Fava v. Liberty Mutual Insurance Company

Filing 99

MEMORANDUM OPINION AND ORDER by Chief District Judge William P. Johnson GRANTING 66 Motion for Summary Judgment Regarding Plaintiffs' Emotional Injury Claims & Damages. (mag)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
_____________________________
HECTOR FAVA and BARBARA FAVA,
Plaintiffs,
v.

No. 17cv00456 WJ/LF

LIBERTY MUTUAL INSURANCE
CORPORATION,
Defendant.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
REGARDING PLAINTIFFS’ EMOTIONAL INJURY CLAIMS AND DAMAGES
THIS MATTER comes before the Court upon a Motion for Summary Judgment Regarding
Plaintiffs’ Emotional Injury Claims and Damages, filed by Defendant Liberty Insurance
Corporation (“Liberty” or “Defendant”) on June 1, 2018 (Doc. 66). Having reviewed the parties’
briefs and the applicable law, the Court finds that Defendant’s motion is well-taken and, therefore,
is granted.
BACKGROUND
In this motion, which is one of several pending in this case, Liberty seeks summary
judgment with respect to Plaintiffs’ claims for emotional injury claims and damages. The lawsuit
arises out of Plaintiffs’ claims for damages under a Homeowners Policy (“Policy”) issued by
Liberty to Mr. Fava. Mr. and Mrs. Fava (“Plaintiffs” or the “Favas”) allege property damages to
their home stemming from a water leak under their home. Plaintiffs filed the Complaint on July
29, 2016 in the Second Judicial District Court, County of Bernalillo, and Liberty removed the case

to federal court under diversity jurisdiction on April 17, 2017. The Complaint asserts four claims
for relief against Defendant:
Count I: Breach of Contract and the Covenant of Good Faith and Fair Dealing;
Count II: Violation of Unfair Practices Act;
Count III: Violation of New Mexico Insurance Code; and
Count IV: Negligence.
Defendant moves for summary judgment on Plaintiffs’ claims for emotional injury and
damages. Defendant argues that emotional distress damages are not recoverable in New Mexico
on a breach of contract claim, particularly where such damages allegedly arise from nonintentional property damage.
I.

Relevant Facts1
Defendant issued a “LibertyGuard Deluxe” Homeowner’s Insurance Policy to Plaintiffs

for the policy period of February 10, 2015-February 10, 2016, bearing policy number H37-298592225-40, insuring Plaintiffs’ Albuquerque residence located at 4203 Prince Street SE,
Albuquerque, NM 87105.
According to the Complaint, on August 18, 2015, a pipe in the crawlspace underneath
Plaintiffs’ home burst, flooding the home’s crawlspace with several inches of standing water.
Plaintiffs took action to stop the leak and report the incident to Plaintiffs’ insurer, Liberty. The
water from the burst pipe caused the floor in Plaintiffs’ kitchen and living room to begin sloping
downward and large cracks to form in several load-bearing walls in the home. The Favas reported
the damage to Liberty. Plaintiffs assert that Liberty repeatedly denied coverage of Plaintiffs’ claim
based on inadequate investigations of the cause of the damage to the home as well as its

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The facts are undisputed unless otherwise noted. The parties submitted separate binders containing exhibits that
are relevant to all pending motions in the case. In these binders, Plaintiffs’ exhibits are numbered; Defendant’s
exhibits are lettered. In addition, specific exhibits are attached to each of the pending motions and thus, an exhibit
may be referred to either by its number or letter, or by its document number, for example, Doc. 67-4 is the same as
Deft’s Ex. H. The Court will omit references to exhibits unless necessary.

