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Walker v. State Farm Mutual Automobile Insurance Co.

United States District Court, D. Nevada

April 26, 2017

JENNIFER M. WALKER, et al., Plaintiffs,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendants.

          ORDER

         Presently before the court is defendant State Farm Mutual Automobile Insurance Company's (“State Farm”) motion for summary judgment. (ECF No. 17). Plaintiff Jennifer M. Walker[1] filed a response (ECF No. 22), to which State Farm replied (ECF No. 25).

         I. Facts

         This is an insurance dispute arising from an accident that occurred at the Sand Mountain Recreation Area (“SMRA” or the “sand dunes”) and resulted in the death of plaintiff's husband Travis Walker (“decedent”).

         On October 30, 2015, decedent was riding his ATV with his friend Joshua Munn (“Munn”) on the sand dunes when his ATV stalled, causing decedent to dismount and inspect his ATV. (ECF No. 1-1). During decedent's inspection, Christian Schauman (“Schauman”) struck decedent with his sandrail. (ECF No. 1-1). Decedent died as a result of the impact. (ECF No. 1-1).

         At the time of the accident, decedent had an automobile insurance policy with State Farm, policy number 059135028 (the “policy”), which included $100, 000.00/$300, 000.00 of underinsured/uninsured motorist (“UM/UIM”) coverage. (ECF No. 1-1). Schauman was uninsured. (ECF No. 1-1).

         On November 10, 2015, plaintiff made a claim (no. 28-761N-685) under decedent's UM/UIM policy for the $100, 000.00 limit. (ECF Nos. 1-1; 17). On that same date, State Farm sent a reservation of rights letter regarding the definitions of “uninsured motor vehicles” and “underinsured motor vehicles.” (ECF No. 19-3).

         On November 23, 2015, State Farm issued a check for $3, 000.00 to plaintiff for medical payment coverage in connection with funeral expenses (claim no. 28-7M58-801; policy no. 0925-537-28A). (ECF No. 22-1 at 1).

         On December 17, 2015, State Farm sent a denial letter to plaintiff's counsel stating that it was unable to provide coverage under the UM/UIM policy because decedent was struck by a sandrail off of public roads and the policy specifically excludes vehicles designated for use off public roads. (ECF No. 19-5). Plaintiff alleges that State Farm denied the claim in bad faith without conducting a reasonable investigation. (ECF No. 1-1).

         Plaintiff filed the original complaint in state court on February 1, 2016. (ECF No. 1-1). The complaint alleges six causes of action: (1) breach of contract; (2) violation of the Unfair Claims Practices Act, NRS 686A.310 et seq.; (3) breach of the covenant of good faith and fair dealing; (4) breach of fiduciary duty; (5) misrepresentation; and (6) punitive damages. (ECF No. 1-1). State Farm removed the action to federal court on May 2, 2016. (ECF No. 1).[2]

         In the instant motion, State Farm moves for summary judgment in its favor on all claims. (ECF No. 17).

         II. Legal Standard

         The Federal Rules of Civil Procedure allow summary judgment when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a). A principal purpose of summary judgment is “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).

         For purposes of summary judgment, disputed factual issues should be construed in favor of the non-moving party. Lujan v. Nat'l Wildlife Fed., 497 U.S. 871, 888 (1990). However, to be entitled to a denial of summary judgment, the nonmoving party must “set forth specific facts showing that there is a genuine issue for trial.” Id.

         In determining summary judgment, a court applies a burden-shifting analysis. The moving party must first satisfy its initial burden. “When the party moving for summary judgment would bear the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted).

         By contrast, when the nonmoving party bears the burden of proving the claim or defense, the moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential element of the non-moving party's case; or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323-24. If the moving party fails to meet its initial burden, summary judgment must be denied and the court need not consider the nonmoving party's evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159- 60 (1970).

         If the moving party satisfies its initial burden, the burden then shifts to the opposing party to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987).

