Associated Aviation Underwriters v. Vegas Jet

• Decision Date: 06 July 2000
• Docket Number: No. CVS990895RLH(RLH).,CVS990895RLH(RLH).
• Citation: 106 F.Supp.2d 1051
• Parties: ASSOCIATED AVIATION UNDERWRITERS, INC., a Delaware corporation, Plaintiff, v. VEGAS JET, L.L.C., a limited liability corporation; Larry Siggelkow, an individual; Eagle Jet Charter, Inc., a Nevada corporation; Eagle Canyon Airlines, Inc., a Nevada corporation; and Does 1 through 50 inclusive, Defendants. Vegas Jet, L.L.C., a limited liability corporation; Larry Siggelkow, an individual, Counterclaimants, v. Associated Aviation Underwriters, Inc., a Delaware corporation, Counterdefendant.
• Court: U.S. District Court — District of Nevada

Page 1051

106 F.Supp.2d 1051

ASSOCIATED AVIATION UNDERWRITERS, INC., a Delaware corporation, Plaintiff, v. VEGAS JET, L.L.C., a limited liability corporation; Larry Siggelkow, an individual; Eagle Jet Charter, Inc., a Nevada corporation; Eagle Canyon Airlines, Inc., a Nevada corporation; and Does 1 through 50 inclusive, Defendants.

Vegas Jet, L.L.C., a limited liability corporation; Larry Siggelkow, an individual, Counterclaimants, v. Associated Aviation Underwriters, Inc., a Delaware corporation, Counterdefendant.

No. CVS990895RLH(RLH).

United States District Court, D. Nevada.

July 6, 2000.

Jo Saxe Levy, Crosby, Heafey, Roach & May, San Francisco, California, lead counsel J. Mitchell Cobeaga, Beckley, Singleton, Jemison, Cobeaga & List, Las Vegas, Nevada, local counsel, for plaintiff and counterdefendant Associated Aviation Underwriters, Inc.

Eric Zubel, Zubel Chartered, Las Vegas, Nevada, for defendant Vegas Jet, L.L.C.

ORDER

HUNT, District Judge.

Presently before this Court are two dispositive motions. On January 24, 2000, Plaintiff and Counterdefendant Associated Aviation Underwriters, Inc.'s ("AAU") filed a Motion for Summary Judgment or in the Alternative Summary Adjudication (# 24). Defendants and Counterclaimants Vegas Jet, L.L.C. ("Vegas Jet") and Larry Siggelkow ("Siggelkow") filed an Opposition (# 30) on March 24, 2000. AAU filed a Reply (# 35) on April 6, 2000.

Vegas Jet and Siggelkow also filed a Countermotion for Partial Summary Judgment (# 31) on March 24, 2000 and a Reply (# 36) on April 24, 2000.

I. BACKGROUND

This case centers around an insurance coverage dispute between Plaintiff and Counterdefendant AAU, a Delaware insurance corporation, and Codefendant and Counterclaimant Vegas Jet, a Nevadabased limited liability corporation. Between January 15, 1998 and January 15, 1999, Vegas Jet maintained an aviation general liability insurance policy ("Policy") issued by AAU. (JSUF ¶ 37.)

It is undisputed that Vegas Jet is a company engaged in the purchase, sale, refurbishment, repair, charter and lease of aircraft. (JSUF ¶ 4.) At the time of the commencement of this suit, Vegas Jet was managed by Codefendant and Counterclaimant Larry Siggelkow. (JSUF ¶ 6.) Prior to his tenure at Vegas Jet, however, Siggelkow served as an employee of Eagle Jet Charter, Inc. ("Eagle Jet Charter") and Eagle Canyon Airlines, Inc ("Eagle Canyon Airlines"). These businesses allegedly provide air tours and charter airplane services to the Grand Canyon area. (JSUF ¶ 9.)

On April 3, 1998, Eagle Jet and Eagle Canyon Airline filed a lawsuit in Nevada state district court, Eagle Jet Charter, Inc. v. Siggelkow, No. A386636, against Siggelkow, Vegas Jet and a number of other codefendants. (JSUF ¶ 10.) This suit alleged that Siggelkow and Vegas Jet had somehow secretly and improperly rendered management and consulting services to Vision Air Corporation ("Vision Air"), one of Eagle Jet's and Eagle Canyon Airline's competitors in the Grand Canyon air tour business.

In May 1998, Vegas Jet and Siggelkow tendered the legal defense of the Eagle Jet action to AAU in the belief that such allegations triggered the advertising injury provisions of the Policy. (Answer & Counterclaim (# 9) at ¶ 20.) AAU initially allegedly refused this tender. Eagle Jet and Eagle Canyon Airline filed a First Amended Complaint in the state court action on June 19, 1998. A Second Amended Complaint was filed on February 23, 1999. In April 1999, AAU allegedly agreed to partially reimburse Siggelkow and Vegas Jet for the legal expenses they had thereto had incurred, while still preserving its claim to any rights extant under the Policy.

