This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Plaintiff, an employee of Circle K, was severely injured while attempting to stop a robbery at his workplace, in accordance with a company policy requiring clerks to confront shoplifters. He sustained permanent brain damage and was awarded over $11 million in compensatory and punitive damages in a lawsuit against Circle K. At the time, Circle K was insured under a multi-layer insurance scheme involving several insurers, including the Defendants, Harbor Insurance Company and St. Paul Surplus Lines Insurance Company. The Plaintiff sought to recover the unpaid portion of the punitive damages from these insurers (paras 2-4).
Procedural History
- District Court: Granted partial summary judgment in favor of Harbor and St. Paul, finding that neither insurer was liable for the punitive damages portion of the judgment (para 1).
Parties' Submissions
- Plaintiff-Appellant: Argued that the insurance policies issued by Harbor and St. Paul did not effectively exclude coverage for punitive damages and sought to recover approximately $6.7 million in punitive damages and interest (paras 7-8).
- Defendant-Appellee (Harbor): Contended that its policy excluded coverage for punitive damages by incorporating the exclusions of an underlying policy, specifically the Lexington policy, which explicitly excluded punitive damages (para 5).
- Defendant-Appellee (St. Paul): Argued that its policy also excluded punitive damages by adopting the exclusions of the immediately underlying policy, which it claimed was the Lexington policy. Additionally, it asserted that the judgment did not meet the $15 million threshold required to trigger its coverage (paras 6, 15).
Legal Issues
- Did the Harbor insurance policy effectively exclude coverage for punitive damages?
- Did the St. Paul insurance policy effectively exclude coverage for punitive damages?
- Was the $15 million loss threshold in the St. Paul policy ambiguous, and if so, does it preclude St. Paul’s liability for the punitive damages portion of the judgment?
Disposition
- The Supreme Court of New Mexico affirmed the grant of summary judgment in favor of Harbor, finding that its policy unambiguously excluded punitive damages (para 23).
- The Court reversed the grant of summary judgment in favor of St. Paul, finding that its policy failed to unambiguously exclude punitive damages and remanded the case for further proceedings to resolve the ambiguity regarding the $15 million loss threshold (para 23).
Reasons
Per Baca J. (Minzner and McKinnon JJ. concurring):
Harbor Policy: The Court held that the Harbor policy effectively excluded punitive damages by adopting the exclusions of the Lexington policy through a "follow form" provision. The language was clear and would have been apparent to an average insured, satisfying the requirements for excluding punitive damages under New Mexico law (paras 11-13).
St. Paul Policy: The Court found that the St. Paul policy was ambiguous because it failed to clearly identify which underlying policy it adopted for exclusions. The ambiguity arose from the lack of clarity regarding which policy constituted the "immediately preceding layer of coverage." As a result, the Court construed the ambiguity in favor of the insured, finding that the policy did not effectively exclude punitive damages (paras 16-19).
$15 Million Threshold: The Court identified an additional ambiguity in the St. Paul policy regarding the $15 million loss threshold. It was unclear whether this provision created a gap in coverage for punitive damages below that amount. The Court remanded the case to the trial court to determine the intent of the parties and whether the threshold precluded St. Paul’s liability for the punitive damages portion of the judgment (paras 20-22).
The Court emphasized that ambiguities in insurance contracts are to be resolved in favor of the insured, particularly when the insurer fails to clearly exclude coverage for punitive damages (paras 9-10).