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 New Mexico Public Schools Insurance Authority (the Authority), a state agency providing risk insurance to public schools, hired Arthur J. Gallagher & Co. and related entities (Gallagher) to draft second-tier insurance policies for Moriarty Municipal Schools from 1986 to 1991. These policies, underwritten by Lloyd's of London, excluded coverage for crime losses discovered more than 12 months after the policy's termination. In 1994, Moriarty discovered embezzlement losses from 1986 to 1994. The Authority denied coverage for losses from 1986 to 1991, citing the policy terms, leading to arbitration where the Authority was held liable for those losses (paras 2-4).
Procedural History
- Arbitration, February 20, 2004: The arbitrator found the Authority liable for crime losses from 1986 to 1991 under its self-insured retention, determining it was a co-insurer for the London policies (para 4).
- District Court, January 2005: The Authority filed a lawsuit against Gallagher for professional negligence, alleging the policies were negligently drafted. The court dismissed the claim as barred by the statute of limitations but allowed the Authority to amend its complaint (paras 5-6).
- District Court, (N/A): The Authority amended its complaint, reframing the claim as one for indemnification. The court dismissed the amended complaint, ruling it still constituted a professional negligence claim barred by the statute of limitations (paras 6-7).
Parties' Submissions
- Appellant (the Authority): Argued that its claim was for indemnification, not professional negligence, and that the statute of limitations for indemnification began in 2004 when the arbitration decision fixed its liability. It contended that Gallagher's defective drafting of the policies caused the adverse arbitration judgment and sought indemnification for the payments made to Moriarty (paras 6-8).
- Appellees (Gallagher): Asserted that the claim was fundamentally one of professional negligence, barred by the four-year statute of limitations, as it accrued in 1996 when the Authority became aware of the policy defects. They argued the amended complaint failed to state a valid claim for indemnification under New Mexico law (paras 7-8).
Legal Issues
- Was the Authority's claim against Gallagher one for indemnification or professional negligence?
- If the claim was for professional negligence, was it barred by the statute of limitations? (paras 8-9)
Disposition
- The Court of Appeals affirmed the district court's dismissal of the Authority's claim, holding it was a professional negligence claim barred by the statute of limitations (para 18).
Reasons
Per Vigil J. (Sutin C.J. and Bustamante J. concurring):
The Court held that the Authority's claim was for professional negligence, not indemnification. The Authority's allegations centered on Gallagher's negligent drafting of the insurance policies, which did not meet the Authority's expectations and led to the adverse arbitration decision. The Court found no express or implied contract for indemnification between the parties, nor did the facts support a claim for equitable indemnification under New Mexico law. The Authority's claim accrued in 1996 when it became aware of the policy defects, and the four-year statute of limitations had expired by the time the lawsuit was filed in 2005. The Court rejected the Authority's arguments for derivative liability and equitable indemnification, emphasizing that the claim could have been brought independently of the arbitration outcome. The procedural device of Rule 1-014(A) did not create a substantive right to indemnification. The Court concluded that the Authority's failure to timely assert its professional negligence claim precluded relief (paras 9-17).