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misrepresentations about those investigations. Since August 2015, Plaintiffs’ home has had a 10’
diameter hole in the living room, made when Liberty performed its inspection of the damage to
Plaintiffs’ home. Plaintiffs claim that their home continues to deteriorate and they that they have
been unable to use a significant portion of their home since that time because of Liberty’s improper
denial of coverage and mishandling of their claim. Defendant denies Plaintiffs’ contentions.
Following the reported water loss, Liberty retained independent adjusters to inspect the water loss
and also retained an engineer to inspect the water loss and report the findings. Based on those
findings and the damages associated with the water leak, Defendant claims it paid what was owed
under the policy.
In their Additional Material Facts section, Plaintiffs offer language from the policy to
support its claim for emotional distress damages, such as: (1) Liberty’s motto in their 2012
introductory letter that reads, “Helping People Live Safe, More Secure Lives.” Ex. 3; (2) Liberty
letter dated Feb. 9, 2012 stating that the company was “committed to doing our best to exceed your
expectations” and that it was “there to provide you with the sense of safety and security you can
depend on.” Id. Plaintiffs rely on this language to show that they had the reasonable expectation
that their Homeowners Policy was intended to ensure their peace of mind that any claim they made
would be handled fairly and paid promptly, and without misrepresentations. Defendant contends
that such language is irrelevant and immaterial to the legal issue of entitlement to emotional
distress damages. The Court finds this information (see Add’l Facts A-F, I, K-L) somewhat
relevant to Plaintiffs’ argument that the nature of Plaintiffs’ contract with Liberty was of the kind
where emotional distress damages were contemplated, although that argument ultimately fails.
The Court finds that Plaintiffs’ Additional Facts H and J (description of damage to house
and insomnia/stress suffered by Plaintiffs) are irrelevant to the legal issue of entitlement of

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emotional distress damages under New Mexico law, and tend to establish that Plaintiffs’ claims
arise out of damage to property damage—which would not entitle Plaintiffs to emotional distress
damages. Finally, Plaintiffs’ Additional Fact G purports to use Liberty claim notes (Ex. 5) to prove
that the Favas suffered emotional distress, but the notes merely state that the Favas were “not
happy” about Liberty’s denial of the claim. The Court agrees with Defendant that Additional Fact
G is not supported by Plaintiffs’ citation to the record and so will not be considered by the Court.
Plaintiffs acknowledge that they allege “garden variety” type emotional distress damages
arising from the property loss at their home, but state that they also seek damages in addition to
those related to property damages, namely the emotional distress damages related to the “bad faith”
handling of their insurance claim. Whether Plaintiffs may recover such damages is the sole
question in this motion.
II.

Legal Standard
Summary judgment should be granted when the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56. The movant bears the initial burden of “show[ing] that there is an absence of
evidence to support the nonmoving party’s case.” Bacchus Indus., Inc. v. Arvin Indus., Inc., 939
F.2d 887, 891 (10th Cir. 1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Once
the movant meets this burden, Rule 56(c) requires the non-moving party to designate specific facts
showing that there is a genuine issue for trial. See Celotex Corp., 477 U.S. at 324; Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). When applying this standard, a court must “view
the evidence and draw reasonable inferences therefrom in the light most favorable to the
nonmoving party.” Simms v. Oklahoma ex rel. Dep’t of Mental Health & Substance Abuse Serv.,

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165 F.3d 1321, 1326 (10th Cir. 1999), abrogated in part on other grounds Eisenhour v. Weber Cty.,
744 F.3d 1220, 1227 (10th Cir. 2014). A mere scintilla of evidence supporting the nonmoving
party’s theory does not create a genuine issue of material fact. Anderson v. Coors Brewing Co.,
181 F.3d 1171, 1175 (10th Cir. 1999). Instead, the nonmoving party must present facts such that
under the applicable law, a reasonable jury could find in its favor. Id. That is, the nonmovant
needs to “present evidence from which a jury might return a verdict in his favor.” Liberty Lobby,
477 U.S. at 257.
In this case, the Court finds that the relevant material facts are largely undisputed, but the
parties differ on the legal significance of the facts. See Rummel v. Lexington Ins. Co., 123 N.M.
752, 758 (1997) (summary judgment is appropriate where no facts are in dispute, but only the legal
significance of the facts).
DISCUSSION
Defendant seeks summary judgment on Plaintiffs’ emotional injury claims and damages
because emotional distress damages are generally not recoverable for non-intentional damage to
property or for breach of contract claims. Plaintiffs contend that New Mexico law does permit
recovery of emotional distress for all their claims, including breach of contract and negligence
claims, primarily because of the “bad faith” component underlying their claims. See Doc. 75 at
10.2
I.

Breach of Contract/Breach of Covenant of Good Faith and Fair Dealing

Count I alleges an “intentional, malicious, wanton, willful or . . . reckless disregard” of Plaintiffs’ contractual
rights; Count II and III allege “willful” violations of the Unfair Practice Act and the Insurance Code; and Count IV
asserts that Liberty acted negligently and in “bad faith.”
2

