Dove v. State Farm Fire & Cas. Co.

• Decision Date: 28 March 2017
• Docket Number: NO. 34,932,34,932
• Citation: 399 P.3d 400
• Parties: Jenny DOVE and David Tapia, Third-Party Plaintiffs-Appellants, v. STATE FARM FIRE AND CASUALTY COMPANY, Third-Party Defendant-Appellee.
• Court: Court of Appeals of New Mexico

399 P.3d 400

Jenny DOVE and David Tapia, Third-Party Plaintiffs-Appellants,

v.STATE FARM FIRE AND CASUALTY COMPANY, Third-Party Defendant-Appellee.

NO. 34,932

Court of Appeals of New Mexico.

Filing Date: March 28, 2017

Certiorari Denied, May 17, 2017, No. S-1-SC-36432

Bauman, Dow & Stambaugh, P.C., Mark C. Dow, Deborah R. Stambaugh, Maria R. Osornio, Albuquerque, NM, for Appellants.

Guebert Bruckner, P.C., Terry R. Guebert, Lawrence A. Junker, Albuquerque, NM, for Appellee.

OPINION

HANISEE, Judge.

{1} At issue in this appeal is whether Defendant State Farm Fire and Casualty Company breached its duty to defend when it refused Plaintiff Jenny Dove's request for legal representation in the underlying lawsuit brought by current co-Plaintiff David Tapia against her. Because the facts tended to show that Dove was arguably covered by the policy, which is the established legal standard in New Mexico, we hold that Defendant breached its duty to defend. The district court having concluded otherwise, we reverse.

BACKGROUND

{2} The following facts underpin the civil action (the primary action) brought by Tapia against Dove: On August 24, 2007, Tapia, a Public Service Company of New Mexico employee, was reading the electrical meter at a residential property in Santa Fe, New Mexico when he was injured by Dove's 150-pound Bullmastiff dog. Dove had been renting the back dwelling unit at the property from Betsy Joyce, the owner, since March 7, 2007. The property consisted of two rental units: a front main house and Dove's studio unit in back, each with its own private yard separated by a fence. There was also a common yard in the front part of the property that contained large trees and planting beds.

{3} Joyce, who lives in California, utilized the services of several third parties to manage and maintain the property in her absence. Gay Nathan—a long-time Santa Fe resident and retired high school English teacher who had many rental properties of her own—was primarily responsible for screening and selecting tenants and collecting rent, activities for which Joyce compensated her. Nathan also provided Joyce and Joyce's tenants with a list of various service providers, such as plumbers, electricians, and exterminators. Nathan was not responsible for either coordinating or making repairs at Joyce's property and did not pay service bills on Joyce's behalf. Nathan also had no involvement in gardening or maintaining the landscaping at the property. Joyce hired a gardener to maintain the common yard, including weeding and watering.

{4} Tenants were responsible for maintaining the private yard associated with their respective dwelling unit. Tenants were also free to use the common yard, including tending to the garden and eating the raspberries and apricots that grew there. Dove knew that she was allowed to use the common yard but spent little, if any, time there out of respect for the privacy of the main house tenants, whose windows faced the common yard.

{5} In the summer of 2007, during one of Joyce's visits to the property, which occurred two times per year, Joyce noticed that one of the trees in the common yard was not getting enough water. Joyce asked Dove to water the tree and "make sure things stayed alive[.]" While Joyce's primary request was that Dove water the tree, Dove was also asked to tend to "all the flower beds around" the common yard. Joyce may have also asked the tenant in the main house to water the common yard, though Dove believed "[t]hey had some kind of agreement where maybe he was doing more maintenance like cleaning ... the yard and things like that." Neither Dove nor the other tenant received payment or a rent reduction for the work they did in the common yard. At the time that Tapia was injured by Dove's Bullmastiff on August 24, 2007, Dove was in the common yard watering plants per Joyce's request.

{6} In April 2010 Tapia sued Joyce¹ and Dove, alleging negligence, negligence per se, and premises liability, and seeking to recover damages for the injuries he sustained from Dove's Bullmastiff. Joyce had a rental dwelling insurance policy with Defendant (the policy) that covered the property, and Defendant tendered a defense to Joyce in the primary action because she was the named insured under the policy. Joyce was granted summary judgment in April 2012. Dove—who was not served with Tapia's complaint until March 2011—filed a pro se answer and motion to dismiss on April 6, 2011. In a letter to Defendant dated April 28, 2011, Dove requested that Defendant tender her a defense. On May 9, 2011, Defendant responded and denied Dove's request because she was not the named insured and did not "qualify as an insured by definition under the [r]ental [d]welling [p]olicy owned by ... Joyce."

