                                                                                  FILED
                                                                      United States Court of Appeals
                                       PUBLISH                                Tenth Circuit

                      UNITED STATES COURT OF APPEALS                        January 20, 2016

                                                                           Elisabeth A. Shumaker
                             FOR THE TENTH CIRCUIT                             Clerk of Court
                         _________________________________
COREY CHRISTY,

      Plaintiff - Appellant,

v.                                                           No. 14-2168

TRAVELERS INDEMNITY COMPANY
OF AMERICA,

      Defendant - Appellee.
                      _________________________________

                     Appeal from the United States District Court
                           for the District of New Mexico
                         (D.C. No. 1:13-CV-00281-WJ-CG)
                       _________________________________

Clayton E. Crowley, Crowley & Gribble, P.C., Albuquerque, New Mexico, for Plaintiff-
Appellant.

Jennifer A. Noya (Tiffany Roach Martin, with her on the brief), Modrall, Sperling, Roehl,
Harris & Sisk, P.A., Albuquerque, New Mexico, for Defendant-Appellee.
                        _________________________________

Before BRISCOE, McKAY, and McHUGH, Circuit Judges.
                  _________________________________

McHUGH, Circuit Judge.
                    _________________________________


      Plaintiff-Appellant Corey Christy purchased a commercial general-liability

insurance policy (the CGL Policy) from Travelers in the name of his sole

proprietorship, K&D Oilfield Supply (K&D). Subsequently, Mr. Christy registered
his business as a corporation under the name K&D Oilfield Supply, Inc. (K&D, Inc.).

Mr. Christy renewed his CGL Policy annually, but did not notify Travelers that he

had incorporated his business. After Mr. Christy formed K&D, Inc., he was in an

accident and made a claim under the CGL Policy. Travelers denied coverage based

on Mr. Christy’s failure to inform it of the change in business form, and Mr. Christy

brought suit. On cross motions for summary judgment, the district court found in

favor of Travelers. We affirm in part, reverse in part, and remand for further

proceedings.

                                 I.     BACKGROUND

      Mr. Christy purchased the CGL Policy from Travelers in 2007. The Policy

designated K&D as the named insured and listed the “Form of Business” as

“Individual,” indicating K&D was a sole proprietorship. The CGL Policy insured a

truck used for K&D’s business as a “covered auto” and included uninsured motorist

(UM) coverage in the amount of $1,000,000. In addition to the CGL Policy, the

Christys also purchased an auto insurance policy through Travelers on their personal

vehicle (the Personal Policy).

      Subsequently, an attorney advised Ms. Christy that K&D should be

incorporated to protect the family’s assets from liability incurred by the business. The

Christys incorporated K&D, Inc. in April 2008, but did not notify Travelers of the

change.

      Each year at the renewal of the CGL Policy, the Christys’ insurance agent sent

a cover letter stating, “Please review your policy for accuracy and advise me if any

                                           2
changes or additional coverage are needed.” Additionally, the Christys’ insurance

agent met with them annually to advise them about their coverage. The Christys did

not inform Travelers of the formation of K&D, Inc. during any of these annual

meetings.

      On July 28, 2010, Mr. Christy was seriously injured when a vehicle operated

by an underinsured motorist struck him while he was riding his bicycle. Mr. Christy

recovered the underinsured motorist’s policy limits of $25,000. He received an

additional $100,000 from the UM coverage on the Personal Policy with Travelers.

Relevant to this appeal, Mr. Christy also sought to recover under the UM provision of

the CGL Policy,1 but Travelers denied the claim.

      Mr. Christy brought suit, arguing he was entitled to UM benefits under the

CGL Policy. Specifically, he pointed to the CGL Policy’s identification of K&D as

the “Named Insured” and the “Form of Business” as “Individual.”2 He also relied on

the CGL Policy’s definition of an “Insured” as “any person or organization

qualifying as an insured in the Who Is An Insured provision of the applicable

coverage.” That provision of the CGL Policy states:

      If the Named Insured is designated in the Declarations as:

      1. An individual, then the following are “insureds”:
            a. The Named Insured and any “family members”.

      1
        The CGL Policy, and in particular the UM Endorsement, includes both
uninsured and underinsured motor vehicles within the definition of “uninsured motor
vehicle.”
      2
         All references to the terms of the Policy reflect the version of the Policy in
effect at the time of Mr. Christy’s accident.
                                            3
            b. Anyone else “occupying” a covered “auto” or a temporary
                substitute for a covered “auto”. The covered “auto” must
                be out of service because of its breakdown, repair,
                servicing, “loss” or destruction.
            c. Anyone for damages he or she is entitled to recover
                because of “bodily injury” sustained by another “insured”.
      2. A partnership, limited liability company, corporation, or any
         other form of organization, then the following are “insureds”:
            a. Anyone “occupying” a covered “auto” or a temporary
                substitute for a covered “auto”. The covered “auto” must
                be out of service because of its breakdown, repair,
                servicing, “loss” or destruction.
            b. Anyone for damages he or she is entitled to recover
                because of “bodily injury” sustained by another “insured”.
            c. The Named Insured for “property damage” only.

