Nautilus Insurance Company v. Access Medical, LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 9, 2021
• Docket: 17-16265
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 9 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

NAUTILUS INSURANCE COMPANY, No. 17-16265

Plaintiff-Appellant, D.C. No. 2:15-cv-00321-JAD-GWF v.

ACCESS MEDICAL, LLC; ROBERT MEMORANDUM* CLARK WOOD II; FLOURNOY MANAGEMENT, LLC,

Defendants-Appellees.

NAUTILUS INSURANCE COMPANY, No. 17-16272

Plaintiff-Appellee, D.C. No. 2:15-cv-00321-JAD-GWF v.

ACCESS MEDICAL, LLC; ROBERT CLARK WOOD II,

Defendants-Appellants,

and

FLOURNOY MANAGEMENT, LLC,

Defendant.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. NAUTILUS INSURANCE COMPANY, No. 17-16273

Defendants,

Defendant-Appellant.

Appeal from the United States District Court for the District of Nevada Jennifer A. Dorsey, District Judge, Presiding

Argued and Submitted June 10, 2019 Submission Withdrawn July 2, 2019 Resubmitted August 6, 2021 San Francisco, California

Before: GOULD, IKUTA, and R. NELSON, Circuit Judges.

On July 2, 2019, we affirmed the district court’s declaration that Nautilus

Insurance Co. had no duty to defend Access Medical, LLC, Robert C. Wood II,

and Flournoy Management, LLC (“Defendants”) in the underlying state litigation.

Nautilus Ins. Co. v. Access Med., LLC, 780 Fed. App’x 457, 458 (9th Cir. 2019)

(“Nautilus II”). But we did not answer whether, under 28 U.S.C. § 2202, Nautilus

2 was entitled to reimbursement of the defense costs spent in the underlying

litigation since Nevada law was unclear. Id. at 459. The Nevada Supreme Court

answered our certified question and held that an insurer is entitled to

reimbursement if “a court determines that an insurer never owed a duty to defend,”

“the insurer expressly reserved its right to seek reimbursement in writing after

defense was tendered,” and “the policyholder accepted the defense from the

insurer.” See Nautilus Ins. Co. v. Access Med., LLC, 482 P.3d 683, 691 (Nev.

2021) (“Nautilus III”). Those conditions are satisfied here, and thus Nautilus is

entitled to reimbursement under Nevada law.1

Deciding the remaining issues in this appeal, see Nautilus II, 780 Fed. App’x

at 459, we conclude the district court incorrectly denied Nautilus’s request for

damages under § 2202. We review the district court’s construction of § 2202 de

novo. Soltani v. W. & So. Life Ins. Co., 258 F.3d 1038, 1041 (9th Cir. 2001). We

reverse and remand for further proceedings consistent with this disposition.

1. The district court faulted Nautilus for not raising a damages claim in its

1 Defendants argue the Nevada Supreme Court’s decision in Nautilus III is not dispositive in this case. We disagree. Nautilus III held that reimbursement is due “[w]hen a court determines that an insurer never owed a duty to defend.” 482 P.3d at 691. And we already “determined that under the policy, Nautilus never owed a duty to defend.” Id. at 688. Defendants do not dispute that Nautilus reserved its right to seek reimbursement or that Defendants accepted Nautilus’s defense. Thus, Nautilus III squarely controls. That Nautilus may owe a duty to defend the Defendants in the future is not before us.

3 complaint.2 Nautilus Ins. Co. v. Access Med., LLC, 2017 WL 2193241, at *4 (D.

