Bergerud v. Progressive Cas. Ins.

• Decision Date: 17 August 2006
• Docket Number: No. 2:06CV0039-PMP-LRL.,2:06CV0039-PMP-LRL.
• Citation: 453 F.Supp.2d 1241
• Parties: Randall BERGERUD, Plaintiff, v. PROGRESSIVE CASUALTY INSURANCE; Progressive Insurance Company; and Does 1 through 5, inclusive, Defendants.
• Court: U.S. District Court — District of Nevada

453 F.Supp.2d 1241

Randall BERGERUD, Plaintiff, v. PROGRESSIVE CASUALTY INSURANCE; Progressive Insurance Company; and Does 1 through 5, inclusive, Defendants.

No. 2:06CV0039-PMP-LRL.

United States District Court, D. Nevada.

August 17, 2006.

COPYRIGHT MATERIAL OMITTED

Bradley S. Mainor, Mainor Eglet Cottle, Lesley B. Miller, Mainor Eglet Cottle, Las Vegas, NV, for Randall Bergerud, Plaintiff.

Dennis M. Prince, Prince & Keating, LLP, John T. Keating, Prince & Keating, Las .Vegas, NV, for Progressive Casualty Insurance Company, Defendant.

ORDER

PRO, Chief Judge.

Presently before the Court is Defendants Progressive Casualty Insurance and Progressive Insurance Company's Motion for Partial Summary Judgment (Doc. # 10), filed on March 24, 2006. Plaintiff Randall Bergerud filed a Response to Defendants' Motion for Partial Summary Judgment (Doc. # 11) on April 5, 2006. Defendant Progressive filed a Reply to Plaintiff's Response to Defendants' Motion for Partial Summary Judgment (Doc. # 13) on April 19, 2006.

I. BACKGROUND

On December 12, 1999, Plaintiff Randall Bergerud was in an accident while driving a 1995 Saturn. (Defs.' Mot. for Partial Summ. J. ["Mot. Summ. J."], Ex. B.) At the time of the accident, Defendants Progressive Casualty Insurance Company and Progressive Insurance Company (collectively "Progressive") had issued an insurance policy covering the Saturn to C. Jane Bergerud Trust. (Mot. Summ. J., Ex. C; Pl.'s Partial Opp'n to Defs.' Mot. for Partial Summ. J. ["Opp'n"], Ex. 1, Ex. 2.) Plaintiff is Jane Bergerud's son, and resided with her at the time of the accident. (Opp'n at 2.)

Plaintiff filed a claim under the Policy for uninsured/underinsured motorist ("UM") benefits.¹ (Mot.Summ. J., Ex. D.) The Policy provides for UM coverage as follows:

Subject to the Limits of Liability, if you pay a premium for Uninsured Motorist Coverage, we will pay for damages . . . , which an insured person is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury:

1. sustained by an insured person;

2. caused by accident; and

3. arising out of the ownership, maintenance, or use of an uninsured motor vehicle.

(Opp'n, Ex. 2 at 24 (original emphasis omitted).) The Policy's UM section defines an "insured person" as:

a. you or a relative, except when occupying a vehicle, other than a covered vehicle, without the express or implied permission of the owner;

b. any person occupying a covered vehicle with the express or implied permission of you or a relative;

.....

Id. The Policy defines "You" to mean "the person shown as the named insured on the Declarations Page, and that person's spouse if residing in the same household." (Id. at 18.) Plaintiff's name does not appear on the Policy's Declarations Page nor is Plaintiff a listed driver under the Policy. (Opp'n, Ex. 2; Mot. Summ. J., Ex. C.)

On November 2, 2005, Plaintiff notified Progressive of his claim and requested settlement by December 2, 2005. (Mot. Summ. J. at 4, Ex. D.) On November 9, 2005, Progressive sought additional information to complete Plaintiffs claim evaluation. (Mot.Summ. J., Ex. E.) On December 6, 2005, Plaintiff filed suit in Nevada state court and on January 11, 2006, Progressive removed Plaintiff's action to this Court based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. (Mot. Summ. J., Ex. A; Notice of Removal [Doc. # 1].) Plaintiffs Complaint alleges breach of contract (claim 1), breach of the duty of good faith and fair dealing (bad faith) (claim 2), violation of Nevada Revised Statute 686A.310 (claim 3), breach of fiduciary duty (claim 4), and fraud (claim 5). Plaintiff also seeks exemplary and punitive damages.

