3 UNITED STATES DISTRICT COURT
4 DISTRICT OF NEVADA
5 * * *
6 ALPS PROPERTY & CASUALTY Case No. 3:19-cv-00709-MMD-CLB INSURANCE COMPANY, 7 ORDER 8 Plaintiff, 9 v. 10 KALICKI COLLIER, LLP, et al., 11 Defendants. 12 AND ALL RELATED ACTIONS 13 14 I. SUMMARY 15 Plaintiff Alps Property & Casualty Insurance Company sues for a declaration that 16 Lawyers Professional Liability Insurance Policy No. ALPS18622-4 for the policy period 17 January 9, 2019 to January 9, 2020 (the “Policy”) does not cover Defendants Kalicki 18 Collier LLP, John A. Collier, and James A. Kalicki (collectively, the “Lawyer Defendants”) 19 in Defendant Robin Rumbaugh’s suit against them for legal malpractice, along with a 20 declaration of no duty to defend or indemnify, and a declaration that Plaintiff is entitled to 21 reimbursement from the Lawyer Defendants for money Plaintiff expended in defending 22 the Lawyer Defendants in Rumbaugh’s suit against them. (ECF No. 2.) While the Court 23 previously dismissed Rumbaugh’s cross-claims against the Lawyer Defendants (ECF 24 No. 63), Rumbaugh also asserted a counterclaim against Plaintiff seeking a declaration 25 of her direct or indirect rights in the Policy (ECF No. 10 at 22-25). Before the Court are: 26 (1) Plaintiff’s motion for summary judgment on both of its asserted claims (ECF No. 77 27 28 1 (“Motion”)); (2) Defendant Collier’s motion for leave to file a counter complaint against 2 Plaintiff (ECF No. 80 (“Counter Complaint Motion”));2 and (3) Plaintiff’s motion for leave 3 to file supplemental authorities in support of its Motion (ECF No. 100). As further 4 explained below, the Court will grant the Motion in full primarily because an objectively 5 reasonable lawyer would have known that dismissal with prejudice of a client’s case on 6 statute of repose grounds may lead to a malpractice claim, and deny the Counter 7 Complaint Motion because Collier has not shown sufficient diligence. The Court will also 8 grant the motion for leave to file supplemental authorities. 9 II. BACKGROUND3 10 This case arises out of the Lawyer Defendants’ representation of Rumbaugh in 11 her capacity as Trustee of the Harley Trusts. (ECF No. 2 at 5.) Rumbaugh was—and 12 is—seeking to recover money that her deceased brother allegedly took from the Harley 13 Trusts before he died, when he was serving as Trustee. (Id. at 5-6.) To this end, 14 Rumbaugh retained Kalicki Collier LLP, specifically Kalicki, in February 2015 to have 15 Rumbaugh confirmed as the Trustee, and to recover assets she believed had been 16 taken from the Harley Trusts. (Id. at 6.) Rumbaugh met again with Kalicki in March 2015, 17 exchanged correspondence with him, and dropped off several boxes of documents 18 regarding the Harley Trusts. (Id. at 6-7.) 19 /// 20 /// 21
1Rumbaugh (ECF No. 83) and the Lawyer Defendants (ECF Nos. 89, 90, 90-1) 22 filed responses, and Plaintiff filed replies (ECF Nos. 93, 95). The Lawyer Defendants explained that they inadvertently filed a draft response at ECF No. 89. (ECF No. 90.) 23 Thus, they filed the final draft of their response at ECF No. 90-1. (ECF No. 90.) The Court considered the final draft (ECF No. 90-1) in analyzing the Motion, and will cite to 24 that version herein.
