Raja v. Ohio Sec. Ins. Co.

• Decision Date: 31 March 2018
• Docket Number: No. CIV 17–0834 JB\CG,CIV 17–0834 JB\CG
• Citation: 305 F.Supp.3d 1206
• Parties: Naresh RAJA d/b/a America's Best Value Inn, Plaintiff, v. OHIO SECURITY INSURANCE COMPANY ; Liberty Mutual Insurance Company and Jeffery Robinson, Defendants.
• Court: U.S. District Court — District of New Mexico

305 F.Supp.3d 1206

Naresh RAJA d/b/a America's Best Value Inn, Plaintiff,

v.OHIO SECURITY INSURANCE COMPANY ; Liberty Mutual Insurance Company and Jeffery Robinson, Defendants.

No. CIV 17–0834 JB\CG

United States District Court, D. New Mexico.

Filed March 31, 2018

Milad K. Farah, Guerra & Farah, PLLC, El Paso, Texas, Attorneys for the Plaintiff

Shannon A. Parden, Ray, McChristian & Jeans, P.C., Albuquerque, New Mexico, Attorneys for the Defendants

MEMORANDUM OPINION AND ORDER

James O. Browning, United States District Judge

THIS MATTER comes before the Court on Defendants Ohio Security Insurance Company and Liberty Mutual Insurance Company's Motion to Dismiss and for Declaratory Judgment and Supporting Authority, filed August 22, 2017 (Doc. 6)("MTD"). The primary issues are: (i) whether the Court should dismiss the Complaint (Third Judicial District Court, County of Doña Ana, State of New Mexico, filed May 22, 2017), filed in federal court August 15, 2017 (Doc. 1–4), because Plaintiff Naresh Raja¹ d/b/a America's Best Value Inn ("Value Inn") failed to meet its contractual conditions precedent for filing suit against Defendants Ohio Security Insurance Company, Liberty Mutual Insurance Company, and Jeffery Robinson ("Liberty Mutual"); (ii) whether Value Inn states claims upon which the Court can grant relief under rule 12(b)(6) of the Federal Rules of Civil Procedure for breach of contract, insurance bad faith, violations of New Mexico's Unfair Insurance Practices Act, N.M. Stat. Ann. §§ 59A–16–1 to –30 ("UIPA"), violations of New Mexico's Unfair Practices Act, N.M. Stat. Ann. §§ 57–12–1 to –26 ("UPA"), and negligent misrepresentation; (iii) whether the Court should abate the action to allow the parties to complete appraisal on Value Inn's property damage claim; and (iv) whether to award attorneys' fees. The Court concludes that: (i) it will not dismiss the Complaint for Value Inn's failure to meet conditions precedent to filing suit, because there is a substantial likelihood that Value Inn will be time barred from filing a complaint alleging these claims again in the future; (ii) Value Inn states a claim for breach of contract, insurance bad faith, and some UIPA violations; (iii) Value Inn does not state a claim for UPA violations, negligent misrepresentation, or some UIPA violations, because Value Inn does not allege facts supporting those claims; (iii) the Court will not abate the action; and (iv) the Court will not award attorneys' fees because Value Inn's unsuccessful UIPA claims were not groundless and its UPA claims were not groundless. Accordingly, the Court grants in part and denies in part the MTD.

FACTUAL BACKGROUND

Value Inn purchased insurance from Liberty Mutual that covered wind and hail damage to its commercial property in Las Cruces, New Mexico. See Complaint ¶ 6, at 2. The Building and Personal Property Coverage Form and Commercial Property Conditions, filed August 22, 2017 (Doc. 6–1)("Contract") has an appraisal provision that states:

If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.

Contract ¶ E(2), at 8 ("Appraisal Clause"). The Contract also lists several "Duties In The Event Of Loss Or Damage":

a. You must see that the following are done in the event of loss or damage to Covered Property:

....

(5) At our request, give us complete inventories of the damaged and undamaged property. Include quantities, costs, values and amount of loss claimed.

(6) As often as may be reasonably required, permit us to inspect the property proving the loss or damage and examine your books and records....

(7) Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms.

(8) Cooperate with us in the investigation or settlement of the claim.

b. We may examine any insured under oath, while no in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured's books and records. In the event of an examination, an insured's answers must be signed.

Contract ¶¶ 3(a)-(b), at 8. The Contract also states:

No one may bring a legal action against us under this Coverage Part unless:

1. There has been full compliance with all the terms of this Coverage Part; and

2. The action is brought within 2 years after the date on which the direct physical loss or damage occurred.

Contract ¶ D, at 10.