         In other words, the nonmoving party cannot avoid summary judgment by relying solely on conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the pleadings and set forth specific facts by producing competent evidence that shows a genuine issue for trial. See Celotex, 477 U.S. at 324.

         At summary judgment, a court's function is not to weigh the evidence and determine the truth, but to determine whether there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the nonmoving party is merely colorable or is not significantly probative, summary judgment may be granted. See Id. at 249-50.

         III. Discussion

         (1) Breach of Contract

         Plaintiff alleges that decedent had a policy with State Farm, that plaintiff submitted a claim for the accident, and that State Farm's failure to pay the benefits due under the UM/UIM policy constitutes a material breach of the insurance contract. (ECF No. 1-1 at 6).

         In diversity actions, as here, federal courts apply substantive state law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Nitco Holding Corp. v. Boujikian, 491 F.3d 1086, 1089 (9th Cir. 2007). Under Nevada law, contractual construction is a question of law and “suitable for determination by summary judgment.” Ellison v. Cal. State Auto. Ass'n, 797 P.2d 975, 977 (Nev. 1990).

         In Nevada, “to succeed on a breach of contract claim, a plaintiff must show four elements: (1) formation of a valid contract; (2) performance or excuse of performance by the plaintiff; (3) material breach by the defendant; and (4) damages.” Laguerre v. Nev. Sys. of Higher Educ., 837 F.Supp.2d 1176, 1180 (D. Nev. 2011) (citing Bernard v. Rockhill Dev. Co., 734 P.2d 1238, 1240 (Nev. 1987) (“A breach of contract may be said to be a material failure of performance of a duty arising under or imposed by agreement.”)).

         In the instant motion, State Farm argues that the breach of contract claim fails because a “sandrail” is not an “uninsured motor vehicle” and is therefore not covered under the policy. (ECF No. 17 at 11). In particular, State Farm asserts that the policy explicitly excludes vehicles designed for use primarily off public roads except while on public roads and that decedent was struck off of public roads with a sandrail, which is primarily an off-road vehicle. (ECF No. 17 at 9).

         In response, plaintiff contends that State Farm waived its right to question coverage by acting inconsistently in denying the UM/UIM claim, but approving the medical payment (“MedPay”) claim, and that such inconsistent conduct renders the policy ambiguous. (ECF No. 22 at 10-11).

         (i)The Policy

         Under Nevada law, “[a]n insurance policy is a contract that must be enforced according to its terms to accomplish the intent of the parties.” Farmers Ins. Exch. v. Neal, 64 P.3d 472, 473 (Nev. 2003). “Insurance policy clauses should be understood in their plain, ordinary and popular sense.” Keener v. Cal. Auto. Ass'n Inter-Ins. Bureau, 814 P.2d 87, 88 (Nev. 1991). “In the insurance context, we broadly interpret clauses providing coverage, to afford the insured the greatest possible coverage; correspondingly, clauses excluding coverage are interpreted narrowly against the insurer.” Fed. Ins. Co. v. Am. Hardware Mut. Ins. Co., 184 P.3d 390, 392 (Nev. 2008) (internal quotation marks omitted). “An insurance policy may restrict coverage only if the policy's language clearly and distinctly communicates to the insured the nature of the limitation.” United Nat'l Ins. Co. v. Frontier Ins. Co., 99 P.3d 1153, 1156-57 (Nev. 2004) (quotation omitted).

         Under the “uninsured motor vehicle coverage” section, the policy states that “We [(State Farm)] will pay compensatory damages for bodily injury an insured is legally entitled to recover from the owner or driver of an uninsured motor vehicle.” (ECF No. 18-2 at 17). The section sets forth, in relevant part, the following definitions and exclusions: . . . .

Uninsured Motor Vehicle means a land motor vehicle: 1. the ownership, maintenance, and use of which is:
a. not insured or bonded for bodily injury liability at the time of ...

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