Old Republic Insurance Company et al v. Arafa-Hekal et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
OLD REPUBLIC INSURANCE COMPANY
and PENSKE TRUCK LEASING CO., L.P.,
Plaintiffs,
v. No. 1:25-cv-00277-KG-JMR
ASHRAF ARAFA-HEKAL a/k/a ASHRAF
HEKAL, ARMANDO SALCIDO, AND
ANDREW MONTOYA,
Defendants.
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendants Armando Salcido and Andrew Montoya’s
motion for summary judgment. Doc. 26. Plaintiffs Old Republic Insurance Company (“Old
Republic”) and Penske Truck Leasing Co. (“Penske”) responded, Doc. 28, and Salcido and
Montoya replied. Doc. 30. For the reasons below, the motion is denied.
I. Background
The Court draws the facts in this section from the pleadings, which are either undisputed or
stated most favorably to the nonmovants, Plaintiffs here. See Parraz v. UNM Bd. of Regents, 2024
WL 3676928, at *1 (D.N.M.). Defendant Ashraf Arafa-Hekel rented a 26-foot medium van from
Penske in Bensalem, Pennsylvania, on March 24, 2021. Doc. 26-1 at 1. Arafa-Hekel declined all
optional protection plans offered by Penske except a Limited Damage Waiver, which protected
Arafa-Hekel from damage to the rented vehicle. Doc. 28 at 8–9. The rental agreement between
Penske and Arafa-Hekel articulated general terms and conditions for the rental as well as limited
liability protection provided by Penske. Id. at 9. Penske agreed to provide Arafa-Hekel with
“liability protection” for any bodily injury, death, or property damage caused by Arafa-Hekel while
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using the rented van. Id. The agreement limited protections to the minimum coverage “required by
the state financial responsibility law” where liability is incurred. Id.
While Penske agrees to cover its renters, Plaintiff Old Republic provides insurance to
Penske. See Doc. 1 at 3–6; Doc. 28 at 9. Old Republic’s policy provides maximum liability
coverage of $1 million to Penske for any “insured” individual under the policy. Doc. 26 at 3. The
policy, which was “issued” and “delivered” in Pennsylvania, clarifies that “rentees” of Penske autos
are “insureds” for purposes of coverage, but the coverage amount is limited to any “contractual
agreement” between Penske and the rentee. Doc. 26 at 20; Doc. 28 at 14.
On March 29, 2021, Arafa-Hekel caused a motor vehicle accident between himself and a
semi-truck occupied by Salcido and Montoya. See Doc. 1 at 6; Doc. 26-2 at 3. Salcido “sustained a
laceration to his left forearm” from the accident, while Montoya sustained “no apparent injuries.”
Id. Both Salcido and Montoya were “transported by EMS to Plains Regional Medical Center in
Clovis, New Mexico.” Id.
Salcido and Montoya filed suit against Arafa-Hekel in New Mexico’s Second Judicial
District Court on December 3, 2021. See Doc. 1 at 6. They eventually added Old Republic and
Penske as defendants in that action. Id. That case is ongoing.
Old Republic and Penske filed this federal action seeking declaratory judgment that the
limits of the rental policy are “$25,000 because of bodily injury or death of one person in any one
accident” and “$50,000 because of bodily injury to or death of two or more persons in any one
accident.” Doc. 1 at 8. Salcido and Montoya move for summary judgment, arguing that the Old
Republic policy “fails to comply with the requirements” of New Mexico’s Financial Responsibility
Act. Doc. 26 at 4. They contend that the violation of New Mexico law invalidates the limits
Penske set forth in the rental agreement with Arafa-Hekel and entitles them to the maximum
liability coverage Old Republic offers Penske—$1 million. Id.
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Old Republic and Penske argue that the Old Republic policy at issue “was made in
Pennsylvania” so the New Mexico statutes “do not apply.” Id. at 2. Accordingly, they argue that
New Mexico law can’t be used to nullify the liability limitations set forth in the Rental Agreement
or the Old Republic policy. Id. at 2.
II. Legal Standard
Summary judgment is warranted if there is “no genuine dispute of material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The movant “bears the
initial responsibility” to identify evidence from the record demonstrating the “absence of a genuine
dispute of material fact,” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986), meaning that the
“record taken as a whole could not lead a rational trier of fact to find” for the nonmovant.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The burden then
shifts to the nonmovant to “go beyond the pleadings and by his own affidavits, or by the
depositions, answers to interrogatories, and admissions on file, designate specific facts showing that
there is a genuine issue for trial.” Id. at 324.
