W. Agric. Ins. Co. v. Legacy Med. Servs., LLC

• Decision Date: 22 July 2020
• Docket Number: No. CIV 19-0679 JB\KRS,CIV 19-0679 JB\KRS
• Parties: WESTERN AGRICULTURAL INSURANCE COMPANY, Plaintiff/Third-Party Defendant, v. LEGACY MEDICAL SERVICES, LLC; JACQUELINE MARINOVICH, FNP-C; and MARVA JOHNSTON, NP, Defendants, LEGACY MEDICAL SERVICES, LLC, Third-Party Plaintiff, v. RANDY ATWOOD, Third-Party Defendant.
• Court: U.S. District Court — District of New Mexico

WESTERN AGRICULTURAL INSURANCE COMPANY, Plaintiff/Third-Party Defendant, v. LEGACY MEDICAL SERVICES, LLC;

JACQUELINE MARINOVICH, FNP-C;and MARVA JOHNSTON, NP, Defendants,LEGACY MEDICAL SERVICES, LLC, Third-Party Plaintiff, v. RANDY ATWOOD, Third-Party Defendant.

No. CIV 19-0679 JB\KRS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

July 22, 2020

MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the Court on Western Agricultural Insurance Company's Motion to Dismiss Counterclaims by Legacy Medical Services, LLC, filed October 30, 2019 (Doc. 11)("MTD"). The Court held a hearing on December 18, 2019. See Clerk's Minutes at 1, filed December 18, 2019 (Doc. 29). The primary issues are: (i) whether the Court should dismiss the breach-of-contract claim of Defendant/Third-Party Plaintiff Legacy Medical Services, LLC ("Legacy Medical") -- a family practice and occupational medicine facility in Hobbs, New Mexico -- against Plaintiff Western Agricultural Insurance Company ("Western Agricultural") and Third-Party Defendant Randy Atwood for failure to state a claim, because Legacy Medical does not allege sufficient facts to support that Western Agricultural and its agent, Atwood, breached the terms of the Insurance Policy, see Businessowners Coverage Form at 15-51, filed July 23, 2019 (Doc. 1-1)("Policy -- Part A"); Businessowners Coverage Form at 1-53, filed July 23, 2019 (Doc. 1-2)("Policy -- Part B"); Business Coverage Form at 1-26, filed July 23, 2019 (Doc. 1-3)("Policy -- Part C"),¹ that Western Agricultural and Atwood issued to Legacy Medical by not defending Legacy Medical against or indemnifying Legacy Medical for medical negligence claims that a former Legacy Medical patient brought against Legacy Medical in Davis v. Legacy Medical Services, LLC, D-101-CV-201901263 (County of Santa Fe, First Judicial District Court, State of New Mexico); (ii) whether the Court should dismiss Legacy Medical's claim pursuant to the Unfair Practices Act, N.M. Stat. Ann. §§ 57-12-1 to -24, for failure to state a claim, because Legacy Medical does not allege sufficient facts to support that Atwood misrepresented the Insurance Policy's terms by making allegedly false statements about the Insurance Policy; and (iii) whether the Court should dismiss Legacy Medical's claim pursuant to the Unfair Insurance Practices Act, N.M. Stat. Ann. §§ 59A-16-4 to -30, for failure to state a claim, because Legacy Medical does not allege sufficient facts to support that Atwood misrepresented the Insurance Policy's terms by making allegedly false statements about the Insurance Policy. The Court concludes that: (i) the Insurance Policy unambiguously excludes coverage for medical malpractice claims, and, thus, the Court dismisses the claim with prejudice, and that, alternatively, Legacy Medical has not alleged sufficient facts to support that Atwood had the authority to modify the Insurance Policy's terms and did so by misrepresenting the Insurance Policy's terms, and, thus, the Court dismisses the claim without prejudice; (ii) Legacy Medical has not alleged sufficient facts to support its Unfair Practices Act claim, because it pleads only conclusory allegations that Atwood misrepresented the Insurance Policy's terms by alleging that Atwood made false statements about the Insurance Policy without specifying the false statements that Atwood allegedly made, and because Legacy Medical does not identify which of the Unfair Insurance Practices Act's provisions Western Agricultural and Atwood allegedly violated and, thus, the Court dismisses the claim without prejudice; and (iii) Legacy Medical has not alleged sufficient facts to support its Unfair Insurance Practices Act claim, because it pleads only conclusory allegations that Atwood misrepresented the Insurance Policy's terms by alleging that Atwood made false statements about the Insurance Policy without specifying the false statements that Atwood allegedly made, and because Legacy Medical does not identify which of the Unfair Insurance Practices Act's provisions Western Agricultural and Atwood allegedly violated and, thus, the Court dismisses the claim without prejudice. Accordingly, the Court grants the MTD, and Legacy Medical may file a motion to amend and attach its proposed Counterclaims and Third-Party Complaint.

