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New Mexico Federal Court Stays Insurance Coverage Dispute in Personal Injury Case to Facilitate Resolution by New Mexico State Court

On Behalf of | Aug 28, 2020 | Insurance Bad Faith

As part of a recent New Mexico personal injury case, insured property owners sought from their insurance company a defense under a landlord protection policy.  The property owners’ need for a defense arose after an alleged carbon monoxide leak in a property that they had rented out to a husband and wife seriously injured the husband and killed the wife.

Following those tragic events, the husband and the estate of his wife filed a state court complaint against the insurance company and other defendants, asserting claims of negligence, gross negligence, wrongful death and loss of consortium in the First Judicial District Court in Santa Fe, New Mexico.  The insurance company then sought a declaratory judgment from a federal court, the United States District Court for the District of New Mexico, providing that the insurance company was not obligated to defend the insured property owners in the state court case or indemnify them.

The insurance company’s position was that carbon monoxide poisoning fell within under the insurance policy’s pollutants and contaminants exclusion and the insurance policy’s expected or intended act or omission exclusion.

The property owners responded by filing a motion to dismiss or stay the insurance company’s declaratory judgment action.  They argued insurance coverage should be determined in the primary action pending in state court, and requested that the federal court abstain from deciding the matter in order to allow the state court to proceed.

The federal court considered a few factors. First the court considered whether a declaratory judgment could settle the controversy, concluding that it could after the parties presented more information.  This weighed in favor of deciding the coverage dispute.  Next the court considered whether its involvement would add to the state court action, concluding not because the state court could decide the dispute just as well.  After considering this factor, the court moved on to whether the insurance company was engaged in procedural fencing or other gamesmanship.  The court did not see indications of this in the limited record before the court and declined to speculate, concluding that this factor did not weigh for or against deciding the parties’ insurance coverage dispute.  Next the court considered whether exercising jurisdiction would cause friction between state and federal courts or encroach on the exercise of jurisdiction by state courts.  The court took a practical approach, looking to the existence of a pending state court action raising identical issues and concluding this factor cut against the exercise of federal court jurisdiction.  Finally the court considered whether there was an alternative remedy that was more effective, and decided that it was appropriate for the insurance coverage dispute to proceed in state court and be stayed in federal court.

If you, a family member, or other loved one has been injured in an accident, you may be entitled by law to receive a financial recovery.  Recoveries of personal injury damages can help people and their families pay out-of-pocket costs including lost wages and medical bills. To understand more about your case and how it can be pursued to maximize your financial recovery, call New Mexico personal injury lawyer Matthew Vance. At the Law Office of Matthew Vance, P.C., we provide a free consultation and can be reached at 505-445-1604 or contact attorney Matthew Vance online.