When an insurance company decides that it has no coverage for defense and damages after a claim has been made by individuals seeking defense and damages against a third party damages measure, it is often wise to request an explanatory judgment from a U.S. District Court rather than taking a chance that the decision to refuse defense may be wrong.
State Farm did it State Farm Fire And Casualty Company, an Illinois company against Rika C. Palomares f / k / a Erika C. Pedroza, an individual; Mario Pedroza Jr., an individual; Raul Pedroza, an individual; Karen Bartee, an individual, as wife and heir to Robert Burl Bartee and as personal representative of Robert Bartee's estate; and Helen Quintana, Cindy Strickland, Charles Ray Bartee and Barbara Bartee, all individuals and natural children and heirs of Robert Burl Bartee, Case No. 1: 20-cv-00392-BLW, United States District Court of Idaho District (March 1) 2021).
When the defendants seeking coverage failed to respond to the attire, State Farm moved the USDC for bankruptcy against the defendants Mario Pedroza, Jr. and Raul Pedroza, who did not appear or respond to the proposal. After considering the information and the minutes, the court will approve the proposal.
State Farm sued the defendants and sought a declaratory judgment that it has no obligation to defend or replace uninsured Mario Pedroza, Jr. and Raul Pedroza. in the underlying trial entitled Karen Bartee Helen Quintana Cindy Strickland Charles Ray Bartee and Barbara Bartee v . Erika C . Pedroza Mario Pedroza Jr ., Raul Pedroza Cesar Martinez-Botello and Does 1-5 Case No. CV20-20- 00463, Fourth District Idaho – Elmore County, the state of Idaho.
State Farm found that Mario Pedroza, Jr. and Raul Pedroza were both properly served with a copy of the plaintiff's complaint and summons in the action described above in August 2020. More than 21 days have elapsed since both Mario Pedroza Jr. and Raul Pedroza was served and neither the defendant appeared in the case.
State Farm & # 39 ;s Motion of Default of Against the Defents Mario Pedroza, Jr. and Raul Pedroza on October 9, 2020 and Clerk & # 39 ;s Entry of Default with to Defents Mario Pedroza, Jr. and Raul Pedroza entered into force on 28 October 2020
State Farm then requests that the Court grant its claim for failure to fulfill obligations as follows:  That all allegations against Mario Pedroza, Jr. and Raul Pedroza in the complaint are determined to be the facts of this matter, including, but not limited to:
- Att Mario Pedroza, Jr. is not an "insured" under State Farm Houseowners Policy, No. 12-BE-S580-4 ("Policy");
- That Raul Pedroza is not an "insured" under Policy;
- That there was no "event", as defined in the Policy, alleged against Mario Pedroza, Jr. or Raul Pedroza in the underlying trial;
- That the actual facts show that there was no "event" in relation to any liability found against Mario Pedroza, Jr. or Raul Pedroza in the underlying trial;
- This exclusion la (3) in the policy (the expected injury exclusion) excludes coverage of the charges against Mario Pedroza, Jr. and Raul Pedroza in the underlying trial and for the facts in relation to any liability found against Mario Pedroza, Jr. or Raul Pedroza in the underlying trial;
- This exception 1.b. in the policy (excluding business practices), excludes coverage for the allegations against Mario Pedroza, Jr. and Raul Pedroza in the underlying trial and for the actual facts relating to any liability found against Mario Pedroza, Jr. or Raul Pedroza in the Underlying Trial;
- That exclusion 1.c. in the insurance (the rental of all insured exceptions) excludes coverage for the charges against Mario Pedroza, Jr. and Raul Pedroza in the underlying trial and for the actual facts relating to any liability found against Mario Pedroza, Jr. or Raul Pedroza in the underlying trial; and
- This exclusion 1.e. in the policy (the exception for bodily injury that occurs from premises that are not an insured place) excludes coverage for the charges against Mario Pedroza, Jr. and Raul Pedroza in the underlying trial and for the facts in relation to any liability against Mario Pedroza, Jr. or Raul Pedroza in the underlying trial.
The reasons for the complaint were clear, unambiguous and required – as the failure to respond serves as an acknowledgment that the allegations are true – to notify them unless there are mitigating factors against entry into the judgment.
Delays are available if there is harm to the plaintiff if the court completely denied the proposal and State Farm would be left in a state of limbo regarding its potential obligation to represent and compensate the defendants.
Due to the defendant's failure to participate, there was no evidence of a potentially disputed material fact or meritorious defense, or that the defendant's negligence was due to excusable negligence. In addition, the sufficiency and benefits of the plaintiff's claims also favor a bankruptcy judgment.
The Court, as a precedent, examined the complaint and was convinced that it makes a valid claim that State Farm does not owe the defendants an obligation to defend or replace any liability in the underlying proceedings. The complaint specifically appealed that State Farm had no obligation to defend or harm Mario and / or Raul under the Homeowners Policy for any liability in the underlying litigation, as, inter alia, reasons do not qualify as "insured", there was no "occurrence" and / or because one or more of the exceptions to the Homeowners Policy apply. "
Since these well-known factual allegations are considered to be recognized because of the defendant's bankruptcy, the court had no choice but to establish that the allegations in the complaint correctly establish the benefits of the plaintiff's claims.
Independently, the Court considered two factors to weigh against bankruptcy. First, the personal liability limit (each occurrence) liability limit for homeowners' policies in controversies is $ 300,000, which is a relatively large amount and the policy that favors merit decisions – weighs against bankruptcy.
However, since the court concluded that Mario and Raul were not "insured" under the insurance, these factors do not prevent the introduction of bankruptcy. The Court therefore granted the proposal.
With $ 300,000 in question, the sole reason is to allow a negligence to be brought if the defendants agreed with the allegations of the complaint for explanatory relief or were judgmental or without means to answer or were unwilling to answer pro se. It is clear that if they were not insured, there is no obligation for State Farm to defend and it was easy to be cautious by filing a declaratory relief measure where a simple denial of coverage would have been sufficient.
© 2021 – Barry Zalma  Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in insurance coverage, insurance claims handling, fraud and insurance fraud almost equally for policyholders and policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and email@example.com.
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