25 2Plaintiff filed a response (ECF No. 82), and Collier filed a reply (ECF No. 91). In his reply, Collier dropped his request for “leave to amend the scheduling order to extend 26 the expert disclosure deadlines in his motion.” (Id. at 2.) Thus, only Collier’s request for leave to amend the scheduling order to file a counter complaint against Plaintiff remains. 27
3The following facts are undisputed unless otherwise noted. 28 1 On August 31, 2015, Kalicki Collier LLP filed a petition in state court, in Washoe 2 County, Nevada, to have Rumbaugh confirmed as the trustee of the Harley Trusts. (Id. at 3 7.) 4 In October 2015, Kalicki Collier LLP filed a notice to withdraw the petition filed in 5 August because they filed it in the wrong county, and filed a new petition in Nevada state 6 court in Carson City to have Rumbaugh confirmed as the trustee of the Harley Trusts. 7 (Id. at 7-8.) 8 The state court in Carson City confirmed Rumbaugh as trustee of the Harley 9 Trusts in November 2015. (Id. at 8.) 10 In October 2016, or nearly a year later, Kalicki began circulating a draft settlement 11 agreement with Cynthia Harley (Rumbaugh’s deceased brother’s wife) under which 12 Cynthia Harley would return a house and cash worth approximately a million dollars to 13 the Harley Trusts that Rumbaugh’s deceased brother had taken from the Harley Trusts. 14 (Id. at 8.) 15 In November 2016, Kalicki wrote Rumbaugh an email in which he explained that 16 he was too busy to continue working on her matters, and informed her that his law 17 partner Collier would work with her and Cynthia Harley’s counsel to finalize the proposed 18 settlement agreement. (Id. at 8.) 19 On February 16, 2017, Collier told Rumbaugh that Cynthia Harley was advised by 20 her counsel not to sign the proposed settlement agreement because the applicable 21 statute of repose, California Code of Civil Procedure § 366.2(a) (“Section 366.2(a)”) 22 barred any claim for recovery of Harley Trusts’ assets. (Id. at 9.) Rumbaugh alleges the 23 Section 366.2(a) repose period ran on October 15, 2015, or about eight months after 24 Kalicki began representing her. (Id. at 8-9.) Rumbaugh also alleges the February 16, 25 2017 phone call with Collier is the first time anyone from Kalicki Collier LLP told her there 26 may be a statue of repose issue preventing her from recovering trust assets. (Id. at 9.) 27 In emails sent in March 2017, Collier confirmed to Rumbaugh that Cynthia Harley 28 would not sign the proposed settlement agreement, and stated that Section 366.2(a) 1 may be a complete bar to her claims against her deceased brother, though he still 2 thought it was possible to bring claims against Cynthia Harley. (Id. at 10.) 3 In April 2017, Collier filed a petition in the state court case already pending in 4 Carson City in an attempt to recover Harley Trusts’ assets from Cynthia Harley. (Id.) 5 In June 2017, Cynthia Harley filed a motion to dismiss the petition for lack of 6 subject matter and personal jurisdiction, and filed a motion to continue trial in which she 7 asserted Section 366.2(a) barred Rumbaugh’s claims. (Id. at 11-12.) 8 In July 2017, the state court in Carson City dismissed Rumbaugh’s petition 9 against Cynthia Harley for lack of personal jurisdiction over Cynthia Harley and subject 10 matter jurisdiction over the Harley Trusts, both of which are based in California. (Id. at 11 12.) 12 In September 2017, Collier filed a new case against Cynthia Harley to recover 13 Harley Trusts’ assets in federal court, in the Eastern District of California. (Id.) 14 In December 2017, Cynthia Harley filed a motion to dismiss the federal case, 15 arguing Rumbaugh’s claims against her were barred by Section 366.2(a). (Id. at 13.) 16 In August 2018, the Eastern District of California granted Cynthia Harley’s motion 17 to dismiss Rumbaugh’s claims, agreeing they were barred by Section 366.2(a). The 18 Eastern District of California dismissed some of Rumbaugh’s claims with prejudice, and 19 others without prejudice, though it noted in its dismissal order that the court was 20 skeptical Rumbaugh could sufficiently amend her claims to survive another motion to 21 dismiss based on Section 366.2(a). (Id. at 13-14.) 22 In September 2018, Collier filed an amended complaint on Rumbaugh’s behalf in 23 the federal case. (Id. at 14.) 24 In October 2018, Cynthia Harley filed another motion to dismiss Rumbaugh’s 25 claims in her amended complaint based on Section 366.2(a). (Id.) 26 /// 27 /// 28 1 In July 2019, the Eastern District of California dismissed Rumbaugh’s amended 2 complaint with prejudice, finding that all of her claims against Cynthia Harley were barred 3 by Section 366.2(a). (Id. at 15.) 4 In August 2019, another attorney, Michael D. Hoy, sent a letter to the Lawyer 5 Defendants on Rumbaugh’s behalf, announcing Rumbaugh’s intention to sue them for 6 malpractice if they could not come to an agreement. (Id. at 15-16.) Within two days of 7 receiving that letter, the Lawyer Defendants sent Plaintiff notice of Rumbaugh’s 8 malpractice claim against them. (Id. at 16.) 