FERNANDO AVILA and ROSARIO REYES, Co-Administrators of the ESTATE OF MANUEL AVILA v. Century National Insurance Company

This disposition is not appropriate for publication and is not precedent*
except as provided by 9th Cir. R. 36-3.
The Honorable James L. Graham, Senior District Judge for the U.S.**
District Court for the Southern District of Ohio, sitting by designation.
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FERNANDO AVILA and ROSARIO
REYES, Co-Administrators of the
ESTATE OF MANUEL AVILA,
Plaintiffs - Appellants,
v.
CENTURY NATIONAL INSURANCE
COMPANY,
Defendant - Appellee.
No. 10-16386
D.C. No. 2:09-cv-00682-RCJ-
GWF
MEMORANDUM*
Appeal from the United States District Court
for the District of Nevada
Robert Clive Jones, Chief District Judge, Presiding
Argued and Submitted August 31, 2011
San Francisco, California
Before: BERZON and BYBEE, Circuit Judges, and GRAHAM, Senior District
Judge.**
FILED
APR 03 2012
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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The estate of Manuel Avila (“Estate”) appeals the district court’s grant of
summary judgment to Century National Insurance Co. (“Century”) on the Estate’s
breach of contract and violation of the implied covenant of good faith and fair
dealing (“bad faith”) claims regarding Century’s refusal to indemnify, defend, or
settle in connection with a suit brought by Dora Rodriguez against Manuel Avila.
The district court found that the Estate had failed to show that it or Manuel Avila
had suffered any economic or emotional distress damages caused by Century’s
refusal. We review the district court’s grant of summary judgment de novo. See
Balint v. Carson City, 180 F.3d 1047, 1050 (9th Cir. 1999) (en banc). We reverse.
1. Regarding the breach of contract claim, we conclude that the district
court erred in granting Century summary judgment on the basis that the Estate
could show no economic damages. Nevada law awards expectation damages,
Colo. Env’ts, Inc. v. Valley Grading Corp., 779 P.2d 80, 84 (Nev. 1989), and we
find no authority suggesting that an insured’s financial status affects his right to be
reimbursed under a liability policy like the one in this case. On the contrary, under
a liability policy, an insurer has an obligation to pay for any legal liability
regardless of whether the insured has already paid the claim. See 2 ALLAN D.
WINDT, INSURANCE CLAIMS AND DISPUTES § 6:5 (5th ed. 2012). As the Estate
conceded, the amount contested under the breach of contract claim stands at

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Although the parties discussed the issue of an offer of judgment by Century1
that Rodriguez accepted, we have no evidence of its terms. Because the issue was
not raised before the district court and there are unresolved factual issues, we leave
it to the district court to resolve in the first instance. See Marx v. Loral Corp., 87
F.3d 1049, 1055 (9th Cir. 1996).
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$135,000, or the amount of the policy less the amount Century paid to Rodriguez.1
We reverse the grant of summary judgment and remand to the district court for
further proceedings to determine whether the insurance contract covered the
Estate’s claim.
2. Regarding the bad faith claim, we also conclude that the district court
erred in granting Century summary judgment based on a lack of economic and
emotional distress damages. We presume that Nevada would look to California
law in determining whether the bad faith claim would be viable. See U.S. Fid. &
Guar. Co. v. Peterson, 540 P.2d 1070, 1071 (Nev. 1975). Under California law,
because Manuel Avila was alive when Century refused to indemnify, defend, and
settle, whether or not he had any assets at the time would be irrelevant to Century’s
duties. See Shapero v. Allstate Ins. Co., 92 Cal. Rptr. 244, 247–48 & n.1 (Ct. App.
1971). If Century breached its implied covenant with Avila while he was alive,
then, under Nevada law, the Estate would retain any such claims as if Manuel
Avila were still alive. NEV. REV. STAT. § 41.100(3). Thus, Manuel Avila’s or the
Estate’s assets at any point in time would be irrelevant to Century’s liability for a

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breach of the implied covenant of good faith and fair dealing, and the Estate may
be able to claim damages based on a bad faith refusal to indemnify, defend, or
settle. We agree with the district court that, under Nevada law, ambiguity in the
insurance contract sufficient to preclude a directed verdict against the insurer on
the contract claim does not necessarily preclude a bad faith claim. See Albert H.
Wohlers & Co. v. Bartgis, 969 P.2d 949, 955–56 & n.2 (Nev. 1999). On the
record, there was a triable issue of fact regarding whether there was bad faith. We
reverse the grant of summary judgment on the bad faith claim and remand for
further proceedings to determine whether Century acted in bad faith and, if so, the
extent of any damages that the Estate suffered as a result.
We also agree with the district court that the Estate remains eligible to
collect any emotional distress damages that Manuel Avila suffered if Century acted
in bad faith. We disagree, however, with its determination that there was
insufficient evidence to support an emotional distress claim. We find that there
was a genuine dispute of material fact over emotional damages because Fernando
Avila’s testimony was sufficient for a jury to reach the conclusion that Manuel
Avila was harmed by Century’s conduct. We reverse the district court’s
determination that there was no genuine dispute of material fact concerning

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The Estate, in its reply brief, raised the issue of whether it should be2
allowed to conduct additional discovery related to emotional distress damages.
While such a claim would ordinarily be waived given that it was not raised in the
opening brief, because we remand for further proceedings, allowing further
discovery is now within the discretion of the district court.
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emotional distress and remand for further proceedings to establish the extent of the
emotional distress damages if it is found that Century acted in bad faith.2
REVERSED AND REMANDED.

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