Searcy v. Esurance Ins. Co.

• Decision Date: 17 March 2017
• Docket Number: Case No. 2:15–cv–00047–APG–NJK
• Citation: 243 F.Supp.3d 1146
• Parties: Rosalind SEARCY, Plaintiff, v. ESURANCE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Nevada

243 F.Supp.3d 1146

Rosalind SEARCY, Plaintiff,

v.ESURANCE INSURANCE COMPANY, Defendant.

Case No. 2:15–cv–00047–APG–NJK

United States District Court, D. Nevada.

Signed March 17, 2017

James J. Ream, Law Offices of James J. Ream, Las Vegas, NV, for Plaintiff.

Daniel Aquino, Gordon M. Park, McCormick Barstow, LLP, Las Vegas, NV, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART THE DEFENDANT'S SUMMARY JUDGMENT MOTION

(ECF No. 74)

ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE

Plaintiff Rosalind Searcy brought this lawsuit for extra-contractual damages against her insurer, defendant Esurance Insurance Company, alleging Esurance refused to pay her policy limits in bad faith and engaged in unfair claims practices. Esurance moves for summary judgment, arguing Searcy's claims for breach of contract and unfair claims practices are barred by claim preclusion because Searcy should have brought those claims in her prior breach of contract action against Esurance. Alternatively, Esurance seeks summary judgment against any award of punitive damages because it contends Esurance relied in good faith on its counsel's advice. Esurance also argues Searcy cannot recover attorney's fees and costs incurred in the underlying breach of contract action because she agreed to dismiss that action with each party to bear its own fees and costs. Finally, Esurance argues Searcy cannot recover damages for actions taken by Esurance's counsel in the underlying action because those actions are privileged.

Searcy responds that she properly waited until she established her entitlement to contractual benefits in the first litigation before bringing extra-contractual claims in this second lawsuit. As to the punitive damages, Searcy argues that Esurance cannot rely on the advice of counsel because Esurance had already decided to deny her the full policy limits and it ignored its attorney's advice to reevaluate her claim upon receipt of new evidence. As to the attorney's fees and costs, Searcy they are recoverable for her bad faith claim, which was not part of the prior action. Finally, Searcy contends the litigation privilege does not apply to Esurance for its bad faith conduct in forcing its insured to litigate past the time when her right to benefits became clear.

I. BACKGROUND

On August 2, 2012, Searcy was injured in a car accident caused by another driver rear-ending her vehicle. ECF No. 75–10 at 2–3. The insurance company for the person who caused the accident paid Searcy the policy limit of $15,000. ECF No. 75–4 at 5.

Searcy was insured by Esurance for underinsured motorist coverage up to $50,000 per person and $100,000 per accident. ECF No. 75–1 at 2. Searcy made several demands on Esurance for the $50,000 policy limit. ECF Nos. 75–5; 75–6; 75–7. Esurance agreed to pay some amounts as the case progressed, but never agreed to pay the full policy limit. ECF Nos. 75–7; 75–8.

On September 16, 2013, Searcy filed suit in Nevada state court against Esurance. ECF Nos. 75–9; 76–1. In that complaint (Searcy I ), Searcy asserted a single claim that Esurance breached the insurance contract.

ECF No. 76–1. She did not assert extra-contractual claims. Id.

The case went to arbitration and Searcy prevailed. ECF No. 76–2. The arbitrator issued his award on September 5, 2014, directing Esurance to pay the $50,000 policy limit. Id. Following the parties' request for clarification, the arbitrator issued a second order on September 17 stating that Searcy was entitled to the entire policy limit without offset for prior recoveries. ECF No. 76–3. The next day, Esurance sent a check for the remaining balance on the $50,000 policy limit to its attorney to forward to Searcy. ECF Nos. 75–11; 75–12 at 8. However, Searcy did not receive the check until October 23, 2014. ECF No. 75–12 at 9; 75–13. According to Esurance's attorney, the delay was caused by the check being mailed to the wrong address.¹ ECF No. 75–12 at 9. On February 3, 2015, the parties stipulated to dismiss Searcy I with prejudice, with each party to bear its own costs and attorney's fees. ECF No. 76–4.

Searcy filed this action (Searcy II ) in Nevada state court on December 4, 2014. ECF No. 1–2. Esurance then removed the case to this court. ECF No. 1. In her amended complaint, Searcy asserts against Esurance claims for bad faith and unfair claims practices. ECF No. 43.