9 While all of the above was occurring, the Lawyer Defendants completed two 10 applications for malpractice insurance with Plaintiff, where the second application, 11 completed in approximately December 2018, led to the Policy. (Id. at 20-23.) Both Kalicki 12 and Collier are listed as named insureds on the Policy. (Id. at 23.) In the application that 13 led to the Policy, the Lawyer Defendants responded ‘no’ to questions asking them 14 whether they were aware of any errors or omissions that could reasonably be expected 15 to be the basis of a claim against any member of Kalicki Collier LLP. (Id. at 21-23.) The 16 application leading to the Policy also stated that any claim arising from an error or 17 omission that should have been disclosed in response to the claim history section of the 18 application will be excluded from coverage under the Policy. (Id. at 23.) The Policy is a 19 claims made and reported policy covering the period January 9, 2019 to January 9, 20 2020. (Id.) The provisions of the Policy particularly important to this case (id. at 23-26) 21 are discussed in more detail infra in Section IV.3. 22 Beginning in the fall of 2019, and continuing to the present, Plaintiff provided 23 representation to the Lawyer Defendants regarding Rumbaugh’s malpractice claims 24 against them under a full reservation of rights. (Id. at 26-27.) 25 IV. DISCUSSION 26 The Court first addresses Plaintiff’s Motion, then Collier’s Counter Complaint 27 Motion, and then the impact of this order on the claims in this case, concluding this order 28 resolves this case in Plaintiff’s favor. 1 A. Plaintiff’s Motion 2 As to Plaintiff’s Motion, the Court first addresses Plaintiff’s motion for leave to file 3 supplemental authority in support of its Motion, then describes the legal standard 4 governing its review of Plaintiff’s Motion, and then addresses the Motion’s merits, with 5 the Court’s analysis organized to map to Plaintiff’s two claims in this case. 6 1. Motion for Leave to File Supplemental Authority 7 Six months after filing its Motion, Plaintiff filed a motion for leave to file 8 supplemental authority in support of that Motion, specifically, two recent orders from 9 federal district courts in North Dakota and Nebraska where Plaintiff prevailed at 10 summary judgment on similar arguments to those it makes here. (ECF No. 100; see also 11 101 (refiling the same motion with the exhibits).) No Defendants filed responses to 12 Plaintiff’s motion for leave to file supplemental authority. 13 “LR 7–2(g) requires parties to acquire leave of court before filing supplemental 14 briefs.” Ra Se. Land Co. LLC v. First Am. Title Ins. Co., Case No. 2:14-cv-01621-MMD- 15 NJK, 2016 WL 4591740, at *2 (D. Nev. Sept. 2, 2016). “A court may grant such a 16 request for good cause.” Id. Good cause may exist either when the proffered 17 supplemental authority controls the outcome of the litigation, or when the proffered 18 supplemental authority is precedential, or particularly persuasive or helpful. See Hunt v. 19 Washoe Cty. Sch. Dist., Case No. 3:18-cv-00501-LRH-WGC, 2019 WL 4262510, at *3 20 (D. Nev. Sept. 9, 2019). 21 To start, Plaintiff complied with LR 7-2(g) by filing a motion for leave to file 22 supplemental authorities instead of simply filing a notice of supplemental authorities or 23 similar document. Further, the Court finds good cause exists to grant the motion. 24 Defendants did not file any responses indicating they oppose the motion. And while 25 Plaintiff’s proffered authorities are of course out-of-circuit and applying the substantive 26 law of other states, the Court nonetheless finds them particularly persuasive and helpful 27 because they also involve Plaintiff, address the same policy provisions at issue here, 28 under similar factual circumstances, and in the same procedural posture. (ECF No. 100 1 at 3 (proffering ALPS Prop. & Cas. Ins. Co. v. Bredahl & Assocs., P.C., et al., Case No. 2 3:19-cv-00195, 2020 WL 6268043 (D.N.D. Oct. 23, 2020), appeal docketed, No. 20- 3 3432 (8th Cir. Nov. 20, 2020) (“Bredahl”); Roberts v. ALPS Prop. & Cas. Ins. Co., Case 4 No. 8:19-cv-00532, ECF No. 29 (D. Neb. Nov. 23, 2020) (“Roberts”).) The Court 5 considered these decisions in ruling on Plaintiff’s Motion. 6 2. Legal Standard 7 “The purpose of summary judgment is to avoid unnecessary trials when there is 8 no dispute as to the facts before the court.” Nw. Motorcycle Ass’n v. U.S. Dep’t of Agric., 9 18 F.3d 1468, 1471 (9th Cir. 1994) (citation omitted). Summary judgment is appropriate 10 when the pleadings, the discovery and disclosure materials on file, and any affidavits 11 “show there is no genuine issue as to any material fact and that the movant is entitled to 12 judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). An 13 issue is “genuine” if there is a sufficient evidentiary basis on which a reasonable fact- 14 finder could find for the nonmoving party and a dispute is “material” if it could affect the 15 outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 16 242, 248-49 (1986). Where reasonable minds could differ on the material facts at issue, 17 however, summary judgment is not appropriate. See id. at 250-51. “The amount of 18 evidence necessary to raise a genuine issue of material fact is enough ‘to require a jury 19 or judge to resolve the parties’ differing versions of the truth at trial.’” Aydin Corp. v. Loral 20 Corp., 718 F.2d 897, 902 (9th Cir. 1983) (quoting First Nat’l Bank v. Cities Service Co., 21 391 U.S. 253, 288-89 (1968)). In evaluating a summary judgment motion, a court views 22 all facts and draws all inferences in the light most favorable to the nonmoving party. See 23 Kaiser Cement Corp. v. Fishbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986) 24 (citation omitted). 