Progressive now moves this Court to grant partial summary judgment on Plaintiffs claims two through five and on Plaintiffs request for punitive damages. Progressive argues Plaintiff is a third-party claimant to whom the covenant of good faith and fair dealing does not extend because no contractual relationship exists between Progressive and Plaintiff as Plaintiff did not choose Progressive as his insurer, has not paid premiums, and is not named expressly in the Policy. Progressive further argues Plaintiffs adversarial position as a claimant for UM benefits negates the implied covenant of good faith and fair dealing and any fiduciary relationship. As to Plaintiffs claim of fraud, Progressive argues Plaintiff has not alleged fraud with the specificity required by Federal Rule of Civil Procedure 9(b). Finally, Progressive asserts the Court cannot award punitive damages for breach of contract, and Plaintiff may not request punitive damages under Nevada Revised Statute 42.005 because it applies only to breached non-contractual obligations where there has been oppression, fraud, or malice. Progressive argues it did not owe Plaintiff an implied good faith duty and thus did not breach non-contractual obligations for which Plaintiff may recover punitive damages.

Plaintiff responds that as an "insured" under the Policy, he has a contractual relationship with Progressive. Furthermore, Plaintiff argues he is a first-party claimant to whom Progressive has not upheld its duty of good faith. Plaintiff argues that because he is an insured first-party claimant with a contractual relationship, he has standing to sue for breach of the fiduciary relationship and the duty of good faith and fair dealing. Therefore, Plaintiff argues the Court should not grant summary judgment in favor of Progressive as to claims two and three. Plaintiff does not oppose dismissal of his fraud claim, and does not respond to Progressive's arguments as to violation of Nevada Revised Statute 686A.310 and punitive damages.

II. LEGAL STANDARD

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any" demonstrate "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The substantive law defines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All justifiable inferences must be viewed in the light most favorable to the non-moving party. County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1154 (9th Cir.2001).

The party moving for summary judgment bears the initial burden of showing the absence of a genuine issue of material fact. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir.2000). The burden then shifts to the non-moving party to go beyond the pleadings and set forth specific facts demonstrating there is a genuine issue for trial. Id.; Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 997 (9th Cir. 2001).

III. DISCUSSION

A. Bad Faith (claim 2) and Fiduciary Duty (claim 4)

Progressive moves this Court to grant summary judgment as to Plaintiffs claims for bad faith and breach of fiduciary duty. Although Progressive agrees Plaintiff is an insured, it argues the implied covenant of good faith and fair dealing applies only when there is a contractual relationship between the insured and the insurer. Progressive asserts because Plaintiff was both a third-party claimant who did not detrimentally rely on Progressive, and a noncontracting, unnamed party with respect to the Policy, no contractual relationship exists between it and Plaintiff. Therefore, Progressive argues Plaintiff cannot state a claim for bad faith. Furthermore, Progressive argues the fiduciary nature of the relationship between Progressive as the insurer, and Plaintiff as the insured, arises because of the covenant of good faith and fair dealing. Progressive asserts because the covenant requires a contractual relationship, and no such relationship exists between Progressive and Plaintiff, it did not breach the fiduciary-like duty. Therefore, Progressive moves this Court to grant summary judgment as to Plaintiffs claims of bad faith and breach of fiduciary duty.

Plaintiff responds that because the Policy covers resident relatives and occupants of a covered vehicle as "insureds," and he was both, he is an insured and first-party claimant. Plaintiff further asserts because he fits under a defined class in the contract, he was contemplated as a party, and thus has a contractual relationship with Progressive. Furthermore, Plaintiff argues because he is a first-party insured and beneficiary of the insurance contract, a fiduciary duty exists which Progressive breached when it failed to act in good faith. Therefore, Plaintiff argues this Court should not grant Progressive's motion for summary judgment as to his bad faith and breach of fiduciary duty claims.

"Under the rule of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), 'federal courts sitting in diversity jurisdiction apply state substantive law and federal procedural law.'" Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir.2003) (quoting Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996)). The Nevada Supreme Court's decisions bind this Court when interpreting Nevada state law. Nat'l Labor Relations Bd. v. Calkins, 187 F.3d 1080, 1089 (9th Cir.1999) (citation omitted).

In Nevada, the covenant of good faith and fair dealing is implicit in every insurance contract. U.S. Fid. & Guar. Co. v. Peterson, 540 P.2d 1070, 1071 (Nev. 1975). Derived from the covenant of good faith and fair dealing is the fiduciary-like duty between an insurer and insured. Powers v. United Services Auto. Ass'n, 114 Nev. 690, 962 P.2d 596, 603 (1998). The fiduciary-like duty "is basically a statement of the kind of good faith duty owed by an insurer to a first-party insured." Id. (citing Tynes v. Bankers Life Co., 224 Mont. 350, 730 P.2d 1115, 1124-26 (1986)). Therefore, in an insurance contract, the fiduciary nature of the relationship between insurer and insured is part of the covenant of...