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Federated Service Insurance Co. v. Martinez

United States Court of Appeals, Tenth Circuit

July 19, 2013

FEDERATED SERVICE INSURANCE COMPANY, a Minnesota corporation, Plaintiff-Counter-Defendant- Appellee,
v.
DANNY MARTINEZ, Defendant-Counter-Claimant- Appellant.

(D.C. No. 1:06-CV-00638-JAP-WDS) (D.N.M.)

Before LUCERO, HOLMES, Circuit Judges, and BRIMMER, [**] District Judge.

ORDER AND JUDGMENT[*]

Carlos F. Lucero, Circuit Judge.

On May 11, 2005, Danny Martinez was working on the premises of his employer, Capitol Motor Company ("Capitol"), when he was struck by a car driven by an uninsured motorist. He and Capitol's insurer, Federated Service Insurance Company ("Federated"), dispute whether Federated is required to pay uninsured/underinsured motorist ("UM/UIM") benefits to Martinez under Capitol's insurance policy.

In this case's prior appearance before this court, we reversed a grant of summary judgment in favor of Federated, concluding that Capitol had not validly rejected UM/UIM insurance for non-management employees like Martinez. Federated Serv. Ins. Co. v. Martinez, 385 F.App'x 845, 846-47 (10th Cir. 2010) (unpublished). On remand, the district court granted summary judgment in favor of Federated after determining that Martinez was covered for UM/UIM purposes only if occupying a vehicle covered by the policy at the time of the accident; Martinez admits he was not. Martinez appeals for a second time. Exercising jurisdiction under 28 U.S.C. § 1291, we reverse and remand.

I

Under the "Garage Coverage" section of Capitol's policy in effect at the time of Martinez's May 2005 accident, Federated agreed to pay "all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies caused by an 'accident' and resulting from 'garage operations' other than the ownership, maintenance or use of covered 'autos.'" Under the header "Who Is An Insured, " the policy provides that "employees . . . while acting within the scope of their duties" are "'insureds' for 'garage operations' other than covered 'autos.'"

The policy initially provided UM/UIM coverage to any person who qualified as an insured. However, an endorsement with an effective date of March 1, 2005 rejects UM/UIM coverage for insureds other than officers, directors, partners, or owners of Capitol and their family members. A related endorsement, also with an effective date of March 1, 2005, sets forth the terms of UM/UIM coverage. It states that "the provisions of the Coverage Form apply unless modified by the endorsement." The endorsement provides that "[a]nyone other than a Class 1 'insured'" is covered "while 'occupying' a covered 'auto.'" Employees are included within the definition of "[a]nyone other than a Class 1 'insured.'"

After his accident, Martinez asserted a claim under the policy. Federated denied the claim and filed a declaratory judgment action to determine whether it was required to pay UM/UIM benefits to Martinez. In its complaint, Federated alleged that UM/UIM "coverage was declined or rejected for employees of Capitol Motor Company as set forth" in the UM/UIM "Limit of Insurance" endorsement. Federated also claimed generally that "[o]ther provisions and conditions of the Federated policy may [] preclude uninsured or underinsured coverage for Mr. Martinez."

Both parties filed motions for summary judgment on the issue of whether Capitol had validly rejected UM/UIM coverage for non-management employees. Concluding that coverage had been validly rejected, the district court granted summary judgment to Federated. Martinez appealed to this court. We certified the following question to the New Mexico Supreme Court: "For a valid rejection of UM/UIM coverage under New Mexico law, must that rejection be written, signed by the insured, and attached to the policy?" Federated Serv. Ins. Co. v. Martinez, 300 F.App'x 618, 618-19 (10th Cir. 2008) (unpublished).

In response, the New Mexico Supreme Court concluded that "an insurer must obtain a written rejection of UM/UIM coverage from the insured in order to exclude it from an automobile liability insurance policy." Marckstadt v. Lockheed Martin Corp., 228 P.3d 462, 464 (N.M. 2009). In Martinez's case, the court noted that "it appears undisputed that the policy provided some liability coverage for the injured employee, " and that it was "uncontested that Capitol intended to reject [UM/UIM] coverage." Id. at 466. However, the state court ruled that "the question of the intent to include or not to include the third-party beneficiaries in UM/UIM coverage is irrelevant because the issue is whether the rejection, if any, conformed with the requirements of the statute and the regulation." Id. at 472.

Because the March 1, 2005 endorsement did not fulfill statutory requirements for rejection, we held that Capitol had not validly rejected UM/UIM insurance. Martinez, 385 F.App'x at 846-47. We accordingly reversed the grant of summary judgment in favor of Federated and remanded for proceedings not inconsistent with our order and judgment. Id. at 849-50.

On remand, the district court granted partial summary judgment to Martinez. Federated moved for reconsideration, contending the prior proceedings established only that Capitol did not effectively reject UM/UIM coverage for non-management employees, but did not decide whether Martinez's injuries were eligible for UM/UIM coverage, whether and how Martinez might be entitled to stack coverage, or the extent of Martinez's damages. The district court granted Federated's motion for reconsideration.

After further briefing, the district court granted summary judgment in favor of Federated. It concluded that Martinez, as an employee of Capitol, was covered for UM/UIM purposes only if he was occupying a vehicle covered by the policy. Because Martinez was not occupying a covered vehicle at the time of his injury, the ...


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