25 The moving party bears the burden of showing that there are no genuine issues 26 of material fact. See Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). 27 Once the moving party satisfies Rule 56’s requirements, the burden shifts to the party 28 resisting the motion to “set forth specific facts showing that there is a genuine issue for 1 trial.” Anderson, 477 U.S. at 256. The nonmoving party “may not rely on denials in the 2 pleadings but must produce specific evidence, through affidavits or admissible discovery 3 material, to show that the dispute exists,” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 4 1409 (9th Cir. 1991), and “must do more than simply show that there is some 5 metaphysical doubt as to the material facts.” Orr v. Bank of Am., 285 F.3d 764, 783 (9th 6 Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 7 (1986)). “The mere existence of a scintilla of evidence in support of the plaintiff’s position 8 will be insufficient[.]” Anderson, 477 U.S. at 252. 9 3. Coverage 10 Plaintiff argues the Policy does not cover the Lawyer Defendants as to 11 Rumbaugh’s suit against them because they should have known at the time they applied 12 for the Policy that letting the applicable statute of repose run without a good reason 13 might lead Rumbaugh to sue them for malpractice. (ECF No. 77 at 21-29.) The Lawyer 14 Defendants counter that Plaintiff has not met its burden of proof to establish that either of 15 Plaintiff’s proffered exclusions apply, the Lawyer Defendants complied with pertinent 16 Policy provisions, rendering Plaintiff’s argument that exclusions apply unpersuasive, and 17 Plaintiff’s reliance on the Lawyer Defendants’ responses to the Policy application is 18 misleading because Plaintiff is not rescinding the Policy. (ECF No. 90-1 at 14-27.) 19 Rumbaugh counters Plaintiff’s Motion by arguing Plaintiff fails to apply the notice- 20 prejudice rule, has not shown prejudice, and misinterprets its own Policy. (ECF No. 83 at 21 7-23.) The Court agrees with Plaintiff. 22 The Parties—and the Court—all agree that Nevada law applies to the Court’s 23 interpretation of the Policy. (ECF Nos. 77 at 19 n.7, 83 at 7-8, 90-1 at 12-13.) See also 24 Capitol Indem. Corp. v. Blazer, 51 F. Supp. 2d 1080, 1084 (D. Nev. 1999). In Nevada, 25 “[a]n insurance contract’s interpretation, including whether it is ambiguous, is a matter of 26 law.” Probuilders Specialty Ins. Co. v. Double M. Const., 116 F. Supp. 3d 1173, 1178 (D. 27 Nev. 2015) (citation omitted). The Court must interpret the Policy in line with its plain 28 language if it is unambiguous. See Century Sur. Co. v. Casino W., Inc., 329 P.3d 614, 1 616 (Nev. 2014). “An insurance policy is considered ambiguous if ‘it creates [multiple] 2 reasonable expectations of coverage as drafted.’” Id. (citation omitted). Where, as here, 3 an insurer seeks to preclude coverage under an exclusion, Plaintiff must: “(1) draft the 4 exclusion in ‘obvious and unambiguous language,’ (2) demonstrate that the 5 interpretation excluding coverage is the only reasonable interpretation of the 6 exclusionary provision, and (3) establish that the exclusion plainly applies to the 7 particular case before the court.” Id. (citation omitted). 8 Plaintiff has established that its two proffered, unambiguous exclusions contained 9 in the Policy apply to the undisputed facts of this case. As Plaintiff explains (ECF No. 77 10 at 21), the Policy only provides coverage if “[a]t the Effective Date of this Policy, no 11 Insured knew or reasonably should have known or foreseen that the Wrongful Act might 12 be the basis of a Claim[.]” (ECF No. 2-3 at 11 (§ 1.A.2).) Wrongful Act is defined as “an 13 actual or alleged: (1) Act, error, or omission in Professional Services that were or should 14 have been rendered by the insured; or (2) a Personal Injury resulting from the 15 Professional Services of the Insured.” (Id. at 17 (emphasis omitted, where capitalization 16 indicates further defined terms).) Claim, subject to certain exceptions not relevant here, 17 “means a demand for money or services including, but not necessarily limited to, the 18 service of suit or institution of arbitration or alternative dispute resolution proceedings 19 against the Insured.” (Id. at 12.) Moreover, and alternatively, Plaintiff further argues the 20 Policy does not provide coverage for any Wrongful Act that occurred prior to its January 21 9, 2019 effective date if (ECF No. 77 at 21): 22 Prior to the Effective Date of this Policy, any Insured gave or should have given to any insurer, notice of a Claim or potential Claim arising from or in 23 connection with the Wrongful Act, or from any Wrongful Act that is connected temporally, logically or causally, by any common fact, 24 circumstance, situation, transaction, event, advice or decision to the Claim 25 or potential Claim. 26 (ECF No. 2-3 at 17 (§ 3.E.3).) 