Articles Posted in Property Damage

A person whose truck was stolen sought compensation in New Mexico state court from his automobile insurer on the basis that the theft constituted property damage under the uninsured motorist provisions of the parties’ contract.  The insurance company removed the lawsuit to federal court and filed a motion to dismiss, which the court granted.  In arriving at its conclusion that the insured’s case should be dismissed, the court accepted the insurance company’s construction of the uninsured motorist provisions of the contract between the insurance company and its insured.

The federal court deciding the motion to dismiss determined that it was tasked with predicting how New Mexico’s Supreme Court would decide the dispute under New Mexico’s Uninsured Motorist Act.  As a decision had not yet been made on the issues at that level, the federal court looked to legislative intent and rulings by other courts.  It concluded that the legislative intent was to protect the public from culpable underinsured motorists and that the phrases “injury to or destruction of property” and “property damage” do not ordinarily include theft.

The court observed that the insured plaintiff was correct that the New Mexico Supreme Court had liberally construed New Mexico law in favor of insureds.  The court rejected the insured’s position he was covered based on concerns the court expressed, including that accepting the position would in effect add a requirement that the New Mexico legislature could have but purportedly had not enacted – that every automobile liability insurance policy in New Mexico provide coverage for auto theft.
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A New Mexico federal Magistrate Judge recently recommended denial of a construction company’s motion to dismiss or stay a suit by the construction company’s insurer.  The insurance company had sued in New Mexico federal court seeking a declaration that it was not obligated to cover a lawsuit against the construction company in New Mexico state court for personal injuries and property damage.

The state court lawsuit was based on the construction company using the services of an insulation and fireproofing contractor to install Icynene SPF in a custom built home.  After the Icynene SPF was installed and homeowners moved in, the homeowners complained that the product was causing noxious and harmful fumes, gases and odors to fill the house.  The homeowners submitted a demand letter to the construction company, and its insurance company retained counsel to represent the construction company.  The homeowners then sued the Icynene SPF manufacturer, the insulation and fireproofing contractor that had installed it and the construction company in the Thirteenth Judicial District of New Mexico.

A few months later the construction company’s insurer filed a complaint in federal court pursuant to the Declaratory Judgment Act.  The insurance company sought a declaration that the allegations in the complaint brought in state court by the homeowners against the construction company were not covered by the construction company’s insurance policy.  The homeowners answered the complaint and the construction company moved to dismiss or, in the alternative, to stay proceedings.

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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The Court of Appeals of New Mexico recently entered a ruling concerning the obligation of insurance companies to pay punitive damages.  In its ruling, the Court of Appeals reversed a judgment entered by the trial court in favor of an insured car owner that provided the insurance company had to pay him $20,000 in punitive damages, in addition to the $10,000 the insurance company had previously paid the insured by way of compensatory damages.

The insurance coverage dispute arose following a New Mexico car accident that occurred early in the morning, when the owner of a 2001 Chevrolet Suburban was sleeping.  An uninsured motorist, then fleeing from police officers, struck the insured’s car when, fortunately, no one was in the car.  No one sustained any injuries to their bodies when the accident occurred.  But the Chevrolet Suburban sustained disabling damage.

According to the Court of Appeals opinion, the insured incurred $3,566.24 in property damage to his vehicle, and he sought a recovery under the uninsured/underinsured (UM/UIM) property damage provision of his policy.  Under his insurance policy, there were coverage limits of $25,000 per person and $50,000 per accident for bodily injury.  The insurance policy also had a provision providing a recovery with coverage limits of $10,000 for property damage.