Ben Archer Health Center v. Hartford Fire Insurance Company

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
____________________
BEN ARCHER HEALTH CENTER,
Plaintiff,
v.
No. 2:25-cv-00521-MLG-DLM
HARTFORD FIRE INSURANCE
COMPANY,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING DEFENDANT’S PARTIAL MOTION TO DISMISS
When it rains it pours. And recently, this District has seen a flood of cases alleging that
insurance companies have failed to uphold their obligations to compensate insureds for property
damage caused by storms. This dispute is yet another example.
BACKGROUND1
Several of Plaintiff Ben Archer Health Center’s (“Archer”) properties in Las Cruces and
Hatch, New Mexico, (“Properties”) sustained damage from storms on or about June 3,2 July 15,
and November 1, 2023. Doc. 1 at 3 ¶ 11, 4 ¶¶ 20, 28. At the time, the Properties were insured by
a policy (“Policy”) provided by Defendant Hartford Fire Insurance Company (“Hartford”). Id. at
2 ¶ 7, 3 ¶ 14, 4 ¶¶ 22, 30. Per the contract, Hartford agreed to insure the Properties “from certain
property and casualty perils.” Id. ¶¶ 7-8. Archer complied with its obligations under that
1 The Court takes these facts from Archer’s complaint, Doc. 1 (“Complaint”), and deems them to
be true for purposes of this Opinion.
2 According to the Complaint, Archer and Hartford’s “contractors or agents” mutually picked the
date June 3, 2023, but the claim “was subsequently denied without reason or justification.” Doc. 1
at 3 ¶ 11.
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agreement—including payment of premiums—but Hartford did not hold up its end of the bargain.
Id. at 2 ¶ 8, 5 ¶¶ 33-35, 37-40.
In support of that allegation, Archer contends that after Hartford initially denied its
insurance claim arising from the June 3 storm, Archer hired a third party, Chris Lamego, to assess
the damage. Id. at 3 ¶¶ 16-17. Although Lamego provided Hartford with a report finding that (in
his opinion) the two Las Cruces properties sustained damage totaling $345,111.85, Hartford paid
only $2,338.11. Id. ¶¶ 18-19. Archer also hired Lamego to calculate the damage sustained at a
property in Hatch during the November 1 storm. Id. at 4 ¶ 24. Lamego assessed the total damage
to that property at $72,049.72 and sent his findings to Hartford. Id. ¶¶ 24, 26. Again, Hartford
ultimately paid just $2,338.11. Id. ¶ 27. Based on these facts, Archer alleges Hartford failed to
“properly investigate, adjust, and pay for the damages to Plaintiff’s Property pursuant to the terms
of the Policy . . . . ” Id. at 5 ¶ 35.
Hartford filed a partial motion to dismiss (“Motion”), Doc. 4, arguing that several counts
(Counts II, III, and IV) in Archer’s Complaint fail to state a claim under Federal Rule of Civil
Procedure 12(b)(6).
LEGAL STANDARD
A claim may be dismissed for “failure to state a claim upon which relief can be granted.”
Fed. R. Civ. P. 12(b)(6). But “[g]ranting a motion to dismiss is a harsh remedy which must be
cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect
the interests of justice.” Howl v. Alvarado, 783 F. App’x 815, 818 (10th Cir. 2019) (internal
quotation marks omitted) (quoting Dias v. City & Cty. of Denver, 567 F.3d 1169, 1178 (10th Cir.
2009)); see also Peterson v. Jensen, 371 F.3d 1199, 1201 (10th Cir. 2004) (“A motion to dismiss
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for failure to state a claim is viewed with disfavor and is rarely granted.” (internal quotation marks
omitted) (quoting Lone Star Indus. Inc. v. Horman Fam. Tr., 960 F.2d 917, 920 (10th Cir. 1992))).
When considering a Rule 12(b)(6) motion, the Court takes all well-pleaded facts as true,
views all facts in the light most favorable to the non-movant, and draws all reasonable inferences
in favor of the non-movant. Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir. 2002). The
complaint must contain sufficient factual allegations “to state a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). But this hurdle is low. As the
Tenth Circuit explains, “the Rule 12(b)(6) standard doesn’t require a plaintiff to ‘set forth a prima
facie case for each element’” of a claim. George v. Urban Settlement Servs., 833 F.3d 1242, 1247
(10th Cir. 2016) (quoting Khalik v. United Air Lines, 671 F.3d 1188, 1193 (10th Cir. 2012)). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citation omitted).
