Fred Loya Ins. Co. v. Swiech

413 P.3d 530

FRED LOYA INSURANCE COMPANY, Plaintiff/Counter-Defendant-Appellant,

v.Thomas J. SWIECH, Defendant/Counter-Plaintiff-Appellee.

NOS. A-1-CA-35338 & A-1-CA-35821 (Consolidated)

Court of Appeals of New Mexico.

December 4, 2017

Craig, Terrill, Hale & Grantham, LLP, Elizabeth G. Hill, Leonard R. Grossman, Andrew B. Curtis, Lubbock, TX, for Appellant.

Carter & Valle Law Firm, P.C., Richard J. Valle, Matthew J. Zamora, Albuquerque, NM, for Appellee.

Jarmie & Associates, Mark D. Standridge, Las Cruces, NM, for Amicus Curiae.

VANZI, Chief Judge.

{1} The dispositive issue in these consolidated appeals is whether New Mexico's uninsured/underinsured motorist statute, NMSA 1978, § 66-5-301 (1983) (UM/UIM Act), requires an insurance company to pay punitive damages from the uninsured/underinsured (UM/UIM) bodily injury coverage limits of its insured's automobile insurance policy, where (1) the insured motorist sustained only property damage caused by an uninsured motorist; (2) the insurer paid the full amount of the UM/UIM property damage coverage limits of the policy; and (3) the punitive damages claim arose only from the uninsured motorist's conduct in causing that property damage. We hold that an insurer that has paid the full amount of the policy's UM/UIM property damage coverage limits is not required to pay from the policy's separate and distinct UM/UIM bodily injury coverage limits amounts representing punitive damages arising solely from property damage. Based on this holding, we reverse the district court's contrary ruling and its award of attorney fees to the insured under NMSA 1978, Section 39-2-1 (1977). We also conclude that the district court abused its discretion in denying the insurer's motion to seal confidential mediation communications pursuant to NMSA 1978, Section 44-7B-4 (2007).

FACTUAL BACKGROUND

{2} In the early morning hours of June 21, 2013, Defendant/Counter-Plaintiff Thomas J. Swiech was asleep in his apartment when an uninsured motorist, fleeing from police, struck Swiech's unoccupied 2001 Chevrolet Suburban. The Suburban sustained disabling property damage from the collision. No one was in the vehicle at the time of the accident, and no one—including Swiech—sustained any bodily injury.

{3} Swiech incurred $3,566.24 in property damage to his Suburban and sought UM/UIM property damage coverage from his automobile insurer, Plaintiff/Counter-Defendant Fred Loya Insurance Company (Loya). The declarations page of Swiech's insurance policy with Loya provided the following UM/UIM coverage limits: $25,000 per person /$50,000 per accident for bodily injury and $10,000 for property damage. The policy defines "bodily injury" as "bodily harm, sickness, or disease, including death that results from bodily harm, sickness, or disease." It defines "property damage" as "physical damage to or destruction of a covered vehicle; and ... physical damage to or destruction of any property owned by an insured person which is contained in the covered vehicle at the time of the accident." Part III of the policy, which specifically pertains to UM/UIM coverage, provides:

Subject to the Limits of Liability , if you pay a premium for [UM/UIM] 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 because of bodily injury :

1. sustained by an insured person;

2. caused by accident; and

3. arising out of the ownership, maintenance, or use of an uninsured motor vehicle or an underinsured motor vehicle.

....

Subject to the Limits of Liability , if you pay a premium for [UM/UIM] Motorist Property Damage Coverage, we will pay for damages which an insured person is entitled to recover from the owner or operator of an uninsured motor vehicle because of property damage :

1. caused by accident; and

2. arising out of the ownership, maintenance, or use of an uninsured motor vehicle.

(Emphases added.) The policy, including Part III, is silent as to punitive damages.

{4} Loya paid Swiech the policy's $10,000 coverage limit for UM/UIM property damage: $3,566.24 in property damage actually incurred plus $6,433.76. Swiech thereafter demanded that punitive damages arising from the property damage be paid from his UM/UIM bodily injury coverage, which Loya denied.¹

PROCEDURAL BACKGROUND

The Summary Judgment Motions and the District Court's Judgment

{5} Following Swiech's demand for payment of punitive damages from his policy's UM/UIM bodily injury coverage, Loya filed a complaint in the district court seeking a declaratory judgment that Swiech was not entitled to any proceeds under the policy beyond the $10,000 UM/UIM property damage coverage limit Loya had already paid. Swiech counterclaimed, alleging that Loya had breached the insurance contract by failing to pay a "first party coverage claim" and had "wrongfully and unlawfully denied UM/UIM coverage." Swiech also sought a declaratory judgment that, among other things, he was entitled to punitive damages and "to recover the entire UM/UIM policy limits." In other words, Swiech sought to recover in excess of the UM/UIM property damage coverage limit by claiming entitlement to the UM/UIM bodily injury coverage limit, despite the fact that he did not sustain any bodily injury.