On or about October 23, 2015, the Value Inn's property sustained wind and hail damage. See Complaint ¶ 7, at 2–3. Value Inn filed a claim with Liberty Mutual, but Value Inn believed that the damage exceeded the $130,301.56 estimate that Liberty Mutual's adjuster, Jeffery Robinson, provided. See Complaint ¶ 8–9, at 3. Value Inn requested a settlement conference with Liberty Mutual, and Liberty Mutual requested an Examination Under Oath ("EUO") of Value Inn. Complaint ¶ 10, at 3.

PROCEDURAL BACKGROUND

On May 22, 2017, Value Inn filed the Complaint in state court alleging that Liberty Mutual breached its contract, see Complaint ¶¶ 15–18, at 6–7; acted in bad faith, see Complaint ¶¶ 19–20, at 7–8; violated New Mexico's UIPA; violated New Mexico's UPA, see Complaint ¶¶ 25–27, at 9–10; and made negligent misrepresentations, see Complaint ¶¶ 28–29, at 10–11. Value Inn also sought a court order declaring that an EUO "is not appropriate in this matter and that this claim proceed through the appraisal process in the policy." Complaint ¶ 38(a), at 12. Liberty Mutual removed the case to federal court, asserting that the Court has diversity jurisdiction. See Notice of Removal ¶ 2, at 1–2.

1. The Motion to Dismiss.

In their MTD, Liberty Mutual asserts that, under their Contract, Value Inn may not bring a legal action against Liberty Mutual or request an appraisal unless Value Inn has fully complied with the Contract's terms. See MTD at 7–8. According to Liberty Mutual, Value Inn has not complied with the Contract's terms, because it has refused to give an EUO or provide certain requested documents. See MTD at 7–8. Liberty Mutual concludes that, because Value Inn has not met the "conditions precedent" to bringing a legal action or demanding an appraisal, Value Inn has failed to state a claim upon which relief may be granted. See MTD at 13.

Next, Liberty Mutual argues that Value Inn's claims for breach of contract and bad faith do not state a plausible claim, because Value Inn makes conclusory allegations that recite UIPA provisions "without regard to applicability or any factual basis." MTD at 13. Liberty Mutual also contends that Value Inn's recitations of UIPA provisions are irrelevant to the breach-of-contract and insurance bad-faith claims, because those claims arise out of contract. See MTD at 13–14. Liberty Mutual contends, moreover, that Value Inn's breach-of-contract and bad-faith claims are premature, "because Plaintiff refuses to allow Liberty Mutual to conduct its investigation." MTD at 14.

As for Value Inn's UIPA violation claim, Liberty Mutual argues Value Inn has not stated a claim upon which relief can be granted, because Value Inn does not allege any facts to support its conclusory allegations. See MTD at 16–17.

Liberty Mutual next addresses Value Inn's UPA claim. See MTD at 17–21. Liberty Mutual argues that UPA claims require proving deceptive practices in the sale of a product, see MTD at 18–19, but Value Inn does not allege unfair practices relating to the insurance policy's sale, see MTD at 20. Liberty Mutual requests that the Court award Liberty Mutual attorneys' fees and costs for defending Value Inn's allegedly baseless UPA claims. See MTD at 21.

Next, Liberty Mutual argues that Value Inn does not "set forth the elements" of its negligent misrepresentation claim. MTD at 21. Liberty Mutual contends that Value Inn appears to be alleging a simple negligence claim, but, nonetheless, does not allege simple negligence's elements. See MTD at 21. Moreover, Liberty Mutual contends that the Court previously made an Erie prediction under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) that " 'New Mexico does not recognize a cause of action for negligence or professional negligence against an insurance company.' " MTD at 21–22 (quoting Grasshopper Natural Medicine, LLC v. Hartford Cas. Ins. Co., 2016 WL 4009834, *29 (D.N.M. July 7, 2016) (Browning, J) ). Liberty Mutual concludes that, because New Mexico does not recognize negligence claims against an insurer, Value Inn's negligence or negligent misrepresentation claim does not state a claim upon which relief can be granted. See MTD at 22.

Liberty Mutual concludes by asking the Court to declare that Value Inn's legal action and request for appraisal are premature, dismiss Value Inn's Complaint in its entirety for failure to state a claim upon which relief can be granted, and award Liberty Mutual its fees for defending Value Inn's baseless UPA and UIPA claims. See MTD at 22–23.

2. The Response.

In the Plaintiff's Response to Defendants' Motion to Dismiss and Plaintiff's Plea in Abatement, filed August 28, 2017 (Doc. 9)("Response"), Value Inn contends that it has agreed to submit to an EUO and that the EUO is set for September 1, 2017. See Response ¶ 5, at 2. Value Inn continues that Liberty Mutual's EUO request letter is "extremely broad and unduly burdensome and appears to be for the purpose of attempting to dissuade him from continuing with his claim,"...