The Cincinnati Specialty Underwriters Insurance Company v. Red Rock Hounds

• Court: District Court, D. Nevada
• Decided: January 6, 2021
• Docket: 3:20-cv-00272
• Status: Unknown

Opinion

2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 THE CINCINNATI SPECIALTY Case No. 3:20-cv-00272-MMD-BNW UNDERWRITERS INSURANCE 7 COMPANY, ORDER

8 Plaintiff, v. 9 RED ROCK HOUNDS, et al., 10 Defendants. 11

12 RED ROCK HOUNDS, et al.,

13 Counterclaimants, v. 14 THE CINCINNATI SPECIALTY 15 UNDERWRITERS INSURANCE COMPANY, et al., 16 Counter-Defendants. 17

18 BEEHIVE INSURANCE AGENCY, INC.,

19 Third-Party Plaintiff, v. 20 MOORE CLEMENS & CO., INC., 21 Third-Party Defendant. 22 23 I. SUMMARY 24 This is a declaratory relief action to determine an insurance company’s duty to 25 defend or indemnify its insureds. Plaintiff Cincinnati Specialty Underwriters Insurance 26 Company seeks declaratory judgment that under the commercial insurance policy 27 (“Policy”) they issued to Defendants, Red Rock Hounds and Lynn Lloyd, it has no duty to 28 defend or indemnify Defendants in the action interested party Tracy Turnbow (“Turnbow”) 2 Plaintiff argues that four exclusions to the Policy apply to the Turnbow Action, and 3 therefore, there is no coverage. (Id.) Before the Court is Turnbow’s motion to dismiss 4 (“Motion to Dismiss”), arguing that Plaintiff’s complaint fails to state a claim upon which 5 relief can be granted. (ECF No. 10.) Defendants joined the Motion to Dismiss (ECF No. 6 14) and moved, in the alternative, to stay the case pending resolution of the Turnbow 7 Action (ECF No. 15 at 7).2 Because Plaintiff’s complaint indeed fails to state a claim upon 8 which relief could be granted, and as further explained below, the Court will grant the 9 Motion to Dismiss. Accordingly, the Court will also deny the Motion to Stay as moot. 10 II. BACKGROUND 11 The following facts are adapted from the Complaint. Defendants run mounted 12 coyote hunts in which patrons ride on horseback accompanied by a pack of hounds. On 13 or about September 25, 2019, Turnbow was on Defendants’ premises feeding horses. 14 (ECF No. 1 at 2.) The horse Turnbow was feeding, Indy, “suddenly and unexpectedly 15 kicked [Turnbow] in the back of her skull neck” and proceeded to stomp on her body, 16 causing her further injury. (Id.) On January 14, 2020, Turnbow filed a complaint in state 17 court against Defendants, asserting claims for negligence and strict liability. (ECF Nos. 1- 18 1 at 1, 10 at 1.) Turnbow alleges that Defendants knew Indy was aggressive, that Indy 19 was prone to attack and injure people, and that another person had been attacked by 20 Indy prior to the incident that injured Turnbow. (ECF No. 1 at 2.) 21 Plaintiff issued Defendants the Policy that was in effect from June 30, 2019 to June 22 30, 2020. (Id. at 3.) The Policy purports to provide coverage for “bodily injury” and 23 “property damage” that “takes place in the coverage territory” and “occurs during the 24 policy period.” (Id. at 4.) But that coverage is subject to several exclusions. (Id. at 5-7.) 25

26 1That case is currently pending in the Second Judicial District Court of the State of Nevada. Turnbow v. Red Rock Hounds, Case No. CV20-00080 (“Turnbow Action”). 27 2The Court also reviewed the parties’ related responses and replies to both 28 motions. (ECF Nos. 27, 28, 30, 31, 32.) 2 rights. (Id. at 4.) On May 7, 2020, Plaintiff filed this action seeking a declaratory that under 3 the Policy, it has no duty to defend or indemnify Defendants in the Turnbow Action. (Id. 4 at 7-8.) 5 While the parties are completely diverse, Turnbow originally pled damages “in 6 excess of $15,000.” (ECF No. 1-1 at 7.) In response to the Court’s order to show cause, 7 Plaintiff demonstrated that the actual amount in controversy in the Turnbow Action is over 8 $100,000, thus satisfying the prerequisites of diversity jurisdiction under 28 U.S.C. § 9 1332. (ECF No. 54.) 10 III. DISCUSSION 11 Turnbow moved to dismiss Plaintiff’s request for declaratory judgment as to three 12 stated exclusions for failure to state a claim upon which relief could be granted. (ECF No. 13 10 at 2.) As to the fourth exclusion, Turnbow asks that the Court either stay or dismiss 14 Plaintiff’s claim for lack of jurisdiction because it is not ripe. (ECF No. 10 at 2.) Defendants 15 joined the Motion to Dismiss and request, in the alternative, that the Court stay this case 16 pending the outcome of the Turnbow Action.3 (ECF No. 15.) As explained below, the 17 Court will grant Turnbow’s Motion to Dismiss—and will therefore deny the Motion to Stay 18 as moot. 19 A. Jurisdiction 20 Because Turnbow asserts that a portion of Plaintiff’s requested relief is not yet ripe 21 and Defendant’s Motion to Stay raised concerns about duplicative litigation and prejudice, 22

