Soseeah v. Sentry Ins.

• Decision Date: 18 December 2015
• Docket Number: No. 14–2199.,14–2199.
• Citation: 808 F.3d 800
• Parties: Delbert SOSEEAH, for himself and others similarly situated ; Maxine Soseeah, for herself and others similarly situated ; John Borrego, for himself and other similarly situated, Plaintiffs–Appellees, v. SENTRY INSURANCE, a Mutual Company, and any other related business entities including parent companies, consolidated tax filers and subsidiaries including, Dairyland Insurance Company; Peak Property and Casualty Insurance Corporation; and Viking Insurance Company of Wisconsin, Defendants–Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

808 F.3d 800

Delbert SOSEEAH, for himself and others similarly situated ; Maxine Soseeah, for herself and others similarly situated ; John Borrego, for himself and other similarly situated, Plaintiffs–Appellees,

v.SENTRY INSURANCE, a Mutual Company, and any other related business entities including parent companies, consolidated tax filers and subsidiaries including, Dairyland Insurance Company; Peak Property and Casualty Insurance Corporation; and Viking Insurance Company of Wisconsin, Defendants–Appellants.

No. 14–2199.

United States Court of Appeals, Tenth Circuit.

Dec. 18, 2015.

John R. Gerstein, of Troutman Sanders LLP, Washington, D.C. (Gabriela Richeimer of Troutman Sanders LLP, Washington, D.C.; Jennifer A. Noya and Alex C. Walker of Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, NM, with him on the briefs), for Defendants–Appellants.

John C. Bienvenu, of Rothstein, Donatelli, Hughes, Dahlstrom, Schoenburg & Bienvenu LLP, Santa Fe, NM (Kristina Martinez of Rothstein, Donatelli, Hughes, Dahlstrom, Schoenburg & Bienvenu LLP, Santa Fe, NM; Linda G. Hemphill of The Hemphill Firm P.C., Santa Fe, NM; and John Howard, Attorney at Law, Santa Fe, NM, with him on the brief), for Plaintiffs–Appellees.

Before BRISCOE, McKAY and McHUGH, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiffs Delbert Soseeah, Maxine Soseeah and John Borrego filed this action against defendants Sentry Insurance, Dairyland Insurance Company, Peak Property and Casualty Insurance Company, and Viking Insurance Company of Wisconsin (collectively Sentry) claiming, in part, that Sentry failed to timely and properly notify them and other Sentry automobile insurance policyholders of the impact of two New Mexico Supreme Court decisions regarding the availability of uninsured and underinsured motorist coverage under their respective policies. The district court granted plaintiffs' motion for class certification. Sentry subsequently sought and was granted permission to appeal the district court's class certification ruling. Exercising jurisdiction pursuant to 28 U.S.C. § 1292(e) and Fed.R.Civ.P. 23(f), we reverse and remand for further consideration of plaintiffs' motion for class certification.

I

The Weed Warrior and Jordan decisions

On October 18, 2010, the Supreme Court of New Mexico issued two related decisions addressing the provision of uninsured/underinsured motorist (UM/UIM) coverage by insurers to New Mexico residents. In the first decision, Progressive Northwestern Insurance Co. v. Weed Warrior Services, 149 N.M. 157, 245 P.3d 1209 (2010), the New Mexico Supreme Court "consider[ed] the duty imposed on insurers to offer uninsured/underinsured motorist (UM/UIM) coverage under NMSA 1978, Section 66–5–301 (1983)." 245 P.3d at 1210. More specifically, the New Mexico Supreme Court addressed the question, certified to it by this court, "of whether the election by an insured to purchase UM/UIM coverage in an amount less than the policy liability limits constitutes a rejection of the maximum amount of UM/UIM coverage permitted under Section 66–5–301." Id. After reviewing the language of the statute and surveying its own case law interpreting that statute, the New Mexico Supreme Court

conclude[d] that Section 66–5–301 requires an insurer to offer UM/UIM coverage in an amount equal to the liability limits of the policy and that the choice of the insured to purchase any lower amount functions as a rejection of that maximum amount of coverage statutorily possible.

Id. at 1214. Consequently, the New Mexico Supreme Court held that "the insurer may not exclude the maximum possible level of UM/UIM coverage in an auto liability policy unless it has offered it to the insured and the insured has exercised the right to reject the coverage through some positive act." Id. at 1213 (internal quotation marks omitted).

The second case, Jordan v. Allstate Insurance Co., 149 N.M. 162, 245 P.3d 1214 (2010), was intended by the New Mexico Supreme Court as a companion to Weed Warrior in order "to provide guidance on the technical requirements for valid offers and rejections of UM/UIM coverage." 245 P.3d at 1219. The court held

that a rejection of UM/UIM coverage equal to the liability limits in an automobile insurance policy must be made in writing and must be made a part of the insurance policy that is delivered to the insured. In order to honor these requirements effectively, insurers must provide the insured with the premium charges corresponding to each available option for UM/UIM coverage so that the insured can make a knowing and intelligent decision to receive or reject the full amount of coverage to which the insured is statutorily entitled. If an insurer fails to obtain a valid rejection [for any reason], the policy will be reformed to provide UM/UIM coverage equal to the limits of liability.

