Property Casualty Focus

In Wilson v. Cincinnati Specialty Underwriters Insurance Co., the New Mexico Court of Appeals affirmed the district court’s decision granting summary judgment to an insurer after determining that bad faith claims on a shooting plainly excluded under the subject general liability policy, raised only in the plaintiff’s motion to amend the complaint and never directly ruled on by the lower court, could not be brought on appeal.

Cincinnati Specialty Underwriters Insurance Co. issued the subject general liability policy to the Improved Benevolent Protective Order of the Elks of the World Albuquerque Navajo Lodge #863. The policy contained an exclusion for assault and battery, which provided in pertinent part:

[I]nsurance does not apply to “bodily injury,” “property damage” or “personal and advertising injury” arising out of ... the failure of any insured ... to prevent or suppress assault or battery ... or provide an environment safe from assault or battery, including but not limited to the failure to provide adequate security, or failure to warn of the dangers of the environment that could contribute to assault or battery ... or the negligent [e]mployment ... [s]upervision, [t]raining, or [r]etention ... of a person for whom any insured is or ever was legally responsible.

On February 14, 2015, Edwin Wilson attended a comedy show at the lodge. During the show, an altercation broke out and Wilson was shot, leaving him paralyzed from the waist down. Wilson made a time-limited policy limits demand to Cincinnati in June 2015, which was accompanied by Wilson’s complaint against the lodge. That same day, Cincinnati advised Wilson that there was no coverage for the event. Five days later, Wilson proceeded to serve his complaint to the lodge.

Thereafter, Cincinnati filed a declaratory judgment action seeking a determination that it had no duty to defend the lodge. The federal district court agreed with Cincinnati and ordered a default judgment against the lodge. In February 2016, following the withdrawal of its attorney from the underlying state district case, the lodge assigned its rights to Wilson. A damages trial in August 2015, at which the Lodge was unrepresented, resulted in a judgment in favor of Wilson in excess of $14 million.

In January 2017, Wilson proceeded to file a separate lawsuit against Cincinnati asserting negligence and various breaches of duty. The lawsuit did not assert any claims related to the duty to defend, the duty to settle, or bad faith. Approximately seven months after the deadline to amend pleadings passed and two months before trial, Wilson filed a motion for leave to file an amended complaint, with the proposed amended complaint attached. The amended complaint included bad faith claims against Cincinnati.

The district court set a hearing on Wilson’s motion for leave to file an amended complaint, Cincinnati’s motion for summary judgment based on lack of coverage, and various other motions. At the hearing, the district court primarily heard argument on the insurer’s motion to dismiss. Wilson did not raise his motion for leave to file an amended complaint, obtain a ruling on his motion, or even mention the existence of any bad faith claims at the hearing. In August 2023, Cincinnati’s summary judgment motion was granted on the basis that the lodge’s policy excluded coverage for Wilson’s injuries, which was dispositive of all other claims.

On appeal, Wilson argued that Cincinnati breached its duty to defend and its duty to settle, which evidenced bad faith, and further argued that the district court erred in finding in favor of Cincinnati on the coverage issue. The New Mexico Court of Appeals, applying New Mexico law, concluded that the district court’s granting of Cincinnati’s motion for summary judgment equated to a denial of Wilson’s motion for leave to file an amended complaint, even though it did not directly rule on the matter.

Though the state district court never directly ruled on Wilson’s motion for leave to file an amended complaint nor issued any ruling on the merits of his bad faith claims, the appellate court followed precedent and held that Wilson was barred from bringing his bad faith claims on appeal because the district court’s summary judgment ruling effectively denied Wilson’s motion for leave to amend the complaint. The court also found that the allegations in the complaint were clearly excluded by the unambiguous assault and battery exclusion. Accordingly, summary judgment in Cincinnati’s favor was affirmed.