Insurance agents probably smile tolerantly at the scene, the way lawyers learn to react to lawyer jokes, but the gags wouldn’t be funny if they lacked all relationship to reality. Writing about insurance poses a challenge for a legal columnist.
That’s true even when a tricky question of insurance law involves a 150-pound bullmastiff dog. The DogTime website describes the bullmastiff as “a firm and fearless family guardian” known to be “standoffish toward strangers.” One-hundred fifty pounds is a lot of standoffishness.
In August, 2007, David Tapia, a PNM employee, was reading the electric meter at a rental property in Santa Fe when the dog demonstrated just what “firm and fearless” really means. Tapia’s injuries were severe. In the ensuing litigation, he and the dog’s owner agreed his damages totaled $107,056.
The dog’s owner was Jenny Dove, a tenant living in a one-room casita at the back of the property. The casita had its own private yard, separated by a fence from the property’s common backyard. But the property owner, Betsy Joyce, who lived in California, had asked Dove to take care of the plants in the common yard. At the time of the attack, Dove was in the common yard, tending to her gardening duties. The dog was keeping her company – and protecting her from strangers.
Joyce had insurance with State Farm. Her policy included liability coverage, which provided protection not only to Joyce, but also to any “real estate manager” she hired to take care of the property. State Farm agreed to pay their legal fees and to cover any damages assessed against them.
Tapia sued Joyce and Dove. State Farm “tendered a defense” (as we lawyers like to say) to Joyce. The attorney hired by State Farm won summary judgment for Joyce, who had done nothing wrong. But State Farm refused to defend Dove, who was merely a tenant and not named in the policy. That corporate decision triggered a sequence of events. First, Dove and Tapia settled. Dove agreed to pay $107,056. But instead of writing a check, Dove assigned to Tapia her claim against State Farm for its refusal to provide her with a defense.
With that assignment, Tapia acquired Dove’s right to sue State Farm. From that point forward, it was in Dove’s interest to assist Tapia in the very lawsuit he had originally brought against her. Previously adversaries, they now became allies, equally intent on getting State Farm to pay the full $107,056, which would compensate him while relieving her of debt.
State Farm’s legal position was straightforward. The contract of insurance required it to provide a defense only to Joyce and any person “acting as real estate manager” for her. It didn’t include any obligation to defend tenants. But when State Farm wrote the contract, it failed to define “real estate manager.” That was a fatal omission.
In New Mexico law, the term “property manager” can mean a licensed real estate professional. But the contract didn’t refer to that legal definition. Since State Farm wrote the contract, it could have been specific. But it wasn’t, leaving the phrase open to interpretation. Tapia contended that grounds maintenance is one aspect of managing a property. That’s a modest proposition, hard to argue with. But it means that when Joyce asked Dove to tend the plants in the common yard, she made her a manager of the property. Not the only manager, or even the primary one (someone else found tenants and collected rent), but the contract didn’t say it applied to only one manager at a time.
When the case came before our Court of Appeals this spring, nearly 10 years after the painful encounter between man and dog, the court concluded that Dove was “potentially” a real estate manager within the meaning of the policy. And that potential imposed on State Farm a contractual duty to do one of two things: either ask a judge to declare it owed no duty to defend Dove, or else defend her. Because it did neither, it breached its duty to her. The appeals court sent the case back to trial court to work out the financial ramifications of its decision.
The case offers lessons for insurance companies (define the crucial terms in your contracts), for landlords (be careful about asking tenants to work on your property), and, above all, for injured Davids battling insurance Goliaths (don’t give up).
Joel Jacobsen is an author and has recently retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at email@example.com