27 Plaintiff relies on either—or both—of these exclusions to argue Rumbaugh’s 28 malpractice suit against the Lawyer Defendants is not covered by the Policy because the 1 Lawyer Defendants missing the applicable statute of repose and then having a case filed 2 on Rumbaugh’s behalf dismissed on those grounds constituted a Wrongful Act that they 3 either knew or should have known would turn into a Claim before the effective date of 4 the Policy. (ECF No. 77 at 21-29.) The Court agrees. More specifically, it is undisputed 5 that Kalicki let Section 366.2(a) lapse about eight months after he agreed to represent 6 Rumbaugh, and then he handed the case off to Collier. (Id. at 25.) After he took over 7 Rumbaugh’s case, opposing counsel informed Collier that his client would not enter into 8 a settlement agreement with Rumbaugh because Section 366.2(a) barred Rumbaugh’s 9 claims against Cynthia Harley, and Collier passed this information on to Rumbaugh, 10 indicating it was likely Section 366.2(a) barred her claim. (Id. at 25-26.) But Collier 11 nonetheless pursued claims on Rumbaugh’s behalf, which a federal court in California 12 dismissed in August 2018 based on Section 366.2(a), noting it was unlikely Rumbaugh 13 could sufficiently amend her claims to avoid dismissal again. (Id. at 26-27.) Indeed, 14 Rumbaugh’s claims were later dismissed with prejudice. (ECF No. 2 at 15.) This all 15 happened before the Policy’s effective date. (ECF No. 77 at 15, 25-27.) These 16 undisputed facts show the Lawyer Defendants reasonably should have known 17 Rumbaugh may bring a malpractice claim against them, bringing this case within 18 Plaintiff’s proffered exclusions.4 19
4The Lawyer Defendants proffer a declaration from Jason Morris, Esq. to support 20 the proposition that, “[b]ased on common custom and practice in the industry, a death of a trustee has no legal effect on the character of the assets and a death of the trustee 21 does not change the character of the trust assets.” (ECF No. 90-1 at 7 (relying on ECF No. 90-3).) The Lawyer Defendants use this evidence to make the argument that the 22 Lawyer Defendants could not have objectively foreseen a potential malpractice suit. (ECF No. 90-1 at 22.) But the Morris declaration does not create a material dispute of 23 fact because it does not contradict the fact the Eastern District of California twice dismissed Rumbaugh’s claims brought by the Lawyer Defendants based on Section 24 366.2(a), once before the effective date of the Policy. The fact of the September 2018 dismissal Rumbaugh was ultimately unable to recover from—not the Lawyer Defendants’ 25 beliefs about whether that dismissal was correct—is what should have put them on notice a malpractice claim might be coming. See Colony Ins. Co. v. Kuehn, Case No. 26 2:10-cv-01943-KJD, 2012 WL 4472038, at *4 (D. Nev. Sept. 25, 2012) (“Where attorney errors led to dismissal of a client’s claims, courts may enter summary judgment on the 27 issue of reasonable expectation of a claim.”).
28 1 Further, Defendants do not dispute any of these facts. (ECF No. 83 (containing no 2 statement of facts), 90-1 at 4-11 (presenting facts that do not materially differ from the 3 facts as described supra in Section II).) Instead, they make several unreasonable 4 interpretive arguments and unpersuasive legal arguments. The Court addresses and 5 rejects these arguments below. 6 The Lawyer Defendants first argue Plaintiff’s interpretation of the Policy 7 exclusions is too broad, and would allow Plaintiff “to deny coverage each and every time 8 an attorney fails to provide it with notice of an arguable breach of professional services.” 9 (ECF No. 90-1 at 14-15.) But that argument fails to address either the facts of this case 10 or Plaintiff’s interpretation of the Policy’s exclusions as applied to these facts. The 11 Lawyer Defendants received multiple, undisputed indications that the initial statute of 12 repose mistake was a determinative issue adverse to Rumbaugh that they could not 13 avoid. Moreover, as Plaintiff argues (ECF No. 95 at 9-10), other courts, including most 14 notably one within this circuit, have stated that missing a statute of limitations deadline 15 would put a reasonable attorney on notice of a potential malpractice claim. See 16 Weddington v. United Nat. Ins. Co., Case No. C 07-1733 SBA, 2008 WL 590512, at *6 17 (N.D. Cal. Feb. 29, 2008), aff’d, 346 F. App’x 224 (9th Cir. 2009).5 The Court agrees that 18 a statute of limitations (or repose, as is the case here) mistake fatal to a client’s case 19 puts a reasonable lawyer on notice they may face a malpractice claim. See, e.g., 20 Chicago Ins. Co. v. Paulson & Nace, PLLC, 37 F. Supp. 3d 281, 294 (D.D.C. 21 2014), aff’d, 783 F.3d 897 (D.C. Cir. 2015) (“the attorney defendants had a ‘reasonable 22 basis to believe’ that they had ‘breached a professional duty’ to [their client] no later than 23 June 18, 2007, when the Virginia judge dismissed her medical malpractice claims with 24 prejudice” because their error cause the statute of limitations to run) (citation omitted). 25
