Runolfson v. Safeco Insurance Company of America

Filing 51

MEMORANDUM DECISION and Order granting 39 Motion for Summary Judgment ; finding as moot 50 Motion to Continue. The Clerk of the Court is directed to enter judgment in favor of Defendant and against Plaintiff, and close this case forthwith. Signed by Judge Ted Stewart on 2/9/16. (jlw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
CASEY RUNOLFSON,

MEMORANDUM DECISION AND
ORDER GRANTING DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT

Plaintiff,
v.
SAFECO INSURANCE COMPANY OF
AMERICA,

Case No. 2:14-CV-588-TS

Defendant.

District Judge Ted Stewart

This matter is before the Court on Defendant Safeco Insurance Company of America’s
(“Safeco”) Motion for Summary Judgment. For the reasons discussed below, the Court will
grant Safeco’s Motion on the grounds of res judicata.
I. BACKGROUND
In October 2009, Safeco issued a homeowner’s insurance policy to Plaintiff Casey
Runolfson (“Runolfson”), which was renewed in October 2010. To obtain the insurance,
Runolfson contacted Marci Pope with McKeachnie Insurance, an insurance broker in Vernal,
Utah. Runolfson stated that his father would come in and sign any papers needed for the policy,
as he was out of town at the time. Runolfson gave Ms. Pope some information over the phone,
she quoted him a rate, and later Runolfson’s father went to the insurance office and signed the
application 1 on Runolfson’s behalf. It is disputed whether Ms. Pope inquired about Runolfson’s
dog ownership while taking his information. However, it is undisputed that Runolfson owned at
least one pit bull that he kept at his home when the policy was issued and at all times that the

1

Runolfson disputes that the documents given to him upon issuance of the policy,
including the page that his father signed, constitute an “application.”
1

policy was in force. It is also undisputed that, despite this, the application form submitted to
Safeco by McKeachnie Insurance and signed by Runolfson’s father indicated that there were no
dogs on the premises. Had the application indicated that Runolfson owned a pit bull, Safeco
would have denied him coverage.
On April 2, 2011, Runolfson’s two pit bulls attacked James Wayman (“Wayman”)
causing serious injuries. Both Runolfson and Wayman contacted Safeco requesting coverage for
Wayman’s injuries. The request triggered an investigation into Runolfson’s coverage because
his application on file with Safeco had the “no dogs” box checked. Runolfson told a Safeco
investigator on April 12, 2011, that he did have pit bulls and had owned at least one pit bull the
entire duration of the policy. On June 9, 2011, Safeco informed Runolfson that it intended to
rescind his policy based on the material misrepresentation on his application that he had no dogs.
Safeco informed Runolfson that this omission would have triggered a declination of coverage,
and therefore gave it grounds to rescind coverage.
On June 30, 2011, Safeco brought a declaratory judgment action against Runolfson in
Utah state court seeking recession of the policy. On October 3, 2011, in exchange for the refund
of his $1,275 in premium payments, Runolfson agreed to rescind the policy and signed a Release
of All Claims. The Release stated:
In consideration of said sum, I hereby release and forever discharge
Safeco Insurance Company of America, and all of its agents, employees,
successors, insurers, assigns, and related entities (hereinafter referred to as
“Releasees”) from any and all claims and causes of action which now exist or
which may hereafter accrue, because of, for, arising out of, or in any way
connected with insurance Policy No. OY06637922, which I entered into on
October 27, 2009 thru October 27, 2010, and extended to October 27, 2010 thru
October 27, 2011. . . .
I also release and forever discharge Releasees from any and all claims and
causes of action which now exist or which may hereafter accrue, because of, for,
arising out of, or in any way connected with an occurrence on April 2, 2011,
wherein dogs under my ownership attacked James Wayman.
2

