American Nat'l Prop. & Cas. Co. v. Arbelaez

• Decision Date: 28 October 2011
• Docket Number: Civ. No. 11-443 JP/GBW,Civ. No. 11-612 JP/GBW
• Parties: AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, a foreign corporation, Plaintiff, v. OMAR ARBELAEZ, Individually and as Personal Representative of the Estate of NORA ARBELAEZ, Defendant.
• Court: U.S. District Court — District of New Mexico

AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY,a foreign corporation, Plaintiff,

v. OMAR ARBELAEZ, Individually and as Personal Representative ofthe Estate of NORA ARBELAEZ, Defendant.

Civ. No. 11-443 JP/GBW

Civ. No. 11-612 JP/GBW

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

Dated: October 28, 2011

MEMORANDUM OPINION AND ORDER

Defendant Omar Arbelaez filed a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure.¹ In the underlying Complaint,² automobile insurerAmerican National Property and Casualty Company (ANPAC) seeks a declaratory judgment regarding the effect of a November 2008 settlement agreement in a state court case between ANPAC and Mr. Arbelaez, who was insured by ANPAC, regarding claims arising from an automobile accident that occurred in November 2006. In ANPAC's view, the settlement agreement and state court judgment preclude Mr. Arbelaez from seeking any additional uninsured/underinsured motorist (UM/UIM) insurance benefits arising out of the accident. In his Motion for Judgment on the Pleadings, Mr. Arbelaez argues that two recent New Mexico Supreme Court decisions dictate that the Court deny ANPAC's request for declaratory judgment, dismiss the Complaint, and reform the 2008 settlement agreement to provide additional UM/UIM coverage. On September 6, 2011, the Court held a hearing on the Motion for Judgment on the Pleadings. Attorney Paul Houston was present for ANPAC, and attorneys George Bleus and Josh Eden were present for Mr. Arbelaez.

On October 20, 2011, the Court sent counsel a letter identifying New Mexico Supreme Court cases that may be relevant to the issues, but which had not been cited in the briefing on the Motion for Judgment on the Pleadings and had not been discussed at the September 6, 2011, hearing. The Court scheduled a supplemental hearing on October 27, 2011, to afford counsel an opportunity to present arguments regarding the cases cited in the October 20, 2011, letter. At the October 27, 2011, hearing, Attorney Paul Houston was present for ANPAC, and attorneys George Bleus and Josh Eden were present for Mr. Arbelaez. After reviewing the parties' briefing, the relevant law, argument by counsel, and the underlying pleadings including attached exhibits, the Court concludes that Mr. Arbelaez's Motion for Judgment on the Pleadings should be denied.

BACKGROUND

This case stems from a single-car accident that occurred on November 20, 2006. The car involved in the accident was a 2002 Chrysler Sebring owned by Mr. Arbelaez, who was not in the car at the time. Driver Jeremy Singleton and four passengers, Nora Arbelaez, Vennessa Arbelaez, Jennessa Singleton, and Jeremiah Singleton, were traveling southbound on Interstate 25 in Douglas County, Colorado, when the car struck a dead deer that was lying in the roadway, causing the car to roll over. As a result of the accident, Jeremy Singleton and Jennessa Singleton died, and the other three people in the car were injured. Nora Arbelaez sustained severe injuries and died on June 8, 2008.

At the time of the accident, Mr. Arbelaez had liability and UM/UIM insurance coverage from ANPAC under Policy No. 30-A-198-04A-6 as well as additional UM/UIM coverage under a separate ANPAC policy. After the accident, Mr. Arbelaez, individually and as personal representative of the estate of Nora Arbelaez, along with Vennessa Arbelaez, individually, and as natural parent and next friend of Jeremiah Singleton, and as personal representative of the estate of Jennessa Singleton, made demand upon ANPAC, both as the liability insurer for Jeremy Singleton and as the UM/UIM carrier for Mr. Arbelaez.

The exhibits attached to ANPAC's Complaint demonstrate that, following the accident, Mr. Arbelaez and Vennessa Arbelaez initiated a wrongful death and personal injury lawsuit against ANPAC, No. D-1329-CV-2008-02128, in the Thirteenth Judicial District Court, County of Sandoval, State of New Mexico. See Complaint at Exhibit C. The Arbelaezes and ANPAC, through legal counsel, subsequently negotiated a settlement of the Arbelaezes' claims. See Complaint at Exhibits A, B. To settle the claims, Mr. Arbelaez and Vennessa Arbelaez eachexecuted a RELEASE IN FULL AND INDEMNITY AGREEMENT (Release in Full)³ in which they agreed to release ANPAC from all claims, "known or unknown," arising out of the accident in exchange for ANPAC's payment of specified amounts of insurance benefits. See Complaint at Exhibits A, B. The Release in Full signed by Vennessa Arbelaez included a settlement on behalf of minor Jeremiah Singleton, which required the approval of the Thirteenth Judicial District Court. See Complaint at Exhibit A.

