Am. Nat'l Prop. & Cas. Co. v. United Speciality Ins. Co., CIV 11-1137 LFG/RHS

CourtUnited States District Courts. 10th Circuit. District of New Mexico
PartiesAMERICAN NATIONAL PROPERTY and CASUALTY CO., Plaintiff/Counterdefendant, v. UNITED SPECIALITY INSURANCE CO., Defendant/Counterclaimant.
Docket NumberNo. CIV 11-1137 LFG/RHS,CIV 11-1137 LFG/RHS
Decision Date24 September 2012

and CASUALTY CO., Plaintiff/Counterdefendant,
UNITED SPECIALITY INSURANCE CO., Defendant/Counterclaimant.

No. CIV 11-1137 LFG/RHS


DATED: September 24, 2012


THIS MATTER1 is before the Court on cross motions for summary judgment filed by Plaintiff American National Property and Casualty Co. ("ANPAC") and by Defendant United Specialty Insurance Co. ("United Specialty"). The cross motions are fully briefed. [Doc. Nos. 29, 30, 32, 33, 35, 37, 38, 39, 41, 43.] After careful consideration of the pertinent law, briefing, and supplemental briefing, along with all exhibits, the Court determines that ANPAC's motion for summary judgment will be denied and that United Specialty's motion for summary judgment will be granted as described below.

Factual Background

While this litigation revolves around insurance coverage questions and interpretations of policy exclusions, the Court begins by describing the underlying fatal automobile accident from

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which the issues arise. The summary of the auto accident is taken from the Joint Status Report and pleadings and generally is undisputed.

On June 11, 2010, Eddy De La Paz ("De La Paz) was killed while driving a 2003 Lincoln Navigator ("Navigator"). De La Paz crossed the centerline of a state road in Lea County, New Mexico, and collided head-on with a vehicle driven by Roland Judson. Judson died at the scene, and De La Paz died in the hospital a short time later. De La Paz was determined to be responsible for the accident. Toxicology studies showed that De La Paz tested positive for the presence of methamphetamines. [Doc. 30, Ex. N.] On the date in question, the Navigator was titled in the name of Jimmie Cooper ("Cooper") or Sheryl Cooper, his wife.

When the accident occurred, De La Paz was an employee or salesman for Endeavor Services, Inc. ("Endeavor"). Endeavor was a start-up trucking company, that, among other things, hauled water to and from oil fields. Endeavor is owned by Cooper's three adult children, along with Virgil Woods ("Woods"). Cooper financed most of Endeavor when it was started in early 2010, while his three children also put some money into the business. Cooper loaned money to Woods for Woods' contribution to the business. Cooper and his wife were listed as directors on Endeavor's corporation division certificate, and Cooper is listed as the registered agent of Endeavor. Jimmie Cooper and his wife were not shareholders in Endeavor.

Endeavor needed a vehicle for De La Paz to conduct Endeavor's business. Woods and Cooper spoke about this, and Cooper commented that he and his wife had a personal vehicle (the Navigator) that they did not use much. Cooper suggested that Endeavor use the Navigator, and later, that Endeavor could buy the Navigator whenever it got sufficient finances. Cooper allowed Endeavor to use the Navigator, beginning approximately several months before the accident occurred. Cooper understood that Endeavor would continue to use the Navigator until Endeavor had

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the funds to buy the vehicle from Cooper. After providing the Navigator to Endeavor, the Coopers themselves never used the Navigator again or requested its return. However, the Navigator was covered on the Coopers' ANPAC insurance policy and continued to be included on the Coopers' insurance coverage, even after Endeavor began using the Navigator.

The decision to allow Endeavor to use the Navigator stemmed from verbal discussions between Cooper and Woods that Cooper would be paid the fair market value of the Navigator when Endeavor could afford to buy it. Cooper thought the fair market value of the 2003 Navigator might be $10,000 to $12,000, or less, but he did not know blue book value. There was no written sales or conditional sales contract, and the price of the vehicle was undetermined. Cooper testified that he may have jotted down some of the details of these communications on a piece of paper, but no such writing was produced. At the time of the accident, Cooper did not expect to be paid for the vehicle until possibly a month to six months, or even a year later. In other words, there was no set date for payment.

