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Montoya v. Loya Insurance Co.

United States District Court, D. New Mexico

October 24, 2019

LOYA INSURANCE COMPANY, a foreign corporation doing business in New Mexico, Defendant.



         THIS MATTER comes before the Court on Defendant Loya Insurance Company's Motion For Partial Summary Judgment Regarding Bad Faith And Violations Of The Unfair Claims Practices Act, filed June 3, 2019. Doc. 71. Defendant Loya argues that Plaintiff was not legally entitled to receive payment of any portion of a state jury verdict before the state court entered a final judgment in that case. Because bad faith is typically a question for the jury and because Defendant has not demonstrated that New Mexico bad-faith insurance law does not apply between the time of a jury verdict and the final judgment, the Court rejects Defendant's argument. In the alternative, Defendant argues that, because it payed Plaintiff prejudgment interest, Plaintiff was not damaged by any delay in paying this verdict. The Court likewise rejects this argument because, assuming Defendant failed to pay the jury verdict for frivolous and unfounded reasons, prejudgment interest may not constitute the full measure of damages to Plaintiff or adequately address the bad faith conduct alleged. Therefore, the Court DENIES Defendant's Motion For Partial Summary Judgment.

         I. BACKGROUND

         A. Procedural History

         Plaintiff filed this suit on May 17, 2018 in state court. Doc. 1-1 (“Compl.”). On June 25, 2018, Defendant removed the case to federal court. Doc. 1. In her Complaint, Plaintiff contends that she was in a motor vehicle accident on October 3, 2016. Compl. ¶ 8. According to the Complaint, the accident was the fault of the other driver, who fled the scene. Compl. ¶¶ 9-10. Plaintiff made a claim for Uninsured Insurance Benefits with her auto insurance company, Defendant Loya. Compl. ¶ 11. Plaintiff filed suit against Defendant in state court in February 22, 2017. Compl. ¶ 20. On January 25, 2018, a jury rendered a verdict in favor of Plaintiff against Defendant in the amount of $23, 742.82. Compl. ¶¶ 45-46. Defendant continued to delay paying the claim even after the verdict. Compl. ¶ 51. The failure to pay caused Plaintiff financial hardship. Compl. ¶ 32. The Complaint brings claims for Breach of Contract, Insurance Bad Faith, Unfair Insurance Claim Practices, and Unfair Trade Practices. Doc. 1-1 at 5-9.

         Prior to the commencement of discovery, Plaintiff filed a Motion for Partial Summary Judgment Regarding Bad Faith and Violations of the Unfair Claims Practices Act, Doc. 8, and on March 11, 2019 the Court issued its Memorandum Opinion and Order denying Plaintiff's Motion, Doc. 57. The Court found that the parties agreed that, on October 3, 2016, Plaintiff was in a motor vehicle collision involving an unknown driver who fled the scene, and Plaintiff's property was damaged as a result. Doc. 57 at 3. Plaintiff made an Uninsured Motorist (“UM”) claim under her auto insurance and reported the claim to her insurer. Id. The Court further found that the parties disputed the facts surrounding Plaintiff's claim and the reasons Defendant denied it. Id. at 3-4. Plaintiff asserted she filed suit in state court because Defendant denied her claim on the basis that “the damages claimed did not happen within the policy period, ” even though the accident was well within the policy period. Id. at 3. On the other hand, Defendant asserted that Plaintiff opened two claims for the one accident. Id. at 3-4. Defendant denied one claim as being outside the policy limits and never denied the second claim, staying in communication with Plaintiff about the open claim throughout mediation and trial. Id.

         The state-court case went to trial and the jury found Plaintiff 0% at fault and awarded $23, 742.82 in damages on January 25, 2018. Id. at 3. Defendant did not pay the claim until June 29, 2018. Id. at 3. The parties disputed whether Plaintiff made multiple requests for payment during that period. Id. at 3-4. Defendant asserted that it delayed payment due to advice of counsel pending the resolution of disputed issues regarding costs, pre- and post-judgment interest, and a lien from First Recovery Group. Id. at 4.

         The Court denied the motion for summary judgment due to this factual dispute and declined to consider the new arguments Plaintiff raised in her reply brief. Id. at 6-9. Most relevant for the present motion, the Court denied Plaintiff's motion for summary judgment based on the delay in payment after the jury verdict. The Court found that “whether defendant committed bad faith in delaying payment is a question for the jury.” Id. at 10.