FACTUAL BACKGROUND

Although Western Agricultural is the plaintiff in this case, Legacy Medical brings Counterclaims against Western Agricultural and a Third-Party Complaint against Atwood, and, therefore, the Court takes its facts from the Answer of Defendant Legacy Medical Services, LLC, Counterclaim and Third-Party Complaint, filed September 27, 2019 (Doc. 6)("Legacy Medical Complaint"), as it must for a motion to dismiss. See Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)("[F]or purposes of resolving a Rule 12(b)(6) motion, we accept as true all well-pled factual allegations in a complaint and view these allegations in the light most favorable to the plaintiff." (citing Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006))). Western Agricultural is an insurance company that is incorporated under the State of Iowa's laws, maintains its principal place of business in West Des Moines, Iowa, and conducts business through duly authorized agents in the State of New Mexico. See Legacy Medical Complaint ¶ 1, at 8. Atwood is a resident of Hobbs, New Mexico, and is a licensed insurance agent for Western Agricultural. See Legacy Medical Complaint ¶ 2, at 8.

Legacy Medical "contracted" with Western Agricultural and Atwood "for coverage for medical malpractice which Legacy [Medical] understood it was obtaining." Legacy Medical Complaint ¶ 12, at 10. Atwood "was intimately aware" of Legacy Medical's "business and activities and undertook to advise and provide insurance product[s] and services to fully cover all of the various activities and businesses." Legacy Medical Complaint ¶ 5, at 9. Western Agricultural and Atwood made oral and written representations to Legacy Medical about the benefits, conditions, and terms of Legacy Medical's malpractice coverage policy. See Legacy Medical Complaint ¶ 19, 26, at 11, 12. Atwood made "business recommendations for insurance coverage" to Legacy Medical based on Western Agricultural's available insurance products and Atwood's knowledge of Legacy Medical's business activities. Legacy Medical Complaint ¶ 6, at 9. Legacy Medical "relied upon" Atwood's professional advice and recommendations, Legacy Medical Complaint ¶ 7, at 9, and Legacy Medical bought Western Agricultural's insurance products "based upon the advice and recommendations of Atwood," Legacy Medical Complaint ¶ 9, at 9. A claimant has since filed a claim against Legacy Medical "for medical malpractice [and] asserting claims . . . for negligence and a request for coverage." Legacy Medical Complaint ¶ 13, at 10 (citing Davis v. Legacy Medical Services, LLC, D-101-CV-201901263). Atwood and Western Agricultural "denied coverage forcing Legacy to hire independent counsel to defend it in the lawsuit." Legacy Medical Complaint ¶ 14, at 10.

PROCEDURAL BACKGROUND

Western Agricultural filed this action on July 23, 2019, requesting that the Court declare that Legacy Medical's malpractice coverage policy does not entitle Legacy Medical to a defense and/or indemnification for the claims brought against Legacy Medical and its employees in Davis v. Legacy Medical Services, LLC, D-101-CV-201901263. See Complaint for Declaratory Relief ¶¶ 28-35, at 7, filed July 23, 2019 (Doc. 1). On September 27, 2019, Legacy Medical responded and filed Counterclaims against Western Agricultural and a Third-Party Complaint against Atwood. See Legacy Medical Complaint ¶¶ 1-39, at 8-14. Legacy Medical alleges that: (i) Western Agricultural and Atwood, "each and all of them, breached the contract with Legacy [Medical]" by denying coverage to Legacy Medical and not providing Legacy Medical's defense in Davis v. Legacy Medical Services, LLC, D-101-CV-201901263, Legacy Medical Complaint ¶¶ 10-17, at 9-10; (ii) Western Agricultural and Atwood violated the New Mexico Unfair Practices Act by making false and misleading representations about the insurance products and services that Legacy Medical would receive under its malpractice coverage policy, see Legacy Medical Complaint ¶¶ 18-24, at 11; (iii) Western Agricultural and Atwood violated the New Mexico Unfair Insurance Practices Act by making misrepresentations about Legacy Medical's malpractice coverage policy, see Legacy Medical Complaint ¶¶ 25-27, at 12; (iv) Atwood breached his fiduciary duty to Legacy Medical by inaccurately disclosing and explaining the terms of Legacy Medical's malpractice coverage policy, see Legacy Medical Complaint ¶¶ 28-31, at 12-13; (v) Atwood breached his duties as Legacy Medical's agent by providing inadequate coverage under Legacy Medical's malpractice coverage policy, see Legacy Medical Complaint ¶¶ 32-35, at 13; and (vi) Atwood was negligent by failing to procure adequate coverage for services that Atwood knew that Legacy Medical provides, see Legacy Medical Complaint ¶¶ 36-39, at 14. Western Agricultural and Atwood now seek to dismiss Legacy Medical's claims against them. See MTD at 1.

1. The MTD.

Western Agricultural filed the MTD on October 30, 2019. See MTD at 1. Western Agricultural contends that the primary issue in Legacy Medical's breach-of-contract claim is "whether Legacy Medical is covered for medical malpractice claims despite the applicable Insurance Policy's specific exclusion of certain professional services, including '[m]edical, surgical, dental, X-ray or nursing services treatment, advice, or instruction' and '[a]ny health or therapeutic service treatment, advice, or instruction.'" MTD at 1 (quoting Policy -- Part B § II(B)(1)(j)(4)-(5), at 3, and citing Legacy Medical Complaint ¶ 12, at 10)(alterations in MTD and not in Policy -- Part B). Western Agricultural argues that New Mexico's substantive insurance and...