Echelon Property & Casualty Insurance Company v. Allstate Med Trans LLC et al

Filing 16

ORDER - IT IS ORDERED that Echelon's motion for default judgment (Doc. 12 ) is granted in part and denied in part. A separate judgment will issue, after which the Clerk of Court shall terminate this action. See document for complete details. Signed by Judge Dominic W Lanza on 6/15/2020. (WLP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Echelon Property & Casualty Insurance
Company,

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Plaintiff,

No. CV-19-08295-PCT-DWL
ORDER

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v.
Allstate Med Trans LLC, et al.,
Defendants.

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In this action, Plaintiff Echelon Property & Casualty Insurance Company

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(“Echelon”) seeks a declaration that an insurance policy it issued to Defendant Allstate

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Med Trans LLC (“Allstate Med”) doesn’t cover a car accident that occurred in July 2017.

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(Doc. 1.) Although Allstate Med was served with the complaint (Doc. 11), it never

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answered or otherwise responded. Accordingly, Echelon has filed a motion for default

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judgment. (Doc. 12.) Specifically, Echelon seeks a judgment that (1) confirms the absence

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of coverage and (2) includes an award of $3,664.50 in attorneys’ fees and costs. For the

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following reasons, Echelon’s motion will be granted in part and denied in part.
BACKGROUND

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I.

Underlying Facts

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The following facts are derived from Echelon’s complaint. (Doc. 1.)

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Echelon issued an insurance policy to Allstate Med. (Id. ¶ 12.) The policy had

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several exclusions, including an exclusion for “automobile related claims.” (Id. ¶ 16.) This

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exclusion encompassed any claim for “‘[b]odily injury’ or ‘property damage’ arising out

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of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or

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watercraft owned or operated by or rented or loaned to any insured.” (Id.) The policy also

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included a provision requiring Allstate Med “to notify Echelon as soon as practicable of an

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occurrence or offense which may result in a claim.” (Id. ¶ 16.)

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In July 2017, a minivan owned by Allstate Med was involved in a collision. (Id. ¶
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In June 2019, one of the occupants of the vehicle that was struck by the minivan

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filed a lawsuit against Allstate Med. (Id. ¶ 20.) Among other things, the lawsuit alleged

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that the driver of the minivan, who was one of Allstate Med’s employees, was intoxicated

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at the time of the collision. (Id. ¶ 22.)

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In September 2019, Echelon was notified for the first time about the collision. (Id.

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¶¶ 25, 26.) This notification occurred when Allstate Med’s attorneys delivered a tender for

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a defense in the lawsuit. (Id. ¶ 25.) In the tender, Allstate Med admitted that the driver

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was one of its employees and further admitted that the employee was intoxicated at the

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time of the collision. (Id. ¶ 27.) Additionally, Allstate Med admitted that the minivan “had

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been removed from its auto policy because it was temporarily out of service and not

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scheduled or authorized for any rides.” (Id. ¶ 28.)

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On October 3, 2019, Echelon responded to the tender by informing Allstate Med

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that it was disclaiming coverage based on, inter alia, the automobile exclusion in the

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policy. (Id. ¶ 30.)

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On October 8, 2019, Allstate Med’s attorneys informed Echelon that they disagreed

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with the determination of non-coverage (without explaining why) and indicated they would

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pursue an assignment of rights against Echelon. (Id. ¶ 31.)

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II.

Procedural History

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On October 9, 2019, Echelon initiated this action by filing a complaint. (Doc. 1.)

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The complaint seeks a declaration of no coverage, as well as costs and attorneys’ fees. (Id.

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at 5-6.)

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On December 31, 2019, Echelon sought an extension of time to complete service.
(Doc. 9.) That motion was granted. (Doc. 10.)

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On January 13, 2020, Echelon timely serve Allstate Med. (Doc. 11.)

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On March 4, 2020, after Allstate Med failed to answer or otherwise respond to the

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complaint, Echelon applied for entry of a default (Doc. 13) and also filed a motion for

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default judgment (Doc. 12).

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On March 6, 2020, the Clerk entered the requested default. (Doc. 15.)

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ANALYSIS
I.

