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Sedillo Electric v. Colorado Casualty Insurance Co.

United States District Court, D. New Mexico

April 10, 2017

SEDILLO ELECTRIC and TELESFOR SEDILLO, Plaintiffs,
v.
COLORADO CASUALTY INSURANCE COMPANY, LIBERTY MUTUAL INSURANCE COMPANY, and PEERLESS INDEMNITY INSURANCE COMPANY, Defendants, SEDILLO ELECTRIC and TELESFOR SEDILLO, Plaintiffs,
v.
COLORADO CASUALTY INSURANCE COMPANY, LIBERTY MUTUAL INSURANCE COMPANY, and PEERLESS INDEMNITY INSURANCE COMPANY, Defendants.

          MEMORANDUM OPINION AND ORDER

          ROBERT C. BRACK UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court upon Defendants' Motion to Bifurcate Plaintiffs' Contract Claims From Their Extra-Contractual Claims At Trial. (Doc. 137.) Federal jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332(a). Having considered the submissions of counsel and relevant law, the Court will GRANT this motion.

         I. Background

         Plaintiff Telesfor Sedillo is the sole proprietor of Plaintiff Sedillo Electric and the owner of a building located at 1219 Main Street SE, Los Lunas, New Mexico (“Property”). (Doc. 13.) Plaintiffs allege they were insured under the “joint insurance policy” issued by Defendants Colorado Casualty Insurance Company, Liberty Mutual Insurance Company, and Peerless Indemnity Insurance Company. (Id.) Plaintiffs allege that “Defendant Peerless, the underwriter for Defendants Liberty Mutual, Colorado Casualty and/or Peerless issued the purported policy (“Policy”) on September 2, 2010, and . . . renewed the policy through September 2, 2013.” (Doc. 1-2.)

         On January 31, 2013, Plaintiffs submitted a claim for hail damage under the Policy (hereinafter “hail claim”). (Doc. 1.) Plaintiffs allege that the damage was caused by a hail storm in the area on May 12, 2013. (Doc. 1-2.) On March 22, 2013, Defendant Liberty Mutual Insurance Company denied the hail claim. (Doc. 1.) On December 23, 2013, Plaintiffs filed a lawsuit based on the denial of the hail claim in the Thirteenth Judicial District Court of the State of New Mexico. See Sedillo Elec. v. Colo. Cas. Ins., No. D-1214-CV-2013-01427 (“2013 Lawsuit”). Therein, Plaintiffs requested damages for breach of insurance contract, the tort of bad faith insurance conduct, breach of the covenant of good faith and fair dealing, violation of equitable principles, unfair insurance practices in violation of the New Mexico Unfair Insurance Practices Act, N.M. Stat. Ann. §§ 59A-16-1, et seq., and unfair trade practices in violation of the New Mexico Unfair Trade Practices Act, N.M. Stat. Ann. §§ 57-12-1, et seq. (Id.) Defendants filed a counterclaim for a declaratory judgment that the Policy does not cover Plaintiffs' claims. (Id.)

         On July 3, 2013, Plaintiffs made a claim for vandalism and theft under the Policy (“vandalism claim”). (Doc. 13-1.) More specifically, Plaintiffs claimed that, on the night of June 30, 2013, thieves broke in to the Property and stole electrical wiring, copper piping, and flooring, and damaged the walls and doors. (Id.)

         On April 14, 2014, Plaintiffs filed a motion to amend the complaint in the 2013 Lawsuit to add the vandalism claim. (Docs. 20-3; 25.) In May 2015, New Mexico District Court Judge John F. Davis denied the motion to amend the complaint to add the vandalism claim as premature because Defendants had not decided whether to deny the vandalism claim. (Doc. 1-4.)

         On June 25, 2015, Plaintiffs filed a second lawsuit in the Thirteenth Judicial District Court of the State of New Mexico seeking damages for breach of insurance contract, the tort of bad faith insurance conduct, breach of the covenant of good faith and fair dealing, violation of equitable principles, unfair insurance practices in violation of the New Mexico Unfair Insurance Practices Act, and unfair trade practices in violation of the New Mexico Unfair Practices Act based on both the hail claim and the vandalism claim. See Sedillo Elec. v. Colo. Cas. Ins., No. D-1314-CV-2015-00684 (“2015 Lawsuit”).

         On August 6, 2015, Defendant Liberty Mutual denied the vandalism claim. (Id.)

         On September 8, 2015, Plaintiffs filed a Second Motion to Amend the Hail Claim Complaint in the 2013 Lawsuit to add allegations pertaining to the vandalism claim. (Doc. 1.) On December 1, 2015, Judge Davis denied the second motion to amend the complaint in the 2013 Lawsuit. (Id.)

         On December 30, 2015, Defendants removed the 2015 Lawsuit to this Court. (Doc. 1.) On January 5, 2016, Plaintiff filed an Amended Complaint in the 2015 Lawsuit based on allegations pertaining to both the hail claim and the vandalism claim. (Doc. 13.) Therein, Plaintiffs requested damages for breach of insurance contract, the tort of bad faith insurance conduct, breach of the covenant of good faith and fair dealing, violation of equitable principles, unfair insurance practices in violation of the New Mexico Unfair Insurance Practices Act, and unfair trade practices in violation of the New Mexico Unfair Trade Practices Act. (Id.) Additionally, Plaintiffs alleged that Defendant Liberty Mutual Insurance Company's waiver, estoppel, and repudiation of contractual damages bar anticipated defenses based on allegations pertaining to both the hail claim and the vandalism claim. (Id.)

         On December 23, 2015, the claims against Defendant Baker Insurance Services, L.L.C. in the 2013 Lawsuit were dismissed without prejudice by stipulation. (Doc. 1-5.) On January 20, 2016, Defendants removed the 2013 Lawsuit to this Court. See Sedillo Elec. v. Colo. Cas. Ins., No. 1:16-cv-0043 MCA/LF.

         Plaintiffs moved to consolidate the 2013 Lawsuit into the 2015 Lawsuit. (Doc. 58.) Defendants opposed the motion. (Doc. 62.) On May 27, 2016, the Court granted the motion to consolidate. (Doc. 71.) On August 17, 2016, the Court set the matter for jury selection and trial to be held on December 11, 2017. (Doc. 89.) On November 16, 2016, Plaintiffs filed a Stipulated Dismissal of Vandalism Claims. (Doc. 126.)

         Defendants move to bifurcate the trial of Plaintiffs' breach of contract and coverage claim (hereinafter “breach of contract claim”) from the trial of the bad faith and other extra-contractual claims (hereinafter ...


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