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Schwartz v. State Farm Mutual Automobile Insurance Co.

United States District Court, D. New Mexico

August 30, 2018

DANA SCHWARTZ, Plaintiff,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT'S MOTION TO DISMISS AND DENYING DEFENDANT'S MOTION TO CERTIFY

         THIS MATTER comes before the Court upon Defendant's Motion to Dismiss Plaintiff's Amended Complaint, filed May 14, 2018 (Doc. 9), and Defendant's Motion to Certify Questions to the New Mexico Supreme Court, filed May 14, 2018 (Doc. 7). Having reviewed the parties' pleadings and the applicable law, the Court finds that Defendant's Motion to Dismiss is not well-taken and, therefore, is DENIED IN PART. However, the Court will dismiss certain counts as specified below, with leave to amend. Finally, the Motion to Certify is DENIED WITHOUT PREJUDICE as premature.

         BACKGROUND

         This class action arises out of a dispute over “underinsured motorist coverage.” NMSA § 66-5-301 (“‘underinsured motorist' means an operator of a motor vehicle with respect to the ownership, maintenance or use of which the sum of the limits of liability under all bodily injury liability insurance applicable at the time of the accident is less than the limits of liability under the insured's uninsured motorist coverage.”). Plaintiff alleges that Defendant misrepresented or failed to adequately explain to her and similarly situated class members the extent of “underinsured motorist” coverage when purchased at the minimum level of $25, 000.

         Plaintiff was the victim of a car crash on December 11, 2012.[1] While Plaintiff was stopped at a red light on Academy Blvd. in Albuquerque, New Mexico, the tortfeasor attempted to slip between her and another stopped car, crashing into both. She received $25, 000 in compensation from the tortfeasor's minimum liability policy. Because she alleges her damages were in excess of $25, 000, she apparently sought benefits from her own uninsured and underinsured motorist coverage from her insurance company, Defendant State Farm. Her policy with Defendant included statutory minimum amount of uninsured and underinsured of $25, 000. Defendant allegedly denied coverage according to the insurance policy and New Mexico law, because the amount received from tortfeasor's minimum liability insurance was offset against Plaintiffs $25, 000 uninsured and underinsured policy. See generally Schmick v. State Farm Mut. Auto. Ins. Co., 103 N.M. 216, 704 P.2d 1092 (N.M. 1985) (explaining statutory offset in NMSA § 66-5-301). Defendant State Farm claims to have paid under the underinsured motorist provisions for property damage, but Plaintiff alleged that Defendant denied underinsured motorist coverage for bodily harm.

         Plaintiff generally alleges that Defendant misrepresented and misled the nature of underinsured motorist coverage she purchased, causing her to reasonably expect that the purchased coverage would compensate her for damages that were greater than the limits of the tortfeasor's liability limits. Doc. 1-02, ¶ 24, 30, 33, 40. Plaintiff claims that Defendant did not inform her of the limited nature of underinsured motorist coverage when purchased at the minimum level. Based on this allegation, Plaintiff filed a complaint asserting the following claims:

Count I: Negligence;
Count II: Violations of the Unfair Trade Practices Act;
Count III: Violations of the Unfair Insurance Practices Act;
Count IV: Breach of Contract and Claim for Motorist Coverage; Count V: Breach of Contract and Covenant of Good Faith and Fair Dealing;
Count VI: Injunctive Relief;
Count VII: Declaratory Judgment; and
Count VIII: Punitive Damages.

         Defendant seeks to dismiss all claims for lack of standing under Fed.R.Civ.P. 12(b)(1), or alternatively, for failure to state a claim under Fed.R.Civ.P. 12(b)(6).

         DISCUSSION

         I. Motion to Dismiss for Lack of Standing under Fed.R.Civ.P. 12(b)(1).

         Defendant argues that this case should be dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction, because Plaintiff lacks standing. Plaintiff “must demonstrate standing to sue by establishing (1) an injury in fact, (2) a sufficient causal connection between the injury and the conduct complained of, and (3) a likelihood that the injury will be redressed by a favorable decision.” Philadelphia Indem. Ins. Co. v. Lexington Ins. Co., 845 F.3d 1330, 1335 (10th Cir. 2017) (internal citations and quotation marks omitted). Here, Defendant solely argues that Plaintiff has not demonstrated an injury in fact.

         “Rule 12(b)(1) motions generally take one of two forms: (1) a facial attack on the sufficiency of the complaint's allegations as to subject matter jurisdiction; or (2) a challenge to the actual facts upon which subject matter jurisdiction is based.” Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir. 2002), citing Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir.1995) (citation omitted). When considering evidence outside the pleadings under Fed.R.Civ.P. 12(b), the Court need not convert the motion to Rule 56, unless the standing issue is intertwined with the merits of the Plaintiff's case. Holt, 46 F.3d at 1003.

         Defendant's sole argument in the motion is that Plaintiff failed to plead any facts that she was actually harmed. Defendant points out that it in fact paid Defendant $3, 225 under the underinsured motorist coverage, and therefore Plaintiff has no standing to assert a denial of underinsured coverage. However, this payment was apparently solely for property damage. Doc. 1-4, ¶ 4-5. Defendant's argument does not tend to facially attack Plaintiffs complaint, because she alleges that she sustained bodily injuries in an accident in which she was not at fault and for which she was not compensated under her underinsured motorist coverage. First Amended Complaint (“FAC) ¶ 10. Plaintiff alleges that Defendant denied coverage under her underinsured motorist coverage. FAC ¶ 30, 32. Based on these allegations, Plaintiff has adequately pled an injury in fact.