The Navigator was loaned to Endeavor. There is no written agreement and no money exchanged hands for any kind of formal loan or purchase. Endeavor paid for the gas it used in the Navigator. Shortly after Endeavor began using the Navigator and before the accident, Cooper and Endeavor were in agreement that Endeavor would buy the Navigator at some undetermined time in the future. No down payment was made, and no specific purchase price was determined. The Navigator remained titled, registered, and insured in the Coopers' name.

According to Woods, De La Paz was on the job or within the course and scope of his employment with Endeavor on the date of the accident. De La Paz used the Navigator for Endeavor with Cooper's express permission, and De La Paz's use of the Navigator on the day of the collision was within the scope of Cooper's permission. De La Paz had a commercial driver's license at the

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time of the accident, and neither Woods nor Cooper had reason to believe De La Paz was using drugs on the date of the accident.

The Navigator was a total loss as a result of the collision. The Coopers made a claim for property damage through their own ANPAC, and ANPAC paid out to the Coopers the value of the vehicle. Endeavor never obtained separate insurance coverage for the vehicle; never paid insurance on it; never reimbursed Cooper for the insurance premiums; and never filed its own claim with its insurer for the vehicle's loss.

Following the accident, Judson's Estate sued the Estate of De La Paz and Endeavor for wrongful death. The three insurers - ANPAC (Cooper's insurer), Great West (Endeavor's insurer), and United Speciality (Endeavor's excess insurer) - were notified of the claim. Settlement negotiations proceeded, and settlement was reached in the amount of $1,650,000, payable to Judson's Estate. Of that amount, Great West paid $1 million through its policy. ANPAC, through its family auto and commercial umbrella policies, paid $650,000. United Speciality states it engaged in settlement discussions with the other two insurers. [Doc. 32, ¶ 21.] ANPAC contends that United Specialty failed to attend the settlement conference with settlement authority and refused to participate in settlement negotiations. [Doc. 41, ¶ 3(c).]

With respect to the underlying lawsuit and prior to the settlement, Plaintiff and Defendants entered into a non-waiver agreement. [Doc. 30, Ex. P.] The insurers allegedly reserved the right to dispute or determine applicable insurance coverage at a later date. ANPAC states that through the agreement, each insurer reserved the right to contest coverage obligations and reserved all claims for subrogation, indemnification, contribution, or otherwise. ANPAC, through this litigation, contests its coverage obligations.

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Procedural History

On December 27, 2011, ANPAC filed a Complaint for Declaratory Judgment and Equitable Subrogation against United Speciality and Great West ("complaint"). [Doc. 1.] In February 2012, United Specialty filed an initial Answer and subsequently, an Amended Answer to the complaint. [Doc. Nos. 12, 13.] United Speciality also asserted a counterclaim against ANPAC. [Doc. 13.] On March 8, 2012, ANPAC filed an answer to the amended counterclaim. [Doc. 18.] In February 2012, ANPAC and Great West stipulated to a dismissal of Great West [Doc. 14]; thus, Great West no longer is a party to this lawsuit, even though it paid its $1 million limit in the underlying settlement. See [Doc. 30, Ex. L, "Release in Full and Indemnity Agreement."] A jury trial is scheduled for January 14, 2013. [Doc. 27.]

In the Joint Status Report ("JSR"), the parties describe, inter alia, that this case involves a "claim for declaratory relief and equitable subrogation by one insurer against another insurer arising from a fatal automobile accident." [Doc. 15, at 1.] ANPAC states that it paid funds to settle a wrongful death claim under a non-waiver agreement with United Speciality. ANPAC now seeks reimbursement from United Specialty for amounts paid to settle the claim. [Id.] United Specialty denies liability to ANPAC and seeks declaratory relief in its counterclaim that it owes nothing to ANPAC on the claims for equitable subrogation. [Id.] The parties agree that the governing law in this case is New Mexico state law. [Id., at 2.]

Undisputed Material Facts Regarding Insurance Coverage/Exclusions

ANPAC Insurance Policies of the Coopers

Cooper insured the Navigator under a family auto policy issued by ANPAC that was in effect at the pertinent time. The Navigator was listed as an insured vehicle under the Coopers' ANPAC

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policy, with bodily injury liability coverage limits at $500,000 per person/occurrence. [Doc. 30, Ex. D.]

The Cooper family auto policy with ANPAC promised to pay "damages for which an insured person becomes legally liable because of bodily injury . . . resulting from the ownership, maintenance or use of your...

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