United States District Court, D. New Mexico
MARCIE SALOPEK, Trustee for THE SALOPEK FAMILY HERITAGE TRUST Plaintiff,
DEFENDANT AMERICAN LIFE INSURANCE COMPANY, Defendant
MEMORANDUM OPINION AND ORDER
24, 2019, Defendant Zurich American Life Insurance Company
(Defendant) filed a motion seeking judgment on the pleadings
as to Counts III, IV, and V of the Complaint filed by
Plaintiff Marcie Salopek, Trustee for the Salopek Family
Heritage Trust (Plaintiff). On July 29, 2019, Plaintiff
responded to Defendant's Motion,  and on August 23, 2019,
Defendant replied. The Motion is fully briefed. After
considering the pleadings and the arguments of counsel, the
Court will grant Defendant's Motion.
FACTS & PROCEDURAL HISTORY
Complaint asserts the following uncontroverted facts:
southern New Mexico, the Salopek family runs one of the
largest pecan farms in the southwest. At some point, the
founder of the business, Tony Salopek (Tony), put the pecan
farm in a trust which provides that only his male descendants
could inherit and control the farm. Complaint (Doc. No. 1-1),
¶ 24. Tony's three sons, who have both sons and
daughters, wanted to correct the unfairness to their
daughters. Id. ¶¶ 25, 26, 27. To make
their children's inheritance fairer, in 2015, the three
sons created the Salopek Family Heritage Trust (SFHT), an
entity from which their daughters could inherit in amounts
equal to the males' inheritance in the pecan farm.
Id. ¶ 28. Insurance policies funded SFHT,
including two policies acquired by one of Tony's sons,
Mark Salopek (Mr. Salopek). Id.
2015, Mr. Salopek, age 68, had two fully vested life
insurance policies with the John Hancock Life Insurance
Company for 15 million dollars. Id. ¶ 31. For a
reason unexplained in the pleadings, Mr. Salopek decided to
get new life insurance policies. He filled out applications
with other insurance carriers to replace his two vested
policies with a new life insurance policy valued in the same
amount. Id. In each application, he included the
information that any policy issued would replace his vested
John Hancock policies. Id. ¶ 35.
August 14, 2015, Mr. Salopek applied to Minnesota Life for
life insurance. Id. ¶ 36. He used insurance
agent Ahmed Hashemian (Hashemian). Id. His
application included information that his father, Tony
Salopek, died at 64 of cirrhosis and his mother died at 72 of
pancreatic cancer. Id. ¶ 37. Mr. Salopek said
he drank beer daily and, in the past, had used smokeless
conducting a physical examination and an evaluation of Mr.
Salopek's medical records, on November 3, 2015, Minnesota
Life rejected Mr. Salopek's application. Id.
¶ 38. Minnesota Life said it would reconsider the
application if Mr. Salopek obtained a complete medical
examination that included a prostate screening test and a
record shows that another insurance company, Ameritas, also
denied Mr. Salopek's application at some time during this
period. However, the record does not say when Ameritas denied
Mr. Salopek's application or why. Id. ¶ 41.
to the pleadings, a Medical Information Bureau (MIB) records
information provided by life insurance companies about
rejections of applications and the reasons for the
rejections. All life insurance companies may access that MIB
information. Minnesota Life recorded its rejection of Mr.
Salopek's application in MIB. Id. ¶ 39.
after the rejection by Minnesota life, Hashemian, through his
agent or employee, Luis Miguel Sisniega (Sisniega), filled
out an application to Defendant for life insurance
(Application). Id. ¶ 40. The Application
disclosed that Mr. Salopek had been rejected for life
insurance by Minnesota Life and by Ameritas. Id.
¶ 41. The Application had some inconsistencies.
Id. ¶ 45. On one question in the Application,
Mr. Salopek told Defendant that he was a former smoker but
still used chewing tobacco occasionally, while in an answer
to another question, he denied any tobacco use. Both Mr.