When sitting in diversity, federal courts must apply the substantive law, including choice of
law rules, of the state in which they sit. See Aiken v. Emp. Health Servs., Inc., 81 F.3d 172 (10th
Cir. 1996). In contract disputes, New Mexico law applies the law of the place the contract was
executed absent an explicit choice of law provision in the contract. See Lee v. Cont’l Cas. Co.,
2005 WL 8164232, at *3 (D.N.M.). New Mexico applies the same choice of law rules that govern
contracts to insurance policies. Id. New Mexico courts apply New Mexico law to foreign contracts
when application of a choice of law rule would result in a violation of fundamental principles of
justice. Id.
In New Mexico, “motor vehicle insurance policy” insures “vehicles of a kind required to be
registered pursuant to New Mexico law.” NMSA 1978, § 66-1-4.11 (Cum. Supp. 2023). New
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Mexico’s Financial Responsibility Act requires minimum liability coverage of $25,000 per person
and $50,000 per accident. See NMSA 1978, § 66-5-208 (Cum. Supp. 1983). The Act also requires
regulated policies to state both the coverage provided and the applicable limits of liability. See
NMSA 1978, § 66-5-205.3(D) (Cum. Supp. 2016). However, the statute provides an exception to
the mandatory coverage requirement “when a vehicle is rented to others or used to carry persons for
charge.” NMSA 1978, § 66-5-205.3(C)(7) (Cum. Supp. 2016).
III. Analysis
Viewing the record in the light most favorable to Penske and Old Republic as the
nonmovants, Salcido and Montoya fail to meet the standard for summary judgment, and their
motion, Doc. 26, is denied. There is a genuine dispute of material fact as to whether New Mexico
law can apply to the Old Republic policy.
Old Republic is a Pennsylvania company. Doc. 1 at 1. Penske, the beneficiary of the Old
Republic policy, is a Pennsylvania company. Doc. 28 at 14. The insurance policy Old Republic
“issued” to Penske was “delivered” in Pennsylvania. Id.; Doc. 1 at 1. Therefore, under New
Mexico’s choice of law rules, Pennsylvania law governs the insurance policy. See Lewis v. XL
Catlin, 542 F. Supp. 3d 1159, 1166 (D.N.M. 2021) (applying Pennsylvania law to an insurance
policy when the holder as well as the broker were Pennsylvania companies). If Pennsylvania law
governs the Old Republic policy, New Mexico’s Mandatory Financial Responsibility Act does not
apply to the policy or the limitations set forth in Penske’s rental agreement with Arafa-Hekel.
While Arafa-Hekel’s individual rental agreement with Penske references minimum liability
requirements consistent with New Mexico law, that reference alone does not establish that New
Mexico law governs the Old Republic policy, nor does it establish that New Mexico law governs
the rental agreement between Penske and Arafa-Hekel. Thus, any technical requirement of the New
Mexico statute does not apply to the policy Old Republic issued. Salcido and Montoya fail to
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demonstrate that there is no genuine issue of material fact that New Mexico law governs Old
Republic’s policy with Penske.
Salcido and Montoya’s reply is unconvincing. See Doc. 30. They concede that “where the
documents to a contract are executed in one state and the contract was formed in that state, that
state’s law applies.” Id. at 3. However, they argue that the Old Republic policy “conflicts with the
settled public policy of New Mexico” and so New Mexico’s Mandatory Financial Responsibility
Act should govern. Id. Not so.
Penske registered the van at issue in this case in Pennsylvania, not New Mexico. See Doc.
26-2 at 1. As a result, the vehicle is not one “required to be registered pursuant to New Mexico
law.” See supra NMSA 1978, § 66-1-4.11. Salcido and Montoya’s erroneous interpretation of New
Mexico’s statute attempts to subjugate every vehicle passing through New Mexico to a New
Mexico policy that is only intended for vehicles that are to be registered in New Mexico by
residents of New Mexico. That interpretation would disregard every other state’s method of
regulating vehicles that are to be registered in their respective state and contravene New Mexico’s
choice of law rules.
IV. Conclusion
Defendants Salcido and Montoya’s motion for summary judgment, Doc. 26, is denied.
IT IS SO ORDERED.
/s/Kenneth J. Gonzales___________________
CHIEF UNITED STATES DISTRICT JUDGE
• Please note that this document has been
electronically filed. To verify its authenticity,
please refer to the Digital File Stamp on the
NEF (Notice of Electronic Filing)
accompanying this document. Electronically
filed documents can be found on the Court’s
PACER public access system.
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