The UM endorsement further provides that Travelers will pay “all sums the ‘insured’

is legally entitled to recover as damages from the owner or driver of an ‘uninsured

motor vehicle’ because of . . . ‘[b]odily injury’ sustained by an ‘insured’ and caused

by an ‘accident.’” The CGL Policy broadly defines “Accident” to include

“continuous or repeated exposure to the same conditions resulting in ‘bodily injury’

or ‘property damage.’”

      Based on this language, Mr. Christy claimed he was entitled to recover UM

benefits as an “insured” under the CGL Policy. Specifically, Mr. Christy argued that

although K&D was designated as the named insured on the CGL Policy, Mr. Christy

was the true named insured as the sole proprietor of K&D, which was simply a name

under which Mr. Christy did business. According to Mr. Christy’s reading of the

CGL Policy, the named insured was an individual—Mr. Christy—and therefore UM

coverage was available for any accident, not only accidents occurring while the



                                           4
insured was occupying a covered auto. As such, Mr. Christy argued the CGL Policy

provides coverage for the accident that occurred while he was riding his bicycle.

      Travelers contended the incorporation of K&D effectively changed the named

insured to K&D, Inc. And, according to Travelers, where the named insured is a

corporation, the CGL Policy covers only persons occupying an insured vehicle at the

time of the accident. Thus, Travelers asserts Mr. Christy’s bicycle accident is not

covered by the CGL Policy.

      Following discovery, the parties filed cross-motions for summary judgment,

advancing their competing positions on whether Mr. Christy was entitled to UM

coverage under the CGL Policy. The district court granted summary judgment in

favor of Travelers. The district court found, first, that Mr. Christy had a duty to

notify Travelers he had changed the form of his business from a sole proprietorship

to a corporation. Second, the district court found that Mr. Christy’s failure to update

Travelers about the change in his business structure constituted a material

misrepresentation that had induced Travelers to renew the CGL Policy in 2008, 2009,

and 2010. The district court therefore reformed the CGL Policy to reflect K&D, Inc.

as the named insured from 2008 through 2010 and held that, as reformed, the CGL

Policy did not cover Mr. Christy’s bicycle accident.

      Mr. Christy appeals. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we

reverse in part, affirm in part, and remand for additional proceedings.




                                            5
                                   II.   DISCUSSION

      Because this case comes before the panel from a grant of summary judgment,

we review the district court’s ruling de novo, applying the same legal standard as the

district court. Holub v. Gdowski, 802 F.3d 1149, 1154 (10th Cir. 2015), petition for

cert. filed, -- U.S.L.W. --- (U.S. Dec. 30, 2015) (No. 15-839). “Summary judgment is

appropriate when ‘the movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.’ We view the

facts and evidence submitted by the parties in the light most favorable to the non-

moving party.” Id. (citation omitted) (quoting Fed. R. Civ. P. 56(a)).3 A factual

dispute is material only if it might affect the outcome of the case. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986).

      On appeal, Mr. Christy argues the district court erred when it determined he

had an affirmative duty to notify Travelers of the formation of K&D, Inc. He also

alleges his failure to inform Travelers about the incorporation did not constitute a

material misrepresentation and, therefore, reformation was inappropriate. Finally,

Mr. Christy contends the district court erred in granting summary judgment on his

claim for breach of the implied covenant of good faith and fair dealing.




      3
        Both parties filed motions for summary judgment before the district court. In
such cases, “[c]ross-motions for summary judgment are to be treated separately.”
Buell Cabinet Co. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979). Because Mr.
Christy appeals the district court’s grant of summary judgment in Travelers’ favor,
we treat Travelers’ motion independently and consider Mr. Christy the non-moving
party for purposes of this appeal.
                                           6
      Because we cannot determine as a matter of law that Mr. Christy had an

affirmative duty to inform Travelers of the formation of K&D, Inc., summary

judgment was inappropriate on this issue. In addition, Mr. Christy raised genuine

issues of fact that preclude a determination at this stage of the proceedings of

whether the failure to inform Travelers was a material misrepresentation. As such,

the district court erred in reforming the policy on that ground.4 We therefore reverse