23 3The arguments raised in Defendants’ Motion to Stay prompted the Court to consider its jurisdiction. See Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 24 1998) (“[T]he Declaratory Judgment Act is deliberately cast in terms of permissive, rather than mandatory, authority.”) (internal quotations omitted). Because Turnbow originally 25 pled damages “in excess of $15,000” in the Turnbow Action (ECF No. 1-1 at 7), the Court ordered Plaintiffs to show cause that the amount in controversy requirement for diversity 26 jurisdiction is met (ECF No. 51). See Dizol, 133 F.3d at 1222 (citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672 (1950)) (reasoning that the Court must 27 establish it would have jurisdiction over the underlying dispute because the Declaratory Judgment Act did not enlarge the Court’s jurisdiction, only provided a remedy for matters 28 that fall within the Court’s authority). The Court is satisfied with Defendants’ response that the amount in controversy of the underlying action exceeds $100,000. (ECF No. 54.) 2 under the Declaratory Judgment Act is discretionary, the Court also considers whether 3 the prudential Brillhart factors recommend exercising that jurisdiction. See Brillhart v. 4 Excess Ins. Co. of Am., 316 U.S. 491 (1942). Because the Court finds that it does have 5 subject-matter jurisdiction over this action and that the Brillhart factors do not weigh in 6 favor of abstention, the Court will exercise its discretion to hear this case. 7 A lawsuit seeking federal declaratory relief must (1) “fulfill statutory jurisdictional 8 prerequisites” and (2) present an “actual case and controversy within the meaning of 9 Article III, section 2 of the United States Constitution.” Gov’t Emps. Ins. Co. v. Dizol, 133 10 F.3d 1220, 1222 (9th Cir. 1998) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 11 667, 672 (1950)); see also 28 U.S.C. § 2201(a). In a declaratory relief action, the amount 12 in controversy for diversity jurisdiction purposes is “the value of the object of the litigation.” 13 Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333, 347 (1977). When an insurer 14 contests the applicability of its liability coverage to a particular issue, the value of the 15 object in litigation is “the value of the underlying potential tort action.” Budget Rent-a-Car, 16 Inc. v. Higashiguchi, 109 F.3d 1471, 1473 (9th Cir. 1997). An insurer’s declaratory relief 17 action to determine a duty to defend and indemnify their insured in a pending state court 18 case creates an actual case or controversy within the meaning of Article III, even when 19 the underlying liability action has not yet proceeded to judgment. See Am. States Ins. Co. 20 v. Kearns, 15 F.3d 142, 144 (9th Cir. 1994) (citing Md. Casualty v. Pac. Coal & Oil Co., 21 312 U.S. 270 (1941)).4 22 This case is justiciable. Plaintiff’s request that the Court determine its legal duty to 23 defend and indemnify Defendants in the underlying Turnbow Action is an actual case and 24 controversy within the meaning of Article III. See Kearns, 15 F.3d at 144. Moreover, with 25 26 27 4Whether a declaratory relief action seeking only to determine a duty to indemnify 28 is ripe prior to judgment is less clear and will be discussed further in the Motion to Dismiss section below. 