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In Count I, Plaintiffs assert both a breach of contract and the associated covenant of good
faith and fair dealing by failing to investigate Plaintiffs’ claims and by denying Plaintiffs’ claims
under the Policy for frivolous or unfounded reasons.
The standard remedy for breach of the covenant is on the contract itself. See Bourgeous v.
Horizon Healthcare Corp., 117 N.M. 434, 439, 872 P.2d 852, 857 (N.M. 1994). The exception to
this rule is in the insurance context: most courts permit a plaintiff to sue in tort for breach of the
covenant in insurance actions based on the nature of the “special relationship” between the parties.
New Mexico law would therefore govern the availability of emotional distress damages not only
for any tort remedy sought under the breach of covenant claim but also for the negligence claim in
Count IV. The discussion in this section, however, applies to Plaintiffs’ contractual claims.3
New Mexico has limited the availability of emotional distress damages in civil actions to
the following circumstances:
. . . intentional infliction of emotional distress, in connection with certain
intentional economic torts, and in contractual situations where the specialized
nature of the contract naturally contemplated that reasonable care would be taken
to avoid the infliction of severe emotional distress . . . New Mexico does not
recognize negligent infliction of emotional distress as a cause of action except for
bystander liability.
Akutagawa v. Laflin, Pick & Heer, P.A., 2005-NMCA-132, ¶ 21, 138 N.M. 774, 779, 126 P.3d
1138, 1143; Andrews v. Stallings, 119 N.M. 478, 491, 892 P.2d 611, 624 (Ct.App.1995) (stating
that “[t]o recover for the intentional infliction of emotional distress” a plaintiff must show that the
defendant's conduct was extreme and outrageous, and was done recklessly or with the intent to
cause severe emotional distress). Also, a claim for negligent infliction of emotional distress

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Of course, should Plaintiffs prevail on both the breach of contract/covenant and negligence claims, they could not
recover on both. See, e.g., Sloan v. State Farm Mut. Auto. Ins. Co., 360 F.3d 1220, 1230–31 (10th Cir. 2004)
(affirming court’s decision that damages awarded to plaintiff under both contract and tort as arising solely from
insurer’s breach of contract instead of from any of its various negligent acts).

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requires some physical manifestation of, or physical injury, to the plaintiff resulting from the
emotional injury. Folz v. State, 1990-NMSC-075, ¶ 33, 110 N.M. 457, 468, 797 P.2d 246, 257.
For contract actions, damages for emotional distress or mental anguish may be recovered
where such damages were within the contemplation of the parties at the time the contract was
made. “Burial cases furnish the most obvious example of cases in which the contract for decent
treatment of a body seems to guarantee not merely a price but proper respect for feelings of
survivors, so that emotional distress damages would seem to be recoverable.” 3 Dan B. Dobbs,
Law of Remedies § 12.5(1), at 110 (2d ed. 1993) (citing Lamm v. Shingleton, 231 N.C. 10, 55
S.E.2d 810, 813 (1949)).
In Flores v. Baca, a decedent’a wife and children brought action against a funeral direction
for failing to completely embalm the decedent’s body as required by the contract for funeral
services. 117 N.M. 306, 311 (1994). In that case, the New Mexico Supreme Court found that an
emotional distress claim was within the contemplation of the parties in forming that contract
because consolation of the deceased’s family members was the aim of such a contract. 117 N.M.
306, 311 (1994). Thus, damages for mental anguish were appropriate:
[w]here the contract is personal in nature and the contractual duty or obligation is
so coupled with matters of mental concern or solicitude, or with the sensibilities
of the party to whom the duty is owed, that a breach of that duty will necessarily
or reasonably result in mental anguish or suffering, and it should be known to the
parties from the nature of the contract that such suffering will result from its
breach, compensatory damages therefor may be recovered.
Flores v. Baca, 117 N.M. at 311 (cited case omitted); see also Greene v. Bank of America, 2014
WL 11497813, at *11-12 (D.N.M. April 7, 2014); see also 3 Dan B. Dobbs, Law of Remedies §
12.5(1), at 110 (2d ed. 1993) (citing Flores, 117 N.M. at 311).
Emotional distress damages are recoverable in an insurance contract breach only in specific
instances. In Woodmen Accident & Life Ins. Co. v. Bryant, the Tenth Circuit upheld the trial court’s
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denial of emotional distress damages for an alleged breach of an insurance contract, finding that
emotional distress is not recoverable under a contract claim, unless the breach causes bodily harm,
or unless the contract or the breach is of such a kind that serious emotional disturbance is a
particularly likely result. 784 F.2d 1052 (10th Cir. 1986) (citing Restatement (Second) of Contracts
§ 353 (1981). That court also found that under New Mexico law, plaintiff’s sleeplessness did not
qualify as a physical injury constituting an exception to the recovery rule.