On July 16, 1999, AAU filed a Complaint for Declaratory Judgment (# 1) before this Court in order to receive a judicial determination as to whether it owed any duty to indemnify or provide a legal defense to Siggelkow and Vegas Jet in the underlying state action. Siggelkow and Vegas Jet filed an Answer and Counterclaim for Declaratory Judgment (# 9) seeking, in part, a judicial declaration that a duty to defend had been triggered by the allegations put forth in the First Amended Complaint. Both sides have now filed countermotions for summary adjudication of these coverage issues. Jurisdiction in this United States District Court is based upon the diversity of the parties and the amount in controversy.

II. APPLICABLE LEGAL STANDARDS

A. Operative State Law

When construing an insurance policy, as in the case here, a federal district court sitting in diversity must apply the substantive law of the forum state in which it lies. See Fortis Benefits Ins. Co. v. Johnson, 966 F.Supp. 987, 989 (D.Nev. 1997). Accordingly, this Court will apply Nevada insurance law in order to dispose of the current dispute. In the absence of controlling precedent from the Nevada Supreme Court, this Court must use its own best judgment to predict how the state highest court would decide the relevant substantive issue. See Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986), reh'g denied, modified, 810 F.2d 1517 (1987); Takahashi v. Loomis Armored Car Service, 625 F.2d 314, 316 (9th Cir.1980). In so doing, this Court may look to state court decisions from sister jurisdictions, treatises and other helpful resources. See Santana v. Zilog, Inc., 95 F.3d 780, 783 (9th Cir.1996).

B. Summary Judgment Standard

The procedural aspects of this case, however, will still be governed by federal law. See Caesar Elecs. Inc. v. Andrews, 905 F.2d 287, 289 n. 3 (9th Cir.1990). A motion for summary judgment is a procedure which terminates, without a trial, actions in which "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The movant is entitled to summary judgment if the non-moving party, who bears the burden of persuasion, fails to designate "`specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(e)). In order to preclude a grant of summary judgment, the non-moving party must do more than show that there is some "metaphysical doubt" as to the material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, the nonmoving party must set forth "`specific facts showing that there is a genuine issue for trial.'" Id. at 587, 106 S.Ct. 1348 (quoting Fed.R.Civ.P. 56(e)). All underlying facts will be viewed in the light most favorable to the non-movant party. See Martinez v. City of Los Angeles, 141 F.3d 1373, 1378 (9th Cir.1998).

III. DISCUSSION

In Nevada, an insurer's duties to defend and indemnify its insured in the event of a lawsuit are defined by the provisions of the insurance policy. See Capitol Indem. Corp. v. Blazer, 51 F.Supp.2d 1080, 1084 (D.Nev.1999). Generally, the duty to defend is triggered by allegations within the complaint in the underlying suit against the insured that "arguably" or "potentially" bring the suit under the policy's provisions. See Insurance Co. of N. Am. v. Hilton Hotels U.S.A., Inc., 908 F.Supp. 809, 814 n. 2 (D.Nev.1995) (construing Nevada law); see also 9 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 129:13 (3d ed.1996). Once triggered, the duty to defend will generally continue throughout the course of the litigation against the insured. See Home Savings Assoc. v. Aetna Cas. and Surety Co., 109 Nev. 558, 854 P.2d 851, 855 (1993). The duty to indemnify, in contrast, will arise only in the event of final placement of covered, non-excluded liability upon the insured through judgment or settlement. See 46 C.J.S. Insurance § 1145 (1993).

In the dispute presently before this Court, the parties have filed cross-motions for summary adjudication of the question of whether AAU bears any duty to defend and indemnify Vegas Jet and Siggelkow in the underlying state court litigation. Resolution of this dispute will require this Court to (A) determine the effect of the state court plaintiffs' amendment of their pleadings and (B) examine whether the facts alleged therein triggered any contractual duty to defend and indemnify.

A. Third-Party Plaintiffs' Amendment of Pleadings

Initially, the parties dispute which complaint from the underlying litigation this Court should reference in order to determine the existence or absence of a duty to defend.

Vegas Jet and Siggelkow contend that a duty to defend was triggered by the facts alleged in the First Amended Complaint of the state court lawsuit, filed on June 19, 1998, and that such a duty continues to this day. AAU, however, counters that the subsequent filing of a Second Amended Complaint in that action had the effect of superceding all prior allegations. As a result, AAU contends that this Court should restrict its examination to only those facts alleged therein in order to determine the propriety of declaratory judgment in its favor. After examining the applicable authorities, this Court finds that both sides have misconstrued the operative mechanisms of insurance law.

In Nevada, an amended complaint generally supersedes the original complaint and renders it nugatory. See Randono v. Ballow, 100 Nev. 142, 676 P.2d 807, 807 (1984); McFadden v. Ellsworth Mill & Mining Co., 8 Nev. 57, 57 (1872). While the Nevada Supreme Court has yet to address the effect of successive complaints in the area of insurance law, authorities from other jurisdictions have held that courts must look to the most recent pleadings in order to discern the continued existence or absence of a duty to defend. See, e.g., Casualty Indem. Exchange v. City of Sparta, Mo, 997 S.W.2d 545, 546 (Mo.Ct.App.1999) (referencing amended petition in underlying suit); Abrams v. State Farm Fire & Cas. Co., 306 Ill.App.3d 545, 239 Ill.Dec. 534, 714 N.E.2d 92, 97 (1999) (same); Reser v. State Farm Fire & Cas. Co., 981 S.W.2d 260, 263 (Tex.A...