2 determine the rights and relationships between the parties before the underlying state 3 litigation has reached judgment. See id. Further, the Court is satisfied that it has statutory 4 subject-matter jurisdiction over this action under 28 U.S.C. § 1332(a). The parties are 5 completely diverse (ECF No. 1) and the amount in controversy of the underlying Turnbow 6 Action exceeds $130,526.75. (ECF No. 54 at 2.) In sum, the Court may exercise 7 jurisdiction over this case. 8 But whether to hear a case under the Declaratory Judgment Act is committed to 9 the Court’s “unique and substantial discretion.” Wilton v. Seven Falls Co., 515 U.S. 277, 10 286 (1995). “In exercising its authority under the Declaratory Judgment Act, a district 11 court: ‘should avoid needless determination of state law issues; it should discourage 12 litigants from filing declaratory actions as a means of forum shopping; and it should avoid 13 duplicative litigation.” Acuity v. Cifuni, Case No. 2:19-cv-01879-GMN-DJA, 2020 WL 14 5763606, at *2 (D. Nev. Sept. 28, 2020) (referencing the three Brillhart factors). These 15 prudential considerations reflect the core concerns of “how judicial economy, comity, and 16 federalism are affected in a given case.” Dizol, 133 F.3d at 1225. Therefore, the Court 17 must still analyze the jurisdictional facts of this case using the Brillhart factors to determine 18 whether it should. 19 While it is a close call, the Court finds that exercising jurisdiction over Plaintiff’s 20 request for relief ultimately would be appropriate under the Brillhart factors and other 21 prudential reasoning. The first Brillhart factor—discouraging needless litigation of state- 22 law issues—weighs most heavily against exercising jurisdiction because each of the 23 declarations that Cincinnati seeks requires a determination of purely state-law issues. 24 See R.R. St. & Co. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011) (“In prior cases, 25 [the Ninth Circuit] ha[s] recognized that needless determination of state law issues alone 26 may support remand.”); see also Acuity, 2020 WL 5763606 at *2 (reasoning there was 27 5The Court will address whether Plaintiff’s claim that there is no duty to defend or 28 indemnify Defendants under the Exemplary or Punitive Damages” exclusion is ripe more specifically below in the Motion to Dismiss section. 2 relief action that solely involved interpretation of Nevada insurance law). But the Supreme 3 Court’s concern in Brillhart that “it would be uneconomical as well as vexatious for a 4 federal court to proceed in a declaratory judgment suit where another suit is pending in a 5 state court presenting the same issues, not governed by federal law, between the same 6 parties,” is not present here. 316 U.S. at 495. The Turnbow Action does not address the 7 “same issues” as this action, and the dispute in the Turnbow Action involves a tort claim 8 between Turnbow and Defendants, not a contract claim between Plaintiff and its insureds. 9 While the Court recognizes that it may need to determine the rights of the parties under 10 Nevada law, the concerns expressed by the first Brillhart factor are not implicated here. 11 Because there is no clear evidence of forum shopping, the second Brillhart factor 12 is neutral. See Cincinnati Ins. Co. v. Nat’l Print Grp., Case No. 2:14-cv-2174-GMN-VCF, 13 2015 WL 5009298, at *3 (D. Nev. Jul. 29. 2015) (finding the factor neutral when there is 14 no evidence of forum shopping). While this action may appear to be “reactive litigation” 15 that the Ninth Circuit disfavors, there is no pending state court action between the parties 16 to the declaratory judgment action. See Ticor Title Ins. Co. of Cal. v. Am. Res., Ltd., 859 17 F.2d 772, 777 n.7 (9th Cir. 1988) (discouraging exercise of jurisdiction over “a declaratory 18 judgment action brought by an insurance company against its insured during the 19 pendency of a non-removable state court action presenting the same issues of state law”); 20 see also State Farm Mut. Auto. Ins. Co. v. Garcia, Case No. 2:13-cv-02099-GMN-VCF, 21 2014 WL 3421641, at *4 (D. Nev. Jul. 9, 2014) (considering it “important” that the insured 22 defendant had not filed an action in state court against the declaratory judgment plaintiff). 23 Moreover, the issues of insurance contract interpretation that Plaintiff raises here are 24 dissimilar from the negligence and strict liability claims Turnbow will litigate against 25 Defendants in the underlying Turnbow Action. See Ticor Title Ins. Co., 859 F.2d at 777 26 n.7. 