Alex Jones v. St. Paul Fire & Marine Ins.

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 12, 2017
• Docket: 15-35856
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 12 2017 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

ALEX JONES; KEN JONES; JO ANNE No. 15-35856 JONES, D.C. No. 2:15-cv-00531-MJP Plaintiffs-Appellants, v.

ST. PAUL FIRE & MARINE INSURANCE MEMORANDUM* COMPANY, DBA Travelers; WASHINGTON RURAL COUNTIES INSURANCE PROGRAM; CANFIELD & ASSOCIATES,

Defendants-Appellees.

Appeal from the United States District Court for the Western District of Washington Marsha J. Pechman, District Judge, Presiding

ESTATE OF FELIPE VARGAS, No. 16-35160

Plaintiff-Appellant, D.C. No. 2:15-cv-00555-TSZ v.

ST. PAUL FIRE & MARINE INSURANCE COMPANY, DBA Travelers; WASHINGTON RURAL COUNTIES INSURANCE PROGRAM,

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Appeal from the United States District Court for the Western District of Washington Thomas S. Zilly, District Judge, Presiding

Submitted December 7, 2017** Seattle, Washington

Before: O’SCANNLAIN, TALLMAN, and WATFORD, Circuit Judges.

Alex Jones, Ken Jones, and Jo Anne Jones (collectively “Jones”) and the

Estate of Felipe Vargas (“Vargas”) appeal from the district court’s grants of

summary judgment in their lawsuits against St. Paul Fire & Marine Insurance

Company (“St. Paul”) and the Washington Rural Counties Insurance Program

(“WRCIP”).1 Because the facts are known to the parties, we repeat them only as

necessary to explain our decision.

I

We agree with the district court that WRCIP—the non-diverse defendant—

was fraudulently joined. The district court therefore properly dismissed WRCIP

and exercised diversity jurisdiction over the remaining claims against St. Paul.

** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). 1 Jones also filed suit against Canfield & Associates (“Canfield”), the third- party administrator responsible for WRCIP’s day-to-day administration. Because our analysis of the claims against WRCIP also governs the claims against Canfield, we do not treat them separately.

2 “Joinder of a non-diverse defendant is deemed fraudulent, and the defendant’s

presence in the lawsuit is ignored for purposes of determining diversity, if the

plaintiff fails to state a cause of action against a resident defendant, and the failure

is obvious according to the settled rules of the state.” Morris v. Princess Cruises,

Inc., 236 F.3d 1061, 1067 (9th Cir. 2001) (internal quotation and editorial marks

omitted). A defendant seeking to dismiss a non-diverse party as fraudulently

joined “is entitled to present the facts showing the joinder to be fraudulent.” Id.

(internal quotation marks omitted).

A

Jones and Vargas failed to state breach of contract claims against WRCIP

because they failed to identify any contractual duties it breached. Even assuming

that they may bring claims as third-party beneficiaries of WRCIP’s contract with

St. Paul, the only contractual duty they allege that WRCIP breached is its failure to

pay a portion of its self-insured retention for their benefit. Such argument has been

forfeited because Jones and Vargas failed to present it before the district court. See

Tibble v. Edison Int’l, 843 F.3d 1187, 1193 (9th Cir. 2016) (en banc) (“Generally,

we do not entertain arguments on appeal that were not presented or developed

before the district court.” (internal quotation and editorial marks omitted)).

Even were the argument not forfeited, it has no merit. The only authority

Jones and Vargas cite for the proposition that WRCIP owes any share of its self-

3 insured retention to them is a California intermediate appellate decision holding

that an insurer must treat its co-insureds equally when paying out coverage. See

Shell Oil Co. v. Nat’l Union Fire Ins. Co., 52 Cal. Rptr. 2d 580 (Cal. Ct. App.

1996). But that case is inapplicable because WRCIP is not an insurer but an

insured, and it satisfied its duties under its contract with St. Paul when it paid the

self-insured retention. Any dispute that Jones and Vargas have over insurance

coverage is therefore with St. Paul and not with WRCIP.

B

Jones and Vargas also failed to state other causes of action against WRCIP

because they have not plausibly alleged that WRCIP owed them any extra-

contractual duties. They acknowledge that the district court was correct in ruling

that WRCIP is exempted by Washington statute from the definition of “insurer,” so

it does not owe an insurer’s statutory duties. See Wash. Rev. Code § 48.01.050.

Jones’s and Vargas’s alternative bases for extra-contractual duties are

unpersuasive. WRCIP owes them no common-law fiduciary duties because neither

of them (nor their public defense attorneys) “occupie[d] such a relation to” WRCIP

“as to justify [them] in expecting that [their] interests will be cared for.”

Liebergesell v. Evans, 613 P.2d 1170, 1175 (Wash. 1980) (internal quotation

marks omitted). Jones and Vargas also rely on a general preambulatory provision

of Washington’s insurance code to suggest that WRCIP owes them duties of good

4 faith related to the general business of insurance. See Wash. Rev. Code

§ 48.01.030. But under Washington law, self-insurance and the payment of self-

insured retentions are not insurance, see Bordeaux, Inc. v. Am. Safety Ins. Co., 186

P.3d 1188, 1191–92 (Wash. Ct. App. 2008), so there is no reason to imply duties

on WRCIP from Washington’s insurance law. Even if there were, Jones and

Vargas have failed to plead any failure by WRCIP to act in good faith because it

paid its self-insured retention, at which point any coverage duties fell to St. Paul.

II

The district court’s grant of summary judgment was also correct because

Jones’s and Vargas’s public defense attorneys were not covered as “appointed

officials” under the insurance policies issued by St. Paul. “Undefined terms in an

insurance contract must be given their plain, ordinary, and popular meaning.”

Panorama Vill. Condo. Owners Ass’n Bd. of Directors v. Allstate Ins. Co., 26 P.3d

910, 915 (Wash. 2001) (internal quotation marks omitted). We do not believe the

plain meaning of “officials” includes independent contractors providing legal

defense services under contract with a government entity.

Even if it were plausible that such independent contractors could be included

within the ordinary meaning of “official,” additional evidence makes clear that

they are not in the context of the specific insurance policies at issue. The

definition of “volunteer worker” in those policies expressly distinguishes between

5 “elected or appointed officials” and “independent contractor[s]” as distinct

categories. Moreover, the contracts that Jones’s and Vargas’s public defense

attorneys entered with Grant County provided that “[n]o officer, employee, or

agent . . . of the COUNTY shall have any personal and/or financial interest . . . in

this Contract,” and the attorneys “agree[d] to indemnify, defend and hold the

COUNTY [and] its elected and appointed officers . . . harmless from and against

any . . . liability.” The contracts also required the attorneys to procure their own

legal malpractice insurance. Such contractual provisions are strong evidence that

neither Grant County nor the public defense attorneys themselves believed that the

attorneys were appointed officials. We will not contort the meaning of those

words years after the fact to upset those expectations.2

AFFIRMED.

2 Vargas also argues that he should be able to garnish Grant County’s insurance policy because, he says, he won a judgment against his public defense attorney in that attorney’s official capacity. But Vargas previously settled with the County and released it of “any and all manner of claims, demands, liabilities[,] or suits . . . which [he] may have had.” Because “an official-capacity suit is, in all respects other than name, to be treated as a suit against the [government] entity,” Kentucky v. Graham, 473 U.S. 159, 166 (1985), Vargas’s release of Grant County also covers any liability for official-capacity claims against its supposed agents.