Default Judgment Standard

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The “decision whether to enter a default judgment is a discretionary one.” Aldabe

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v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The following factors, known as the Eitel

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factors, may be considered when deciding whether default judgment is appropriate: (1) the

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possibility of prejudice to the plaintiff, (2) the merits of the claims, (3) the sufficiency of

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the complaint, (4) the amount of money at stake, (5) the possibility of factual disputes, (6)

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whether the default was due to excusable neglect, and (7) the policy favoring decisions on

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the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

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“[T]he general rule” for default judgment purposes “is that well-pled allegations in

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the complaint regarding liability are deemed true.” Fair Housing of Marin v. Combs, 285

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F.3d 899, 906 (9th Cir. 2002). “The district court is not required to make detailed findings

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of fact.” Id. “However, necessary facts not contained in the pleadings, and claims which

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are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of N. Am.,

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980 F.2d 1261, 1267 (9th Cir. 1992).

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II.

The First, Fifth, Sixth, And Seventh Eitel Factors

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“In cases like this one, in which Defendants have not participated in the litigation at

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all, the first, fifth, sixth, and seventh [Eitel] factors are easily addressed.” Zekelman Indus.

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Inc. v. Marker, 2020 WL 1495210, *3 (D. Ariz. 2020).

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The first factor weighs in favor of default judgment. If Echelon’s motion for default

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judgment were denied, it would be without other recourse. See, e.g., Stillwater Ins. Co. v.

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Fricker, 2018 WL 2985255, *1 (D. Ariz. 2018) (first factor weighed in favor of default

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judgment in declaratory judgment action where insurer sought determination of no

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coverage); Mesa Underwriters Specialty Ins. Co. v. Paradise Skate, Inc., 2016 WL

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9045622, *3 (N.D. Cal. 2016) (“There is potential prejudice where denying default

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judgment would deny an insurer a judicial determination as to whether it has a duty to

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indemnify and defend the defendant and whether it is entitled to reimbursement of the

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defense costs in the underlying action. Moreover, an insurer’s continued exposure to

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liability in an underlying lawsuit amounts to potential prejudice that weighs in favor of

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default judgment.”) (citations omitted).

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The fifth and sixth factors weigh in favor of default judgment or are neutral. Due

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to Allstate Med’s failure to participate, there is no dispute over material facts and no

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indication that default is due to excusable neglect.

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The seventh factor generally weighs against default judgment, given that cases

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“should be decided on their merits whenever reasonably possible.” Eitel, 782 F.2d at 1472.

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However, the existence of Rule 55(b) of the Federal Rules of Civil Procedure, which

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authorizes default judgments, “indicates that this preference, standing alone, is not

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dispositive.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002).

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Put simply, “the default mechanism is necessary to deal with wholly unresponsive parties

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who could otherwise cause the justice system to grind to a halt. Defendants who appear to

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be ‘blowing off’ the complaint should expect neither sympathy nor leniency from the

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court.” 2 Gensler, Federal Rules of Civil Procedure Rules and Commentary, Rule 55, at

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119-20 (2020).

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III.

The Fourth Eitel Factor—The Amount Of Money At Stake

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“Where the plaintiff’s claim is for declaratory relief rather than for money damages,

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some courts have found that this factor weighs in favor of granting default judgment,” but

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“[w]here the declaratory relief sought implicates the parties and merits of a separate action,

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. . . courts have considered the amount at stake in that separate action while weighing

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the Eitel factors.” Stillwater Insurance, 2018 WL 2985255 at *2.

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Here, although Echelon is not seeking an award of damages against Allstate Med,

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the declaratory relief it is seeking is still valuable—it certified in its complaint that diversity

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jurisdiction exists because the amount in controversy exceeds $75,000. (Doc. 1 ¶ 11.)

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$75,000 is a substantial sum, so the fourth factor weighs against granting default judgment.

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IV.

The Second And Third Eitel Factors—Merits And Sufficiency

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That leaves the second and third Eitel factors—the merits of the claim and the

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sufficiency of the complaint. “These two factors are often analyzed together and require

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courts to consider whether a plaintiff has stated a claim on which it may recover.” Vietnam

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Reform Party v. Viet Tan - Vietnam Reform Party, 416 F. Supp. 3d 948, 962 (N.D. Cal.

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2019) (internal quotation marks omitted). “Of all the Eitel factors, courts often consider

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the second and third factors to be the most important.” Id.

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Here, both factors weigh in favor of granting default judgment. Taken as true, the

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factual allegations in the complaint establish that the accident fell within the policy’s

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automobile exclusion. Thus, Echelon is entitled to a determination of no coverage. Cf.

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Stillwater Insurance, 2018 WL 2985255 *2 (second and third Eitel factors favored default

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judgment in insurer’s declaratory relief action because complaint established that

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underlying lawsuit fell within policy’s exclusions).