27 The third Brillhart factor, cautioning against duplicative litigation, also does not 28 weigh against the Court’s exercise of jurisdiction. While the underlying tort action will 2 clear that the issues grounding the exclusions in the Policy will be similarly litigated. It is 3 conceivable that some issues Plaintiff raises involve disputes of fact that will likely be 4 litigated in the underlying Turnbow Action—for example, whether Defendants had 5 knowledge that the horse which injured Ms. Turnbow, Indy, was aggressive and could 6 injure guests would be relevant to the negligence and strict liability claims, and could also 7 implicate whether Ms. Turnbow’s injury was an “Expected or Intended Injury” that could 8 be excluded from the policy. (ECF Nos. 1 at 2, 5; 10 at 7.) But determining whether 9 Plaintiff must defend or potentially indemnify Defendants in the Turnbow Action ultimately 10 does not address whether Defendants breached a duty of care to Turnbow. Moreover, 11 other issues Plaintiff’s declaratory relief claim raises are unlikely to be litigated in the 12 Turnbow Action—for example, whether the horse, Indy, was ‘boarding’ on Defendants’ 13 premises or simply being otherwise housed there, or whether Turnbow could be 14 considered a participant in a “games, sport, contest, race, exhibition, demonstration, 15 special event, performance or show.” (ECF No. 1 at 6 (“Designated Operation or Work” 16 and “Participants and Contestants” Exclusions, respectively).) Even though there may be 17 some overlapping facts litigated in both cases, the issues ultimately are different and 18 unlikely to produce duplicative litigation. 19 Because the Brillhart factors do not weigh in favor of abstention, the Court will 20 exercise jurisdiction over Plaintiff’s declaratory judgment action. 21 B. Dismissal 22 Turnbow moves to dismiss Plaintiff’s claim as it relates to three coverage 23 exclusions, and dismiss or stay the case as it relates to the fourth until the punitive 24 damages question becomes ripe. (ECF No. 10 at 2.) Turnbow argues Plaintiff’s Complaint 25 is “facially deficient to grant the relief requested” and “has not crossed the line ‘from 26 conceivable to plausible.’” (Id.) Specifically, Turnbow argues that Plaintiff “provides no 27 factually plausible connection between the exclusions and the facts in Ms. Turnbow’s 28 State Court Complaint.” (Id. at 5.) Defendants joined the Motion to Dismiss without 2 state a claim under any of the four identified exclusions, the Court will grant the Motion to 3 Dismiss with leave to amend as to the first three exclusions. The Court will dismiss 4 Plaintiff’s claim under the fourth exclusion without leave to amend as to the duty to defend, 5 but with leave to amend as to the duty to indemnify when the question becomes ripe. 6 1. Legal Standard 7 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 8 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pleaded complaint must provide 9 “a short and plain statement of the claim showing that the pleader is entitled to relief.” 10 Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While 11 Rule 8 does not require detailed factual allegations, it demands more than “labels and 12 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 13 Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “Factual allegations 14 must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to 15 survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a 16 claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 17 U.S. at 570). 18 In Iqbal, the Supreme Court clarified the two-step approach district courts are to 19 apply when considering motions to dismiss. First, a district court must accept as true all 20 well-pleaded factual allegations in the complaint; however, legal conclusions are not 21 entitled to the assumption of truth. See id. at 678. Mere recitals of the elements of a cause 22 of action, supported only by conclusory statements, do not suffice. See id. Second, a 23 district court must consider whether the factual allegations in the complaint allege a 24 plausible claim for relief. See id. at 679. A claim is facially plausible when the plaintiff’s 25 complaint alleges facts that allow a court to draw a reasonable inference that the 26 defendant is liable for the alleged misconduct. See id. at 678. Where the complaint does 27 not permit the Court to infer more than the mere possibility of misconduct, the complaint 28 has “alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 2 When the claims in a complaint have not crossed the line from conceivable to plausible, 3 the complaint must be dismissed. See Twombly, 550 U.S. at 570. Dismissal of a complaint 4 without leave to amend is only proper when it is clear the complaint could not be saved 5 by any amendment. Ariz. Students Ass’n v. Ariz. Bd. of Regents, 824 F.3d 858, 871 (9th 6 Cir. 2016); see also Fed. R. Civ. P. 15(a)(2) (instructing district courts to “freely give leave” 7 to amend). 