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Charters v. Geico Indemnity Co.

United States District Court, D. New Mexico

September 5, 2018

GEICO INDEMNITY COMPANY, an Insurance Company authorized to do business in New Mexico, Defendant.



         THIS MATTER comes before the Court on Defendant Geico's Opposed Motion to Dismiss Claim for Punitive Damages [Doc. 15]. The Court, having considered the motion and relevant law, finds that the motion is well-taken and will be granted.


         On January 24, 2014, an automobile accident occurred during which Leigh Jenke rear-ended Plaintiffs' vehicle. Id. ¶ 7. Ms. Jenke's insurer, Geico Indemnity Company, inspected Plaintiffs' vehicle and concluded that its insured, Ms. Jenke, was at fault and issued a property damage payment to Plaintiffs. Id. ¶¶ 10, 12. Plaintiffs then provided information to Geico about their injuries, including medical records and billings. Id. ¶ 13. Plaintiffs asked Geico to settle their personal injury claims, but Geico refused. Id. ¶15, 17. Although the timeline is unclear, it appears that Geico later offered to settle for an amount that Plaintiffs viewed as being significantly less than they were owed. Id. ¶ 33.

         On September 2015, Plaintiffs filed an action against both Ms. Jenke and Geico. Id. ¶ 28. Prior to trial, the parties agreed to mediate. Id. ¶ 34. Plaintiffs offered to settle for a total of $40, 000.00, but Geico offered only $16, 000.00, and the mediation subsequently failed. Id. ¶ 34. At trial, the jury found Ms. Jenke 100 percent at fault for the accident and awarded Plaintiffs a combined award of $100, 000.00 in damages.

         Thereafter, on August 8, 2017, Plaintiffs filed the instant action against Geico (“Defendant”) in New Mexico state court. [Doc. 1]. Defendant removed the action to this Court on September 8, 2017. Id. In their Complaint, Plaintiffs allege that, despite determining that its insured was liable for the accident, Defendant refused to settle Plaintiffs' personal injury claims or offer reasonable money to Plaintiffs in order to resolve those claims. Id. ¶¶ 17-18. According to Plaintiffs, this refusal was in keeping with Defendants' policy and practice of refusing to settle and/or alternatively to offer unreasonably low settlement proposals to persons claiming injuries arising from low speed auto accidents. Id. ¶¶ 20-21. Citing to the New Mexico Supreme Court's decision in Hovet v. Allstate Ins. Co., 89 P.3d 69 (N.M. 2004), Plaintiffs assert that Defendant's failure to “attempt in good faith to effectuate prompt, fair and equitable settlement of Plaintiffs' claims in which liability was reasonably clear, and Defendant's “intentional pattern and practice of dishonesty and intimidation of personal injury claimants involved in low speed collisions, ” violate the New Mexico Unfair Claims Practices Act (“UCPA”). Id. ¶¶ 41, 49. Based on Defendant's alleged violations of the UCPA, Plaintiffs seek to recover damages against Defendant, “including punitive damages, attorney's fees, and other costs.” Id. ¶ 51.

         On November 11, 2017, Defendant filed the instant motion, seeking to dismiss Plaintiffs' claims for punitive damages, arguing that the UCPA only allows recovery of actual damages. Plaintiffs filed a response in opposition on December 20, 2017, contending that the intent of the legislature in drafting the UCPA was to allow for punitive damages. Defendant's reply followed on December 28, 2017.


         Under Rule 12(b)(6), a Court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within the four corners of the complaint.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). When considering a Rule 12(b)(6) motion, the Court must accept as true all well-pleaded factual allegations, ignore conclusory allegations, view the factual allegations in the light most favorable to the non-moving party, and draw all reasonable inferences in the plaintiff's favor. Smith v. United States, 561 F.3d 1090, 1097 (10th Cir. 2009), cert. denied, 130 S.Ct. 1142 (2010); Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009).

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. 662, 678. “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679. Dismissal is warranted where plaintiffs “fail to allege any facts, or articulate any legal basis” to support their request for relief. Ambuehl v. Aegis Wholesale, 555 Fed.Appx. 817, 820 (10th Cir. 2014).


         Defendant moves to dismiss Plaintiffs' punitive damages claims on the ground that, even if Plaintiffs allegations were proven to be true, those allegations do not articulate any legal basis for an award of punitive damages. Specifically, Defendant argues that Plaintiffs' cause of action arises only under the UCPA and that, as a matter of law, the UCPA provides for the recovery of actual damages only. As set forth herein, the Court agrees.

         Historically, there were no means for a third-party claimant to bring suit against an insurance company for unfair practices in the common law. However, in 1984, the New Mexico Legislature drafted the UCPA, which gave private parties the right to sue insurers for unfair practices. That statute provides in relevant part: “Any person […] who has suffered damages as a result of a violation of [the UCPA] by an insurer or agent is granted a right to bring an action in district court to recover actual damages.” N.M.S.A. 1978, §59A-16-30. Although the language in Section 59A-16-30 is void of any explicit reference to third-party or private claimants, the New Mexico Supreme Court determined that, by using the phrase “[a]ny person, ” the Legislature did not mean to “restrict recovery solely to first parties, those insured under the policy.” Hovet, 89 P.3d at 73. “In creating a separate statutory action, ” the court explained, “the Legislature had a remedial purpose in mind: to encourage ethical claims practices within the insurance industry. The private right of action is one means toward that end.” Id. In keeping with “the remedial purposes the Legislature envisioned, ” the Court held that “if a third party is injured by one of the enumerated unfair claims practices, that party is no less a ‘person' falling with the ambit of legislative protection.” Id. The ruling in Hovet thus provides third-party claimants, such as Plaintiffs, a basis for recovery for unfair practices by insurance companies.

         The parties agree that Plaintiffs' right to recover against Defendant for its alleged unfair claims practices arises solely from the UCPA, as made applicable to third parties under Hovet. The UCPA, by its plain language, provides that a plaintiff may bring an action “to recover actual damages.” N.M.S.A. 1978, § 59A-16-30. Despite this plain language, Plaintiffs argue that recovery under the UCPA is not limited to actual damages, but rather, that punitive damages are available to them. In support of this argument, Plaintiffs assert that “[t]here is nothing in the [UCPA] which indicates punitive damages are not available, ” and that the court's reasoning in Hovet supports the imposition of punitive damages in cases such as this in order to further the remedial purposes of the statute. Doc. 17 at 4. Plaintiffs also note the language in the UCPA ...

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