The court also

acknowledged that while there was no New Mexico precedent on the issue, the majority of
jurisdictions agreed with the court’s position. Id. at 1056-57 (citing cases).
Plaintiffs claim that since Woodmen was decided, New Mexico courts have since addressed
the issue, but the case they offer does not depart from the current state of the law in New Mexico.
In Jimenez v. Found. Reserve Ins. Co., the case offered by Plaintiffs, the New Mexico Supreme
Court addressed stacking in automobile coverage in the context of medical payments coverage.
107 N.M. 322 (1988). The court in that case mentioned the “peace of mind” which an insured
purchases by paying the premium for medical coverage, but there is no mention or discussion of
emotional distress damages in the decision and so Jimenez is irrelevant to the issue here. Plaintiffs
also seem to ignore both Flores and Akutagawa which sets out New Mexico law on the recovery
of emotional distress damages more recently than the Woodmen decision.
Plaintiffs contend that Liberty’s obligation under the policy is analogous to the funeral
director’s obligation in Flores that was coupled with matters of mental concern and peace of mind,
and that Liberty would have foreseen that mishandling the Favas’ claim would result in mental
anguish. The argument fails for two reasons. First, the sense of security one has knowing one’s
house in insured is very different from the mental concerns one has with funeral matters; the latter
is more personal in nature. It is fair to say that the damage resulting from the flood in the Favas’

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home would have caused Plaintiffs considerable distress and trauma, but it is not the same as
viewing the results of negligent mishandling of the corpse of a loved one. The purpose of the
Liberty policy was to protect the Favas’ property.
The limited circumstances identified in Akutagawa and Flores are not present in this case.
The insurance contract between Plaitiffs and Liberty is not of such a specialized nature that it
“naturally contemplated that reasonable care would be taken to avoid the infliction of severe
emotional distress.” See Flores, 117 N.M. at 311 (“Contracts for funeral and burial services are
imbued by the very nature of their subject with certain expectations to be implied in fact unless
specifically disclaimed.”). Second, Plaintiffs have not suffered any physical injury, which would
be another way to be entitled to recover emotional distress damages under New Mexico law.
Plaintiffs also frame the issue as one of consequential damages flowing from a breach of contract
and the covenant of good faith and fair dealing. See Doc. 75 at 6. In a contract action, a defendant
is liable for those consequential damages that were objectively foreseeable as a probable result of
his or her breach when the contract was made and include those losses that may be caused by the
absence of performance of the contract. Sunnyland Farms v. Cent. N.M. Elec. Coop., Inc., 2013NMSC-017, ¶16, 301 P.3d 387. In Sunnyland Farms, the court found that the tomato farm could
not recover lost profits as consequential damages because there was no evidence that defendant
Electric Cooperative should have known that the farm had a particular vulnerability to fire at the
farm. Plaintiffs offer the Sunnyland case to argue that they are entitled to emotional distress
damages, but the case does not address emotional distress damages at all. The case discusses only
“consequential damages” such as lost profits. As explained elsewhere:
Damages for breach of contract are intended to put the aggrieved party in the
same economic position he would have been in if the contract had been
performed. This includes all actual economic injury that the breaching party had
reason to know would arise from the breach, both direct or general damages ...
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and consequential damages, consisting of other economic injury the breaching
party would have had reason to foresee as a probable result of the breach."
O'Toole v. Northrop Grumman Corp., 305 F.3d 1222, 1225 (10th Cir. 2002) (New Mexico law)
(emphasis added). Thus, Plaintiffs offer nothing to show that they can recover emotional distress
damages as a category of consequential damages, nor do they offer any legal support for the
recovery of emotional distress damages under a contract theory.
II.

Negligence Claims
For common negligence claims, a plaintiff in New Mexico cannot recover separate,

additional damages for emotional distress. As discussed above, only specific torts allow recovery
of emotional distress damages, such as intentional infliction of emotional distress. See Akutagawa,
138 N.M. at 779; Folz, 110 N.M. at 468. Defendant relies on Castillo v. City of Las Vegas which
the Court finds helpful in setting out current law on recovery of emotional distress damages in
New Mexico even though it is not an insurance case, because it is factually analogous to Favas’
predicament in this case. 145 N.M. 205, 210 (2008). In Castillo, a property owner and his live-in
partner brought an action against the city to recover for damages caused by a second sewer backup.
The plaintiff acknowledged that he did not suffer a physical injury, but stated that he felt “terrible
– just like losing part of the family.” Nevertheless, the court found that plaintiff’s case “more
closely resembles cases in which the courts have determined that a plaintiff's loss can be adequately
compensated by economic damages.” Castillo, 145 N.M. at 212. The Castillo case is factually
similar to this case. The Court certainly does not discount the turmoil and upset the Favas claim to
suffer, but they arise from damage to their property and they have suffered no physical injury.
Plaintiffs are therefore not legally entitled to emotional distress damages under New Mexico law.
Plaintiffs make several arguments, insisting that emotional distress damages are allowed
in this case. The Court discusses each of them in turn.
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A.