         Although the Court denied Plaintiff's motion for summary judgment, it also rejected some of Defendant's arguments in the process. Defendant contended that it delayed payment because no contractual obligation to pay exists in the absence of a judgment. Id. Defendant also asserted that it was waiting on its counsel to instruct it “as to how, when and the amount to pay” in light of “ongoing issues regarding costs and pre- and post-judgment interest still being litigated” and the resolution of a medical services lien. Id. The Court disagreed with Defendant's reliance on State Farm General Insurance Co. v. Clifton, 1974-NMSC-081, ¶ 8, 86 N.M. 757, 759, and Hauff v. Petterson, 755 F.Supp.2d 1138, 1147 (D.N.M. 2010), which Defendant cited in support of an argument that the delay was not bad faith as a matter of law. Id. at 10-11. The Court explained:

Defendant's asserted reasons for delay in this case-advice of counsel and the existence of a lien-are significantly less substantial than the reasons for delay presented in Clifton. Defendant does not explain why it could not have, for example, tendered the requested amount in exchange for an indemnification agreement placing the responsibility for resolving the lien on Plaintiff.
. . . . [In addition, ] Defendant did not need to take five months to “investigate” and “evaluate” this claim. It had already had ample opportunity to make its investigation before the jury rendered its verdict, and by its own admission had already evaluated the claim as worth only the cost of a defense.


         Nonetheless, the Court concluded that a five-month delay in payment did not constitute bad faith as a matter of law. Id. at 11. Although the New Mexico Court of Appeals has found that “unreasonable delay, in bad faith, in making payments pursuant to the insurance contract” states a claim for relief, Travelers Ins. Co. v. Montoya, 1977-NMCA-062, ¶ 5, 90 N.M. 556, 557, the Court found the case unhelpful for purposes of summary judgment because the court of appeals in that case indicated that a claim for bad faith “depends on the facts.” Id. at 12. The Court ultimately concluded: “Certainly, Plaintiff is correct that a delay of any amount, if it is frivolous or unfounded, can constitute a breach of the insurer's duty to act honestly and in good faith. NMRA Civ. UJI 13-1702. But on these facts, a reasonable trial of fact could resolve the question in favor of either party.” Doc. 57 at 11.

         B. Defendant's Motion for Partial Summary Judgment

         After the Court's Memorandum Opinion and Order, Defendant filed the present motion for partial summary judgment, asking the Court to again consider the issue of the alleged payment delay. Defendant elaborates on its argument that, under the relevant policy, it was required to pay only “damages which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle.” Doc. 71 at 3. Because a jury verdict is not yet a legal entitlement, Defendant argues that Plaintiff was not “legally entitled to recover” payment before a final judgment was entered on the case. Id. at 2-3. In support of its motion, Defendant presents the following facts, which are undisputed except where noted.

         Defendant issued New Mexico Auto Policy No. 62 604581180 to Plaintiff, which covered a 2002 Dodge Durango. Doc. 71 at 3 ¶ 1; Doc. 81 at 3. The policy provided Uninsured/ Underinsured Motorist Coverage and contained the following provision:

Subject to the Limits of Liability, if you pay a premium for Uninsured/ Underinsured Motorist Bodily Injury Coverage, we will pay for damages which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle or underinsured motor vehicle . . . .

Doc. 71 at 3 ¶ 2; Doc. 81 at 3.

         Plaintiff was involved in a motor vehicle accident involving an unknown driver on October 3, 2016. Doc. 71 at 3 ¶ 3; Doc. 81 at 3. On January 20, 2017, Defendant first learned of a Medicaid lien in the amount of $169.54 for treatment related to the October 3, 2016 accident. Doc. 71 at 3 ¶ 4; Doc. 81 at 3-4.[1] On September 20, 2017, Defendant received subsequent correspondence that indicated the lien had not been paid. Doc. 71 at 4 ¶ 5; Doc. 81 at 3-4.

         A state jury ultimately decided the outcome of Plaintiff's uninsured motorist claim, awarding Plaintiff $23, 742.82 through a Special Verdict entered on January 25, 2018. Doc. 71 at 4 ¶ 6; Doc. 81 at 3. On January 29, 2018, Plaintiff's counsel at the time, Richard W. Sutten, attempted to negotiate a settlement of all of Plaintiff's claims, including the bad faith claims, the jury verdict, and costs and prejudgment interest. He offered on behalf of Plaintiff to waive mandatory post-judgment interest in exchange for full payment of the verdict and discretionary prejudgment interest and costs. Doc. 71 at 4 ¶ 7.[2] On January 31, 2018, counsel for Defendant, Leonard R. (Bud) Grossman, requested an extension to respond to Plaintiff's offer of settlement on the basis that pending questions remained regarding Plaintiff's bill of costs and the statutory limit on prejudgment interest. Id. ¶ 8. On February 7, 2018, Mr. Sutten filed Plaintiff's Costs Bill with the Court. Id. ¶ 9. On March 27, 2018, Mr. Sutten again indicated that Plaintiff sought 15% prejudgment interest and Mr. Grossman questioned the appropriateness of that amount. Id. ¶ 10. Within an hour, Mr. Grossman responded to Plaintiff, stating the law that governs prejudgment interest provides for 10%, not 15%. Id. ¶ 11. And, as of March 27, 2018, Defendant had not been informed if the Medicaid lien had been resolved. Id. ¶ 12.

