United States District Court, D. New Mexico
SHAWN AMMONS and JESSICA AMMONS, Plaintiffs/Counter-Defendants,
SENTRY INSURANCE COMPANY, Defendant/Counter-Plaintiff.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT, DENYING PLAINTIFFS' MOTION
FOR SUMMARY JUDGMENT, AND DENYING PLAINTIFFS' MOTION TO
Opinion addresses Plaintiffs'/Counter-Defendants'
Motion for Partial Summary Judgment for UM Benefits (Doc.
13), filed May 24, 2019;
Defendant's/Counter-Plaintiff's Cross-Motion for
Summary Judgment (Doc. 17), filed June 12, 2019; and
Plaintiffs' Opposed Motion for Leave to File First
Amended Complaint (Doc. 33), filed September 12, 2019. I held
a hearing on these motions on December 16, 2019. Doc.
central issue before the Court is whether Plaintiffs are
entitled to recover punitive damages under their uninsured
property damage coverage for the actions of an unknown thief,
who crashed Plaintiffs' car after stealing it. Defendant
argues that Plaintiffs have no valid punitive damages claim
under their uninsured property damage coverage for two
primary reasons: (1) uninsured motor vehicle coverage (on
which the punitive damages claim is based) is not available
for insured vehicles such as the one at issue here, and (2)
even if such coverage were available, punitive damages are
not available against an unknown tortfeasor. Regarding
Defendant's first argument, although the operative policy
defines Plaintiffs' vehicle as insured (and therefore
ineligible for uninsured motorist coverage), it is uncertain
whether this policy exclusion would be valid under New
Mexico's Uninsured Motorist Act. Regarding
Defendant's second argument, the Court agrees that
punitive damages, which are meant to punish and deter, are
not available against an unknown tortfeasor. The Court
therefore determines that Plaintiffs are not entitled to the
punitive damages they seek.
this conclusion necessarily resolves most of the issues
Plaintiffs raise in their complaint, a portion of
Plaintiffs' extra-contractual allegations not related to
denial of coverage remains viable. Specifically, the
Court's decision that punitive damages are not available
against an unknown tortfeasor has no effect on
Plaintiffs' extra-contractual claims that are premised on
Defendant's alleged delays in responding to
Plaintiffs' requests. However, Plaintiffs' failure to
allege sufficient facts to sustain those allegations makes
them subject to dismissal. Plaintiffs shall be allowed 30
days from the entry of this Order to move to amend to remedy
the Court denies Plaintiffs' Partial Motion for Summary
Judgment and grants Defendant's Motion for Summary
Judgment. The Court also denies as futile Plaintiffs'
Motion for Leave to File First Amended Complaint because the
claims in that proposed amendment would be subject to
case arises from the theft of Plaintiffs' vehicle, which
was stolen from an auto repair shop on November 22, 2018.
Plaintiffs' Undisputed Material Facts
(“P-UMF”) 1. A police officer later spotted the
stolen vehicle and initiated a traffic stop. Doc. 27 at 1
(Joint Status Report). The driver fled, leading the officer
on a chase. Id. The officer lost sight of the
vehicle but later found it unoccupied and crashed.
Id.; P-UMF 2. The auto repair shop's insurer
paid Plaintiffs for the property damage to the car.
Defendant's Undisputed Material Facts
(“D-UMF”) 7. Plaintiffs seek, under their
uninsured (“UM”)/underinsured motorist
(“UIM”) policy with Defendant Sentry Insurance
Company, only punitive damages for the acts of the unknown
thief.D-UMF 7. Defendant Sentry denied the claim,
asserting that UM property damage coverage does not provide
coverage for theft. See Docs. 13-3 to 13-10.
initially filed this suit in state court. Doc. 1-1. The
Complaint brings three counts: (1) UIM benefits; (2) breach
of contract; and (3) violations of the insurance practices
act, insurance bad faith, and punitive damages. Id.
Defendant removed the matter to federal court, Doc. 1, and
filed a counterclaim with two counts: (1) declaratory relief
regarding UM/UIM coverage; and (2) declaratory relief
regarding UM/UIM limits. Doc. 4. Plaintiffs now seek partial
summary judgment on Count I of their Complaint and on Count
II of the Counterclaim. Doc. 13. Defendant filed a
cross-motion, seeking summary judgment on all three counts of
Plaintiffs' Complaint. Doc. 17.
