Unreported / Non-Citable
Background
Great West Casualty Company sued in the Eastern District of California on March 30, 2026, seeking a declaration of its rights and obligations under a commercial automobile liability policy it issued to DJT Transport, Inc. The coverage dispute stems from a state-court action filed on August 19, 2024, in which Olman Santos sued the Palogix defendants for negligence and premises liability over injuries he allegedly sustained while picking up bins on premises Palogix controlled. The Palogix defendants cross-complained against Santos, DJT (a trucking company owned by Santos), and J. Delgadillo Trucking, the company that hired Santos or DJT for the pickup, alleging negligence and seeking equitable indemnity and apportionment of fault.
Great West learned of the cross-complaint on August 5, 2025, and agreed to defend all three under reservations of rights. On December 10, 2025, it disclaimed any duty to defend or indemnify, citing a policy exclusion, and it filed this action when the three did not withdraw their tender. The complaint contends, at least in part, that the policy's Movement of Property By Mechanical Device Exclusion bars coverage for Santos, DJT, and Delgadillo. DJT and Santos did not respond, and the clerk entered their defaults. Delgadillo answered on June 18, 2026, denying the declaratory allegations, and the Palogix defendants were later dismissed. On July 10, 2026, Great West moved for default judgment against DJT and Santos, supported by declarations from counsel, a process server, and a senior claims specialist.
The Court’s Holding
Magistrate Judge Erica P. Grosjean recommends that the motion be denied without prejudice. She did not reach the merits of the coverage question or apply the seven Eitel factors, which the findings recite only as the general standard. Instead, she relied on Federal Rule of Civil Procedure 54(b), under which a court may direct entry of final judgment against fewer than all parties only if it expressly determines there is no just reason for delay.
The court could not make that determination. Great West asserts the same declaratory claims against the defaulting defendants and against Delgadillo, who has appeared and denied them. A default judgment declaring that the exclusion bars coverage would adversely affect Delgadillo's rights, and because Delgadillo has not defaulted, there is no valid basis to deny it the chance to defend. The findings rely on Westchester Fire Insurance Co. v. Mendez, 585 F.3d 1183 (9th Cir. 2009), which says one defaulting party's conduct should not ordinarily produce a judgment fatal to other parties' interests, a point the Ninth Circuit called especially strong in third-party liability insurance. Several district court decisions are cited for the risk of inconsistent results when similarly situated defendants have similar defenses.
This is a recommendation, not an order. It goes to the assigned district judge, and objections, limited to 15 pages, are due within fourteen days. Failure to object may waive appellate rights.
Key Takeaways
- A clerk's entry of default does not entitle a plaintiff to default judgment, because Rule 55(b)(2) leaves that decision to the court's discretion.
- Under Rule 54(b), a court should not enter judgment against some defendants when doing so would necessarily lead to a result adverse to non-defaulting parties who face the same claims.
- Here, the shared policy exclusion and Delgadillo's pending denial of the declaratory allegations supplied the just reason for delay.
- The denial is recommended without prejudice, so the findings do not bar Great West from seeking default judgment later. They also do not describe the entered defaults against DJT and Santos as being set aside.
- Because this is a magistrate judge's recommendation, it has no binding effect unless the district judge adopts it after the fourteen-day objection period.
Why It Matters
The findings apply a familiar Ninth Circuit caution to a common insurer approach: suing the insured, the driver, and other putative insureds together for a coverage declaration, then seeking default against those who do not respond. Where the same exclusion is asserted against a party that is actively defending, the court treats that party's pending defense as a reason to hold off on judgment against the defaulting parties. The findings also cite other Eastern District rulings denying default judgment as to fewer than all defendants under Rule 54(b).
The ruling is limited. It is an unadopted recommendation, it decides nothing about whether the exclusion applies, and the claims against Delgadillo remain pending. Insurers in similar multi-insured cases may expect default judgment requests to be deferred until the claims against appearing co-defendants are resolved.