United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT AS TO COUNTS II AND III AND
GRANTING SUMMARY JUDGMENT ON COUNT IV NEGLIGENCE
MATTER comes before the Court upon Defendant's Motion for
Summary Judgment on Plaintiffs' Statutory Claims and
Negligence (Counts II, III and IV), filed June 1, 2018 (Doc.
68). Having reviewed the parties' briefs and applicable
law, the Court denies Defendant's motion as to Counts II
and III, but grants Defendant's motion as to Count IV.
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 tried to
stop the leak and reported 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 pre-existed the water leak and that the
water leak caused Plaintiff the structural damages.
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.
claims that the damage to Plaintiffs' home was caused by
water coming into crawlspace from outside the house over a
long period of time prior to bursting of the water pipe, and
that coverage for such damage was excluded under the policy
that was issued to Plaintiffs. Plaintiffs maintain that the
damage was caused by the acute event of a burst water line
causing water to flood the crawlspace area, which is a
covered event under their 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.
Doc. 1-3 (First Am. Compl.) at 15. The Court has become quite
familiar with this lawsuit, having denied relief to Liberty
on four of dispositive motions Defendant has filed. See Docs.
98, 99, 100 and 101 (denying relief on Docs. 66, 67, 69 and
70). This last motion, addressing Counts II, III and IV, is
the last dispositive motion presented for the Court's
Policy provisions and factual background in this case have
been set forth in detail by the Court's recent decisions
denying summary judgment on Plaintiffs' claims for
emotional injury, breach of contract and bad faith claims,
see Docs. 99, 100 and 101, and there is no reason to
reiterate them here.
Count II: Violation of Unfair Practices Act
allege that Liberty violated the New Mexico Unfair Practices
Act (“UPA”) by failing to deliver the quality and
quantity of goods or services contracted for; representing
that services have characteristics, uses, benefits, or
quantities that they do not have; and knowingly making false
or misleading oral and written statements in connection with
the sale, lease, rental or loan of services. See NMSA 1978
§§57-12-2(D)(17). A claim under the UPA has four
First, the complaining party must show that the party charged
made an oral or written statement, visual description or
other representation that was either false or misleading.
Second, the false or misleading representation must have been
knowingly made in connection with the sale, lease, rental or
loan of goods or services in the extension of credit or . . .
collection of debts. Third, the conduct complained of must
have occurred in the regular course of the representer's
trade or commerce. Fourth, the representation must have been
of the type that may, tends to or does, deceive or mislead
Guidance Endodontics, LLC v. Dentsply Intern., Inc.,
749 F.Supp.2d 1235 (2010) (internal quotation marks omitted)
(emphasis added) (quoting Stevenson v. Louis Dreyfus
Corp., 1991- NMSC-051, 112 N.M. 97, 100, 811 P.2d 1308,
1311. “The gravamen of an unfair trade practice is a
misleading, false, or deceptive statement made knowingly in
connection with the sale of goods or services.”
Diversey Corp. v. Chem-Source Corp., 1998-NMCA-112,
¶ 17, 125 N.M. 748.
claims that even assuming that misrepresentations were made
to Plaintiffs in connection with the August leak, they cannot
have been made “in connection with” an insurance
policy that had already been sold to them and Plaintiffs
therefore cannot sustain a claim under the UPA. See
Eisert v. Archdiocese of Santa Fe, 2009-NMCA-042,
¶¶ 22-28, 146 N.M. 179 (affirming summary judgment
for defendants where plaintiff offered no evidence that
defendants made knowing misrepresentations “at the
time” services were contracted for).
contend that New Mexico law holds that an actionable
misrepresentation under the UPA can be made after a sale of
goods and services has been consummated as long as “it
occurred in connection with the commercial relationship for
which the Defendant[s] were compensated.” Maese v.
Garrett, 2014-NMCA-072, ¶19, 329 P.3d 713.
Plaintiffs' understanding of the law is accurate and is
supported by both the legislative intent behind the statute
as well as its plain language. A viable UPA claim is not
foreclosed by the fact that the alleged misrepresentations
took place after the sale of the policy. See Lohman v.
Daimler-Chrysler Corp., 2007-NMCA-100, ¶ 30, 142
N.M. 437, 443, 166 P.3d 1091, 1097. An “unfair or
deceptive trade practice” does not require “a
misrepresentation in the course of a sale between plaintiff
and defendant; it merely requires that a misrepresentation be
“made in connection with the sale . . . of goods”
generally. Id. (emphasis in original). The
legislative intent of the UPA affords the statute a broad
enough scope “to encompass misrepresentations which
bear on downstream sales by and between third parties.”
Id.; see also State ex rel. Stratton v. Gurley
Motor Co., 105 N.M. 803, 808, 737 P.2d 1180, 1185
(Ct.App.1987) (interpreting UPA “liberally to
facilitate and accomplish its purposes and intent.”).
Maese v. Garrett, the New Mexico Court of Appeals
held that misrepresentations made after the sale of goods and
services could support a claim under the UPA, specifically
rejecting previous decisions suggesting that the alleged
misrepresentation had to be made in the course of selling a
product or services to the plaintiff. 2014-NMCA-072,
¶18. Defendant initially relied on Maese to argue that
Plaintiffs could not pursue a UPA claim based on a
misrepresentation made after the sale of the policy. After
having been caught in what the Court considers to be a
misstatement of the law in Maese, Defendant abandoned its
initial approach in the reply and switched to the argument
that Maese is factually distinguishable and therefore does
not apply to Plaintiffs' UPA claim. Doc. 91 at 22.
However, any factual distinctions do not change the
black-letter statement of the law, which applies here as well
as in Maese.
determined the relevant legal standard, the next question is
to decide whether Plaintiffs have presented any facts to
dispute Defendant's position that there is no evidence of
misrepresentation. The Court finds that Plaintiffs have done
• Factual Disputes Regarding Grounds for Denial: Liberty
sent Plaintiffs three letters denying their claim: on October
3, 2015, March 21, 2016 and July 16, 2016. Doc. 100 at 12-13.
The second and third letters contained different grounds for
denial, and abandoned some of the grounds previously cited.
Liberty offered no explanation why the ...