James Luard Wallis; v. CENTENNIAL INSURANCE COMPANY, INC., a New York corporation

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JAMES LUARD WALLIS; et al.,
Plaintiffs - Appellants,
v.
CENTENNIAL INSURANCE
COMPANY, INC., a New York
corporation and ATLANTIC MUTUAL
INSURANCE COMPANY, INC., a New
York corporation,
Defendants - Appellees.
No. 14-15555
D.C. No. 2:08-cv-02558-WBS-AC
MEMORANDUM*
Appeal from the United States District Court
for the Eastern District of California
William B. Shubb, Senior District Judge, Presiding
Submitted March 16, 2016**
San Francisco, California
FILED
MAR 21 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

-- 1 of 4 --

Before: BYBEE and N.R. SMITH, Circuit Judges and KORMAN,*** Senior
District Judge.
Dale M. Wallis, D.V.M. (“Dr. Wallis”), James L. Wallis (“Mr. Wallis”), and
Hygieia Biological Laboratories, Inc. (“Hygieia”) (collectively “Appellants”)
appeal the district court’s judgment and award in favor of Centennial Insurance
Company (“Centennial”) and Atlantic Mutual Insurance Company (“Atlantic
Mutual”) on Centennial’s counterclaim for reimbursement of costs incurred in
defending Appellants against a motion for sanctions in the underlying action. We
affirm.
1. Centennial and Atlantic Mutual were not required to comply with the pre-
filing requirements of California Insurance Code section 1616, because Centennial
and Atlantic Mutual were not “nonadmitted” insurers.1 Dr. Wallis purchased a
professional liability insurance policy from Centennial in 1988, when Centennial
and Atlantic Mutual were admitted to transact business in California.2 In 2011,
*** The Honorable Edward R. Korman, Senior District Judge for the U.S.
District Court for the Eastern District of New York, sitting by designation.
1 Accordingly, Appellants’ Motion to Strike Appellees’ Answering Brief is
denied.
2 We take judicial notice of Centennial and Atlantic Mutual’s Exhibits 1–4,
and 6 of Gary Sevin’s declaration in support of Appellees Opposition to
Appellants’ Motion to Strike under Federal Rule of Evidence 201 and Ninth
Circuit Rule 27-1.
-2-

-- 2 of 4 --

Centennial and Atlantic Mutual were placed in liquidation, and each became an
“insolvent insurer.” See Cal. Ins. Code § 1063.1(b). Claimants of insolvent insurers
are protected by the California Insurance Guarantee Association (“CIGA”).
Hawthorne Sav. F.S.B. v. Reliance Ins., 421 F.3d 835, 857 (9th Cir.), amended and
superseded by 433 F.3d 1089 (9th Cir. 2005). Thus, Appellants are protected by
CIGA, not section 1616 of the California Insurance Code. See id. at 858.
2. The district court did not clearly err in finding that Centennial and Atlantic
Mutual are indistinguishable for purposes of determining who paid Appellants’
attorneys’ fees for the sanctions litigation, because both companies’ names were on
the checks. See Neptune Orient Lines, Ltd. v. Burlington N. & Santa Fe Ry., 213
F.3d 1118, 1119 (9th Cir. 2000) (“Factual determinations are reviewed for clear
error.”). Further, Appellants argued at trial that Centennial and Atlantic Mutual
should be treated as one.
3. The district court did not abuse its discretion by permitting Centennial and
Atlantic Mutual to present evidence of damages at trial after finding that, even if
the companies failed to comply with Federal Rule of Civil Procedure 26(a)
initially, such noncompliance was harmless under Federal Rule of Civil Procedure
37(c)(1). Even if the district court had erred, we would not reverse, because
Appellants were not prejudiced. See Freeman v. Allstate Life Ins., 253 F.3d 533,
-3-

-- 3 of 4 --

536 (9th Cir. 2001) (“Evidentiary rulings are reviewed for an abuse of discretion
and should not be reversed absent some prejudice.”).
4. The district court did not err in awarding Centennial and Atlantic Mutual
reimbursement of defense costs for the sanctions litigation. “‘California law clearly
allows insurers to be reimbursed for attorney’s fees’ and other expenses ‘paid in
defending insureds against claims for which there was no obligation to defend.’”
Buss v. Super. Ct., 939 P.2d 766, 776 (Cal. 1997) (quoting Omaha Indem. Ins. v.
Cardon Oil Co., 687 F. Supp. 502, 504 (N.D. Cal. 1988)). Centennial’s insurance
policy covered damages for injuries arising out of Dr. Wallis’s actions or inactions
resulting from her status as a veterinarian. The policy did not cover damages
arising from misconduct during litigation. Further, the California Insurance Code
clarifies that “[a]n insurer is not liable for a loss caused by the wilful act of the
insured,” Cal. Ins. Code § 533, including court-imposed sanctions,3 see Cal. Cas.
Mgmt. Co. v. Martocchio, 15 Cal. Rptr. 2d 277, 281–82 (Cal. Ct. App. 1992).
AFFIRMED.
3 Appellants cite Downey Venture v. LMI Ins., 78 Cal. Rptr. 2d 142 (Cal. Ct.
App. 1998), for the proposition that, even if indemnification of a claim is
precluded by section 533, an insurer may still have a duty to defend. However,
Downey Venture is distinguishable because, in that case, the insurance policy
specifically covered the wilful conduct at issue. See id. at 160.
-4-

-- 4 of 4 --