{6} Loya moved for summary judgment, arguing that it was entitled to judgment as a matter of law because the $10,000 policy limit for property damage coverage had been exhausted, and "there are no genuine issues of material fact as to whether [Swiech] has suffered any bodily injury damages." Swiech did not dispute any material facts, and he admitted that Loya had paid the $10,000 policy limit for UM/UIM property damage coverage but argued that he was entitled to the $25,000 policy limit for UM/UIM bodily injury coverage because (1) the uninsured motorist's conduct warranted punitive damages, (2) the policy did not preclude him from seeking punitive damages, (3) "punitive damages are separate and distinct damages" from actual damages, and (4) New Mexico law provides that punitive damages are included in UM/UIM coverage.

{7} A month later, Swiech filed his own motion for partial summary judgment on the same grounds asserted in his response to Loya's summary judgment motion, arguing that he was entitled to judgment as a matter of law that he "can request punitive damages from the available $25,000.00 in UM/UIM [bodily injury] coverage." Loya countered that the policy's UM/UIM property damage coverage limit complied with NMSA 1978, Section 66-5-215 (1983) of the Mandatory Financial Responsibility Act (MFRA), and reiterated that Swiech was not entitled to proceeds under the policy's UM/UIM bodily injury coverage because punitive damages derive from actual damages, and Swiech had sustained only property damage.

{8} After an unsuccessful attempt at arbitration, Loya and Swiech renewed their summary judgment motions, relying on the same arguments. After holding a hearing, the district court issued orders denying Loya's summary judgment motion and conditionally granting Swiech's motion, ruling that Swiech's "motion to exceed the [policy] limitation if a punitive damage award is obtained above the $10,000 is, conditionally, GRANTED; provided that a trial will be necessary to determine whether punitive damages are recoverable." In so ruling, the district court noted the following points: (1) the policy delineated specific limits but did not address payment of punitive damages; (2) UJI 13-1827 NMRA, the uniform jury instruction for punitive damages, makes "no distinction ... between the recovery of bodily injury [versus] property damage"—this notwithstanding that the UJI does not, by its terms, apply specifically to liability insurance policies and the Use Note's caution that the instruction merely "provides a general framework"; (3) Loya "did not explain where the policy language clearly and unambiguously limited punitive damages stemming from a property damage claim to $10,000"—this, despite that the policy expressly stated that any loss "because of property damage" is "subject to the limits of liability" for property damage.

{9} Loya unsuccessfully moved for reconsideration based on Lucero v. Northland Insurance Co. , 2015-NMSC-011, 346 P.3d 1154, in which our Supreme Court analyzed an insurance contract under generally applicable contract principles.

{10} After a one-day bench trial, the district court entered judgment in favor of Swiech upon findings of fact and conclusions of law. The court ruled that Loya must pay Swiech $20,000 in punitive damages "over and above the $10,000 amount previously paid for property damage-based compensatory damages," based on its conclusion that "assur[ing] the punishment motive of the law is furthered" demanded "utilizing the higher limits under the policy." Many findings focus on the uninsured's conduct while fleeing from police and during his subsequent arrest. Although these matters have no relevance to the issues in dispute, the district court's conclusion that Loya must pay punitive damages for property damage from the policy's separate UM/UIM coverage limits for bodily injury relies heavily on what the court deemed to be the need to send a "societal" message to punish the tortfeasor and "to deter other drivers from engaging in such dangerous and reprehensible conduct" and the court's view that "the punitive damage purpose logically demands access to the greater policy limits."

{11} According to the court, the insuring agreement's statement that if any policy provision "fails to conform with the legal requirements of the state listed on your application [New Mexico] as your residence, the provision shall be deemed amended to conform with such legal requirements," as "allow[ing] recovery of punitive damages under the insuring agreement by operation of law when combined with current New Mexico law on award of punitive damages in this context." The court did not...