Dove v. State Farm Fire & Casualty Company
(Any Potential for Coverage Triggers Insurer’s Duty to Defend Until the Parties’ Rights and Responsibilities are Judicially Determined)
(April 2019) - In Dove v. State Farm Fire & Cas. Co., 2017-NMCA-051, the New Mexico Court of Appeals (“NMCA”) reversed the trial court’s entry of summary judgment in favor of State Farm Fire & Casualty Company (“State Farm”) on the issue of State Farm’s duty to defend a tenant, Jenny Dove (“Dove”) under a rental dwelling insurance policy issued to Dove’s landlord Betsy Joyce (“Joyce”).
Dove was renting one unit of a two unit complex from Joyce. At the time of the loss, Joyce had asked Dove to water the flowers in the common areas of the complex and “make sure things stayed alive.”. Dove was not compensated for watering and she did not receive a rent reduction. While Dove was in the common area watering pursuant to Joyce’s request, a utilities employee David Tapia (“Tapia”) was reading an electric meter on the premises when he was attacked and injured by Dove’s dog.
Tapia sued Dove and Joyce for negligence. At the time of the incident, Joyce was the named insured on a rental dwelling insurance policy issued by State Farm. State Farm tendered a defense to Joyce because she was the named insured. However, State Farm denied Dove’s demand for a defense because she was not the named insured and because State Farm believed Dove did not “qualify as an insured by definition under the rental dwelling policy.”. The policy defined “insured” to include “any person or organization while acting as real estate manager for [Joyce].” The policy did not define “real estate manager.”.
Tapia and Dove entered into a settlement agreement wherein Dove assigned to Tapia her rights against State Farm for any cause of action Dove had against State Farm for failure to defend and indemnify Dove in the primary action. Dove and Tapia then filed a third-party complaint against State Farm, seeking a declaratory judgment that State Farm breached its duty to defend Dove. State Farm moved for summary judgment, arguing that Dove “was simply a tenant” and thus “[State Farm] correctly concluded [Dove] was excluded from coverage under [the policy as a tenant].”. State Farm argued that Dove could not be considered a “real estate manager” (and thereby covered under the policy) based on her limited maintenance duties as a tenant.
Dove and Tapia argued that the question the trial court had to answer was not whether Dove was, in fact, a real estate manager, but whether the facts as known to or discoverable by State Farm suggested that Dove was “potentially” covered by the policy. The trial court granted summary judgment in favor of State Farm, finding that State Farm did not have a duty to defend based upon the fact that Dove was a tenant and not a “real estate manager” and thus not covered under the policy. Dove and Tapia appealed. The NMCA reversed and found that because Dove watered plants she was “potentially” or “arguably” a real estate manager, or at the least it was ambiguous enough to trigger a duty to defend.
The NMCA reversed the trial court’s decision and entered summary judgment against State Farm, holding that State Farm breached its duty to defend. The NMCA concluded that in order for the trial court’s ruling to be affirmable, the trial court must have been indisputably correct in its assessment that Dove was not a real estate manager under the policy, i.e. that the incident clearly fell outside the policy’s coverage provisions.
Jill M. Collins, Partner