Garcia v. Republic Underwriters Ins. Co.

658 F.Supp.3d 1022

Yvonne GARCIA, individually and on behalf of other similarly situated individuals, Plaintiff, v. REPUBLIC UNDERWRITERS INSURANCE COMPANY, Defendant.

Civ. No. 21-1023 KG/JMR

United States District Court, D. New Mexico

Filed February 27, 2023

Corbin Hildebrandt, Corbin Hildebrandt, P.C., Albuquerque, NM, Kedar Bhasker, Albuquerque, NM, Rebekah S. Wright, Law Office of Rebekah S. Wright, LLC, Albuquerque, NM, Geoffrey R. Romero, Law Offices of Geoffrey R. Romero, Albuquerque, NM, for Plaintiff.

Brian S. Goldenberg, David L. Luck, Pro Hac Vice, Seth Alhadeff, Pro Hac Vice, Lewis, Brisbois, Bisgaard, and Smith, LLP, Coral Gables, FL, Jill M. Collins, Lewis Brisbois Bisgaard & Smith LLP, Albuquerque, NM, for Defendant.

MEMORANDUM OPINION AND ORDER

Kenneth J. Gonzales, UNITED STATES DISTRICT JUDGE

This case represents the latest in a series of putative class action claims challenging New Mexico's underinsured motorist insurance scheme and requires the Court to determine whether the New Mexico Supreme Court's reasoning in Crutcher v. Liberty Mutual Insurance Co., 2022-NMSC-001, 501 P.3d 433, extends beyond the minimum limits circumstances of that case. Having considered the briefing and applicable law, and being otherwise fully advised, the Court concludes that Crutcher does not apply to non-minimums policies and, therefore, grants Defendant Republic Underwriters Insurance Company's (Republic) Motion to Dismiss (Doc. 18).

The following facts are assumed true for purposes of this Motion and viewed in the light most favorable to the nonmovant. Santa Fe Alliance for Public Health and Safety v. City of Santa Fe, 993 F.3d 802, 811 (10th Cir. 2021) (citation omitted). Republic sold Plaintiff, Yvonne Garcia, personal automobile insurance on two vehicles with liability limits of $100,000 per person and $300,000 per accident. Ms. Garcia also carried uninsured/underinsured motorist (UM/UIM) coverage. Because Ms. Garcia had two covered vehicles, her UM/UIM limits stacked to $200,000 per person and $600,000 per accident.

On October 6, 2018, Ms. Garcia was involved in a car accident. The tortfeasor's insurer paid Ms. Garcia $100,000.00, representing the limit of the tortfeasor's liability insurance. Ms. Garcia then made a claim with Republic for UM/UIM coverage. Republic paid Ms. Garcia $100,000.00 in UM/UIM benefits, for a total recovery of $200,000.00. Republic invoked the statutory offset recognized in Schmick v. State Farm Mutual Automobile Insurance Company, 1985-NMSC-073, 103 N.M. 216, 704 P.2d 1092, to subtract the payment Ms. Garcia received from the tortfeasor's insurance company from the payment due to its own policyholder. See also Crutcher, 2022-NMSC-001, ¶ 9, 501 P.3d 433. Ms. Garcia asserts her injuries exceed $200,000.00.

Ms. Garcia contends that Republic was negligent, engaged in false and misleading trade practices, violated the New Mexico Unfair Insurance Practices Act, breached the covenant of good faith and fair dealing, and made negligent misrepresentations by selling her illusory UM/UIM coverage and not explaining the Schmick offset. She seeks reformation of the insurance policy to receive the full benefit of UM/UIM limits, declaratory judgment, injunctive relief, and class certification for all persons who carried UM/UIM coverage through Republic. Ms. Garcia proposes to define the class as:

All persons (and their heirs, executors, administrators, successors, and assigns) from whom Defendant collected a premium for an underinsured motorist coverage on a policy that was issued or renewed in New Mexico by Defendant and that purported to provide underinsured motorist coverage on the fact of its application and declaration pages, but which effectively no underinsured motorists coverage and/or misleading underinsured coverage, reflected on Defendant's declaration page, because of the statutory offset recognized in Schmick v. State Farm Mutual Automobile Insurance Company, 704 P.2d 1092 (1985).