         Still not having received any payment as of June 6, 2018, Plaintiff filed a Motion for Entry of Judgement and other discretionary awards. Id. ¶ 14. On June 7, 2018, Plaintiff filed an Amended Costs Bill, which included additional costs the state court ultimately determined to be nonrecoverable pursuant to Rule 1-054, NMRA, such as mediation fees. Id. ¶ 15. On June 22, 2018, Defendant responded in opposition to Plaintiff's Motion for Entry of Judgment. Id. ¶ 16. A week later, on June 29, 2018, Defendant paid the amount of the jury verdict. Id. ¶ 17.[3]

         Rather than file a reply in support of her Motion for Entry of Judgment, Plaintiff notified the state court on July 10, 2018, that the motion was ready to be heard. Id. ¶ 18. The state court held a hearing September 19, 2018 related to the discretionary award of Plaintiff's costs and interest. Id. ¶ 19. Plaintiff prepared an order on the proposed form of judgment on October 2, 2018. Id. ¶ 20. In an October 22, 2018 order, the state court entered final judgment. Id. ¶ 23. It also rejected Plaintiff's demand for mediation fees and for prejudgment interest in excess of the statutory limit of 10%. Id. ¶¶ 21-22.

         Ultimately, Defendant asserts that actions Plaintiff's counsel took in the underlying state case after the January 25 jury verdict caused the delay in payment of that verdict. Defendant's Fact No. 13 states that “Loya was aware of possible issues including Plaintiff's costs and interest that would need to be addressed by the Court.” Id. ¶ 13 (citing Deposition of Jose Bolanos, Loya Insurance adjuster, Exhibit E, at 17:4-14). Defendant relies on the deposition testimony of Mr.

         Bolanos, who testified first in his capacity as Defendant's corporate representative under Federal Rule of Civil Procedure 30(b)(6), and subsequently testified in his individual capacity as a fact witness. In his capacity as the corporate representative, he testified as follows:

Q. Regardless of any negotiations, it was Loya's obligation to pay that verdict, yes?
. . .
A. At that point, no.
Q. Why not?
A. Because there were legal ramifications, things that were pending still. There could have been an appeal filed. There could have been motions filed. There could have been court costs, interests that would need to be addressed.

Doc. 71-5 at 2.

         Plaintiff disputes Fact No. 13, citing to the Mr. Bolanos's testimony in his individual capacity as a fact witness. During this testimony Mr. Bolanos, who was also the adjustor responsible for handling Plaintiff's claim before the state trial took place, explained that he did not immediately take action to pay the adverse state jury verdict because he was waiting for direction from Mr. Grossman. Doc. 81-3 at 5. He further testified that he did not know about any negotiations between Mr. Sutten and Mr. Grossman. Doc. 81-3 at 5. Defendant argues in reply that Mr. Bolanos' Rule 30(b)(6) testimony does not contradict his fact witness testimony: “Mr. Bolanos' lack of personal knowledge as to any particular matter does not mean that Loya also lacked such knowledge.” Doc. 90 at 2. As set forth below in more detail, the Court construes these facts in favor of Plaintiff, the non-moving party.

         C. Plaintiff's Statement of Additional Facts

         In response to Defendant's motion for partial summary judgment, Plaintiff provided a number of additional facts. She first asserts that Mr. Bolanos had no knowledge of any post-verdict settlement discussions between Mr. Grossman and Mr. Sutten and that Mr. Grossman did not otherwise advise Defendant of such discussions. Doc. 81 at 5 ¶¶ 1-2. Although Plaintiff's counsel, Mr. Sutten, sent Defendant's counsel an email four days after the jury verdict demanding payment of the verdict by February 2, 2018, Mr. Bolanos did not see that email or learn of any settlement discussions between Mr. Grossman and Mr. Sutten until April 11, 2019, the day before Mr. Bolanos' deposition. Id. ¶ 3. Thus, none of Mr. Bolanos' post-verdict claims handling decisions were made as a result of the post-verdict settlement negotiations. Id. at 6 ¶ 4.[4]

         Regarding the timing of Defendant's duty to pay the state verdict, Plaintiff asserts that “Loya's insurance policy does not require entry of a judgment before payment of a claim based on a jury verdict.” Id. ¶ 5. As support, Plaintiff cites the deposition of Chris Bennett, a Rule 30(b)(6) witness, as follows:

Q. Okay. Is there any portion of that policy where it says a judgment must be entered to pay a claim on a jury verdict?
A. Not that I'm aware of.

Doc. 81-1 at 3. Although Defendant admits that “the policy does not say verbatim that a judgment must be entered to pay a claim, ” it disputes Plaintiff's fifth asserted fact based on the “legally entitled ...

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