Costanzo v. Prop. & Cas. Ins. Co. of Hartford
| Decision Date | 01 October 2014 |
| Docket Number | CV 13-1199 WPL/RHS |
| Court | U.S. District Court — District of New Mexico |
| Parties | ALFRED COSTANZO and MELANIE COSTANZO, Plaintiffs, v. PROPERTY & CASUALTY INSURANCE COMPANY OF HARTFORD, Defendant. |
This matter is before me on Hartford's ("Hartford") Motion for Summary Judgment on Plaintiffs' Statutory Claims. (Doc. 34.) Hartford argues that it is entitled to summary judgment on Alfred and Melanie Costanzo's ("the Costanzos") claims brought under the New Mexico Unfair Insurance Practices Act ("UIPA"), N.M. STAT. ANN. § 59A-16-20(B), (C), (E), (G) (2014) and the New Mexico Unfair Practices Act ("UPA"), N.M. STAT. ANN. § 57-12-2D(15), (17) (2014). The Costanzos filed a response (Doc. 38), and Hartford filed a reply (Doc. 43). Based on a review of the briefing, the record, and the relevant law, I grant in part and deny in part Hartford's motion.
The factual and procedural background found in the record and all reasonable inferences therefrom are presented in the light most favorable to the Costanzos. See Munoz v. St. Mary-Corwin Hosp., 221 F.3d 1160, 1164 (10th Cir. 2000). Hartford issued a homeowners insurance policy, No. 55 RBC358006, effective September 1, 2011, to September 1, 2012, for the houselocated at 242 Vermont St. NE, Albuquerque, NM 87108. The Costanzos had sold the property to Theresa K. Hamill and James P. Hamill ("the Hamills") in 1998. The Costanzos financed the sale and retained a purchase money mortgage on the property. The named insureds on the policy were the Hamills. The Costanzos were not involved in the purchase of the policy and did not know how long the policy had been in place. They knew only that Harford was the insurer, based on oral assertions by James Hamill. The Costanzos claim that they were mortgagees listed in the policy through their escrow agent, Westar Escrow, and were thus additional insureds under the policy.
On or about December 27, 2011, a fire occurred in the house, causing damage to the property. Prior to the fire, the Costanzos had no contact with Hartford regarding the property. The Costanzos do not dispute Hartford's assertion that Hartford assessed the damages caused by the fire and made a payment to the Hamills for said damages. The Hamills did not repair the home and instead moved out. The Hamills defaulted on their mortgage payments, and the Costanzos later foreclosed on the mortgage. The Costanzos are the current owners of the property.
The Costanzos contend that Hartford exercised bad faith by failing and refusing to take all steps necessary to repair the damage from the fire and to meet its obligations under the policy. Furthermore, the Costanzos allege that because of Hartford's failure to promptly repair the fire damage, the property suffered extensive additional damages such that the property is currently uninhabitable and a total loss. Given such damages, the Costanzos assert that Hartford's payment offers have been unreasonable.
The Costanzos raise four claims for relief in this case. First, they state that Hartford's failure and refusal to take all steps necessary to repair the fire damage and to meet its policyobligations violated the New Mexico Unfair Insurance Practices Act ("UIPA"), N.M. STAT. ANN. § 59A-16-20(B), (C), (E), (G). Second, the Costanzos contend that they suffered damages as a result of breach of contract and other improper conduct. Third, the Costanzos appear to make a bad faith claim for a knowing and willful unfair trade practice. Finally, the Costanzos allege that Hartford's actions violated the New Mexico Unfair Practices Act ("UPA"), N.M. STAT. ANN. § 57-12-2D(15), (17). It is undisputed that the only evidence upon which the Costanzos rely in support of their UPA claim is Hartford's alleged failure to repair the property after the fire and communication between the Costanzos and Hartford after the filing of an insurance claim.