****
I understand and agree that this is a release of all claims against Safeco
Insurance Company of America and includes, but is not limited to, all claims
under Insurance Policy No. OY06637922, claims for defense, indemnification,
and reimbursement, claims for breach of contract, breach of implied covenant of
good faith and fair dealing, claims for mental or emotional distress, claims for
loss of time, wages, income, profits, claims for punitive damages, and claims for
attorney’s fees and costs.
****
The foregoing enumeration of claims is illustrative, and the claims hereby
released are in no way limited by the above recitation of specific claims, it being
the intent of the parties to this Release to fully and completely release and
discharge Releasees from all claims. . . .
****
I FURTHER STATE THAT I HAVE CAREFULLY READ THE
FOREGOING RELEASE OF ALL CLAIMS, KNOW AND UNDERSTAND
THE CONTENTS THEREOF, HAVE CONSULTED WITH MY ATTORNEY
CONCERNING THE CONTENTS THEREOF AND THAT I SIGN THE SAME
AS MY OWN FREE ACT. 2
On that same date, Safeco and Runolfson filed a Stipulation for Entry of Judgment in the
state court action (“Consent Judgment”). They agreed to judgment being entered in favor of
Safeco and against Runolfson rescinding the insurance policy. As stated in the stipulation,
Safeco agreed to reimburse Runolfson the $1,275 he paid for insurance premiums, and
Runolfson agreed to “release all claims against Safeco Insurance Company of America that
currently exist, or may arise in the future under Policy No. OY06637922,” and “to release all
claims against Safeco Insurance Company of America that currently exist, or may arise in the
future, due to an incident on April 2, 2011 where Casey Runolfsen’s dogs attacked James
Wayman.” 3 On October 21, 2011, the state court entered the Order and Judgment on Stipulation
memorializing the agreement. 4

2

Docket No. 40-9, at 2.

3

Docket No. 40-7, at 2–3.

4

Docket No. 40-8, at 2.
3

Over two years after the rescission and entry of judgment, on April 1, 2014, Wayman
filed suit against Runolfson in state court. Runolfson tendered the defense to Safeco, who denied
the tender based on the 2011 settlement. 5 In turn, on July 16, 2014, Runolfson filed suit against
Safeco in state court asserting claims for breach of contract, breach of the implied covenant of
good faith and fair dealing, fraud, and for declaratory judgment. 6 Safeco removed.
II. DISCUSSION
Summary judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” 7 In
considering whether a genuine dispute of material fact exists, the Court determines whether a
reasonable jury could return a verdict for the nonmoving party in the face of all the evidence
presented. 8 The Court is required to construe all facts and reasonable inferences in the light most
favorable to the nonmoving party. 9 While some facts are disputed, it is undisputed that
Runolfson entered into the Consent Judgment in state court to rescind his homeowner’s
insurance policy and signed a release of any other claims that he might have remaining against
Safeco. The Court holds that the Consent Judgment precludes Runolfson’s claims under the
doctrine of res judicata for the reasons stated below.
“The Constitution’s Full Faith and Credit clause, Art. IV, § 1, is implemented by the
Federal Full Faith and Credit Statute. 28 U.S.C. § 1738, which reads . . . ‘judicial proceedings . .

5

Docket No. 2-2, at 5.

6

Id. at 5–10.

7

Fed. R. Civ. P. 56(a).

8

See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Clifton v. Craig, 924
F.2d 182, 183 (10th Cir. 1991).

9

See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);
Wright v. Sw. Bell Tel. Co., 925 F.2d 1288, 1292 (10th Cir. 1991).
4

. shall have the same full faith and credit in every court within the United States . . . as they have
by law . . . in the courts of such State . . . from which they are taken.’” 10 Therefore, federal
courts “‘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.’” 11 Therefore, the
Court looks to Utah law to determine whether Runolfson’s claims are barred by res judicata.
In Utah, “‘[t]he doctrine of res judicata embraces two distinct branches: claim preclusion
and issue preclusion.’” 12 Claim preclusion involves the same parties, their privies, and “all
issues that could have been litigated as well as those that were, in fact, litigated in the prior
action.” 13 Issue preclusion “prevents parties or their privies from relitigating facts and issues in
the second suit that were fully litigated in the first suit.” 14
Runolfson’s claims are barred by claim preclusion. Claim preclusion bars claims in a
subsequent action when three elements are met: 1) both actions involve the same parties or their
privies, 2) the allegedly barred claim was presented, or could have been presented in the first
action, and 3) the claim in the first action must have been resolved by a final decision on the
merits. 15
Here, all elements of claim preclusion are met. First, both actions involve the same
parties, Safeco and Runolfson; second, both claims arise out of the same transaction, Runolfson’s

10

Vance v. State of Utah, 744 F.2d 750, 752 (10th Cir. 1984) (applying Utah preclusion
law in a diversity case).
11

Id. (quoting Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 81 (1984)).

12

Mack v. Utah State Dept. of Commerce, 221 P.3d 194, 203 (Utah 2009) (quoting
Macris & Assocs. v. Neways, Inc., 16 P.3d 1214, 1219 (Utah 2000)).
13

Buckner v. Kennard, 99 P.3d 842, 846 (Utah 2004) (internal quotation marks omitted).