On November 25, 2008, the Thirteenth Judicial District Court entered an ORDER OF DISMISSAL in Case No. 1329-CV-2008-021128. The ORDER OF DISMISSAL provides,

THIS MATTER having come before the Court on Plaintiff's Motion to Dismiss With Prejudice, on the grounds that all matters in controversy between Plaintiffs and Defendants have been fully settled and compromised; the Court, having reviewed said Motion and being otherwise fully advised in the premises,

FINDS that the Court has jurisdiction over the parties and subject matter herein, and that said Motion is well-taken and should be granted.

IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that

Plaintiff's Complaint for Damages for Wrongful Death and Personal Injuries, and all causes of action or counts that are or that could have been filed therein, be and the same hereby are dismissed with prejudice.

Complaint at Exhibit C. The Thirteenth Judicial District Court also entered an order approving the settlement on behalf of minor Jeremiah Singleton. Complaint at Exhibit D.

On April 19, 2011, despite the settlement agreement and dismissal with prejudice of the Arbelaezes' lawsuit, attorney George Bleus sent a letter to ANPAC, claiming that the Arbelaezes are entitled to recover additional UM/UIM insurance benefits under two recently filed New Mexico Supreme Court decisions, Progressive Northwestern Insurance Co. v. Weed Warrior Services, 2010-NMSC-050, 149 N.M. 157, 245 P.3d 1209, and Jordan v. Allstate Insurance Co.,2010-NMSC-051, 149 N.M. 162, 245 P.3d 1214, and expressing the Arbelaezes' intent to make a claim for additional UM/UIM benefits. Complaint at Exhibit E.

In Weed Warrior, the New Mexico Supreme Court considered "the duty imposed on insurers to offer [UM/UIM] coverage" under New Mexico's UM/UIM statute, NMSA 1978, § 66-5-301 (1983). Weed Warrior, 2010-NMSC-050, ¶ 1. The New Mexico Supreme Court in Weed Warrior held that § 66-5-301 requires an automobile insurer to "offer UM/UIM coverage in an amount equal to the liability limits of the policy" and concluded "that the choice of the insured to purchase any lower amount [of UM/UIM coverage] functions as a rejection of that maximum amount of coverage statutorily possible." Id. ¶ 15.

In Jordan, decided the same day as Weed Warrior, the New Mexico Supreme Court clarified the elements of a valid rejection of UM/UIM coverage as follows:

If an insurer does not (1) offer the insured UM/UIM coverage equal to his or her liability limits, (2) inform the insured about premium costs corresponding to the available levels of coverage, (3) obtain a written rejection of UM/UIM coverage equal to the liability limits, and (4) incorporate that rejection into the policy in a way that affords the insured a fair opportunity to reconsider the decision to reject, the policy will be reformed to provide UM/UIM coverage equal to the liability limits.

Jordan, 2010-NMSC-051, ¶ 22. In Jordan, the New Mexico Supreme Court reviewed three consolidated cases on appeal from the New Mexico Court of Appeals. Id. ¶ 1. In each case, the automobile insurer had issued an insurance policy to the insured that provided a lower amount of UM/UIM coverage than the amount of liability coverage. Id. In each of the three consolidated cases, the New Mexico Supreme Court affirmed the Court of Appeals' holding that the defendant insurer had not obtained a valid rejection of UM/UIM coverage from the insured and that the appropriate remedy was reformation of the insurance policy to provide UM/UIM coverage equal to the liability limits. Id. ¶ 1-2.

Additionally, in Jordan, the New Mexico Supreme Court considered whether its holdings should be limited to a prospective application. Id. ¶¶ 25-29. The New Mexico Supreme Court follows a presumption that its decisions apply retroactively, which "'can be overcome by an express declaration, in the case announcing the new rule,'" that the new rule will be given a prospective application. Jordan, 2010-NMSC-051, ¶ 26 (quoting Beavers v. Johnson Controls World Servs., Inc., 118 N.M. 391, 398, 881 P.2d 1376, 1383 (1994)).⁴ In Jordan, one of the defendant insurers argued that Jordan's holdings should apply "only to conduct occurring after" Jordan was decided, while another defendant insurer argued that Jordan should be applied "to the parties before the court . . . and to parties whose conduct occurred" after Jordan was decided, "but not to other parties whose conduct occurred before" Jordan was decided. Id. ¶ 25. The New Mexico Supreme Court concluded as a matter of public policy that its holdings should not "be limited to prospective application only," but instead should be applied "to [automobile insurance] policies . . . that were issued before the date" that Jordan was decided. Id. ¶ 25. As explained by the New Mexico Supreme Court, although reforming automobile insurance policies already in effect "to provide the statutorily authorized [UM/UIM] coverage will necessarily result in an unplanned cost to insurers who have not secured meaningful rejection and who have not collected appropriate premiums for full coverage," it is "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,...