8 2. Analysis 9 Nevada law interprets insuring clauses “broadly so as to afford the greatest 10 possible coverage to the insured.” Nat’l Union Fire Ins. Co. of State of Pa., Inc. v. Reno’s 11 Exec. Air., Inc., 682 P.2d 1380, 1383 (Nev. 1984). “Because the Insurer is the one to draft 12 the policy, an ambiguity in that policy will be interpreted against the insurer.” Powell v. 13 Liberty Mut. Fire Ins. Co., 252 P.3d 668, 672 (Nev. 2011). Accordingly, “clauses excluding 14 coverage are interpreted narrowly against the insurer.” Nat’l Union Fire Ins. Co., 682 P.2d 15 at 1383. “[I]f an insurer wishes to exclude coverage by virtue of an exclusion in its policy, 16 it must (1) write the exclusion in obvious and unambiguous language in the policy, (2) 17 establish that the interpretation excluding [coverage] under the exclusion is the only 18 interpretation of the exclusion that could fairly be made, and (3) establish that the 19 exclusion clearly applies to this particular case.” Powell, 252 P.3d at 674. “Ultimately, a 20 court should interpret an insurance policy to ‘effectuate the reasonable expectations of 21 the insured.’” Id. at 672 (quoting Nat’l Union Fire Ins. Co., 682 P.2d at 1383). 22 To survive the Motion to Dismiss, Plaintiff’s Complaint must plausibly allege that, 23 based on the facts included in the Complaint, a coverage exclusion applies and, because 24 the exclusion applies, Plaintiff may be entitled to declaratory judgment that it has no duty 25 to defend and no duty to indemnify. None of the exclusions plausibly provides relief. As 26 pleaded, the “Expected Or Intended Injury,” “Designated Operation or Work,” and 27 “Participants and Contestants” exclusions do not plausibly state a claim upon which relief 28 could be granted. Finally, the language of the “Exemplary or Punitive Damages” exclusion 2 permit the requested relief that its duty to indemnify is limited. The Court considers each 3 of the four exclusions Plaintiff relies upon in its Complaint in turn. 4 a. “Expected Or Intended Injury” Exclusion 5 The Policy excludes coverage for bodily injury that is “expected or intended from 6 the standpoint of the insured.” (ECF No. 1-2 at 21 (“Expected Or Intended Injury”).) But 7 Plaintiff does not state in its Complaint that Turnbow’s injury was ‘expected’ or ‘intended’ 8 by Defendants. Instead, Plaintiff reiterates that Turnbow alleges in her state court 9 complaint that Indy injured several people before Turnbow, and that Defendants knew 10 Indy was unreasonably dangerous. (ECF No. 1 at 2-3.) The Court must therefore infer 11 that Plaintiff requests declaratory relief under this exclusion because Defendants’ alleged 12 prior knowledge amounts to an ‘expected or intended injury.’ 13 Turnbow does not make a claim for intentional tort against Defendants in the 14 Turnbow Action, but does allege that Defendants had prior knowledge of Indy’s 15 dangerous propensity and that, accordingly, they should be held strictly liable. (ECF No. 16 1 at 3.) Although the Policy language mirrors common “intentional act” exclusions, see 3 17 Allan D. Windt, Insurance Claims and Disputes § 11:9 (6th ed. 2020),6 there is no clear 18 labelling in the Policy that specifies whether this exclusion is broader than a traditional 19 intentional act exclusion. The Court therefore will construe this term, for the purposes of 20 the Motion to Dismiss, as ambiguous in meaning and with broad coverage for the 21 insureds. See Powell, 252 P.3d at 674; Nat’l Union Fire Ins. Co., 682 P.2d at 1383. To 22 successfully argue that this exclusion prevents coverage, Plaintiff must first establish a 23 clear interpretation of this provision and, second, show that its interpretation is the only 24 fair definition. See Powell, 252 P.3d at 674. Plaintiff’s Complaint does neither. 25 /// 26

