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Nationwide Insurance Company, an Ohio Corporation v. Joe David Hunley Raymond Clarfield Rebecca Clarfield, Individually and as Surviving Heirs of Gail Vivian Clarfield, Deceased Wendy Travis, Individually and as Personal Representative of the Estate of Michael Anthony Travis, Deceased Amber C. Travis Benjamin J. Travis Keri A. Travis, Minors, Individually

Citations: 915 F.2d 557; 1990 U.S. App. LEXIS 17267Docket: 89-16070

Court: Court of Appeals for the Ninth Circuit; October 2, 1990; Federal Appellate Court

Narrative Opinion Summary

The case involves an appeal by Nationwide Insurance Company against a district court's declaratory judgment mandating it to indemnify a permissive user, Joe David Hunley, under a car insurance policy held by Michael Travis. Following a fatal accident, Nationwide paid $25,000 to Travis's survivors but did not extend the same to Hunley, who failed to appear in the lawsuit against him. The survivors contended that California Insurance Code § 11580.1(b)(4) obligated Nationwide to indemnify Hunley, a position the district court supported. On appeal, the Ninth Circuit reversed this decision, holding that the policy did cover Hunley equivalently to Travis. The court explained that any judgment against Hunley would be offset by Nationwide's prior payment on Travis's behalf, as permitted under California Code of Civil Procedure Section 877. The court further noted that Nationwide's actions did not breach its obligation to insure Hunley to the same extent as Travis. The case was remanded for further proceedings, with an unresolved question remaining about Nationwide's duty to defend Hunley after policy limits were exhausted. The judgment was reversed, highlighting the nuance in determining insurance coverage equivalence without regard to settlement outcomes.

Legal Issues Addressed

Crediting of Payments under California Code of Civil Procedure Section 877

Application: The court found that Nationwide's payment on behalf of Travis could be credited against Hunley's liability, thus allowing Nationwide to fulfill its obligation to insure Hunley equivalently.

Reasoning: California Code of Civil Procedure Section 877 is pertinent to the case, as it allows Nationwide's $25,000 payment on Travis' behalf to be credited against Hunley's liability.

Duty to Defend after Exhaustion of Policy Limits

Application: The unresolved issue of whether Nationwide's duty to defend Hunley terminates after a good faith payment of policy limits remains a question under California law.

Reasoning: Nationwide has not pursued a claim regarding its duty to defend Hunley, leaving an unresolved question of California law concerning whether policy language terminating the duty to defend after a good faith payment of policy limits is enforceable when relevant claims were known at the time of payment.

Extent of Coverage for Permissive Users

Application: The Ninth Circuit determined that Hunley was insured to the same extent as Travis, regardless of differing benefits received from settlement outcomes.

Reasoning: The Ninth Circuit found that the insurance policy did cover Hunley to the same extent as Travis and noted that Nationwide was already defending him in the underlying action.

Indemnification Obligation under California Insurance Code § 11580.1(b)(4)

Application: The court examined whether Nationwide was obligated to indemnify Joe David Hunley as a permissive user under the insurance policy, determining that the policy did provide such coverage.

Reasoning: The survivors argued that under California Insurance Code § 11580.1(b)(4), Nationwide had an obligation to defend and indemnify Hunley, which the district court upheld.