{7} Tapia and Dove eventually entered into a settlement agreement on May 7, 2012. Under its terms, Tapia's damages were determined to be $ 107,056.03, and Dove agreed to assign Tapia "all rights, claims and causes of action, together with the proceeds therefrom which [Dove] has against [Defendant] for its failure to defend and/or indemnify ... Dove" in the primary action. Dove executed the assignment concurrently with the settlement agreement.

{8} On November 9, 2012, Dove and Tapia filed their third-party complaint against Defendant, seeking a declaratory judgment that Defendant breached its duty to defend Dove in the primary action. Defendant moved for summary judgment, arguing that Dove was "simply a tenant" and "[t]hus, [Defendant] correctly concluded [Dove] was excluded from coverage under [the policy] as a tenant." At the hearing on Defendant's motion, Defendant argued that Dove could not be considered a "real estate manager" (and thereby covered by the policy) based on her limited maintenance duties as a tenant. Dove and Tapia argued that the question the district court had to answer was not whether Dove was, in fact, a real estate manager, but whether the facts as known to or discoverable by Defendant suggested that Dove was potentially covered by the policy.

{9} The district court granted Defendant's motion for summary judgment, finding that Dove was a tenant and "not a property manager² and, thus, she was excluded from coverage under [the policy]." Dove and Tapia appealed.

DISCUSSION

Standard of Review

{10} We review the district court's grant of summary judgment de novo. See Montgomery v. Lomos Altos, Inc. , 2007-NMSC-002, ¶ 16, 141 N.M. 21, 150 P.3d 971 ("An appeal from the grant of a motion for summary judgment presents a question of law and is reviewed de novo."). "Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Self v. United Parcel Serv., Inc. , 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. "All reasonable inferences are construed in favor of the non-moving party." Montgomery , 2007-NMSC-002, ¶ 16, 141 N.M. 21, 150 P.3d 971 (internal quotation marks and citation omitted). "Furthermore, the interpretation of an insurance contract is a matter of law, which we review de novo." Krieger v. Wilson Corp. , 2006-NMCA-034, ¶ 30, 139 N.M. 274, 131 P.3d 661.

Duty to Defend

1. Applicable Case Law and Analyses

{11} "The obligation of an insurer is a matter of contract law and must be determined by the terms of the insurance policy." Miller v. Triad Adoption & Counseling Servs., Inc. , 2003-NMCA-055, ¶ 8, 133 N.M. 544, 65 P.3d 1099. In this regard, our appellate jurisprudence establishes certain interpretive requirements in determining whether an insurance contract triggers an obligation to defend in a given set of circumstances. First, an "insurance company is obligated to defend when the complaint filed by the claimant alleges facts potentially within the coverage of the policy." State Farm Fire & Cas. Co. v. Price , 1984-NMCA-036, ¶ 18, 101 N.M. 438, 684 P.2d 524, overruled on other grounds by Ellington v. N.N. Inv'rs Life Ins. Co. , 1991-NMSC-006, 111 N.M. 301, 805 P.2d 70 ; see also Miller , 2003-NMCA-055, ¶ 9, 133 N.M. 544, 65 P.3d 1099 ("If the allegations of the complaint or the alleged facts tend to show that an occurrence comes within the coverage of the policy, the insurer has a duty to defend regardless of the ultimate liability of the insured."). Second, there is a duty to defend when the facts in the complaint "are not stated with sufficient clarity so that it can be determined from the face of the complaint whether the action falls within the coverage of the policy." Am. Emp'rs Ins. Co. v. Cont'l Cas. Co. , 1973-NMSC-073, ¶ 9, 85 N.M. 346, 512 P.2d 674. "[A]ny doubt about whether the allegations are within policy coverage is resolved in the insured's favor." Price , 1984-NMCA-036, ¶ 18, 101 N.M. 438, 684 P.2d 524. Third, "[i]f the duty to defend does not arise from the complaint on its face, the duty may arise if the insurer is notified of factual contentions or if the insurer could have discovered facts, through reasonable investigation, implicating a duty to defend." Sw. Steel Coil, Inc. v. Redwood Fire & Cas. Ins. Co. , 2006-NMCA-151, ¶ 14, 140 N.M. 720, 148 P.3d 806. In New Mexico, "an insurance company is required to conduct such an investigation into the facts and circumstances underlying the complaint against its insured as is reasonable given the factual information provided by the insured or provided by the circumstances surrounding the claim in order to determine whether it has a duty to defend." G & G Servs., Inc. v. Agora Syndicate, Inc. , 2000-NMCA-003, ¶ 23, 128 N.M. 434, 993 P.2d 751. But cf. Guar. Nat'l Ins. Co. v. C de Baca , 1995-NMCA-130, ¶ 14, 120 N.M. 806, 907 P.2d 210 (explaining that "when an insured is sued, the insurer has no duty to defend if the allegations in the complaint clearly fall outside the policy's provisions").

{12} Regarding the nature and duration of the defense owed, "[i]t is the norm that an insurer, though denying coverage and liability, must nonetheless defend its insured unless and until it...