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). A dispute about a material fact is
“genuine” if the evidence is such that a
reasonable jury could return a verdict for the non-moving
party. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). In other words, a dispute is genuine
“if there is sufficient evidence on each side so that a
rational trier of fact could resolve the issue either way,
” and it is material “if under the substantive
law it is essential to the proper disposition of the
claim.” Becker v. Bateman, 709 F.3d 1019, 1022
(10th Cir. 2013) (internal quotation marks omitted). In
reviewing a motion for summary judgment, the Court views the
evidence and all reasonable inferences therefrom in the light
most favorable to the non-moving party. S.E.C. v.
Thompson, 732 F.3d 1151, 1156-57 (10th Cir. 2013)
(internal quotation marks omitted). Initially, the party
seeking summary judgment has the burden of showing that there
is no genuine dispute as to any material fact. See
Shapolia v. Los Alamos Nat'l Lab., 992 F.2d 1033,
1036 (10th Cir. 1993). Once the moving party meets its
burden, the non-moving party must show that genuine issues
remain for trial. Id.
this Court is sitting in diversity jurisdiction, the
substantive law governing this case is that of New Mexico.
Racher v. Westlake Nursing Home Ltd. P'ship, 871
F.3d 1152, 1164 (10th Cir. 2017). New Mexico courts
“resolve questions regarding insurance policies by
interpreting their terms and provisions in accordance with
the same principles which govern the interpretation of all
contracts.” Ponder v. State Farm Mut. Auto. Ins.
Co., 2000-NMSC-033, ¶ 11, 12 P.3d 960 (internal
quotation marks omitted). “In order to determine
coverage, [courts] initially look to the language of the
policy itself.” Gonzales v. Allstate Ins. Co.,
1996-NMSC-041, ¶ 12, 921 P.2d 944. New Mexico courts
“interpret unambiguous insurance contracts in their
usual and ordinary sense unless the language of the policy
requires something different.” Id. (internal
quotation marks omitted). “Thus, when the policy
language is clear and unambiguous, [courts] must give effect
to the contract and enforce it as written.”
Ponder, 2000-NMSC-033, ¶ 11. “But when an
insurance provision does conflict with a statute, it is
void.” Chavez v. State Farm Mut. Auto. Ins.
Co., 1975-NMSC-011, ¶ 6, 533 P.2d 100.
The amount in controversy needed to sustain diversity
jurisdiction is met.
addressing the merits of the pending cross-motions, the Court
must determine whether it has subject matter jurisdiction to
hear this case. Plaintiffs originally filed this lawsuit in
state court and Defendant removed it to federal court, citing
diversity jurisdiction under 28 U.S.C. § 1332. Doc. 1 at
2. Section 1332(a) gives federal courts “original
jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75, 000, exclusive
of interest and costs, and is between citizens of different
States . . . .” When a plaintiff files a civil action
in state court over which the federal court would have
original jurisdiction based on diversity of citizenship, the
defendant may remove the action to federal court, provided
that no defendant is a citizen of the State in which such
action is brought. See 28 U.S.C. § 1441(a),
(b). However, if the federal court determines it lacks
subject matter jurisdiction, such as lacking diversity
jurisdiction, it must remand the matter to the state court.
28 U.S.C. § 1447(c). The removing party bears the burden
of establishing the requirements for federal jurisdiction.
Martin v. Franklin Capital Corp., 251 F.3d 1284,
1290 (10th Cir. 2001), abrogated on other grounds by Dart
Cherokee Basin Operating Co. v. Owens, 574 U.S. 81
case, the parties do not dispute that they are citizens of
different states. See Doc. 1 at 2. Rather,
Plaintiffs challenge whether the amount in controversy is
met. Doc. 21 at 16. Plaintiffs assert that the Court should
dismiss Count II of the Defendant's Counterclaim (seeking
declaratory relief regarding UIM/UM limits) because the
amount of available UM coverage is only $14, 763.37-that is,
$25, 000 minus the offset from the underlying settlement with
the auto repair shop. Doc. 13 at 25. Plaintiffs argue that
Defendant only brought Count II of the Counterclaim to
justify removing the case to federal court when the amount in
controversy is clearly less than $75, 000. Id.
Although Plaintiffs' argument focuses on the
Defendant's Counterclaim, the Court must begin with
whether it has subject matter jurisdiction over
determine the amount in controversy, the court should first
look to the complaint. If the plaintiff's complaint,
filed in state court, demands monetary relief of a stated
sum, that sum, if asserted in good faith, is “deemed to
be the amount in controversy.” 28 U.S.C. §
1446(c)(2). When the plaintiff's initial pleading seeks
nonmonetary relief or does not state the amount in
controversy, the defendant's notice of removal may do so.
