453 P.3d 1235
N.M. Ct. App.2019Background
- Late at night Haygood was assaulted by Cordova near Cordova’s parked, uninsured car; parties stipulated the gunshot occurred while Haygood was inside the vehicle and the car was not running or driven.
- Haygood sought uninsured motorist (UM) coverage from USAA; initial examiner recommended coverage but subsequent examiner Hawken, after investigation, denied coverage. In-house counsel noted sympathy concerns and recommended further inquiry.
- Haygood sued USAA and the claims examiner for breach of contract, breach of the implied covenant of good faith and fair dealing, insurance bad faith, violations of the Unfair Insurance Claims Practices Act (UIPA) and Unfair Practices Act (UPA).
- The district court granted summary judgment for Defendants, holding Haygood’s injuries did not "arise out of the use" of the vehicle (applying the Britt three-part test) because the vehicle was not put to a "normal use" and Cordova’s intentional assault was an intervening act; the court dismissed all claims as coverage-dependent.
- On appeal the Court of Appeals affirmed the no-coverage rulings but reversed as to Haygood’s separate bad-faith theory based on the investigation and evaluation of the claim, remanding that claim for further proceedings.
Issues
| Issue | Haygood's Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether a "normal use" requirement applies when deciding if injury "arises out of the use" of an uninsured vehicle | Britt directs the test, but statute/policy require only "use," not "normal use" | Britt’s three-part test (including normal use) governs UM coverage inquiries | Court follows Britt: normal use is required |
| Whether confinement inside the parked car or storage of contraband constituted a "normal use" causally connected to the injury | Confinement/ storage are normal uses and sufficiently connected to the shooting | Vehicle was not being used as a motor vehicle; no transportation/operation or specialized function; assault was independent | Neither use met "normal use"/causal-connection requirement; no UM coverage |
| Whether an insurer can be liable for bad faith based on its investigation/evaluation absent an ultimate coverage duty to pay | Bad faith can arise from unreasonable investigation/evaluation even if coverage is lacking | Bad faith claims require a contractual duty to pay (i.e., coverage) | Court: bad-faith liability may be based on investigation/handling independent of coverage; remand for fact-specific inquiry |
| Whether dismissal of contract, implied covenant, UIPA, and UPA claims was proper given lack of coverage | (Some claims conceded to depend on coverage; overall argued district court erred) | Those claims depend on existence of coverage | Affirmed: dismissal of contract, implied covenant (as conceded), UIPA, and UPA claims upheld |
Key Cases Cited
- Britt v. Phoenix Indemnity Insurance Co., 120 N.M. 813, 907 P.2d 994 (N.M. 1995) (adopts three-part test: causal connection, intervening act, and normal use to determine whether harm "arises out of the use" of an uninsured vehicle)
- O'Neel v. USAA Insurance Co., 131 N.M. 630, 41 P.3d 356 (N.M. Ct. App. 2002) (bad-faith claim may be based on insurer conduct separate from refusal to pay, e.g., unfair/untethered investigation)
- Progressive Cas. Ins. Co. v. Vigil, 413 P.3d 850 (N.M. 2018) (approves O'Neel principle that bad-faith findings may rest on conduct distinct from coverage denial)
- Miera v. State Farm Mut. Auto. Ins. Co., 135 N.M. 574, 92 P.3d 20 (N.M. Ct. App. 2004) (standard of review for applying law to undisputed facts; applies Britt)
- Barncastle v. Am. Nat'l Prop. & Cas. Co., 129 N.M. 672, 11 P.3d 1234 (N.M. Ct. App. 2000) (applies Britt; finds coverage where vehicle was used to drive alongside victim to assault)