order 2 IT IS ORDERED GRANTING Plaintiffs’ Application for Default Judgment 3|| Against Defendants M.M. and R.S. (Doc. 18). Default judgment is entered in favor of 4|| Plaintiffs and against Defendant Defendants M.M. and R.S. (collectively, “Defendants”’). 5 || The Court hereby enters the following declaratory judgment in favor of GEICO and against || Defendants: 7 1. GEICO has no duty to defend or indemnify M.M. with respect to the claims 8 asserted against M.M. by R.S. in the Superior Court of the State of Arizona in 9 and for the County of Pima, Case No. C20224705.? 10 IT IS FURTHER ORDERED DIRECTING the Clerk of the Court to terminate this action. 12 Dated this 18th day of July, 2023. [13] 14 ‘ 15 WS Ht br-b onorable John C. Hinderaker 16 United States District Judge [28] > Concurrent with this Order, the Court will file under seal a deanonymized judgment. -8-