27 6“The exclusion for intentionally caused injury, or injuries expected or intended by the insured, applies when the insured intended to cause not only the event that resulted 28 in the harm, but also the resulting injury or harm itself. As a general rule, therefore, one must look to the subjective intent of the insured.” Id. 2 subjective intent by the insureds. See Allstate Ins. Co. v. Sanders, 495 F. Supp. 2d 1104 3 (D. Nev. 2007) (finding that expected injury exclusion did not apply to throwing a metal 4 sign from a distance of 10-20 feet away during horseplay because hitting a man in the 5 eye was improbable and the injury could not be expected); Beckwith v. State Farm Fire 6 Ins. Co., 83 P.3d 275, 277 (Nev. 2004) (finding that intentional act exclusion applied when 7 intoxicated insured punched someone because, although it was not voluntary, the act of 8 striking was intentional); Capitol Indem. Corp. v. Wright, 341 F. Supp. 2d 1152, 1157-58 9 (D. Nev. 2004) (finding that an expected or intended injury exclusion did not preclude 10 coverage for an insured corporation in an action for intentional harm by an employee 11 because negligence was not enough to trigger the exclusion). The Court cannot infer such 12 subjective intent from the Complaint. At this stage in the litigation, questions about 13 Defendants’ responsibility for Indy’s actions, Indy’s prior injurious behavior, and 14 Defendants’ knowledge about Indy’s dangerous proclivities all remain open. The Court 15 agrees with Turnbow’s argument that Plaintiff’s Complaint relies heavily on inferences 16 that connect the allegations in Turnbow’s complaint to the Policy exclusions. For Plaintiff’s 17 Complaint to plausibly state a claim upon which relief could be granted, it would have to 18 have asserted that under Nevada law, Defendants are liable for Indy’s actions and that 19 their level of culpability rose above mere negligence. The Complaint does not so allege. 20 Because the Court finds that Plaintiff has not plausibly alleged the facts necessary 21 for the “Expected Or Intended Injury” exclusion to apply, the Court will dismiss Plaintiff’s 22 claim under this exclusion, with leave to amend. 23 b. “Designated Operation or Work” Exclusion 24 The Policy also excludes coverage for bodily injury “[a]rising out of or caused by 25 the operations designated in the schedule,” where operations are defined as “Horse 26 Training, Horse Riding Training, Animal Boarding, Sale of animals or animal handling 27 products.” (ECF No. 1-2 at 63.) Turnbow makes two general arguments that this exclusion 28 does not apply. (ECF No. 10 at 7-10.) First, she argues that under the specific exclusions 2 she argues that her injury was not caused by animal boarding because there is no 3 assertion that Indy was being boarded at Defendants’ facility and not merely housed 4 there. (Id. at 9.) Plaintiff does not respond directly to these arguments, but instead asserts 5 that the Complaint should not be dismissed because Defendants are on notice of what 6 the claims will be.7 7 Plaintiff’s Complaint does not plausibly show an entitlement to declaratory relief 8 under this exclusion. Plaintiff does not state which defined operation Turnbow’s injury 9 would fall under, only that “all of the allegations of Ms. Turnbow arose out of the 10 operations of Red Rock.” (ECF No. 1 at 7.) But injuries arising generally out of the 11 operations of Defendants’ business are not de facto excluded from coverage. Only 12 injuries arising out of the four stated operations will be excluded. See Nat’l Union Fire Ins. 13 Co., 682 P.2d at 1383 (holding exclusions should be construed narrowly and in favor of 14 providing coverage). 15 Because Plaintiff has failed to plausibly connect the facts of the incident with the 16 four stated operations in the “Designated Operation or Work” exclusion, the Court will 17 dismiss Plaintiff’s claim for declaratory relief that it has no duty to defend or indemnify 18 under that exclusion, with leave to amend. 