Id. § 1446(c)(2)(A). “[A] defendant's
notice of removal need include only a plausible allegation
that the amount in controversy exceeds the jurisdictional
threshold. Evidence establishing the amount is required by
§1446(c)(2)(B) only when the plaintiff contests, or the
court questions, the defendant's allegation.”
Dart Cherokee, 574 U.S. at 89. Thus, “when a
defendant seeks federal-court adjudication, the
defendant's amount-in-controversy allegation should be
accepted when not contested by the plaintiff or questioned by
the court.” Id. at 87.
defendant's allegation regarding the amount in
controversy is contested, Section 1446(c)(2)(B) provides that
“removal of the action is proper on the basis of an
amount in controversy asserted” by the defendant
“if the district court finds, by the preponderance of
the evidence, that the amount in controversy exceeds”
the jurisdictional minimum. As the Supreme Court has
explained, “[t]his provision . . . clarifies the
procedure in order when a defendant's assertion of the
amount in controversy is challenged. In such a case, both
sides submit proof and the court decides, by a preponderance
of the evidence, whether the amount-in-controversy
requirement has been satisfied.” Dart
Cherokee, 574 U.S. at 88. A defendant seeking removal
can establish jurisdictional facts by a preponderance in many
by contentions, interrogatories or admissions in state court;
by calculation from the complaint's allegations[;] by
reference to the plaintiff's informal estimates or
settlement demands[;] or by introducing evidence, in the form
of affidavits from the defendant's employees or experts,
about how much it would cost to satisfy the plaintiff's
McPhail v. Deere & Co., 529 F.3d 947, 954 (10th
Cir. 2008) (quoting Meridian Sec. Ins. Co. v.
Sadowski, 441 F.3d 536, 541-42 (7th Cir. 2006)). If a
defendant is able to prove these jurisdictional facts, the
matter should stay in federal court unless it is legally
certain that the amount in controversy is not met.
Id.; see also Hammonds v. Stamps.com, Inc.,
844 F.3d 909, 912 (10th Cir. 2016) (“to justify
dismissal under this standard it must appear to a legal
certainty that the claim is really for less than the
case, Plaintiffs do not demand a stated sum in their
Complaint; instead, they seek punitive damages under the UM
portion of their policy, as well as damages for breach of
contract and extra-contractual claims, including punitive
damages and attorney's fees. See Doc. 1-1. In
the Notice of Removal, Defendant alleges that
“Plaintiffs have a Sentry policy with limits of $25,
000 for Uninsured Motorist Property Damage (‘UMPD')
and have four vehicles insured under the policy. In the
course of the adjustment of the claim, Plaintiffs have
claimed that their policy has a total of $100, 000 in stacked
UM/UIM property damage coverage.” Doc. 1 at 2.
Defendant further explains that Plaintiffs demanded $55, 000
to settle their property damage claim and also claim damages
for extra-contractual claims and attorneys' fees, which
“makes it possible to establish here that $75, 000 is
‘in play.'” Id. at 3-5 (citing cases
in which juries awarded punitive damages against an insurance
company for bad faith and unfair insurance claims
Court finds, by a preponderance of the evidence, that the
amount in controversy is satisfied. Before they filed suit,
Plaintiffs demanded $55, 000 to resolve their punitive
damages UM claim. Doc. 13-4. In making that demand,
Plaintiffs claimed that they had not received the requested
rejection forms and thus “can only assume those forms
do not exist and therefore applicable coverage must be
reformed to $100, 000 in stacked UM property damage
coverage.” Id. After making their demand,
Plaintiffs received the rejection forms. Doc. 13-6.
Plaintiffs now assert that because their Complaint does not
state that the rejection forms are invalid, the Complaint
clearly seeks only $25, 000 for their property damage claim.
Yet, the Complaint does not make clear that Plaintiffs are
seeking less than their previous demand. Omitting a specific
demand is not the same as conceding that only $25, 000 is
available for the property damage claim. Additionally,
Plaintiffs offer no other evidence to show that they
communicated to Defendant, after receiving the rejection
forms, that they were seeking only $25, 000 in coverage or
that they would not be seeking to reform the rejection under
New Mexico law.
addition to the property damage claim, Plaintiffs also seek
damages for extra- contractual claims. In the Notice of
Removal, Defendant provides general calculations based on
those theories and what previous juries have awarded, showing
that juries have awarded large sums for bad faith. Doc. 1 at
3-4. Plaintiffs offer no rebuttal to those calculations.