Nev. May 18, 2017) (“Nautilus I”). But district courts are to “grant the relief to

which each party is entitled, even if the party has not demanded that relief in its

pleadings.” Fed. R. Civ. P. 54(c); see, e.g., Z Channel Ltd. v. Home Box Office,

Inc., 931 F.2d 1338, 1341 (9th Cir. 1991). Nevada law entitles Nautilus to the

reimbursement it seeks, see generally Nautilus III, 482 P.3d 688, and § 2202

provides the procedural vehicle to attain that reimbursement, see 28 U.S.C. § 2202

(allowing plaintiffs to seek “[f]urther necessary or proper relief based on a

declaratory judgment”). Moreover, the Declaratory Judgment Act imposes no

stringent pleading requirements either. Section 2202 requires “reasonable notice

and hearing,” not, as § 2201 requires, “an appropriate pleading.” See Wisc. Cent.

Ltd. v. United States, 138 S. Ct. 2067, 2071 (2018) (citation omitted) (differences

in a statute are assumed to be intentional).

Here, there was reasonable notice. Nautilus sent Defendants letters,

agreeing to provide legal services subject to a reservation of rights to seek

reimbursement. Nautilus’s complaint also asked “[f]or such other further relief as

this Court may deem just and proper.” See Jet Inv., Inc. v. Dep’t of Army, 84 F.3d

2 Nautilus’s request is best construed as one for damages, not attorney’s fees. See generally Nautilus III, 482 P.3d 683 (treating such a request as one for restitution damages under a contract theory). Thus, Defendants’ reliance on Alliance for Nonprofits for Insurance Risk Retention Group v. Barratt, 2013 WL 3200083 (D. Nev. June 24, 2013), is inapt.

4 1137, 1143 (9th Cir. 1996) (citation omitted) (general prayer for relief can provide

sufficient notice of a later request for damages). During the district court

proceedings, Nautilus also sent a letter to the Defendants, stating it “will file

another motion seeking reimbursement of all defense fees and costs incurred in

defending the Insureds in the Underlying Action” after the district court granted

the requested declaratory relief. Lastly, Nautilus did not “disavow[] any claim for

damages” as was the case in Seven Words, LLC v. Network Solutions, 260 F.3d

1089, 1096 (9th Cir. 2001). Taken together, Nautilus’s actions constituted

“reasonable notice” to Defendants. See 28 U.S.C. § 2202; see also Penthouse Int’l,

Ltd. v. Barnes, 792 F.2d 943, 950 (9th Cir. 1986).3

We recognize the district court’s concern that there has not been “discovery

or briefing related to Nautilus’s incurred costs.” Nautilus I, 2017 WL 2193241, at

*4. But § 2202 permits additional hearings after a court grants declaratory relief.

See 28 U.S.C. § 2202. On remand, the district court may hold further hearings to

determine how much reimbursement is “necessary or proper” to effectuate its

3 That Nautilus sought further relief after the district court entered its declaratory judgment is not dispositive. After the entry of a declaratory judgment, the district court retains authority under its inherent powers and § 2202 to grant further relief “at a later point.” Rincon Band of Mission Indians v. Harris, 618 F.2d 569, 575 (9th Cir. 1980) (citations omitted); see also Powell v. McCormack, 395 U.S. 486, 499 (1969) (“A declaratory judgment can then be used as a predicate to further relief.”).

5 declaration. See id.; see, e.g., Omaha Indem. Ins. Co. v. Cardon Oil Co., 902 F.2d

40, 1990 WL 55904, at *2 (9th Cir. May 1, 1990) (unpublished) (“[T]he

reimbursement of defense costs paid by” insurer on behalf of insureds “constitutes

proper relief based on the declaratory judgment that [the insurer] was not, in fact,

required to defend the [insureds] under their policy.”).

2. The district court also rejected Nautilus’s request because § 2202 does

not “solely” provide grounds for relief. Nautilus I, 2017 WL 2193241, at *4. The

Declaratory Judgment Act is “procedural only.” Aetna Life Ins. Co. v. Haworth,

300 U.S. 227, 240 (1937). But we need not decide whether § 2202 provides a

basis for relief independent of substantive state or federal law because here Nevada

law entitles Nautilus to relief. See generally Nautilus III, 482 P.3d at 685–86.

REVERSED AND REMANDED.