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V.

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Balancing The Factors
Having considered all of the Eitel factors, the Court concludes that default judgment

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is appropriate.

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VI.

Attorneys’ Fees And Costs

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Echelon also requests attorneys’ fees and costs “pursuant to Federal Rule of Civil

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Procedure 54(d)(2), Local Rule of Federal Civil Procedure 54.2, and A.R.S. § 12-341.01.”

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(Doc. 12 at 2.)

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As an initial matter, the only one of these provisions that might provide a substantive

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entitlement to attorneys’ fees is A.R.S. § 12-341.01. The other provisions set forth the

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procedures governing requests for attorneys’ fees—they do not, on their own, entitle a

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prevailing party to recover such fees.

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A.R.S. § 12-341.01(A) provides in relevant part that, “[i]n any contested action

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arising out of a contract, express or implied, the court may award the successful party

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reasonable attorney fees.” Here, Echelon is clearly the successful party, and although

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Echelon did not provide any briefing concerning whether this lawsuit qualifies as an

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“action arising out of a contract,” the law makes clear that it does. See, e.g., Nat. Union

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Fire Ins. Co. of Pittsburgh, Pa. v. Aero Jet Servs., LLC, 2012 WL 510490, *1-4 (D. Ariz.

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2012) (canvassing Arizona law before concluding that a “successful party in an insurance

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declaratory relief action” may seek fees under A.R.S. § 12-341.01(A)); John Deere Ins.

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Co. v. W. Am. Ins. Grp., 854 P.2d 1201, 1204-05 (Ariz. Ct. App. 1993) (awarding fees

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under A.R.S. § 12-341.01 to insurer who initiated and prevailed in declaratory relief

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action).

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Nevertheless, A.R.S. § 12-341.01(A) does not compel an award of attorneys’ fees

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to the prevailing party in every contract action. “The legislature used the phrase ‘may

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award’ . . . . The natural import of this phrase is to vest discretion in the trial court to

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determine the circumstances appropriate for the award of fees.” Associated Indem. Corp.

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v. Warner, 694 P.2d 1181, 1184 (Ariz. 1985). The factors Arizona courts have identified

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as “useful” in determining whether to award fees pursuant to A.R.S. § 12-341.01(A)

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include (1) the merits of the claim or defense of the unsuccessful party; (2) whether the

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litigation could have been avoided or settled; (3) whether assessing fees would cause

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extreme hardship; (4) whether the successful party prevailed with respect to all relief

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sought; (5) whether the legal question was novel or had been previously adjudicated; and

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(6) whether an award would discourage other parties with tenable claims or defenses from

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litigating them.” Id.

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Here, the Court’s analysis is hamstrung by the fact that Echelon did not provide any

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briefing or evidence concerning these factors. Instead, it simply submitted an itemization

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of its fees and rates (Doc. 12-3) and an attorney declaration verifying that the listed time

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entries “were reasonabl[y] necessary for the successful defense of this matter” (Doc. 12-2

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¶ 12). This is problematic because, among other things, it’s not clear to the Court that

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litigation was actually necessary. Although the complaint mentions some back-and-forth

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between the parties’ counsel that preceded Echelon’s decision to file suit, which culminated

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with Allstate Med’s counsel voicing an intention to seek an assignment of rights (Doc. 1

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¶¶ 30-31), the absence of detail makes it impossible to evaluate whether Echelon truly

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needed to rush into federal court the very next day to file this lawsuit. Perhaps that step

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was justified, but Echelon hasn’t met its burden of establishing justification on the current

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record. Thus, the Court will, in its discretion, deny Echelon’s request for attorneys’ fees

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under A.R.S. § 12-341.01(A).

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Finally, although the declaration from Echelon’s attorney explains that Echelon is

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seeking $3,064 in attorneys’ fees and $600.50 in “costs” (Doc. 12-2 ¶ 14), it is unclear

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where the “costs” figure comes from. The enclosed billing records (Doc. 12-3) only seem

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to identify attorneys’ fees. In any event, to the extent Echelon wishes to submit a bill of

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costs under Rule 54(d)(1) and LRCiv 54.1(a) after entry of judgment, it may do so.

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Accordingly,

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IT IS ORDERED that Echelon’s motion for default judgment (Doc. 12) is granted

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in part and denied in part. A separate judgment will issue, after which the Clerk of Court

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shall terminate this action.

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Dated this 15th day of June, 2020.

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