(Doc. 17) at ¶ 44. Ms. Garcia also asserts the following subclass:

All Class Members (and their heirs, executors, administrators, successors, and assigns) where an underinsured motorist coverage on a policy that was issued or renewed in New Mexico by Defendant and that purported to provide the underinsured motorist coverage on the face of its application and declaration pages, but which in fact provides no underinsured motorists coverage and/or misleading underinsured coverage because of the statutory offset recognized in Schmick v. State Farm Mutual Automobile Insurance Company, 704 P.2d 1092 (1985), and who sustained damages in excess of an insured tortfeasor's policy limits, received the extent of all bodily injury liability limits available and would be or were denied those benefits by Defendant due to the Schmick offset.

Id. at ¶ 45.

Ms. Garcia attached the policy to her Amended Complaint. (Doc. 17-1). Relevantly, the policy includes an "Uninsured Motorists Coverage - New Mexico (Stacked)" endorsement. Id. at 20-23. That endorsement includes the following passages under "Insuring Agreement":

A. We will pay damages which an "insured" is legally entitled to recover from the owner or operator of an:

1. "Uninsured motor vehicle" or "underinsured motor vehicle" because of "bodily injury":

a. Sustained by an "insured"; and

b. Caused by an accident;

2. "Uninsured motor vehicle" or "underinsured motor vehicle" because of "property damage" caused by an accident.

The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the "uninsured motor vehicle" or "underinsured motor vehicle". With respect to damages an "insured" is legally entitled to recover from the owner or operator of an "underinsured motor vehicle", we will pay under this coverage only if Paragraph 1. or 2. below applies:

1. The limits of liability under any liability bonds or policies applicable to the "underinsured motor vehicle" have been exhausted by payment of judgments or settlements; or

. . .

D. "Underinsured motor vehicle" means a land motor vehicle or trailer of any type for which the sum of the limits of liability under all liability bonds or policies applicable at the time of the accident is less than the sum of the limits of liability applicable to the "insured" for Uninsured Motorists Coverage under this policy and any other policy.

. . .

Id. at 20. And the following under "Limit of Liability":

C. With respect to damages caused by an accident with an "underinsured motor vehicle", the limit of liability shall be reduced by all sums paid on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A of the policy.

Id. at 22.

I. Standard of Review

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). Conclusory allegations of liability, without supporting factual content, are insufficient. "The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief." Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008).

The Court, sitting in diversity, applies New Mexico substantive law. In doing so, the Court must either follow the decisions of the New Mexico Supreme Court, or attempt to predict what the New Mexico Supreme Court would do. Coll v. First Am. Title Ins. Co., 642 F.3d 876, 886 (10th Cir. 2011). The Court may consider the insurance policy as it is referred to in the complaint without converting Republic's motion to one for summary judgment under Rule 56 because it is central to the Plaintiff's claims and the parties do not dispute its authenticity. Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002).

II. Analysis

Under New Mexico's Mandatory Financial Responsibility Act, every driver must carry an "absolute minimum amount" of auto liability insurance of at least $25,000 per person and $50,000 per occurrence and UM/UIM coverage of at least the same amount. Crutcher, 2022-NMSC-001, ¶ 6, 501 P.3d 433 (citing NMSA 1978, § 66-5-215(A)(1)-(2); § 66-5-301(A)). Uninsured motorist (UM) insurance coverage protects drivers who are damaged by a tortfeasor who does not have automobile insurance. See NMSA 1978, § 66-5-301(A); Crutcher, 2022-NMSC-001, ¶ 5, 501 P.3d 433. Underinsured motorist (UIM) "insurance coverage protects drivers who are hit by a tortfeasor who does not have enough auto insurance to cover the cost of the driver's injuries and damages." Crutcher, 2022-NMSC-001, ¶ 5, 501 P.3d 433 (citing NMSA 1978, § 66-5-301(B)). Pursuant to statute, a tortfeasor is underinsured when there is a difference between the injured driver's UM/UIM coverage and the tortfeasor's liability insurance.¹ Id. (citing NMSA 1978, § 66-5-301(B)).

In Crutcher, the New Mexico Supreme Court found that UIM coverage on a policy that provides minimum UM/UIM limits of $25,000 per person and $50,000 per accident was "illusory" because "it may mislead minimum UM/UIM policyholders to believe that they will receive underinsured motorist benefits, when in reality they may never receive such a benefit." 2022-NMSC-001, ¶ 2, 501 P.3d 433. The Schmick offset rule also made it "practically impossible" for minimally insured motorists to collect UIM insurance under a statutory minimum policy because the deduction of the $25,000 received from the tortfeasor's insurance company from the $25,000 due from the policyholder's insurer balances out to zero....