Dove v. State Farm Fire & Cas. Co.
2017 NMCA 51
| N.M. Ct. App. | 2017Background
- In August 2007 David Tapia (PSC employee) was injured by a 150‑lb Bullmastiff at a Santa Fe rental property; Jenny Dove rented the back studio and was in the common front yard watering plants at the owner’s request when the incident occurred.
- Owner Betsy Joyce lived in California, visited twice a year, hired others (including a gardener) to maintain the property, and relied on third parties for day‑to‑day matters; tenants maintained private yards but could use the common yard.
- Tapia sued Joyce and Dove (negligence/premises liability). Joyce’s insurer, State Farm, defended Joyce and obtained summary judgment; Dove requested defense from State Farm, which refused, saying she was only a tenant and not an insured under Joyce’s rental‑dwelling policy.
- Tapia and Dove settled the underlying claim; Dove assigned to Tapia her claims against State Farm for failure to defend and they sued State Farm for declaratory judgment and breach of the duty to defend.
- The district court granted summary judgment for State Farm, finding Dove was a tenant not a “real estate manager.” The Court of Appeals reversed, holding facts tended to show Dove was potentially a covered “real estate manager,” so State Farm breached its duty by refusing to defend without seeking a judicial determination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer breached duty to defend by refusing to defend Dove | Dove (via assignment to Tapia) argued State Farm had a duty to defend because the complaint and discoverable facts showed Dove was potentially an insured (real estate manager) | State Farm argued Dove was merely a tenant excluded from coverage and thus no duty to defend | Reversed: insurer breached duty — potential coverage existed, so State Farm should have defended or sought a judicial declaration before refusing |
| Proper standard for duty to defend | Alleged facts that tend to show coverage or facts discoverable by reasonable investigation trigger duty to defend | Insurer relied on alleged clear exclusion (tenant) to deny defense | Court reiterated New Mexico standard: any doubt resolved for insured; duty arises if complaint or discoverable facts potentially fall within coverage |
| Meaning/application of “real estate manager” in policy | Dove argued the term can encompass an unpaid tenant performing owner‑requested common‑area maintenance | State Farm argued term does not include a tenant with limited, informal duties, especially where others were hired | Court held term as‑applied was ambiguous; reasonable insured could view Dove as acting as a real estate manager given facts (watering common yard at owner’s request) |
| Insurer’s required response when coverage is doubtful | Plaintiffs: insurer must defend or seek declaratory judgment; cannot unilaterally refuse without investigation | State Farm: unilaterally denied coverage without showing it had no duty to defend | Court held insurer must either defend (possibly under reservation) or obtain court relief; good‑faith belief is not a defense to breach if proper investigation or declaratory action wasn’t pursued |
Key Cases Cited
- State Farm Fire & Cas. Co. v. Price, 101 N.M. 438, 684 P.2d 524 (NM Ct. App.) (insurer must defend if complaint alleges facts potentially within coverage)
- Miller v. Triad Adoption & Counseling Servs., Inc., 133 N.M. 544, 65 P.3d 1099 (N.M. Ct. App.) (duty to defend when complaint’s facts tend to show coverage)
- G & G Servs., Inc. v. Agora Syndicate, Inc., 128 N.M. 434, 993 P.2d 751 (N.M. Ct. App.) (insurer must reasonably investigate facts to determine duty to defend)
- Sw. Steel Coil, Inc. v. Redwood Fire & Cas. Ins. Co., 140 N.M. 720, 148 P.3d 806 (N.M. Ct. App.) (duty can arise from facts insurer could have discovered through reasonable investigation)
- Loya v. Gutierrez, 350 P.3d 1155 (N.M. 2015) (insurer generally must defend until relieved by court)
- Found. Reserve Ins. Co. v. Mullenix, 97 N.M. 618, 642 P.2d 604 (N.M. 1982) (insurer may seek declaratory judgment to be relieved of duty; refusal to defend at insurer’s peril)
- Lopez v. N.M. Pub. Sch. Ins. Auth., 117 N.M. 207, 870 P.2d 745 (N.M. 1994) (coverage determination is factual and properly decided in primary action)
- United Nuclear Corp. v. Allstate Ins. Co., 285 P.3d 644 (N.M. 2012) (ambiguous policy terms construed against insurer; interpret policies from reasonable insured’s perspective)
- Krieger v. Wilson Corp., 139 N.M. 274, 131 P.3d 661 (N.M. Ct. App.) (policy interpretation de novo; view language from hypothetical reasonable insured)
- Apodaca v. Farmers Ins. Co. of Ariz., 134 N.M. 188, 75 P.3d 404 (N.M. Ct. App.) (policy terms ambiguous as‑applied may create coverage questions requiring resolution in insured’s favor)