Plaintiffs Challenge Castillo

First, Plaintiffs contend that Castillo actually supports their position that emotional anguish
damages are recoverable in bad faith actions, Doc. 75 at 11, but Castillo does not say that at all.
What the court actually stated is that the New Mexico Supreme Court has “consistently allowed
recovery for emotional harm in intentional tort cases.” Castillo, 145 N.M. at 212. The Castillo
case explains:
Our courts have limited the availability of damages for emotional distress. . . Such
damages are available for plaintiffs who prevail on a claim for negligent or
intentional infliction of emotional distress. See Baldonado v. El Paso Natural Gas
Co., 2008–NMSC–005, ¶ 27, 143 N.M. 288, 176 P.3d 277 (intentional infliction of
emotional distress); Fernandez v. Walgreen Hastings Co., 1998–NMSC–039, ¶ 6,
126 N.M. 263, 968 P.2d 774 (negligent infliction of emotional distress). In
addition, compensation for emotional distress is permitted when a plaintiff
establishes loss of consortium, intentional misconduct, defamation, or a physical
injury. See Romero v. Byers, 117 N.M. 422, 425, 426, 872 P.2d 840, 843, 844
(1994) (loss of consortium); Chavez v. Manville Prods. Corp., 108 N.M. 643, 649,
777 P.2d 371, 377 (1989) (intentional torts); Marchiondo v. Brown, 98 N.M. 394,
402, 649 P.2d 462, 470 (1982) (defamation); Higgins v. Hermes, 89 N.M. 379,
381, 552 P.2d 1227, 1229 (Ct.App.1976) (physical injury).
Castillo, 145 N.M. at 210-11. The court then examined the specific circumstances that would
allow a plaintiff to recover for emotional distress based on property damage under New Mexico
law and found that these situations were limited to: physical injury, bystander recovery (negligent
infliction of emotional distress) and intentional misconduct by a defendant, such as retaliatory
discharge. 145 N.M. at 214; see Chavez v. Manville Prods. Corp., 108 N.M. 643,649 (1989)
(recognizing retaliatory discharge as an intentional tort). Castillo cannot be read by any stretch to
mean that damages for emotional distress are recoverable in bad faith actions. The case does
mention “bad faith” nor does it suggest that “bad faith” claims should be categorized as intentional
torts. Thus, Castillo is completely irrelevant to Plaintiffs’ argument; however, it does support
Defendant’s position that emotional distress damages are not recoverable for claims of property
damage, regardless of whether a plaintiff labels it as a “bad faith” claim.
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B.

Negligence as an “Intentional” Tort?

Plaintiffs maintain that alleging “bad faith” within their negligence claim entitles them to
a recovery of damages for emotional distress. Doc. 75 at 10 (“Plaintiffs’ claims for “bad faith”
are encompassed by all of the counts in Plaintiffs’ First Amended Complaint”).4 Specifically, they
contend that Defendant has mischaracterized their bad faith claim as a negligence claim, when it
is really a “non-contract based bad faith claim” which entitles them to a recovery of emotional
distress damages. Doc. 75 at 5. This is puzzling to the Court, since Count IV plainly alleges
“Negligence,” see Doc. 1-3, which is not an intentional tort, nor is it one of the specific torts for
which emotional damages are available under New Mexico law. Akutagawa, 138 N.M. at 779
(“mere negligence” in legal malpractice claim is not sufficient for emotional distress damages . . .
[t]here must be a direct violation of the plaintiff's rights by willful, wanton or malicious conduct.
. . .”), cited in Castillo v. City of Las Vegas, 2008-NMCA-141, ¶ 27, 145 N.M. 205, 212, 195 P.3d
870, 877.
Plaintiffs attempt to recast their negligence claim as an intentional tort, but they offer no
New Mexico case which holds that a negligence claim converts to an intentional tort simply
because a plaintiff alleges that the defendant acted in “bad faith.” This argument therefore fails.
C.