Salopek and his wife signed the Application. See
Response (Doc. No. 123-2), Exhibit 2 at 2. Mr. Salopek also
signed a release allowing Defendant to obtain all of his
insurance and medical information. Complaint (Doc. No. 1-1)
¶ 46. Defendant did not require Mr. Salopek to undergo a
new examination or blood testing but relied on the August 14,
2015 medical examination conducted for Mr. Salopek's
application with Minnesota Life. Id. ¶ 48.
December 28, 2015,  Defendant issued a life insurance policy
on Mr. Salopek's life for 15 million dollars payable on
his death to SFHT. Id. ¶ 49. The annual premium
for this policy was $405, 915, which Mr. Salopek paid.
Id. Subsequently, Mr. Salopek cancelled his policies
with John Hancock. Id. ¶ 50.
January 2016, Mr. Salopek had severe stomach pains and went
to the hospital. Id. ¶ 51. On January 15, 2016,
he had exploratory surgery, which resulted in a diagnosis of
metastatic colon cancer. Id. He died on August 21,
2016. Id. ¶ 52.
family submitted a claim to Defendant on the life insurance
policy. Id. ¶ 54. Defendant interviewed Mr.
Salopek's widow, Marcie Salopek, on December 20, 2016.
Id. ¶ 55. The Defendant's interviewer read
Ms. Salopek some information from Mr. Salopek's files and
then asked for more information about Mr. Salopek.
Id. ¶ 56.
Salopek said that the medical records were incorrect that Mr.
Salopek used snuff; he used chewing tobacco. At times he did
not use chewing tobacco at all. Id. ¶ 58. Ms.
Salopek said that during their marriage, Mr. Salopek drank
beer daily. Sometimes he drank 5-6 beers a day, other times
he drank 12 or more. Id. ¶ 59.
January 13, 2017, Defendant denied the request for payment of
benefits under the life insurance policy, which was within
the two-year contestability period. Id. ¶¶
61-62. In its denial letter, Defendant named three
inconsistencies in Mr. Salopek's Application:
1. An inconsistency between Mr. Salopek's saying that he
used chewing tobacco and “dip now and then” and
the “No” that was checked on another page denying
other tobacco use.
2. Mr. Salopek's claim in his Application that he drank
one or two beers a day at the time of the Application was
inconsistent with representations of his previous alcohol
3. Mr. Salopek's failure to disclose the removal of a
nonrecurrent skin cancer in July 2013, which Defendant stated
should have been disclosed in response to a question about
“Cancer, tumor, polyp or disorder of the skin or
(Doc. 1-1) ¶ 62. Defendant indicated that points one and
two would have made it decline the risk and did not cite the
skin cancer as a reason supporting rescission. Id.
¶¶ 63, 64.
March 6, 2018, Plaintiff filed a Complaint in New Mexico
state court against Defendant, alleging the following counts:
Count I, Breach of Contract; Count II, Bad Faith Insurance
Conduct; Count III, Violation of Unfair Insurance Practices
Act; Count IV, Violation of Unfair Trade Practices Act; Count
V, Negligence. On April 11, 2018, Defendant removed the case
to federal court based on diversity of jurisdiction under 28
U.S.C. § 1332. On April 11, 2018, Defendant answered the
7, 2018, Plaintiff filed a motion seeking to amend the
Complaint to add an additional count of civil conspiracy and
to join three additional Defendants, Ahmed Hashemian, Capital
Aspects, LLC, and Luis Miguel Sisniega. A second motion,
filed on September 17, 2018, requested joinder of another
Defendant, BGA Insurance.
March 28, 2019, the Court denied both of Plaintiff's
motions. The Court concluded that Plaintiff's
second motion was untimely. See Moo (Doc. No. 109)
at 9. With respect to Plaintiff's first motion to amend,
the Court held that it was improper because “all
essential facts that would have supported Plaintiff's
claim of civil conspiracy were known to Plaintiff when she
filed the Complaint, ” and therefore, Plaintiff had not
shown the joinder was proper. Id. at 13-14.
time after the pleadings are closed, but before trial begins,
a party may move for judgment on the pleadings under Federal
Rule Civil Procedure (Rule) 12(c). A motion for judgment on
the pleadings is evaluated under the same standard used in
deciding Rule 12(b)(6) motions to dismiss. See Atlantic
Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d
1138, 1160 (10th Cir. 2000).
