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Searcy v. Esurance Insurance Co.

United States District Court, D. Nevada

March 17, 2017




         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, 000policy 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 (1955) (“While the 1943 judgment precludes recovery on claims arising prior to its entry, it cannot be given ...

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