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The moving party bears "the initial burden of showing that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has met this burden, the nonmoving party must identify specific facts that show the existence of a genuine issue of material fact requiring trial on the merits. Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991). A fact is "material" if, under the governing law, it could have an effect on the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a material fact is "genuine" if a rational jury could find in favor of the nonmoving party on the evidence presented. Id. A mere "scintilla" of evidence is insufficient to successfully oppose a motion for summary judgment. Id. at 252. The record and all reasonable inferences therefrom must be viewed in the light most favorable to the nonmovant. See Muñoz, 221 F.3d at 1164. In a case such as this, where theburden of persuasion at trial would be on the nonmovant, the movant can meet Rule 56's burden of production by either (1) providing affirmative evidence negating an essential element of the nonmovant's claim or (2) showing the Court that the nonmovant's evidence is insufficient to demonstrate an essential element of the nonmovant's claim. Celotex, 477 U.S. at 331 (citations omitted).
Hartford argues that the Costanzos have no legal basis upon which to bring a claim under the UIPA because the Costanzos are not "insureds" under the statute. All four subsections of the UIPA cited by the Costanzos as subject to violation by Hartford apply to those who are "insured."1 The statute, however, does not define "insured." The Costanzos counter that they are insureds under the Hartford policy, or that there is at least a genuine issue of material fact as to whether they are insureds. They cite to the Mortgage Clause in the policy, which states, "If a mortgagee is named in this policy, any loss payable under Coverage A or B [which includes fire insurance coverage] will be paid to the mortgagee and [the Hamills], as interests appear." (Doc. 48 Ex. 1 at 64.) Next, the Costanzos cite to the Declaration Page of the policy, which includes West Star Escrow as the sole mortgagee. (Id. at 3.) They state that West Star Escrow was merely the escrow agent for the Costanzos as mortgagees.
(Id. at 64.)
There are two general types of mortgage clauses: simple mortgage clauses and standard mortgage clauses. A simple mortgage clause typically includes the language "as its interests may appear," and the mortgagee is treated only as a loss payee. See Florists' Mut. Ins. Co. v. Agstar of New Mexico, Inc., No. CIV. 03-1164 JBLFG, 2005 WL 3664325, at *5 (D.N.M. Nov. 11, 2005) (unpublished). A loss payee is subject to any defenses the insurer may have against the mortgagor. Id. (citing In re Tower Air, Inc., 397 F.3d 191, 203 (3d Cir. 2005)). The mortgagee becomes a mere appointee of the insurance fund, unable to recover anything greater than that to which the mortgagor is entitled. Ingersoll-Rand Fin. Corp. v. Emp'rs Ins. Of Wausau, 771 F.2d 910, 913 (5th Cir. 1985).
In contrast, a standard mortgage clause creates a mortgagee payee and "is an independent and separate contract between the mortgagee and the insurance company." Florists' Mut., 2005 WL 3664325, at *5 (citing Nassar v. Utah Mortg. & Loan Corp., 671 P.2d 667, 670 (N.M. Ct. App. 1983)); see also Ingersoll-Rand, 771 F.2d at 913 (). Themortgage clause itself defines the scope of the contract between the insurer and the mortgagee. St. Paul Fire & Marine Ins. Co. v. Whitney Holding Corp., No. CIV.A. 04-3492, 2006 WL 3627105, at *2 (E.D. La. Feb. 15, 2006) (unpublished). A standard mortgage clause can typically be identified because it includes a provision stating that an "act or neglect" by the mortgagor does not affect the rights of the mortgagee payee. Florists' Mut., 2005 WL 3664325, at *5 (citing Fulwiler v. Traders & Gen. Ins. Co., 285 P.2d 140, 143 (N.M. 1955)). That is, "[t]he mortgagee payee is treated just as if he or she had applied for the insurance entirely independently of the mortgagor." Id. (citing In re Tower Air, 397 F.3d at 203). As a result, a standard mortgage clause "gives the mortgagee an insured interest that the insured does not have." Id. (citing United States v. Commercial Union Ins. Co., 821 F.2d 164, 166 (2d Cir. 1987)); see also St. Paul Fire, 2006 WL 3627105, at *4 ().
Sometimes mortgage clauses stray from the unique phraseology often associated with either a simple...
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