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 in the complaint, view those 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, 1098 (10th
Cir. 2009). The allegations must “‘state a claim
to relief that is plausible on its face.'”
Id. (quoting Ridge at Red Hawk L.L.C. v.
Schneider, 493 F.3d 1174, 1177 (10th Cir.
2007) (further citation omitted). “The claim is
plausible only if it contains sufficient factual allegations
to allow the court to reasonably infer liability.”
Moya v. Garcia, 895 F.3d 1229, 1232 (10th Cir. 2018)
(citing Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). The term “plausible” does not mean
“likely to be true.” Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008). A claim
is facially plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678 (citing
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556
(2007)). The factual allegations must “raise a right to
relief above the speculative level.” Twombly,
550 U.S. at 555. A mere “formulaic recitation of the
elements of a cause of action will not do.”
Id. When analyzing the sufficiency of the allegation
under 121(b)(6), a court may consider documents incorporated
into the complaint by reference and undisputed at to
authenticity. Smith, 561 F.3d at 1098.
federal court exercising diversity jurisdiction applies the
substantive law of the forum state. Boyd Rosene &
Assocs., Inc. v. Kansas Mun. Gas Agency, 123 F.3d 1351,
1352 (10th Cir. 1997). When determining whether dismissal of
a cause of action is proper under 12(c) of the Federal Rules
of Procedure, a federal court applies federal law. See
Stickley v. State Farm Mut. Auto Ins. Co., 505 F.3d
1070, 1076 (10th Cir. 2007); see also Brokers' Choice
of America, Inc. v. NBC Universal, Inc., 861 F.3d 1081,
1099 (10th Cir. 2017) (applying federal standards to motion
preliminary matter, Plaintiff asks the Court to convert
Defendant's motion from a request for judgment on the
pleadings to a motion for summary judgment so the Court may
consider documents extrinsic to the Complaint. She suggests
three bases for doing so. First, according to Plaintiff,
discovery has revealed several “new facts” that
should be considered in evaluating Defendant's
Motion. In opposition, Defendant asserts that
Plaintiff's “new facts” are not new to this
Court but were facts offered in support of Plaintiff's
proposed amended complaints, which the Court denied. While
Plaintiff acknowledges that the Court denied her motions to
amend her pleadings, she asserts that it is now proper for
the Court to use her asserted new facts to fill gaps in her
pleadings. She contends that the Court should do so whether
the Court considers the Motion on the pleadings or on summary
Plaintiff cloaks her argument as a request for the Court to
convert the Motion to one for summary judgment, it is
actually an invitation for the Court to reconsider its
earlier ruling. The Court denied Plaintiff's motion to
amend her Complaint based on its finding that Plaintiff had
delayed too long in seeking her amendments. Significantly,
the Court held the alleged new facts claimed in
Plaintiff's motions to amend were facts either that the
Plaintiff should have known or did know prior to the filing
of her Complaint. See Moo (Doc. No. 109) at 13.
As before, none of Plaintiff's alleged new facts in this
Motion are new. Consequently, Plaintiff offers no arguments
previously unexamined by the Court that would substantiate
Plaintiff cites Rule 56(d) as a basis for converting this
Motion to one for summary judgment. Rule 56 delineates the
procedures parties must follow when seeking summary judgment.
Under Rule 56(d), when a nonmovant cannot adequately respond
to a summary judgment motion because material facts are
inaccessible, the nonmovant may ask the court to defer its
summary judgment ruling. Nowhere in Rule 56 does it say, nor
does Plaintiff supply authority for the proposition that
subsection (d) applies to a motion for judgment on the
pleadings under Rule 12(c). As a summary judgment motion is
not before this Court, Rule 56(d) is inapplicable.
Plaintiff suggests that the Court should lower the pleading
standard for this case because it was originally brought in
state court, which has a lower standard. She supports this
argument with the unpublished case Albuquerque Cab Co. v.