14

Id. (internal quotation marks omitted).

15

Miller v. USAA Cas. Ins. Co., 44 P.3d. 663, 678 (Utah 2002).
5

alleged misrepresentation to Safeco and Safeco’s subsequent rescission of his homeowner’s
policy; and finally, the state court judgment is considered a final judgment on the merits.
Runolfson concedes in his memorandum in opposition to summary judgment that “the
first two elements have been met,” 16 but disputes that the Consent Judgment was a final
judgment on the merits. He argues that a Consent Judgment is generally not appealable, and
therefore cannot be a final judgment on the merits for the purposes of claim preclusion.
Runolfson is mistaken. The Utah Court of Appeals has held that “claim preclusion applies to
consent judgments” and that the fact that a judgment is entered upon “a stipulation does not
change [that] holding.” 17
Runolfson argues, in the alternative, that the judgment is void and is therefore a nullity,
and as such, cannot be a final judgment on the merits. “A judgment is not void merely because it
is erroneous or because some irregularity inhered in its rendition. It is void only if the court that
rendered it lack jurisdiction of the subject matter or of the parties or if the court acted in a
manner inconsistent with due process.” 18
The Eighth District Court of Utah had jurisdiction to enter judgment on Safeco’s claim
and did not act in a manner inconsistent with due process. The alleged misrepresentation, the
issuance of the policy, and the dog attack all occurred in Vernal, Utah. Absent a motion to
remove by either party, the Eighth District Court had personal and subject matter jurisdiction
over the claim.
Runolfson argues that the judgment was inconsistent with due process because Wayman
was not notified of the declaratory judgment action or the consent judgment and had no
16

Docket No. 40, at 7.

17

State of Utah v. V.G.P. 845 P.2d 944, 946 (Utah Ct. App. 1992).

18

Richins v. Delbert Chipman & Sons Co., 817 P.2d 382, 385 (Utah Ct. App. 1991).
6

opportunity to join. This argument is unavailing because, notwithstanding his injuries, Wayman
did not have standing to join Safeco’s declaratory judgment suit. The Utah Supreme Court has
stated “we want to repel any inference . . . that one who claims to be damaged by the negligent
act of another, is a proper party to an action by [that party’s] insurer . . . whereby a declaratory
judgment is sought declaring the legal effect of the terms of such a policy. . . . The tort victim has
no present legal interest in [such an] insurance contract.” 19 Wayman had the opportunity to
receive due process by seeking a judgment against Runolfson, which he eventually obtained
through arbitration.
Runolfson relies on a California state appellate court case to further argue that a judgment
is void when it violates a statutory scheme or offends public policy. This is not Utah law, and
the Utah state child support case that Runolfson cites, which tangentially supports this
proposition, is inapposite in this context of an insurance dispute. The statutory scheme that
Runolfson argues has been violated is Utah Code Ann. § 31A-22-202, which prohibits collusion
between an insurer and insured to retroactively abrogate insurance coverage after a loss that
harms a third party. Safeco counters that this statute only applies to collusion between an insurer
and insured, and not to stipulations that allow courts to enter judgment in contested litigation.
The Court need not resolve which interpretation of the statute is correct because Utah has not
extended the definition of void judgments beyond those entered without jurisdiction or in
violation of due process. Moreover, this is not the type of comprehensive statutory scheme at
issue in the cases relied upon by Runolfson. In any case, even if the judgment were void for
violating the statute, the proper remedy is not to bring this action, but to seek relief from the state
court judgment under Utah Rule of Civil Procedure 60(b)(4).

19

Utah Farm Bureau Ins. Co., v. Chugg, 315 P.2d 277, 281 (Utah 1957).
7

If the judgment was instead voidable because it was erroneous, which this Court need not
decide, the remedy is also to seek relief in state court under Rule 60. The erroneousness of a
judgment is no defense to claim preclusion. “Res judicata protects wrong decisions as fully as
right ones.” 20
III. CONCLUSION
It is therefore
ORDERED that Defendant Safeco’s Motion for Summary Judgment (Docket No. 39) is
GRANTED. It is further
ORDERED that Plaintiff Runolfson’s Motion to Continue (Docket No. 50) is DENIED
as moot.
The Clerk of the Court is directed to enter judgment in favor of Defendant and against
Plaintiff, and close this case forthwith.
DATED February 9th, 2016.
BY THE COURT:

________________________________________
Ted Stewart
United State District Judge

20

Vance, 744 F.2d at 753.
8