The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge
ORDER: DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. No. 21)
Presently before the Court is Plaintiffs' motion for partial summary judgment on the issue of consequential damages. (Doc. No. 21.) The Court also is in receipt of Defendant's opposition and Plaintiffs' reply. (Doc. Nos. 27 & 31.) Having fully reviewed the parties' arguments and the law underlying this case, the Court DENIES Plaintiffs' motion for partial summary judgment.
Plaintiff Security Capital Corporation, which conducted business under the name Insurance I.S. Strategies Insurance Agency ("Insurance Strategies"), is a Nevada corporation with its principal place of business in California. (Doc. No. 1 (Compl.) ¶ 8.) Insurance Strategies and Defendant Evanston Insurance Company entered into an insurance contract which "provided coverage to the insured for any claim first made during the policy period by reason of an act, error or omission that arose 'out of professional services rendered, or that should have been rendered by the insured . . . in the conduct of the Insured's profession as an insurance agent.'" (Id. ¶¶ 23 & 27.)
In 2004, a dispute arose between Molina Healthcare of Washington and Insurance Strategies about alleged overpayment of insurance premiums. (Id. ¶¶ 29--35.) Molina Healthcare filed suit in the United States District Court for the Central District of California against Insurance Strategies, Stephanie Buffery, Aaron Goffman, and Plaintiffs Larry Rieser, Sharyl Rieser, and Cynthia Thompson, alleging fraud, negligent misrepresentation, breach of contract, and breach of fiduciary duty. (Id. ¶¶ 39, 40, 41, 43, & 45.) Molina claimed "that the amount of premium paid . . . was higher than the premium [paid by defendants] for the reinsurance policy, and that the Riesers and Goffman improperly retained the difference." (Id. ¶ 47.) It also alleged "that the Riesers had altered the written insurance policies obtained from ReliaStar in order to reflect the 'higher' premium rates Molina paid." (Id. ¶ 48.) Plaintiffs denied and continue to deny these allegations. (Id. ¶¶ 50, 51, 59--64.)
Plaintiffs tendered the lawsuit to Defendant, and Defendant "accepted the tender of the defense . . . subject to a reservation of rights." (Id. ¶¶ 65--71.) However, on April 21, 2005, Defendant wrongfully denied coverage for the underlying lawsuit. (Id. ¶¶ 72--74; Doc. No. 14 (Prior Order) at 14.)
Although Plaintiffs initially retained counsel, eventually their counsel withdrew because Plaintiffs could no longer afford to pay. (Compl. ¶ 99.) Proceeding pro se, Plaintiffs failed to timely file an opposition to Molina Healthcare's motion for summary judgment, and judgment was entered against them in part for $655,479. (Id. ¶¶ 100--05.) They then opted to settle the matter for $250,000. (Id. ¶ 111.)
Plaintiffs filed this action on May 20, 2009, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. (Id. ¶¶ 123--38.) They seek consequential and incidental damages along with emotional distress damages, attorney's fees, and punitive damages. (Id. at 15.) On June 16, 2009, Defendant filed a motion to dismiss and on September 1, 2009, Plaintiffs filed a cross motion for summary judgment on the issue of Defendant's duty to defend in the underlying action. (Doc. Nos. 3 & 8.) On December 7, 2009, the Court denied Defendant's motion and granted Plaintiffs' motion for summary judgment. (Prior Order.)
Federal Rule of Civil Procedure 56 permits a court to grant summary judgment where (1) the moving party demonstrates the absence of a genuine issue of material fact and (2) entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "Material," for purposes of Rule 56, means that the fact, under governing substantive law, could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). For a dispute to be "genuine," a reasonable jury must be able to return a verdict for the nonmoving party. Anderson, 477 U.S. at 248.
The initial burden of establishing the absence of a genuine issue of material fact falls on the moving party. Celotex, 477 U.S. at 323. The movant can carry his burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party "failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Id. at 322--23. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).
Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the nonmoving party to set forth facts showing that a genuine issue of disputed fact remains. Celotex, 477 U.S. at 324. The nonmoving party cannot oppose a properly supported summary judgment motion by "rest[ing] on mere allegations or denials of his pleadings." Anderson, 477 U.S. at 256. When ruling on a summary judgment motion, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Plaintiffs seek summary judgment on a single issue only: a partial damages award of $250,000 in consequential damages based on their settlement of the underlying case. (See Memo. ISO Motion at 5--10; Reply at 1 (withdrawing ...