AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

A convenience store clerk was severely injured while attempting to stop a theft, resulting in permanent brain damage. The clerk sued the store, obtaining a judgment of over $11 million in compensatory and punitive damages. The store, which held multiple insurance policies, entered bankruptcy and later settled with one insurer, assigning claims against other insurers, including the Defendant, to the Plaintiff. The Defendant refused to pay, alleging the settlement violated its policy and was collusive (paras 1-13).

Procedural History

• District Court of Bernalillo County: Granted summary judgment in favor of the Defendant, finding the settlement violated the Defendant's insurance policy (para 1).

Parties' Submissions

• Plaintiff-Appellant: Argued that the Defendant's policy did not preclude the settlement and that the Defendant acted in bad faith by refusing to participate in settlement negotiations or contribute to the judgment (paras 1, 9, 11).
• Defendant-Appellee: Contended that its policy required full payment of underlying insurance in cash before its liability was triggered, that punitive damages were excluded, and that the settlement was collusive and violated its policy terms (paras 13, 43, 61).

Legal Issues

• Did the Defendant's insurance policy require full payment of underlying insurance in cash before its liability was triggered?
• Was the allocation of damages between compensatory and punitive amounts permissible under the Defendant's policy?
• Did the settlement negotiations involve bad faith or collusion by the Plaintiff and other parties?
• Did the Defendant act in bad faith by refusing to participate in the settlement process?

Disposition

• The Supreme Court of New Mexico reversed the summary judgment and remanded the case for trial on the merits of the bad faith and related allegations raised by both parties (para 64).

Reasons

Per Franchini CJ. (Baca and McKinnon JJ. concurring):

• Contract Interpretation: The court found that the Defendant's policy did not require full payment of underlying insurance in cash. The policy language allowed for situations where underlying insurers were held liable but had not fully paid, and it did not preclude settlements for less than policy limits (paras 24-33).
• Allocation of Damages: The policy did not explicitly prohibit the allocation of damages to maximize coverage for the insured. The court emphasized that exclusions must be clearly expressed, and the Defendant failed to include such a provision in its policy (paras 45-55).
• Bad Faith Allegations: The court held that there were genuine issues of material fact regarding whether the Defendant acted in bad faith by refusing to participate in or monitor settlement negotiations and whether the Plaintiff and other parties acted collusively or in bad faith during the settlement process. These issues required a trial (paras 56-63).