DISCUSSION3
I. The Unfair Insurance Claims Practices Act (“UIPA”) (Count II)
Archer asserts Hartford violated Sections 59A-16-20(A), (E), (G), and (N) of the UIPA.
Doc. 1 at 6-7 ¶¶ 52-53; see also Doc. 7 at 3-5. Hartford argues “there are no factual allegations in
any part of the Complaint that would support a finding that Hartford engaged in any of the unfair
practices listed [by Archer].” Doc. 4 at 5. The Court disagrees. The Complaint alleges that Archer’s
insurance claims were for losses covered by the Policy, that Hartford paid just a fraction of the
3 As this is a diversity case, the Court applies New Mexico law to determine whether Archer’s
claims survive. See, e.g., Armijo v. Ex Cam, Inc., 843 F.2d 406, 407 (10th Cir. 1988) (“In a
diversity action, the federal courts are required to apply the law of the forum state.” (citation
omitted)).
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estimated cost of damage to the Properties, and that it did so only after Archer hired a third party
to assess the damage. Doc. 1 at 3 ¶¶ 14, 16-19, 4 ¶¶ 24-27, 5 ¶ 33. At this stage of litigation, these
factual allegations are sufficient to state claims under NMSA 1978, Section 59A-16-20(E) and
(G), which prohibit “not attempting in good faith to effectuate prompt, fair and equitable
settlements of an insured’s claims in which liability has become reasonably clear,” and
“compelling insureds to institute litigation to recover amounts due under policy by offering
substantially less than the amounts ultimately recovered in actions brought by such insureds when
such insureds have made claims for amounts reasonably similar to amounts ultimately recovered,”
respectively. Cf. Corrales Ventures, LLC v. Union Ins. Co., 643 F. Supp. 3d 1247, 1258 (D.N.M.
2022) (“[A] reasonable jury could find that [Defendant] Union compelled [Plaintiff] Corrales
Ventures to institute litigation to recover amounts due under the policy by offering substantially
less tha[n] the amount Corrales Ventures may recover in its breach of contract claim (assuming
Corrales Ventures recovers an amount that is reasonably similar to the amount it claimed prior to
instituting this lawsuit.)”).
Archer also asserts that Hartford failed to explain why it denied Archer’s first insurance
claim, Doc. 1 at 3 ¶ 11, in violation of Section 59A-16-20(N)’s prohibition against “failing to
promptly provide an insured a reasonable explanation of the basis relied on in the policy in relation
to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.”
Doc. 7 at 4-5. Archer additionally claims that Hartford “misrepresent[ed] . . . pertinent facts or
policy provisions relating to coverages at issue,” NMSA 1978, § 59A-16-20(A), by denying
Archer’s claim and refusing to make a payment, despite its obligation to do so under the Policy.
Doc. 7 at 3. Taking these allegations as a collective whole, and viewing them as true, the Court
concludes the Complaint provides a plausible ground to infer that Hartford violated Section 59A-
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16-20(A), (E), (G), and (N), which is all the federal pleading standard requires. See Twombly, 550
U.S. at 556 (“Asking for plausible grounds to infer [wrongdoing] does not impose a probability
requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation
that discovery will reveal evidence of [the alleged wrongdoing].”).
II. The Unfair Practices Act (“UPA”) (Count III)
The UPA prohibits “[u]nfair or deceptive trade practices and unconscionable trade
practices in the conduct of any trade or commerce . . . .” NMSA 1978, § 57-12-3 (1971). “[T]here
are three essential elements to a UPA claim.” Hicks v. Eller, 2012-NMCA-061, ¶ 18, 280 P.3d 304
(citation omitted). The plaintiff must (1) prove that “the defendant made an oral or written
statement, a visual description or a representation of any kind that was either false or misleading”;
(2) demonstrate that “the false or misleading representation was knowingly made in connection
with the sale, lease, rental, or loan of goods or services in the regular course of the defendant’s
business”; and (3) show that “the representation was of the type that may, tends to, or does deceive
or mislead any person.” Lohman v. Daimler-Chrysler Corp., 2007-NMCA-100, ¶ 5, 142 N.M. 437,
