374 P.3d 723
N.M. Ct. App.2016Background
- Barbara Sherrill was a Farmers Insurance claims adjuster (2007–2010). Farmers required early in-person contact (IPC) and set early claim settlement (ECS) quotas to settle a percentage of unrepresented bodily-injury claims within 60 days for $1,500 or less.
- Sherrill complained about ECS as coercive and unfair to vulnerable, unrepresented claimants and failed to meet ECS quotas.
- Farmers repeatedly reprimanded Sherrill for ECS performance; she was placed on probation and terminated in March 2010, with ECS performance cited.
- Sherrill sued for retaliatory discharge (and other claims dismissed earlier), alleging she was fired for refusing to participate in ECS and IPC because those practices violated Section 59A-16-20 and the implied covenant of good faith and fair dealing.
- The district court granted summary judgment for Farmers, finding (1) Section 59A-16-20 and the implied covenant did not embody a clearly mandated public policy sufficient to support retaliatory discharge and (2) no causal link existed between Sherrill’s IPC objections and her termination.
- The Court of Appeals affirmed dismissal as to IPC (no evidence Farmers knew she objected) but reversed on the public-policy issue as to ECS and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 59A-16-20 constitutes a "clearly mandated public policy" supporting retaliatory discharge | Sherrill: §59A-16-20 (duty to effectuate prompt, fair, equitable settlements) protects claimants and forbids insurer practices that coerce premature low settlements; opposing ECS furthers that policy | Farmers: the statute requires case-by-case, subjective assessments and is too vague to give employers notice for retaliatory-discharge liability | Held: Yes. The statute embodies a clear public policy sufficient to support a retaliatory-discharge claim; summary judgment reversed as to ECS-related claim |
| Whether the implied covenant of good faith and fair dealing is a "clearly mandated public policy" supporting retaliatory discharge | Sherrill: the insurer’s common-law duty to treat insureds fairly is a well-recognized, fundamental policy; opposing ECS furthers that duty | Farmers: prior cases limit use of the implied covenant in employment contexts and the covenant is not a public-policy basis for retaliation claims against employers | Held: Yes. The court concluded the implied covenant in the insurer/insured context embodies a clear public policy sufficient to support retaliatory-discharge claims |
| Whether Sherrill acted in furtherance of the protected public policies (causation) for ECS | Sherrill: she objected to ECS, refused to meet quotas when they would force unfair settlements, and was disciplined for ECS performance | Farmers: ECS is lawful and nonactionable; Sherrill’s ECS noncompliance was performance-based, not protected activity | Held: Question of fact exists. Evidence (reprimands, probation, testimony, affidavits) raises triable issues whether Sherrill’s opposition to ECS furthered the statutes/covenant and motivated termination |
| Whether Sherrill’s objections to IPC support retaliatory-discharge (causation) | Sherrill: her ECS objections implicitly included IPC objections and put Farmers on notice | Farmers: Sherrill never explicitly complained about IPC; employer lacked knowledge, so no causal link | Held: No. Affirmed — no genuine factual dispute that Farmers had actual knowledge of any IPC objection, so IPC-based claim fails |
Key Cases Cited
- Palmateer v. Int’l Harvester Co., 421 N.E.2d 876 (Ill. 1981) (definition and limits of "clearly mandated public policy" in retaliatory-discharge context)
- Hovet v. Allstate Ins. Co., 89 P.3d 69 (N.M. 2004) (Insurance Code aims to protect anyone injured by unfair insurance practices; §59A-16-20 duty of good faith)
- Russell v. Protective Ins. Co., 751 P.2d 693 (N.M. 1988) (Article 16 should be broadly construed to allow third-party claimants to sue for unfair insurance practices)
- Dairyland Ins. Co. v. Herman, 954 P.2d 56 (N.M. 1998) (implied covenant can require insurer to settle when there is a substantial likelihood of recovery in excess of limits)
- Ambassador Ins. Co. v. St. Paul Fire & Marine Ins. Co., 690 P.2d 1022 (N.M. 1984) (insurer’s duty to settle and investigate claims measured by good-faith standards)
- Lihosit v. I & W, Inc., 913 P.2d 262 (N.M. Ct. App. 1996) (elements of retaliatory-discharge claim and causation requirement)