5That said, Weddington dealt with failure to prosecute. See generally Weddington, 26 2008 WL 590512. In affirming the district court, the Ninth Circuit wrote that “Failure to bring an action to trial within five years is the sort of incident likely to give rise to a claim 27 for the reasons set forth in the district court’s order.” Weddington v. United Nat. Ins. Co., 346 F. App’x 224, 227 (9th Cir. 2009). 28 1 The Lawyer Defendants next argue Plaintiff’s proffered Policy exclusions do not 2 apply here because Claim, as defined in the policy, requires that legal proceedings have 3 already been instituted. (ECF No. 90-1 at 15-16.) But this argument is rendered 4 unpersuasive by the plain language of the Policy. (ECF No. 2-3 at 12 (defining that 5 Claim, subject to certain exceptions not relevant here, “means a demand for money or 6 services including, but not necessarily limited to, the service of suit or institution of 7 arbitration or alternative dispute resolution proceedings against the Insured.”) (emphasis 8 added).) In any event, Plaintiff’s argument is beside the point because Plaintiff’s 9 arguments turn on Wrongful Act, not Claim. (ECF Nos. 77 at 21, 95 at 3.) Plaintiff’s 10 argument is that any reasonable attorney would have been on notice a potential 11 malpractice claim may be coming at any of the several moments it became clear the 12 statute of repose issue was fatal to Rumbaugh’s claims regarding the Harley Trusts 13 before the effective date of the Policy. (ECF No. 77 at 27.) 14 The Lawyer Defendants’ remaining arguments similarly fail to grapple with this 15 straightforward and persuasive argument. Moreover, in attempting to limit Claim, 16 Potential Claim, and the prior knowledge exclusion in the Policy to a demand letter 17 threatening a lawsuit or the actual filing of a lawsuit—and their related arguments that 18 those terms are ambiguous—the Lawyer Defendants attempt to re-write the Policy in a 19 way unreasonably favorable to them. But the Court cannot do that. See Christensen v. 20 Darwin Nat. Assur. Co., Case No. 2:13-cv-00956-APG, 2014 WL 1628133, at *4 (D. Nev. 21 Apr. 14, 2014), aff’d, 645 F. App’x 533 (9th Cir. 2016) (“Where the provisions of a policy 22 are clear and unambiguous, the Court must enforce them as written.”). Plaintiff’s 23 proffered, unambiguous exclusions preclude coverage here. (ECF No. 2-3 at 11, 17.) 24 The Court therefore rejects the Lawyer Defendants’ remaining arguments. See 25 Christensen, 2014 WL 1628133, at *4-*6 (granting summary judgment to defendant 26 insurance company). 27 More generally, while both the Lawyer Defendants and Rumbaugh argue against 28 the ‘subjective-objective’ framework that Plaintiff argues applies here, the Court agrees 1 with Plaintiff that framework applies. (ECF No. 77 at 21-23.) As Judge Dawson found in 2 a case in this district proffered by Plaintiff in reply but not addressed by Defendants (ECF 3 Nos. 83, 90-1, 93, 95),6 courts will enforce a prior-knowledge exclusion like one of the 4 exclusions Plaintiff proffers here: “(1) if the insured had knowledge of the relevant suit, 5 act, error, or omission and (2) if the suit, act, error, or omission might reasonably be 6 expected to result in a claim or suit.” Kuehn, 2012 WL 4472038, at *4 (citing 7 Weddington, 2008 WL 590512, at *5). “The exclusion applies regardless of whether the 8 insured actually formed an expectation of a claim, if a reasonable ‘professional in the 9 insured’s position might expect a claim or suit to result.” Id. (citations omitted). “Where 10 attorney errors led to dismissal of a client’s claims, courts may enter summary judgment 11 on the issue of reasonable expectation of a claim.” Id. (citations omitted). Like Judge 12 Dawson—even if he did not explicitly use the phrase subjective-objective framework— 13 the Court finds the subjective-objective framework applies here. 14 The application of the subjective-objective framework to the facts of this case 15 further compels the conclusion that the Policy does not cover Rumbaugh’s suit against 16 the Lawyer Defendants. First, as described supra in Section II, the undisputed facts 17 show that both Kalicki and Collier knew about the statute of response issue, and that it 18 was likely fatal to Rumbaugh’s case, before they completed the Policy application. 19 Second, as also discussed supra, a reasonable attorney would have known the statute 20 of repose issue might result in a malpractice lawsuit like the one Rumbaugh eventually 21 filed. See Kuehn, 2012 WL 4472038, at *4 (explaining these are the two elements). 22 There is also no real dispute that the Lawyer Defendants’ error led to the dismissal of 23 Rumbaugh’s claims—more than once. See id. The Court therefore finds it appropriate to 24 grant Plaintiff’s Motion as to coverage. See id.; see also Weddington, 2008 WL 590512, 25 at *8 (granting summary judgment to defendant insurance company). 26
6The fact that Defendants did not address Kuehn is immaterial. See Hunt, 2019 27 WL 4262510, at *3 (“the court must comply with the law regardless of whether the parties cited to such law in the briefing.”) (citation omitted). 28 1 However, before moving on to reimbursement, the Court will address two of 2 Rumbaugh’s ultimately unpersuasive arguments raised in response to the Motion. 