7 N.M. 486
N.M. Ct. App.2015Background
- Colleen and her son Martin were insured by Progressive; a premium-payment dispute led to a lapse question after conflicting notices and phone calls in Oct–Nov 2002.
- Martin was in a fatal/serious injury car accident on November 4, 2002; Colleen paid a premium and reported the claim to Progressive shortly after the accident.
- Progressive initially concluded the policy had lapsed on November 3 and filed a declaratory-judgment action seeking a ruling of no coverage; the Vigils counterclaimed for bad faith.
- Progressive settled third-party wrongful-death and injury claims for $100,000 each under a reservation of rights and later sought reimbursement; the district court granted summary judgment for Progressive on coverage at one point, but this was reversed on appeal and remanded for retrial.
- At retrial the court excluded (1) evidence of the prior judge’s ruling that there was no coverage and (2) evidence that Progressive paid $200,000 to settle third-party claims; the jury found coverage and awarded the Vigils compensatory and large punitive damages for bad faith.
- The Court of Appeals affirmed the coverage verdict but reversed the bad-faith judgment (including compensatory, punitive damages, and §39-2-1 attorney fees and costs), holding the district court abused its discretion by excluding the two categories of relevant evidence and remanding for a new trial on bad faith.
Issues
| Issue | Progressive's Argument | Vigils' Argument | Held |
|---|---|---|---|
| Admissibility of prior district judge’s ruling that there was no coverage | The prior ruling is relevant and tenders that Progressive’s denial was reasonable; excluding it prejudiced Progressive | The prior ruling was not relevant to the jury’s determination at retrial | Reversed: prior ruling was relevant to reasonableness and should have been admissible; exclusion was abuse of discretion |
| Admissibility of evidence that Progressive paid $200,000 to settle third-party claims | Settlement payments are relevant to rebut bad-faith claim and show Progressive did not abandon insureds; exclusion left a one-sided picture | Payments were tied to reimbursement issue resolved on summary judgment and not relevant to coverage/bad faith | Reversed: settlement payments were relevant to reasonableness and exclusion was abuse of discretion |
| Reimbursement claim (Progressive’s right to reimbursement for settlements) | Progressive argued it could seek reimbursement if there was no coverage | Vigils argued Progressive could not seek reimbursement as a matter of law | Court did not decide on appeal because jury found coverage; reimbursement issue is moot given affirmed coverage verdict |
| Attorney fees and costs under §39-2-1 awarded to Vigils | Fees were warranted because jury found insurer acted unreasonably | Vigils sought fees after bad-faith verdict | Vacated: fee award depends on bad-faith finding; because bad-faith judgment reversed/remanded, fees and costs must be redetermined after new trial |
Key Cases Cited
- Kilgore v. Fuji Heavy Indus. Ltd., 146 N.M. 698, 213 P.3d 1127 (N.M. Ct. App. 2009) (standard of review for evidentiary rulings and admissibility principles)
- United Nuclear Corp. v. Allendale Mut. Ins. Co., 103 N.M. 480, 709 P.2d 649 (N.M. 1985) (insurer entitled to debate fairly debatable coverage issues)
- Lennar Corp. v. Transamerica Ins. Co., 256 P.3d 635 (Ariz. Ct. App. 2011) (prior judicial interpretations of policy language are relevant to insurer reasonableness)
- Karen Kane Inc. v. Reliance Ins. Co., 202 F.3d 1180 (9th Cir. 2000) (prior court rulings supporting insurer can support finding the insurer’s interpretation reasonable)
- Morris v. Paul Revere Life Ins. Co., 135 Cal. Rptr. 2d 718 (Cal. Ct. App. 2003) (subsequent or prior court opinions are probative of insurer reasonableness)
- State v. Alberico, 116 N.M. 156, 861 P.2d 192 (N.M. 1993) (error to exclude evidence that frustrates jury’s role to weigh credibility)