129 F. Supp. 3d 1252
D.N.M.2015Background
- Plaintiff Robert Sinclair sought to amend his complaint to add bad-faith and Unfair Insurance Practices Act (UIPA) claims against Zurich for denying underinsured motorist (UIM) benefits.
- Zurich denied coverage, asserting SAIA (Sinclair’s employer) validly rejected UIM coverage for New Mexico under a multi-state policy; Zurich provided partial policy excerpts and later produced the full policy after litigation began.
- Sinclair alleged Zurich failed to timely/fairly investigate, communicate, settle, and provide policy copies; he also criticized Zurich’s summary-judgment briefing as misrepresenting New Mexico law.
- The magistrate judge considered Rule 15(a) (and noted Rule 16(b) scheduling-order implications) and applied Twombly/Iqbal plausibility standards to the proposed amended complaint.
- The court found Sinclair’s proposed amended complaint contained largely conclusory allegations lacking sufficient factual detail to plausibly plead bad faith or UIPA violations.
- The court also held that Zurich’s counsel’s litigation conduct (including a deficient summary-judgment brief) should not be admitted as evidence of bad faith in this case and that Sinclair’s new claims would be futile; amendment was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to amend should be granted under Rule 15 | Sinclair sought to add bad-faith and UIPA claims based on Zurich's denial and post-filing conduct | Zurich argued amendment was untimely and claims would be futile | Denied: amendment futile under Rule 15(a); Rule 16(b) good-cause issues noted but not resolved |
| Whether the proposed bad-faith and UIPA pleadings meet Twombly/Iqbal plausibility | Sinclair alleged denial of UIM, failure to provide full policy, and conclusory bad-faith/UIPA assertions | Zurich contended allegations are conclusory and insufficiently factual | Denied: allegations are legal conclusions/rote recitations and fail plausibility standard |
| Whether Zurich’s litigation conduct (e.g., summary-judgment briefing) may be used as evidence of insurer bad faith | Sinclair argued litigation misconduct (misstating New Mexico law) shows continuing bad faith | Zurich argued attorney litigation tactics are protected, irrelevant, and prejudicial | Court: post-filing conduct can be relevant in rare/extraordinary cases, but here summary-judgment conduct is not sufficiently extraordinary; excluded as evidence of bad faith/UIPA |
| Whether sanctions or other remedies make litigation conduct admissible as bad-faith evidence | Sinclair pointed to purported misrepresentations; sought to use them substantively | Zurich emphasized existing procedural remedies (Rule 11, discovery sanctions, professional discipline) and prejudicial risk | Court: procedural sanctions and professional regulation are appropriate remedies; counsel’s poor briefing addressed by court action but not conversion into substantive evidence of bad faith |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of plausibility standard)
- Frank v. U.S. West, Inc., 3 F.3d 1357 (10th Cir. 1993) (denial of leave to amend for undue delay/untimeliness)
- Jefferson Cty. Sch. Dist. No. R-1 v. Moody's Inv'rs Servs., Inc., 175 F.3d 848 (10th Cir. 1999) (futility standard for amendments)
- Sloan v. State Farm Mut. Auto. Ins. Co., 85 P.3d 230 (N.M. 2004) (definition of insurer bad faith in New Mexico)
- Timberlake Constr. Co. v. U.S. Fidelity & Guar. Co., 71 F.3d 335 (10th Cir. 1995) (limits on using litigation tactics as bad-faith evidence)
- Knotts v. Zurich Ins. Co., 197 S.W.3d 512 (Ky. 2006) (discussing admissibility of litigation conduct as bad-faith evidence)
- Hovet v. Allstate Ins. Co., 89 P.3d 69 (N.M. Ct. App. 2004) (UIPA scope and defendants; insurer duties)