3 Specifically, while Rumbaugh argues the notice-prejudice rule applies here (and makes 4 other dependent arguments), the Court disagrees. (ECF No. 83 at 5-15.) The Policy is a 5 claims made and reported policy. (ECF No. 2-3 at 2, 10.) It says so several times in large 6 capital letters. (Id.) While the notice-prejudice rule applies to occurrence policies, see 7 Las Vegas Metro. Police Dep’t v. Coregis Ins. Co., 256 P.3d 958, 965 (Nev. 2011), it 8 does not clearly apply to claims made and reported policies such as the Policy. See 9 Physicians Ins. Co. of Wisconsin v. Williams, 279 P.3d 174, 178 n.4 (Nev. 2012) 10 (declining to reach the question but indicating through its chosen citations that the 11 Nevada Supreme Court would be unlikely to hold that the notice-prejudice rule applies to 12 claims made and reported policies); Burns v. Int’l Ins. Co., 929 F.2d 1422, 1425 (9th Cir. 13 1991) (affirming the district court’s holding “that the notice-prejudice rule does not apply 14 to a claims-made policy in California”); W. Edna Assocs., Ltd. v. Twin City Fire Ins. Co., 15 Case No. 2:19-cv-00607-GMN-BNW, 2020 WL 1308327, at *9 (D. Nev. Mar. 18, 2020) 16 (“the Nevada Supreme Court has not reached the question of whether the notice- 17 prejudice rule extends to claims made and reported policies.”); Cox v. Liberty Ins. 18 Underwriters, Inc., 773 F. App’x 931, 932 (9th Cir. 2019) (affirming the district court’s 19 holding that the notice-prejudice rule did not apply to a claims made and reported 20 policy). The Court therefore declines to apply the notice-prejudice rule to the Policy. 21 Second, Rumbaugh argues that Plaintiff’s proffered interpretation of the Policy is 22 impermissible under NAC 686A.660(4). (ECF No. 83 at 16-17.) However, NAC 23 686A.660(4) contains the carve-out, “except where there is a time limit specified in the 24 insurance contract or policy[.]” The Policy specifies time limits. (ECF No. 2-3 at 2 25 (explaining the policy is a claims made and reported policy that only covers claims made 26 and reported during the effective policy period), 10 (same), 20-25 (specifying additional 27 time limits).) Thus, the Policy does not appear to violate NAC 686A.660(4). Moreover, 28 1 Rumbaugh proffers no binding caselaw in support of her argument. (ECF No. 83 at 16- 2 17.) The Court also rejects Rumbaugh’s argument based on NAC 686A.660(4). 3 In sum, Plaintiff is entitled to summary judgment on its first claim for a declaration 4 that the Policy does not afford coverage to the Lawyer Defendants. 5 4. Reimbursement 6 Plaintiff argues it is also entitled to summary judgment on its reimbursement claim 7 because the Policy expressly provides for a right of reimbursement for money Plaintiff 8 spends defending a non-covered claim, and Plaintiff sought reimbursement in its 9 Complaint. (ECF No. 77 at 29-30.) The Lawyer Defendants primarily argue Plaintiff is not 10 entitled to reimbursement because Plaintiff is only entitled to reimbursement for 11 defending a claim that it has no legal duty to defend.7 (ECF No. 90-1 at 27-28.) Because 12 the Lawyer Defendants’ reimbursement argument rises and falls with their coverage 13 arguments the Court rejected supra, and because the Court otherwise agrees with 14 Plaintiff’s reading of its own Policy, the Court agrees with Plaintiff. 15 “The right to reimbursement does not arise unless there is an understanding 16 between the parties that the insured would be required to reimburse the insurer for 17 monies expended in providing a defense.” Blazer, 51 F. Supp. 2d at 1090 (denying the 18 insurance company’s request for reimbursement because it presented no evidence of 19 the existence of such an understanding). Plaintiff has proffered evidence of such an 20 understanding here—the Policy. (ECF No. 77 at 29-30.) The Policy provides that Plaintiff 21 has a right to seek reimbursement of any amount it pays to defend an insured against 22 any non-covered claim. (ECF No. 2-3 at 11 (§ 1.B.2).) Plaintiff also explicitly sought 23 reimbursement in its Complaint. (ECF No. 2 at 34-36.) Further, the Lawyer Defendants’ 24 argument effectively concedes that Plaintiff is entitled to reimbursement if Plaintiff 25 prevails on coverage. (ECF No. 90-1 at 27-28.) Because the Court found supra that 26 Rumbaugh’s claims against Lawyer Defendants are not covered by the Policy, the Policy 27
7Rumbaugh does not respond to the reimbursement portion of Plaintiff’s Motion. 28 1 provides for reimbursement. (ECF No. 2-3 at 11 (§ 1.B.2).) Thus, the Court will also 2 grant Plaintiff’s Motion as to reimbursement. 3 B. Collier’s Counter Complaint Motion 4 Collier seeks untimely leave to file a counter complaint against Plaintiff. (ECF No. 5 80.) The operative scheduling order gave the parties until May 24, 2020 to amend 6 pleadings or add parties, and Collier filed his motion on July 20, 2020. (ECF Nos. 62 at 7 3, 80.) The Court first describes the legal standard governing its review of Collier’s 8 Counter Complaint Motion, and then explains in more detail why it will deny his motion. 9 1. Legal Standard 10 Because Collier is seeking leave to file a counter complaint against Plaintiff after 11 the Court entered a scheduling order, and after the deadline to amend pleadings or add 12 parties expired on May 24, 2020 (ECF No. 62 at 3), Federal Rule of Civil Procedure 13 16(b)(4)’s “good cause” standard for modifying a scheduling order applies, not Rule 14 15(a)(2)’s more lenient amendment standard.8 The ‘good cause’ standard of Rule 16(b) 15 “primarily considers the diligence of the party seeking the amendment.” Johnson v. 16 Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). While the Court may 17 consider prejudice to the nonmoving party as an additional reason to deny a motion, “the 18 focus of the inquiry is upon the moving party’s reasons for seeking modification.” Id. 19 “[C]arelessness is not compatible with a finding of diligence and offers no good reason 20 for a grant of relief.... If [a] party was not diligent, the inquiry should end.” Id. (citations 21 omitted); see also In re W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 738 22 (9th Cir. 2013), aff’d sub nom. Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (2015) (“As in 23 Johnson, the Plaintiffs here have failed to demonstrate good cause for their untimely 24 motion to amend, and thus, the district court did not abuse its discretion in denying that 25 motion.”). 26 /// 27