II. ANALYSIS

A. Claim Preclusion

I "must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered." White v. City of Pasadena , 671 F.3d 918, 926 (9th Cir. 2012) (quotation omitted). I therefore look to Nevada's rules of preclusion to determine whether Searcy I bars the claims in this case. Id. Under Nevada law, claim preclusion applies where: (1) "the final judgment is valid," (2) "the parties or their privies are the same in the instant lawsuit as they were in the previous lawsuit, or the defendant can demonstrate that he or she should have been included as a defendant in the earlier suit and the plaintiff fails to provide a good reason for not having done so," and (3) "the subsequent action is based on the same claims or any part of them that were or could have been brought in the first case." Weddell v. Sharp , 350 P.3d 80, 85 (Nev. 2015) (en banc) (quotation and emphasis omitted).

Here, there is no dispute that the final judgment in Searcy I is valid. The parties stipulated to dismiss Searcy I with prejudice following the arbitrator's award. There also is no question the parties are the same in the two actions. Searcy sued Esurance in both cases.

The parties dispute whether Searcy's new claims are based on the same claims that were or could have been brought in the first case. "Generally, the date of final judgment in the first case marks the latest date at which the claim preclusion bar could apply." Carstarphen v. Milsner , 594 F.Supp.2d 1201, 1209 (D. Nev. 2009) ; see also Lawlor v. Nat'l Screen Serv. Corp. , 349 U.S. 322, 328, 75 S.Ct. 865, 99 L.Ed. 1122 (1955) ("While the 1943 judgment precludes recovery on claims arising prior to its entry, it cannot be given the effect of extinguishing claims which did not even then exist and which could not possibly have been sued upon in the previous case.").

"Under Nevada law, however, it is not necessarily the case that all claims arising before the date of final judgment in the first case are barred." Carstarphen , 594 F.Supp.2d at 1209. This district has predicted that the Supreme Court of Nevada would adopt the majority rule that "claim preclusion extends to claims in existence at the time of the filing of the original complaint in the first lawsuit and any additional claims actually asserted by supplemental pleading." Carstarphen , 594 F.Supp.2d at 1210 ; see also Round Hill Gen. Improvement Dist. v. B–Neva, Inc. , 96 Nev. 181, 606 P.2d 176, 178 (1980) (holding that a delinquent assessment claim in the second action was not identical, and thus not precluded, when the evidence supporting the second claim related to a different time period than evidence supporting the first claim). There are exceptions to the majority rule: (1) where the "second claim depends on the allegation that a series of wrongful acts constituted a single scheme, rather than merely later actions of the same type;" (2) the first action "incorporated a settlement intended to govern future, related transactions between the parties;" (3) the first action "resolved claims for declaratory or injunctive relief dealing with conduct persisting through trial or into the future;" or (4) the first action established "the legality of the continuing conduct into the future." Carstarphen , 594 F.Supp.2d at 1210–11 (quotations omitted).

Searcy's bad faith and unfair practices claims are claim precluded to the extent they rely on Esurance's conduct before the complaint in Searcy I was filed because she could have brought those claims in her complaint in Searcy I. See ECF No. 76–1 at 4–15 (alleging that Esurance had medical records of injuries resulting in over $24,000 in medical bills and had no evidence those injuries pre-dated the accident but Esurance nevertheless refused to settle for policy limits); id. at 16 (alleging Esurance was concerned with minimizing its own costs, not investigating, and causing Searcy hardship and stating Esurance did not discharge its fiduciary-like duty to Searcy).

Additionally, those aspects of Searcy's bad faith claims that are based on the same acts and information that Esurance had when it denied her claim pre–Searcy I are barred because she has not alleged any post-filing acts that would support a new bad faith claim. For example, Searcy alleges that prior to the complaint being filed in Searcy I , Esurance had doctor's reports and related medical bills showing the extent of her injuries. ECF No. 43 at 3–4. She further alleges that no new information came to light during discovery to suggest that her injuries were not caused by the accident or were not as extensive as she initially claimed. Id. at 7–10. Her extra-contractual claims based on Esurance's continued refusal to pay therefore are barred because there is no post-filing act to support a separate bad faith claim. Rather, these allegations are a continuation of the same pre-filing bad faith claim that Searcy could and should have brought in Searcy I.

However, not all of Searcy's claims fall into this category. Searcy makes three allegations of post-filing events: (1) she hired an economist to do an economic loss valuation in Searcy I and Esurance still denied payment after receiving the expert's report; (2) Esurance unreasonably delayed payment for five weeks following the arbitrator's award;² and (3) Esurance's attorney in Searcy I engaged in various aggressive litigation tactics, such as asking her embarrassing and irrelevant questions during her deposition. Id. at 5–7, 18–19. Searcy could not have brought a bad faith claim based on these allegations when sh...