166 P.3d 1091.
Relevant here, the Complaint alleges that “Hartford agreed to pay for direct physical loss
or damage to the Property caused by risks of direct physical loss or damage unless otherwise
limited or excluded and to pay all amounts owed for such losses.” Doc. 1 at 3 ¶ 9. Archer claims
that the cost of the property damage was significantly more than what Hartford ultimately paid,
even though the damage constituted covered losses under the Policy. See id. ¶¶ 16-19; id. at 4 ¶¶
24-27; id. at 5 ¶¶ 35-37. Accepting these factual allegations as true, the Court can reasonably infer
that Hartford represented to Archer that it would pay for more damage under the Policy than it did,
that it made this representation in the regular course of its business selling insurance, and that the
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representation may, would tend to, or did deceive or mislead. See Lohman, 2007-NMCA-100, ¶ 5;
Iqbal, 556 U.S. at 678 (“A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” (citing Twombly, 550 U.S. at 556)). Accordingly, Archer has “state[d] a plausible claim
for relief” under the UPA. See Iqbal, 556 U.S. at 678-79.
III. Implied Covenant of Good Faith and Fair Dealing (Count IV)
“Whether express or not, every contract in New Mexico imposes the duty of good faith and
fair dealing upon the parties in the performance and enforcement of the contract” unless the
contract contains express provisions “that specifically cover the same subject matter.” Cont’l
Potash, Inc. v. Freeport-McMoran, Inc., 1993-NMSC-039, ¶¶ 56, 64, 115 N.M. 690, 858 P.2d 66
(citation omitted). In the context of insurance contracts,4 the implied covenant of good faith and
fair dealing requires that “the insurer . . . not injure its policyholder’s right to receive the full
benefits of the contract.” Dairyland Ins. Co. v. Herman, 1998-NMSC-005, ¶ 12, 124 N.M. 624,
954 P.2d 56. To state a claim for breach of the duty, a plaintiff-insured must allege that the
defendant-insurer withheld a benefit under the insurance policy or otherwise prevented the
contract’s performance. See Azar v. Prudential Ins. Co. of Am., 2003-NMCA-062, ¶ 51, 133 N.M.
669, 68 P.3d 909 (providing that the implied duty of good faith and fair dealing “is breached only
when a party seeks to prevent the contract’s performance or to withhold its benefits from the other
4 New Mexico’s courts recognize a special relationship between insurers and insureds “due to ‘the
inherent lack of balance in and adhesive nature of the relationship, as well as the quasi-public
nature of insurance and the potential for the insurer to unscrupulously exert its unequal bargaining
power at a time when the insured is particularly vulnerable.’” Sherrill v. Farmers Ins. Exch., 2016-
NMCA-056, ¶ 36, 374 P.3d 723 (quoting Dellaira v. Farmers Ins. Exch., 2004-NMCA-132, ¶ 14,
136 N.M. 552, 102 P.3d 111)). Indeed, “[a]n insured is particularly vulnerable at the point
following a loss when the insured makes a claim for the loss.” Dellaira, 2004-NMCA-132, ¶ 14.
“Absent the prospect of damages for bad faith breach, the entity performing claims determination
has no incentive to pay in good faith.” Id. (citation modified).
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party”). An insurer may deny “a claim without exposure to bad faith if it has reasonable grounds
to deny coverage,” but this requires “a reasonable investigation of the claim.” Am. Nat’l. Prop. &
Cas. Co. v. Cleveland, 2013-NMCA-013, ¶ 13, 293 P.3d 954.
Here, Archer alleges that Hartford failed to properly investigate the insurance claims,
initially denied at least one of the claims even though the property damage was covered under the
Policy, and later agreed to pay only a small portion of the estimated property damage. Doc. 1 at 3-
4 ¶¶ 11-27, 5 ¶¶ 33, 35, 37-38, 40. Accepting these contentions as true, and construing them in
Archer’s favor, the Complaint sufficiently states a claim for a breach of the implied covenant of
good faith and fair dealing under New Mexico law.
CONCLUSION
The Court denies Hartford’s Motion. It is so ordered.
UNITED STATES DISTRICT JUDGE
MATTHEW L. GARCIA
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