19 c. “Participants and Contestants” Exclusion 20 The Policy excludes coverage for bodily injury to “any person while practicing, 21 instructing, supervising, officiating, training or participating in any physical exercise, 22 game, sport, contest, race, exhibition, demonstration, special event, performance, or 23 show.” (ECF No. 1-2 at 65 (“Exclusion – Participants and Contestants”).) As above, 24 Plaintiff has made no allegation in its Complaint that Turnbow was a participant or 25 26 7Notice-pleading is no longer sufficient to survive a motion to dismiss. See In re 27 Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1107 (9th Cir. 2013) (“Iqbal and Twombly moved us away from a system of pure notice pleading. In addition to providing 28 fair notice, the complaint’s allegations must now suggest that the claim has at least a plausible chance of success.”). 2 relationship between the allegations in the Complaint and this policy exclusion. 3 The parties generally agree that Turnbow was injured when she was “at Red Rock 4 feeding horses.” (ECF No. 1; ECF No. 11 (admitting the “general characterization of 5 Turnbow’s claims”).) A plain meaning interpretation of the policy exclusion would bar 6 coverage for persons who are engaged in some sort of organized activity. But simply 7 interacting with horses is insufficient to trigger a ‘participants and contestants’ exclusion. 8 See, e.g., Diamond State Ins. Co. v. Gulli, Case No. 2:10-cv-2159 JCM (GWF), 2012 WL 9 2072854, at *3 (D. Nev. Jun. 8, 2012) (“Simply walking a horse to an area to rope cattle 10 with a friend is not practice for or participation in an equestrian event.”). Feeding a horse, 11 with or without permission, dose not rise to the level of ‘participating’ in a ‘special event.’ 12 Plaintiff has failed to plausibly allege that this exclusion would bar coverage for bodily 13 injury that resulted from the type of activity that the parties agree occurred. Accordingly, 14 the Court will dismiss Plaintiff’s claim for declaratory relief that there is no duty to defend 15 or indemnify under the “Participants and Contestants” exclusion, with leave to amend. 16 d. “Punitive or Exemplary Damages” Exclusion 17 Turnbow finally argues that the question of whether Plaintiff has a duty to defend 18 or indemnify Defendants for claims involving punitive damages is not ripe. (ECF No. 10 19 at 11-13.) The Court agrees that the Plaintiff’s request for a declaratory judgment that it 20 has no duty to indemnify Defendants is not ripe—and will not be—until judgment is 21 entered in the Turnbow Action. Plaintiff’s request for declaratory relief that it has no duty 22 to defend a claim for punitive damages, however, is ripe, and the Court will dismiss it. 23 Regarding its duty to defend under this exclusion, Plaintiff has failed to state a 24 claim on which its request for declaratory judgment could be granted. Plaintiff’s claim is 25 ripe because Turnbow requested punitive damages in her complaint (ECF No. 1-1 at 8) 26 and an insurer’s duty to defend arises “whenever it ascertains facts which give rise to the 27 potential of liability under the policy.” United Nat’l Ins. Co. v. Frontier Ins. Co., Inc., 99 28 P.3d 1153, 1157 (Nev. 2004). The Policy explicitly provides that “[i]f a suit is brought 2 compensatory and punitive or exemplary damages, we will provide a defense to such 3 action.” (ECF No. 1 at 5.) Based on this language, there is no reasonable reading of this 4 exclusion that would abrogate Plaintiff’s duty to defend a claim otherwise covered by the 5 Policy. See Powell, 252 P.3d at 672. Because amendment would be futile, the Court will 6 deny Plaintiff leave to amend its claim that it has no duty to defend under “Punitive or 7 Exemplary Damages” exclusion. 8 Further, the Court finds that Plaintiff’s request for declaratory judgment on its duty 9 to indemnify is not yet ripe. The Ninth Circuit has not distinguished between the duty to 10 defend and the duty to indemnify when determining whether a claim for declaratory 11 judgment is ripe. See Kearns, 15 F.3d at 144 (finding a declaratory judgment action was 12 ripe before any judgment had been entered). It has, however, suggested that a 13 declaratory relief claim to determine an insurer’s duty to indemnify prior to final judgment 14 in the underlying action is not an actual controversy. See Ticor Title Ins. Co. of Cal. v. 15 Am. Resources, Ltd., 859 F.2d 772, 777 n.7 (9th Cir. 1988) (“We note that none of the 16 pending actions had determined whether and to what extent [the insureds] are