Id. at 1217. The court also held that its decision applied retroactively and was not limited to prospective application. Id. at 1222–23. And the court emphasized that the cost of reforming existing policies would be borne solely by insurers. Id. at 1223 ("On balance, we deem it more equitable to let the financial detriments be borne by insurers, who were in a better position to ensure meaningful compliance with the law, than to let the burdens fall on non-expert insureds, who are the Legislature's intended beneficiaries.").

The filing of this action

On September 18, 2012, plaintiffs Delbert and Maxine Soseeah filed a purported class action complaint against Sentry in New Mexico state district court. The complaint alleged that Delbert Soseeah, after being injured in a motor vehicle accident, made a claim for UM/UIM benefits under two policies of automobile insurance issued by Sentry to Mrs. Soseeah. According to the complaint, Mrs. Soseeah "never executed a valid waiver of UM/UIM coverage under the" two policies and, consequently, Mr. Soseeah "demanded that ... Sentry reform" the two policies "to provide stacked uninsured/underinsured motorist coverage limits equal to the limits of the liability coverage on each of the vehicles covered by the" policies "in accordance with the decisions in Jordan and Weed Warrior. " Dist. Ct. Docket No. 1, Exh. A at 4. Sentry purportedly refused to reform the policies and rejected Mr. Soseeah's claim for UM/UIM benefits. Id. The complaint alleged that Sentry, by doing so, violated New Mexico's Unfair Practices Act (UPA), N.M. Stat. Ann. § 57–12–1 et seq., violated a portion of New Mexico's Insurance Code known as the Trade Practices and Frauds Act (TPFA), N.M. Stat. Ann. § 59A–16–1 et seq., breached the implied covenant of good faith and fair dealing, and breached the terms of the two policies.

Notably, the complaint alleged that the Soseeahs' claims were representative of "all Sentry-insured New Mexico residents entitled to the benefits of UM/UIM coverage who failed to receive notification from ... Sentry that UM/UIM coverage limits were, as a matter of law, reformed [by Weed Warrior and Jordan ] to provide coverage equal to liability limits." Id. at 6–7. The complaint in turn alleged that the "action should proceed as a class action" under New Mexico state law. Id. at 8. Lastly, the complaint alleged that the named plaintiffs and the class should "recover treble damages" and "attorney's fees and costs" in connection with their UPA claim, id. at 11, damages in connection with their TPFA claim, id. at 13, reformation of their policies to provide "UM/UIM coverage with limits in an amount equal to the limits of the liability coverage of the policies at issue," id. at 13, actual and punitive damages in connection with their claim for breach of the implied covenant of good faith and fair dealing, id. at 14, actual damages in connection with their breach of contract claim, id., injunctive relief "requiring that ... Sentry be enjoined from continuing practices that violate the statutory duties as well as the contractual and legal obligations owed to the [named] Plaintiffs and the Class," id., a "declaratory judgment establishing the respective rights and obligations of the parties with respect to the claims set forth" in the complaint, id. at 15, and punitive damages, id.

Removal to federal court and amendment of the complaint

On October 22, 2012, Sentry removed the action to the United States District Court for the District of New Mexico pursuant to 28 U.S.C. §§ 1441, 1446, and 1453. Soon thereafter, plaintiffs filed a first amended class action complaint. That was later followed by a second, a third, and, ultimately, a fourth amended class action complaint.

The Fourth Amended Complaint

The fourth amended complaint continued to list Delbert and Maxine Soseeah as the lead plaintiffs and included many of the same factual allegations that were included in the original complaint. The fourth amended complaint, however, expanded substantially upon the original complaint by discussing the impact Weed Warrior and Jordan had upon the Soseeahs' policies and Sentry's response or lack thereof to Weed Warrior and Jordan. To begin with, the complaint alleged that the Soseeahs' purported rejection of UM/UIM coverage on their Sentry policies was, for several reasons, "legally insufficient" under Weed Warrior and Jordan. Dist. Ct. Docket No. 131 at 5. The complaint further alleged that in early 2011, Sentry "sent to every policyholder with a policy then in force that had rejected UM/UIM coverage, including Plaintiff Maxine Soseeah, a form letter [ (referred to in this litigation as the "IMPORTANT NOTICE") ] and follow-up form letter [ (referred to in this litigation as the "FINAL NOTICE") ]." Id. at 6. Both letters stated that "[i]n ... 2010, the New Mexico Supreme Court issued a ruling requiring new information to be provided with Uninsured Motorist ... coverage selection forms," id., Att. 1, Exh. A at 1, and in turn advised policyholders "that they had to sign a new waiver or ‘Your Premium Will Go Up,’ " id. at 6. The complaint also alleged that "[i]n January 2012, ...