         Alternatively, Defendant could be interpreted to attack the facts upon which Plaintiffs standing rests.[2] In response, Plaintiff filed a declaration stating she incurred bodily injury in excess of the tortfeasor's liability policy, and Defendant preemptively denied coverage under her underinsured motorist coverage. Doc. 24-1, ¶ 8 (“State Farm denied my request for uninsured/underinsured motorist coverage on November 5, 2015, stating “there is not underinsured motorist exposure form [sic] the motor vehicle accident.”). She also attached a letter from Defendant that states that Defendant concluded that because the tortfeasor's liability limits were $25, 000, she had no underinsured motorist coverage, and that they would therefore close the case. Plaintiff has shown that Defendant denied coverage under the underinsured motorist provision.

         Moreover, it appears that Defendant's standing arguments may be tied together with the merits of the case. To the extent Defendant argues that Plaintiff suffered no harm because coverage was not illusory and there was no misrepresentation, that goes to the merits of the case, and is best addressed under Fed.R.Civ.P. 56. Holt v. United States, 46 F.3d 1000, 1003 (10th Cir. 1995) (“Consequently, unless the jurisdictional issue is intertwined with the merits of Plaintiff's case, the district court properly considered evidence outside of the pleadings and resolved factual disputes without converting the motion into a Rule 56 motion”).

         II. Motion to Dismiss for Failure to State a Claim under Fed.R.Civ.P. 12(b)(6).

         A. Legal Standard under Fed.R.Civ.P. 12(b)(6).

         To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Conclusory allegations of liability, without supporting factual content, are insufficient. “The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.” Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008).

         Because this is a diversity case based on New Mexico law, this Court must ascertain and apply New Mexico law. In doing so, the Court must either follow the decisions of the New Mexico Supreme Court, or attempt to predict what the New Mexico Supreme Court would do. Coll v. First Am. Title Ins. Co., 642 F.3d 876, 886 (10th Cir. 2011); Federated Serv. Ins. Co. v. Martinez, 529 Fed.Appx. 954, 957 (10th Cir. 2013) (if no controlling state supreme court case, district court must predict how such court would rule based on intermediate appellate decisions, decisions of other states, federal decisions, and general weight and trend of authority).

         Although not attached to the complaint or the motion to dismiss, the Court may consider the insurance policy as it is referred to in the complaint, it is central to the Plaintiff's claims and the parties do not dispute its authenticity. Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002), cited in Brokers' Choice of America, Inc. v. NBC Universal, Inc., 861 F.3d 1081, 1103 (10th Cir. 2017). Therefore, the Court may consider the policy and need not convert to Fed.R.Civ.P. 56.

         B. New Mexico Statutory Offset Procedure for Underinsured Motorist Coverage.

         NMSA § 66-5-301(A) mandates that every motor vehicle policy include uninsured and underinsured motorist coverage for bodily injury or death and property damage. This statute is “intended to expand insurance coverage and to protect individual members of the public against the hazard of culpable uninsured motorists.” Progressive Nw. Ins. Co. v. Weed Warrior Servs., 2010-NMSC-050, ¶ 5, 149 N.M. 157, 159, 245 P.3d 1209, 1211, quoting Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245 (1990). Motor vehicle policies must contain bodily injury limits at a minimum level of $25, 000 per person and $50, 000 per accident. NMSA § 66-5-215(A)(2)-(3). Uninsured and underinsured motorist coverage has the same minimum level, and may be bought at an amount up to the liability amount in the policy. Insureds have the option of rejecting uninsured and underinsured motorist coverage. NMSA § 66-5-301(C). Underinsured motorist coverage is defined as follows:

The uninsured motorist coverage described in Subsection A ... shall include underinsured motorist coverage for persons protected by an insured's policy.... “[U]nderinsured motorist” means an operator of a motor vehicle ... which the sum of the limits of liability under all bodily injury liability insurance applicable at the time of the accident is less than the limits of liability under the insured's uninsured motorist coverage.

NMSA § 66-5-301(B) (emphasis added). “The state of being underinsured exists when the aggregate of the insured's uninsured motorist coverage reduced by the tortfeasor's liability coverage is greater than zero.” Schmick v. State Far Mutual Automobile Insurance Co., 103 N.M. 216, 223 (N.M. 1985). Thus, according to the New Mexico Supreme Court, underinsured motorist coverage does not exist where the tortfeasor carries the minimum liability amount of $25, 000, and the insured has the same amount of uninsured motorist coverage. Progressive Nw. Ins. Co. v. Weed Warrior Servs., 2010-NMSC-050, ¶ 10, 149 N.M. 157, 161, 245 P.3d 1209, 1213 (“An insured carries UIM coverage only if the UM/UIM limits on her or his policy are greater than the statutory minimum of $25, 000.”). Based on that reasoning, the New Mexico Supreme Court required insurers to offer underinsured motorist insurance in an amount greater than $25, 000, reasoning that an offer of underinsured motorist coverage at the minimum level is no offer at all. Id.

         C. Plaintiff States a Claim for Negligent Misrepresentation.

         Defendant argues that Plaintiff failed to state a claim as to the negligence count, because (1) she failed to allege sufficient facts to support a negligence claim, and (2) as a matter of law a negligence claim may not arise where there is contractual relationship between an insurer and insured. See Ambassador Ins. Co. v. St. Paul Fire & Marine Ins. Co.,102 N.M. 28, ...


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