Lyft, Inc., 2019 U.S. Dist. LEXIS 36800, ¶¶
22, 23 (D. N.M. Mar. 7, 2019). Albuquerque Cab does
not support the Plaintiff's argument. In Albuquerque
Cab, the court did not lower the pleading standard but
granted the plaintiff leave to amend a complaint based on the
differences between federal and state pleading standards.
Id. Here, the Court denied Plaintiff's earlier
motions to amend. As previously stated, the Court will not
now reassess that ruling.
seeks judgment on the pleadings as to Count III, Violation of
Unfair Insurance Practices Act; Count IV, Violation of Unfair
Trade Practices Act and Count V, Negligence. All events
relevant to this matter occurred in New Mexico, so New Mexico
state law applies. Much of Plaintiff's allegations in all
three counts rest on a premise that in New Mexico, before
issuing Mr. Salopek a policy, Defendant had a legal duty to
perform an underwriting investigation that would have exposed
any of Mr. Salopek's potential misrepresentations. The
substance of a Defendant's duty to a life insurance
applicant is an essential element of Plaintiff's Count V
Negligence claim. For this reason, the Court will turn first
to that question.
Count V, Negligence
Count V, Plaintiff alleges negligence. “A negligence
claim requires that the plaintiff establish four elements:
(1) defendant's duty to the plaintiff, (2) breach of that
duty, typically based on a reasonable standard of care, (3)
injury to the plaintiff, and (4) breach of duty as cause of
the injury.” Zamora v. St. Vincent Hosp., 335
P.3d 1243, 1249 (N.M. 2014) (citing Herrera v. Quality
Pontiac, 73 P.3d 181, 186 (N.M. 2003).
prove negligence, a plaintiff must first prove as a matter of
law, the defendant owed plaintiff a duty. Calkins v. Cox
Estates, 792 P.2d 36, 38 (N.M. 1990). “A duty is a
legal obligation [by a party] to conform a certain standard
of conduct to reduce the risk of harm to an individual or
class of persons.” Baxter v. Noce, 752 P.2d
240, 243 (N.M. 1988). In New Mexico, “a duty exists
only if ‘the obligation of the defendant [is] one to
which the law will give recognition and effect.'”
Herrera, 73 P.3d at 187 (internal alterations in
original) (quoting Ramirez v. Armstrong, 673 P.2d
822, 825 (N.M. 1983). When considering whether a duty exists,
a court should examine legal precedent, statutes, and other
principles of law. Herrera, 73 P.3d at 186; see
also Calkins, 792 P.2d at 39 (saying “[t]he
existence of a duty is a question of policy to be determined
with reference to legal precedent, statutes, and other
principles comprising the law.”).
Mexico recognizes that an insurer owes an insured an implied
contractual duty of good faith and fair dealing. Watson
Truck & Supply Co. v. Males, 801 P.2d 639, 642 (N.M.
1990) (observing “[w]hether express or not, every
contract imposes upon the parties a duty of good faith and
fair dealing in its performance and enforcement.”)
(further citation omitted). “This implied covenant is
an exception to the general rule that only those obligations
contained in the written agreement will be imposed upon the
parties.” Ambassador Ins. Co. v. St. Paul Fire
& Marine Ins. Co., 690 P.2d 1022, 1024 (N.M. 1984).
But New Mexico law does not recognize an implied negligence
standard in insurance contracts. See Id. (observing
that because the implied covenant is an exception to the
general rule “[t]o impose a negligence standard on the
insurer would violate this general rule and impose a duty
that is not expressly provided for in the contract of
pleadings, Plaintiff does not allege that Defendant's
duty toward Plaintiff arose from the insurance contract
between them. Rather, Plaintiff asserts that Defendant's
duty toward Plaintiff began before the parties'
contractual relationship, when Mr. Salopek was an applicant.
Plaintiff alleges that Defendant was negligent by doing or
not doing the following:
a. Engaging in underwriting practices that violated its own
or industry practices;
b. Upon information and belief, choosing not to review the
MIBs data concerning Mr. Salopek;
c. Choosing not to have Mr. Salopek undergo an independent
medical evaluation and blood testing performed by a [sic]
d. Choosing not to have Mr. Salopek obtain a current medical
evaluation from its own primary care provider, including a