8Collier relies on the wrong standard. (ECF No. 80 at 7-8.) 28 1 2. Analysis 2 Collier was not diligent in seeking the Court’s leave to file a counter complaint. 3 The Court will therefore deny the Counter Complaint Motion. See Johnson, 975 F.2d at 4 609 (stating the inquiry should end after a court determines the moving party was not 5 diligent). 6 Collier proffers two reasons why he was diligent. Collier first argues that his ability 7 to seek leave to file a counter complaint was impacted by the extraordinary 8 circumstances created by the COVID-19 pandemic, particularly the shelter-in-place 9 orders that went into effect in late March 2020. (ECF No. 80 at 5.) Second, he argues he 10 was diligent in seeking leave to file a counter complaint once he received Plaintiff’s 11 Motion. (Id.) Neither of these proffered reasons persuasively shows diligence. 12 Collier appears to seek leave to file a counter complaint to assert claims against 13 Plaintiff for including Collier in this case. (ECF No. 80 at 5-10.) But Collier was named as 14 a Defendant in this case from its inception on November 27, 2019. (ECF No. 2.) And the 15 Complaint contains numerous factual allegations against Collier. (Id.) If Collier wished to 16 assert counterclaims against Plaintiff based on his inclusion in this case, he could have 17 asserted them as early as the end of November 2019—but did not. In other words, the 18 Complaint, and not Plaintiff’s Motion, reasonably put Collier on notice for the first time 19 that he was a defendant in this case. Moreover, Collier does not even attempt to explain 20 what prevented him from filing or seeking leave to file a counter complaint between the 21 end of November 2019 and the end of March 2020, when he says the shelter-in-place 22 orders issued in response to the COVID-19 pandemic affected his ability to do so. 23 Further, Collier stipulated to amend the scheduling order (ECF No. 61), setting the May 24 24, 2020 deadline to amend pleadings once adopted by the Court (ECF No. 62), on April 25 3, 2020 (ECF No. 61)—or after the shelter-in-place orders that purportedly affected his 26 counsel’s productivity went into effect (ECF No. 80 at 5). Collier then proceeded to miss 27 the deadline he agreed to by about another two months. (ECF Nos. 61, 80.) Collier was 28 1 not diligent in seeking leave to file a counter complaint against Plaintiff. Collier’s Counter 2 Complaint Motion is therefore denied. 3 C. Other Claims 4 As noted, the Court previously dismissed Rumbaugh’s crossclaims against the 5 Lawyer Defendants. (ECF No. 63.) And as explained supra, the Court finds Plaintiff 6 entitled to summary judgment on both of its claims, meaning there is no coverage for 7 Lawyer Defendants under the Policy for Rumbaugh’s suit against them, and the Lawyer 8 Defendants must reimburse Plaintiff for the money Plaintiff spends providing a defense 9 in Rumbaugh’s suit against the Lawyer Defendants. The Court must also therefore direct 10 entry of judgment in Plaintiff’s favor on Rumbaugh’s crossclaim, because she has no 11 rights, direct or indirect, created by the Policy. As the Policy does not cover the Lawyer 12 Defendants as applicable here, it cannot provide any benefit to Rumbaugh. 13 V. CONCLUSION 14 The Court notes that the parties made several arguments and cited to several 15 cases not discussed above. The Court has reviewed these arguments and cases and 16 determines that they do not warrant discussion as they do not affect the outcome of the 17 motions before the Court. 18 It is therefore ordered that Plaintiff’s motion for summary judgment (ECF No. 77) 19 is granted. As further explained herein: (1) the Policy does not cover Defendants John A. 20 Collier, James A. Kalicki, or Kalicki Collier, LLP as to Rumbaugh’s suit against Lawyer 21 Defendants; (2) Plaintiff has no duty to defend or indemnify these Defendants under the 22 Policy with respect to Rumbaugh’s suit against Lawyer Defendants; and (3) Plaintiff is 23 entitled to reimbursement of the fees and costs Plaintiff has paid to defend the Lawyer 24 Defendants in Rumbaugh’s suit against them. 25 It is further ordered that Defendant John A. Collier’s motion for leave to file a 26 counter complaint against Plaintiff (ECF No. 80) is denied. 27 It is further ordered that Plaintiff’s motion for leave to file supplemental authorities 28 (ECF No. 100) is granted. 1 The Clerk of Court is directed to enter judgment accordingly, in Plaintiff’s favor, 2 including on Defendant and Counter Claimant Robin Rumbaugh’s counterclaim against 3 Plaintiff, and close this case. 4 DATED THIS 17th Day of March 2021. 5
6 MIRANDA M. DU 7 CHIEF UNITED STATES DISTRICT JUDGE 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28