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Nautilus Insurance Co. v. Access Medical, LLC

United States District Court, D. Nevada

May 18, 2017

Nautilus Insurance Company, Plaintiff
Access Medical, LLC, et al., Defendants


          Jennifer A. Dorsey United States District Judge.

         Nautilus Insurance Company brought this action seeking a declaration that it does not owe a duty to defend its insureds, defendants Access Medical, LLC, Flournoy Management, LLC, and one of the companies' managing members, Robert Clark Wood, II. Access, Flournoy, and Wood are defendants in a California state-court action brought by Wood's former business partner, non-party Ted Switzer.[1]

         I granted summary judgment in favor of Nautilus, holding that it had no duty to defend the defendants in the state action.[2] Nautilus's policy extends coverage only to claims arising from slander, libel, or disparagement, and I explained that the state-court claims asserted against the defendants did not allege any of these. The defendants now ask me to reconsider my prior order.[3]They do not cite any new law or changed circumstances; they contend that I clearly erred.

         But the defendants have simply repackaged the same arguments that they made before, and I am no more persuaded now than I was then. The thrust of their argument is that a covered claim, such as slander, could possibly be alleged against them in the future. I don't disagree, and if that happens, then perhaps Nautilus will then have a duty to defend. But that does not change the fact that existing allegations asserted against the defendants in the state-court action are not covered by Nautilus's policy. I therefore deny the defendants' motions.[4]

         Now that I have ruled that Nautilus had no duty to defend, it moves to recover the fees and costs it incurred in defending the state-court action. But Nautilus did not plead a claim for damages or reimbursement in its complaint, and it has not established that it is entitled to these costs as a matter of law, so I deny its motion.


         A. Defendants have not demonstrated that I should reconsider my prior order.

         A motion to reconsider must set forth “some valid reason why the court should reconsider its prior decision” by presenting “facts or law of a strongly convincing nature.”[5] Reconsideration is appropriate if the court “is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.”[6]“A motion for reconsideration is not an avenue to re-litigate the same issues and arguments upon which the court has already ruled”[7] or “to raise arguments or present evidence that could have been raised prior to the entry of judgment.”[8]

         The defendants do not demonstrate any of the three grounds for reconsideration. They offer no new material evidence, they cite no intervening caselaw, and they have not shown that I clearly erred in my prior order.

         1. Defendants fail to demonstrate that they need time for more discovery.

         The defendants' first argument for reconsideration is that they need more time for discovery. Rule 56(d) provides “a device for litigants to avoid summary judgment when they have not had sufficient time to develop affirmative evidence.”[9] To prevail on a Rule 56(d) request, the movant must show: “(1) that [she has] set forth in affidavit form the specific facts that [she] [hopes] to elicit from further discovery, (2) that the facts sought exist, and (3) that these sought-after facts are ‘essential' to resist the summary judgment motion.”[10] A Rule 56(d) motion “may be denied where the movant has been dilatory, or where the movant seeks irrelevant, speculative, or cumulative information.”[11]

         I previously explained why the defendants' prior showing on this point fell short, and they offer nothing new here. Defendants still have not articulated any specific facts that they hope to discover, what basis they have for believing those facts exist, and how these specific facts are essential. The defendants have therefore not shown that I clearly erred by declining to reopen discovery or otherwise delay my ruling under FRCP 56(d).

         2. Defendants fail to demonstrate that I clearly erred in determining that Nautilus has no duty to defend them.

         The defendants next argue that I clearly erred in determining that Nautilus has no duty to defend them. Defendants maintain that the allegations against them in the state action create a potential for coverage triggering Nautilus's duty to defend under its policy.

         “The duty to defend is broader than the duty to indemnify.”[12] An insurer has a duty to defend unless “there is no potential for coverage.”[13] The duty to defend arises whenever the insurer “ascertains facts [that] give rise to the potential of liability under the policy”[14] and “continues throughout the course of the litigation.”[15] To prevent an insurer from evading its defense obligations “without at least investigating the facts behind a complaint, ” any doubts about the insurer's duty to defend must be resolved in the insured's favor.[16] As I explained in my prior order, the duty to defend may be triggered by facts known to the insurer through extrinsic sources or by the factual allegations in the complaint.[17]

         Nautilus's policy requires it to defend against claims arising from “oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services[.]”[18] Defendants thus needed to point to allegations or extrinsic evidence asserted against them in the state action amounting to a claim of a “publication” of “material that slanders or libels” or “disparages” another.

         The thrust of the defendants' argument for reconsideration is a repackaged version of the same arguments that they made before. They contend that the claims asserted against them in the state-court action could potentially include an allegation of defamation in the future, so Nautilus should defend them. They point to the fact that the intentional-interference claim that they are defending against requires proof of a “wrongful act”-and that independent torts like defamation (which is covered under Nautilus's policy) could constitute that wrongful act.

         But the defect in the defendants' theory remains: there is no indication that the plaintiff in the state action has alleged that the predicate wrongful act for the intentional-interference claim is a defamatory publication that would trigger Nautilus's coverage. That the plaintiff in the state action could theoretically add a qualifying allegation or that new evidence could surface in the future makes no matter. The duty to defend does not sprout from thin air anytime someone is sued; it exists when the allegations and known facts create a potential for coverage. In other words, coverage exists only when the evidence and allegations given to the insurer could ...

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