“Bad Faith” Claims and Damages

Plaintiffs argue that emotional distress damages are available if Defendant acted in “bad
faith.” This argument dovetails into Plaintiffs’ previous argument that their negligence claim
morphs into an intentional tort because they allege that Defendant allegedly acted in “bad faith.”

Because Counts II and III are statutory-based, the Court assumes that Plaintiffs’ argument in this section refers
only to the alleged negligence claim in Count IV. However, to the extent that Plaintiffs contend that the statutory
claims are also “bad faith” claims, this discussion would apply to those claims as well.
4

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Plaintiffs conflate punitive damages with emotional distress damages. See Doc. 75 at 11
(“As the Sloan court recognized, ‘such reckless disregard supports a claim for punitive damages’”)
(emphasis added). They rely on cases that are irrelevant because they set out black letter law
regarding the insurer’s duty of good faith, see Doc. 75 at 10, but are silent on the topic of emotional
distress claims. See, e.g., Sherrill v. Farmers Ins. Exch., 2016-NMCA-056, ¶ 36, 374 P.3d 723,
732 (citing Sloan v. State Farm Mut. Auto. Ins. Co., 360 F.3d 1220, 1224 (10th Cir. 2004) (“In
most cases, evidence of bad faith sufficient to present the case to the jury will warrant an
instruction on punitive damages because it could support a culpable mental state”) (emphasis
added).5
Under New Mexico law, allegations of a culpable state allow a plaintiff to recover punitive
damages, but they do not constitute one of the limited circumstances in which a plaintiff may
recover emotional distress damages.
D.

Cases From Other Jurisdictions

Plaintiffs have managed to unearth a few cases from other jurisdictions to argue that their
claims entitle them to a recovery of emotional distress damages. See, e.g.,Patel v. United Fire &
Cas. Co., 80 F. Supp. 2d 948, 957 (N.D. Ind. 2000) (emotional distress damages allowed in the
case of an intentional tort which would foreseeably provoke an emotional disturbance of the kind
normally to be aroused in the mind of a reasonable person); Universal Life Ins. Co. v. Veasley, 610
So. 2d 290, 295 (Miss. 1992) (Bad faith is considered an independent tort allowing damages for

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See also Woodmen Acc. & Life Ins. Co. v. Bryant, 784 F.2d 1052, 1057 (10th Cir. 1986) (punitive damages may be
awarded in New Mexico for the bad faith denial of an insurance claim) (State Farm General Insurance Co. v.
Clifton, 86 N.M. at 759, 527 P.2d at 800–01); Jackson Nat. Life Ins. Co. v. Receconi, 113 N.M. 403, 418–19 (1992)
(concluding that insurer’s refusal to pay on policy did not support a judgment for punitive damages); Sloan v. State
Farm Mut. Auto. Ins. Co., 2004-NMSC-004, 135 N.M. 106, 85 P.3d 230) (under New Mexico law, punitive
damages are available in order to recover punitive damages for an insurer's failure to settle or pay, even without a
showing of a culpable mental state), overruling Teague–Strebeck Motors, Inc. v. Chrysler Ins. Co., 127 N.M. 603,
985 P.2d 1183.

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mental anguish and emotional distress); Goodson v. Am. Standard Ins. Co. of Wisconsin, 89 P.3d
409, 412 (Colo. 2004) (in tort claim against an insurer for breach of the duty of good faith and fair
dealing, a plaintiff may recover damages for emotional distress without proving substantial
property or economic loss).
These cases support Plaintiffs’ position, but the Court will not consider them because they
are irrelevant to whether New Mexico allows recovery of emotional distress damages for bad faith
claims. Boyd Rosene & Assocs., Inc. v. Kansas Mun. Gas Agency, 123 F.3d 1351, 1352–53 (10th
Cir. 1997) (federal court sitting in diversity must apply the substantive law of the state in which it
sits).
CONCLUSION
New Mexico law allows the recovery of emotional distress damages under limited
circumstances. Plaintiff do not assert any claims which fall under those circumstances. Plaintiffs
argue that allegations of bad faith entitle them to recover damages for emotional distress, but this
argument is not supported under New Mexico law.
THEREFORE, IT IS ORDERED that Defendant’s Motion for Summary Judgment
Regarding Plaintiffs’ Emotional Injury Claims and Damages (Doc. 66) is GRANTED for the
reasons described in this Memorandum Opinion and Order.

_________________________________________
CHIEF UNITED STATES DISTRICT JUDGE

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