Articles Posted in Insurance Bad Faith

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Though parties to personal injury litigation in American federal courts have broad discovery rights, certain materials are protected in the discovery process including those that are subject to the attorney-client and work product privileges.  In a recent case, the United States District Court for the District of New Mexico granted in part a motion for a protective order brought by an insurance company defendant.

The case arose after an insurance company denial of coverage.  A woman was involved in a New Mexico motor vehicle accident with an unknown driver, following which she made a claim with her insurance company for uninsured motorist (UM) coverage.  The insurance company denied coverage, taking the position that its insured was 100% at fault for the accident.  The insured driver then sued for UM benefits and punitive damages and a jury found the UM driver 100% at fault and awarded the insured driver damages.

Thereafter the plaintiff sued her insurance company for breach of contract, bad faith, negligence, and unfair practices for the insurance company’s failure to pay the claim, including paying the jury verdict, and for its handling of the claim through the underlying lawsuit.  The insurance company paid the jury verdict and sought a protective order with respect to discovery sought by the plaintiff.

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The U.S. District Court for the District of New Mexico handed down a decision on January 3, 2019 in favor of a plaintiff who was seeking a recovery from her insurance company following a New Mexico car accident resulting in the plaintiff allegedly suffering personal injuries.  The insurance company had argued that the plaintiff needed to prove entitlement to underinsured motorist coverage (UIM) benefits before she could proceed with her other claims against the insurance company.  The court denied the defendant insurance company’s motion for bifurcation, thereby allowing the plaintiff’s claims to proceed forward together.

The plaintiff alleged that she had suffered injuries after her vehicle was rear-ended by another vehicle.  She settled with the insurance company of the driver who had allegedly caused the accident for the limits of that driver’s insurance policy, and then made a demand on her own insurance company for UIM and the insurance company refused to pay.  She then sued her insurance company, asserting two different sets of claims.  She claimed a breach of contract based on her insurer’s non-payment of UIM benefits and breach of the duties of good faith and fair dealing.  These were contract based claims under her insurance policy with the defendant insurance company.

In separate counts, the plaintiff’s complaint alleged extra-contractual claims for insurance bad faith, violations of New Mexico’s Unfair Insurance Practices Act (UIPA), and violations of New Mexico’s Unfair Trade Practices Act (UTPA).   The defendant insurance company moved to bifurcate the trials of Plaintiff’s UIM contract based claims from her bad faith, UIPA, and UTPA claims and stay discovery on those extra-contractual claims “until such time as a jury has found that the Plaintiff is legally entitled to recover benefits on the underlying UIM breach of contract claim.”  The plaintiff opposed.

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The United States District Court for the District of New Mexico recently handed down an opinion dismissing a claim for punitive damages brought in connection with a personal injury case.  The plaintiffs had filed a complaint against the defendant’s insurer after a trial in which the plaintiffs had prevailed.  The plaintiffs brought their post-trial complaint in New Mexico state court under the New Mexico Unfair Claims Practices Act (“UCPA”), seeking to recover damages, including punitive damages, attorney’s fees, and other costs.  The defendant insurance company removed the case to federal district court and successfully argued that the damages available to the plaintiffs under the UCPA did not include punitive damages.

Allegedly, at the time of the accident that led to the trial, the plaintiffs were in a vehicle that was rear-ended by another vehicle and this caused them to suffer personal injuries and property damage.  The driver of the car that collided with the plaintiffs’ car was insured.  Her insurance company determined that she was at fault and paid plaintiffs for property damage.  The insurer refused to pay for personal injuries that the plaintiffs documented with materials, including medical records and bills.  The insurer then offered to settle for an amount that the plaintiffs rejected on the basis that it was less than the amount they believed they were owed.  After the plaintiffs filed a lawsuit against the driver of the car and her insurer, the parties engaged in a mediation.  The plaintiffs purportedly offered to settle their claims for $40,000 and the insurance company was willing to pay $16,000.  No settlement was achieved and the case went to trial.  Following the trial the jury found the driver that rear-ended the plaintiffs to be 100% at fault for the car accident and awarded the plaintiffs $100,000.

The plaintiffs then sued the insurance company for refusing to settle their personal injury claims sooner, alleging that this was in keeping with a policy and practice of the insurance company to refuse to settle or offer only unreasonably low settlements to people seeking recoveries for injuries arising from low speed accidents.  The plaintiffs based their claims on the UCPA.  The insurance company moved to dismiss the punitive damages claim asserted in the plaintiffs’ complaint on the basis that the UCPA allows for recovery of actual damages, but not punitive damages.  The plaintiffs asserted that the UCPA did not expressly preclude the award of punitive damages, and pointed to statutory language suggesting recoveries under the UCPA for punitive damages are available in addition to state common law and statutory recoveries.

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A plaintiff injured in a New Mexico car accident who sues to recover damages for personal injuries often can assert causes of action based on multiple theories of recovery.  Under some circumstances, a defendant can successfully move to bifurcate the causes of action.  The consequences will depend on what stage the litigation is in when bifurcation is sought and can result, for example, in the litigation being split up so that discovery proceeds with respect to one or more causes of action while being stayed with respect to other causes of action.

In a recent case, the plaintiff asserted causes of action against an insurance company, which included breach of the underinsured motorist coverage provisions of the contract he had entered into with the insurance company that provided him car insurance, plus alleging bad faith.  The insurance company filed a successful motion to bifurcate the cause of action for denial of underinsured motorist coverage under the insurance contract from extra-contractual causes of action, and to stay discovery with respect to all extra-contractual causes of action.

The plaintiff had filed a lawsuit in the Twelfth Judicial District for Lincoln County, New Mexico.  He alleged that a teenager had driven her parents’ car into his truck while talking on her cell phone after rolling through a stop sign, and that this resulted in his truck spinning on two wheels and sustaining severe damage.  The plaintiff also alleged that he suffered grave injuries, which necessitated evaluation and treatment of his chest, hip, back and neck at the Lincoln County Medical Center.  Continue reading

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Insurance companies sometimes try to change the forum for lawsuits filed against them or their insureds as part of their litigation strategy.  A common strategy is to try to remove a lawsuit filed by plaintiffs against them in state court to federal court and then make a motion to dismiss in order to try to stop the case from proceeding through the discovery process and to trial.

Federal courts are courts of limited jurisdiction and are restricted from adjudicating, for example, state law claims asserted by citizens of one state against citizens of another state.  In a recent case, an insurance company removed a state court lawsuit against it, its law firm, and one of the attorneys working for the law firm from state court, where the insureds had filed it, to federal court.

The insureds had filed suit in New Mexico state court, alleging causes of action including violations of the Trade Practices and Frauds Article (TPFA) of the New Mexico insurance code, stemming from interactions with the lawyers acting for the insurance company.  They alleged that they believed themselves to be victims of a profit-maximizing scheme designed to coerce them to settle for a fraction of what their insurance claims were worth arising from the stealing and burning of a van and the removal of tools and equipment from the van.

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