liable to 17 [the underlying claimant]; it is therefore doubtful that there exists an actual controversy 18 concerning [insurer’s] obligation to indemnify its insured.”). Because the Ninth Circuit 19 leaves this question somewhat open, the Court considers Nevada substantive law to 20 determine whether Plaintiff’s claim is ripe. See Hunt v. State Farm Mut. Auto. Ins. Co., 21 655 F. Supp. 284, 286 (D. Nev. 1987) (citing St. Paul Fire and Marine Ins. Co. v. Weiner, 22 606 F.2d 864, 867 (9th Cir. 1979)) (“In this declaratory judgment action, in which subject 23 matter jurisdiction is based solely on diversity, the question whether a justiciable 24 controversy exists within the purview of the Declaratory Judgment Act, 28 U.S.C. § 2201, 25 is determined by federal law. Where, however, substantive law governing the rights of the 26 parties is relevant to the Court’s analysis, state law applies.”) (internal citations omitted). 27 The Nevada Supreme Court construes the two duties as distinct in purpose and 28 form. See Century Sur. Co. v. Andrew, 432 P.3d 180, 183 (D. Nev. 2018) (“Courts have 2 indemnify. The duty to indemnify provides those insured financial protection against 3 judgments, while the duty to defend protects those insured from the action itself.”) 4 (internal quotations omitted). Under Nevada law, an insurer’s duty to indemnify “arises 5 when an insured ‘becomes legally obligated to pay damages in the underlying action that 6 gives rise to a claim under the policy.’” United Nat’l Ins. Co., 99 P.3d at 1157. Because 7 federal law finds it “doubtful” that a declaratory judgment claim that there is no duty to 8 indemnify would be ripe until after judgment is entered, Ticor Title Insurance Company of 9 California, 859 F.2d at 777 n.7, and Nevada law holds that the duty to indemnify does not 10 arise until there is a legal obligation to pay damages in the underlying action, United 11 National Insurance Company, 99 P.3d at 1157, the Court finds Plaintiff’s claim is not yet 12 ripe and will not be until a judgment is entered in the Turnbow Action. 13 The Court therefore will dismiss Plaintiff’s claim for declaratory judgment that it has 14 no duty to defend under the “Punitive or Exemplary Damages” exclusion, without leave 15 to amend. The Court will dismiss Plaintiff’s claim for declaratory judgment that this 16 exclusion will prevent Plaintiff from indemnifying Defendants for any award of punitive 17 damages as unripe, with leave to refile once judgment is entered in the Turnbow Action. 18 3. Conclusion 19 To restate and summarize, the Court will grant the Motion to Dismiss as to the 20 “Expected Or Intended Injury,” “Designated Operation or Work,” and “Participants and 21 Contestants” exclusions, with leave to amend. Plaintiff’s claim requesting declaratory 22 judgment that it has no duty to defend under the “Exemplary or Punitive Damages” 23 exclusion is denied without leave to amend; its claim requesting declaratory judgment 24 that is has no duty to indemnify for potential future punitive damages is dismissed as the 25 claim will not be ripe until judgment is entered in the Turnbow Action. Because there is 26 no longer a request for declaratory relief before the Court, the Motion to Stay is denied 27 as moot. 28 /// 1 || IV. CONCLUSION 2 The Court notes that the parties made several arguments and cited to several 3 || cases not discussed above. The Court has reviewed these arguments and cases and 4 || determines that they do not warrant discussion as they do not affect the outcome of the 5 || motions before the Court. 6 It is therefore ordered that Interested Party Tracy Turnbow’s motion to dismiss 7 || (ECF No. 10) is granted as specified herein. Should Plaintiff wish to amend its claims as 8 || provided for herein, Plaintiff must file an amended complaint within 15 days. In the 9 || alternative, Plaintiff may elect not to amend but to file a subsequent action once its 10 || declaratory relief claim relating to its duty to indemnify for potential future punitive 11 || damages is ripe. 12 It is further ordered that Defendants’ motion to stay this case (ECF No. 15) is 13 || denied as moot. 14 DATED THIS 6" Day of January 2021. LLnr_ 16 Sf MIRANDA M. DU 17 CHIEF UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 16