United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT ON PLAINTIFFS' BREACH OF
MATTER comes before the Court upon a Motion for Summary
Judgment on Plaintiffs' Breach of Contract Claims, filed
by Defendant Liberty Mutual (“Defendant” or
“Liberty”) on June 1, 2018 (Doc.
70). Having reviewed the parties' briefs and
applicable law, the Court finds that Defendant's motion
is not well-taken and, therefore, is denied.
Hector and Barbara Fava are homeowners who are suing Liberty
for damages under a Homeowners Policy (“Policy”)
issued by Liberty to Mr. Fava. Plaintiffs (or “the
Favas”) allege property damages to their home stemming
from a water leak under their home. Plaintiffs initially
filed the Complaint on July 29, 2016 in the Second Judicial
District, County of Bernalillo, and Liberty removed the case
to federal court under diversity jurisdiction on April 17,
to the Complaint, on August 18, 2015, a pipe in the
crawlspace underneath Plaintiffs' home burst, flooding
the crawlspace with several inches of standing water. Almost
immediately after the leak, Plaintiffs noticed cracks in
load-bearing walls and a sloping floor. Plaintiffs took
action to stop the leak and report the incident to
Plaintiffs' insurer, Liberty. The water from the burst
pipe caused the floor in Plaintiffs' kitchen and living
room to begin sloping downward and large cracks to form in
several load-bearing walls in the home. The Favas reported
the damage to Liberty. Liberty investigated and concluded
that much of the structural damage preexisted the water leak
and that the water leak caused Plaintiff the structural
damages and Plaintiffs disagreed with Liberty. Plaintiffs
assert that Liberty repeatedly denied coverage of
Plaintiffs' claim based on inadequate investigations of
the cause of the damage to the home as well as its
misrepresentations about those investigations. Since August
2015, Plaintiffs' home has had a 10' diameter hole in
the living room, made when Liberty performed its inspection
of the damage to Plaintiffs' home. Because of
Liberty's improper denial of coverage and mishandling of
Plaintiffs' claim, Plaintiffs' home continues to
deteriorate, and Plaintiffs have been unable to use a
significant portion of their home since that time.
denies Plaintiffs' contentions. Following the reported
water loss, Liberty retained independent adjusters to inspect
the water loss and retained an engineer to inspect the water
loss and report the findings. Based on those findings and the
damages associated with the water leak, Defendant claims that
it paid what was owed under the policy. The Complaint asserts
four claims for relief against Defendant:
Count I: Breach of Contract and the Covenant of Good Faith
and Fair Dealing;
Count II: Violation of Unfair Practices Act;
Count III: Violation of New Mexico Insurance Code; and
Count IV: Negligence.
motion is directed solely to Count I, which is based on
Liberty's contractual duties to fully and fairly evaluate
Plaintiffs' claim. Liberty contends that it is entitled
to summary judgment either because either:
(1) a fact finder will not be able to attribute the damages
to Plaintiff's home from the water leak discovered on
August 18, 2015, or alternatively,
(2) even if the water leak caused the structural damage to
Plaintiffs' home, the undisputed material facts establish
that the insurance policy does not cover these damages based
on certain uncovered or excluded perils, such as wear and
tear, earth movement, water damage and seepage.
judgment is appropriate only if there is no genuine issue of
material fact and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986); Henderson v.
Inter-Chem Coal Co., Inc., 41 F.3d 567, 569 (10th Cir.
1994). Whether there is a genuine dispute-as to a material
fact depends upon whether the evidence presents a sufficient
disagreement to require submission to a jury or conversely,
is so onesided that one party must prevail as a matter of
law. Anderson v. Liberty Lobby, 477 U.S. 242, 248-
49 (1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132
(10th Cir. 2000); Carey v. U.S. Postal Serv., 812
F.2d 621, 623 (10th Cir. 1987). A fact is
“material” if it pertains to an element of a
claim or defense; a factual dispute is “genuine”
if the evidence is so contradictory that if the matter went
to trial, a reasonable party could return a verdict for
either party. Anderson, 477 U.S. at 248. The Court
must resolve factual ambiguities against the moving party,
thus favoring the right to a trial. Houston v. Nat'l
Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).
construction of an insurance policy is a matter of law which
can be decided on summary judgment. Adams-Arapahoe Joint
School Dist. v. Continental Ins. Co., 891 F.2d 772, 774
(10th Cir.1989); Quaker State Minit-Lube, Inc. v.
Fireman's Fund Ins. Co., 868 F.Supp. 1278, 1287
(D.Utah 1994), aff'd, 52 F.3d 1522 (10th
Cir.1995). In construing an insurance policy, the Court in a
diversity case looks to the law of the forum state and, if
the state Supreme Court has not addressed the issue, the
Court's duty is to determine, as best it can, how the
issue would be resolved by the state Supreme Court.
Quaker State Minit-Lube, Inc. v. Fireman's Fund Ins.