Accordingly, the Court finds that Defendant has shown by a
preponderance of the evidence that more than $75, 000 is at
issue in this case, and that there is no legal certainty that
$75, 000 or less is at stake.
the Court has subject-matter jurisdiction over
Plaintiffs' Complaint, it likewise has subject-matter
jurisdiction over Defendant's Counterclaim. Counterclaims
are categorized as being either “compulsory” or
“permissive.” Fed.R.Civ.P. 13(a), (b). A
counterclaim is compulsory if it “arises out of the
transaction or occurrence that is the subject matter of the
opposing party's claim.” Fed.R.Civ.P. 13(a)(1)(A).
Defendant's request for declaratory judgment arises out
of the same dispute as Plaintiffs' Complaint. The Court
thus has subject-matter jurisdiction over the
Counterclaim. N.L.R.B. ex rel. Int'l Union of
Elec., Radio & Mach. Workers, AFL-CIO-CLC v. Dutch Boy,
Inc., Glow Lite Div., 606 F.2d 929, 932 (10th Cir.
1979); see also 28 U.S.C. § 1367(a); Glob.
NAPs, Inc. v. Verizon New England Inc., 603 F.3d 71,
85-86 (1st Cir. 2010).
Plaintiffs are not entitled to recover punitive damages under
their UM policy for the acts of an unknown thief.
parties dispute whether Plaintiffs are entitled to recover
punitive damages under their UM property damage coverage for
the actions of the unknown thief. Defendant asserts
Plaintiffs are not for two primary reasons: (1) the policy
does not permit recovery of UM benefits when the vehicle is
insured rather than uninsured; and (2) punitive damages are
not available against an unknown tortfeasor. While the Court
agrees with Defendant about what the policy says, it
nonetheless rejects Defendant's first argument because
the portion of the policy Defendant relies on may be invalid
under New Mexico's Uninsured Motorist Act
(“UMA”), as interpreted by the New Mexico courts.
The Court agrees with Defendant, however, that punitive
damages in New Mexico are not available for the actions of an
unknown tortfeasor. Finally, the Court rejects
Plaintiffs' argument that the mend-the-hold doctrine
would apply here to prevent Defendant from prevailing on this
argument. Even if Plaintiffs are correct that Defendant
should have asserted, pre-lawsuit, the argument that punitive
damages are not available against an unknown tortfeasor,
Plaintiffs have shown no prejudice resulting from the failure
to do so.
Whether Defendant's policy would be valid under New
Mexico law is uncertain.
addressing whether coverage exists, the Court first looks at
the policy. It next considers whether the relevant portions
of the policy are valid under New Mexico law.
Plain language of the policy
argues that the damage to Plaintiffs' car “did not
arise out of an accident involving the use of an uninsured
motor vehicle” because the vehicle at issue was
insured. Doc. 16 at 5. This argument has logical appeal under
the terms of the policy at issue. The policy provides UM
property damage coverage in the following situation:
We will pay damages for property damage which an insured
person is legally entitled to recover from the owner or
operator of an uninsured motor vehicle or an
underinsured motor vehicle. The property damage must
be caused by a car accident and result from the ownership,
upkeeping or use of an uninsured motor vehicle or an
underinsured motor vehicle.
D-UMF 1 (emphasis added). The policy defines an uninsured motor
vehicle as follows:
(A) Not insured by a property damage liability bond or policy
or does not have liability limits complying with the
financial responsibility law of the policy state.
(B) Insured by a property damage liability bond or policy at
the time of the car accident whose insurer is or becomes
insolvent or denies coverage.
(C) A hit-and-run vehicle. A hit-and-run vehicle is a motor
vehicle whose operator and owner are unknown and which causes
property damage that is coverage by this endorsement.
D-UMF 2. The policy defines an underinsured motor vehicle as
“Underinsured motor vehicle” means a motor
vehicle as to which there is a property damage liability
policy or a bond applicable at the time of the car accident
but the sum of the limits of liability under all property
damage liability insurance applicable at the time of the car
accident is less than the sum of the limits of liability
applicable to the insured person for Uninsured/Underinsured
Motorist Property Damage Coverage under this policy and any
policy also provides that an uninsured or underinsured motor
vehicle does ...