Co., 52 F.3d 1522, 1527 (10th Cir. 1995).
facts in this case are numerous and many are disputed, but
they can all be neatly categorized as belonging to one of the
two grounds for which Defendant seeks summary judgment: (1)
whether the burst pipe caused the structural damage to the
Favas' home (the causation issue); and/or (2) and whether
Liberty breached its contract with the Favas when it denied
coverage, even assuming that the damage was caused by the
reviewing all the facts presented by the parties with their
accompanying exhibits, the Court concludes that material
disputes of fact exist for both grounds. Both sides have
retained at least one engineering expert to support their
respective positions on the causation issue, namely, Gordon
McKeen for Plaintiffs and Vic Chavez for Defendants.
See Exs. 8 & 13 (McKeen reports); Ex. Y (Chavez
report). The Court recently denied Defendant's
motion to strike Plaintiffs' experts, see Doc.
98, and so experts on both sides will testify at trial. These
experts, not surprisingly, do not agree with each other as to
whether the structural damage to the residence was caused by
water coming into crawlspace from outside the house over a
long period of time prior to the water leak
(Defendant's position) or whether the damage was caused
by the acute event of a burst water line which caused water
to flood the crawlspace area (Plaintiffs' position). This
conflict in testimony requires resolution by the jury, and
not by a court on summary judgment. See Zuchel v.
Spinharney, 890 F.2d 273, 275 (10th Cir. 1989)
(generally speaking, summary judgment is not advisable in
situations in which there is a conflict in expert testimony,
even when the evidence leans one way); see also
Tenth Cir. Pattern Jury Instr. §1.17, “Expert
Witness.” There are also disputes of material fact with
respect to whether the structural damage to the Favas'
residence should have been covered by the policy if it was
caused by the water leak from the burst pipe. Thus, the
question of whether Liberty's denial of coverage was a
breach of their insurance contract with the Favas cannot be
resolved on summary judgment.
Court's review of the copious facts was especially taxing
because of the manner in which Liberty chose to respond to
many of Plaintiffs' Additional Facts, requiring a tedious
search through other pleadings before finding the response.
For example, in order to read Defendant's responsive
statement to Plaintiffs' Additional Fact
(“PAF”) G (“Same as response to PAF G in
Doc. 79”), one is led to the pleadings on
Defendant's motion for summary judgment on
Plaintiffs' bad faith claims (“Same as
Plaintiffs' Additional Fact B in Doc. 77”), and
then to the pleadings on Defendant's motion for summary
judgment on Plaintiffs' statutory and negligence claims
(Doc. 91, reply). The Court was dispatched on a similar
search for Defendant's response to PAF S (“response
to PAF V in Doc. 79”), which refers the reader first to
summary judgment pleadings on Plaintiffs' bad faith
claims (“Same as Plaintiffs' Additional Fact G in
Doc. 75”) and then on to the pleadings for summary
judgment on Plaintiffs' emotional injury claims.
Court found Liberty's manner of responding to
Plaintiffs' facts particularly irksome because the
responses failed to create material factual disputes despite
the trouble it took to hunt them down. Liberty's reply
brief contains many more examples of “responses”
to Plaintiffs' Additional Facts that are buried within
several layers of other briefs, but further examples would be
pointless. Instead, the Court will present a few examples of
relevant disputed facts that preclude summary judgment,
starting with relevant language from the insurance policy for
background and context. In setting out these facts below, the
Court will omit any responses to Plaintiffs' facts that
are either immaterial, irrelevant or unresponsive.
The Policy 
issued a policy for the policy period of February 10,
2015-February 10, 2016, to Barbara Fava and Hector Fava to
insure their home located in Albuquerque, New Mexico. Doc.
66-1. The policy provided in pertinent part as follows,
describing losses that were excepted from
coverage:SECTION 1 - PERILS INSURED AGAINST
insure against risk of direct loss to property described in
Coverages A and B only if that loss is a physical loss to
Property. We do not insure, however, for loss:
. . .
2. Caused by: . . .
(e) Any of the following:
1. Wear and tear, marring, deterioration;
2. Inherent vice, latent defect, mechanical breakdown;
3. Smog, rust or other corrosion, mold, wet or dry rot;
6. Settling, shrinking, bulging or expansion, including
resultant cracking of pavements, patios, foundations, walls,
floors, roofs or ceilings;
. . .
9. Seepage, meaning a gradual, continuous, or
repeated. seepage or leakage of water, steam
or fuel over a period of .14 days or more, resulting in
damage to the structure, whether hidden or not.
If any of these [coverage exceptions in Section 2(e)] cause
water damage not otherwise excluded, from a plumbing,
heating, air conditioning or automatic fire protective
sprinkler system or household appliance, we cover loss caused
by the water including the cost of tearing out and replacing
any part of a building. necessary to repair the system or
appliance. We do not cover loss to the system or appliance
from which this water escaped.
3. Excluded under Section 1 - Exclusions.
Under items 1. And 2., any ensuing loss to property described
in coverages A and B not excluded or excepted in this policy
Doc. 66-1 at 11 (emphasis added). The Liberty policy also
listed specific losses that were expressly excluded from
SECTION 1 - EXCLUSIONS
1. We do not insure for loss caused directly or indirectly by
any of the following. Such loss is. excluded regardless of
any other cause or event contributing ...