      4
         Before the district court, Travelers also asserted theories of mutual and
unilateral mistake and breach of contract. Because the district court found Mr.
Christy made a material misrepresentation by not informing Travelers of the
incorporation of K&D, Inc., it did not address Travelers’ additional arguments. On
appeal, Travelers has not renewed its breach of contract argument as an alternate
ground to affirm the district court’s grant of summary judgment. And Travelers
addresses its theories of unilateral and mutual mistake only in passing in two
footnotes in its brief. As such, they are not properly presented to this court as
alternate grounds to affirm the grant of summary judgment.
       But even if Travelers had properly presented these arguments as alternate
grounds to affirm, we would nevertheless be precluded from doing so because either
theory requires factual determinations better made by the district court in the first
instance. For unilateral mistake, reformation is appropriate under New Mexico law
only if the mistake is accompanied by fraud or other inequitable conduct on the part
of the nonmistaken party. See Chromo Mountain Ranch P’ship v. Gonzales, 681 P.2d
724, 725 (N.M. 1984). The district court has not made a finding that Mr. Christy
acted fraudulently by not updating Travelers about the incorporation of his business.
See Prudential Ins. Co. of Am. v. Anaya, 428 P.2d 640, 643 (N.M. 1967) (holding a
finding of fraud is not required when determining whether a party engaged in a
material misrepresentation). We therefore leave the consideration of this issue for
remand.
       As to mutual mistake, New Mexico law allows for reformation of a contract
“where there has been a meeting of the minds, an agreement actually entered into, but
the contract, deed, settlement, or other instrument, in its written form, does not
express what was really intended by the parties thereto.” C.R. Anthony Co. v. Loretto
Mall Partners, 817 P.2d 238, 245 (N.M. 1991) (internal quotation marks omitted).
Before the court can reform a writing, the party seeking reformation must show
“clearly and beyond doubt that there has been a mistake . . . [and must] also be able
to show with equal clearness and certainty the exact and precise form and import that
the instrument ought to be made to assume, in order that it may express and
                                           7
the grant of summary judgment in favor of Travelers and remand for further

proceedings. But we affirm the grant of summary judgment as to Mr. Christy’s claim

for breach of the implied covenant of good faith and fair dealing.

                                    A. Duty to Inform

      We begin our analysis with the question of whether—based on the undisputed

facts—Mr. Christy had an affirmative obligation to inform Travelers that he had

incorporated K&D, Inc. The district court found Mr. Christy was obligated to inform

Travelers of the change in the form of his business for two reasons: (1) the provisions

of the CGL Policy created a contractual duty to inform and (2) public policy supports

imposition of such a duty. We disagree.

1. CGL Policy Provisions

      Under New Mexico law, parties are free to structure their contractual

obligations as they wish, so long as they do not clearly contravene public policy. See

First Baptist Church of Roswell v. Yates Petroleum Corp., 345 P.3d 310, 313–14

(N.M. 2015); Nearburg v. Yates Petroleum Corp., 943 P.2d 560, 571 (N.M. Ct. App.

1997) (“Parties to a contract agree to be bound by its provisions and must accept the

burdens of the contract along with the benefits.”). Recognizing this general principle,

New Mexico courts interpret contractual provisions to effectuate the intent of the

parties. See WXI/Z Sw. Malls v. Mueller, 110 P.3d 1080, 1083 (N.M. Ct. App. 2005).

effectuate what was really intended by the parties.” Twin Forks Ranch, Inc. v.
Brooks, 964 P.2d 838, 841 (N.M. Ct. App. 1998) (internal quotation marks omitted).
But the question of the parties’ true intent is a factual matter, best decided by the
district court after a full evidentiary hearing. C.R. Anthony, 817 P.2d at 246. Again,
the district court should consider this question in the first instance on remand.
                                           8
“[A]nd absent any ambiguity, the court may not alter or fabricate a new agreement

for the parties.” Id. (internal quotation marks omitted).

      Travelers argues the express language of the Policy imposed an obligation on

Mr. Christy to inform Travelers he had incorporated his business. To begin, Travelers

relies on a provision in the Policy that reads: “This policy contains all the agreements

between you and us concerning the insurance afforded.” According to Travelers, this

language created an affirmative obligation requiring Mr. Christy to notify Travelers

of any changes to his business structure. The district court agreed with Travelers,

characterizing this language as a “catch-all” provision that required Mr. Christy to

inform Travelers of any changed circumstances.

      We do not agree with this reading. Nothing in the express language of the

provision imposes any obligation on either Mr. Christy or Travelers. Rather, the

provision is a standard integration clause, which merges any prior or

contemporaneous agreements into the final written contract. See Nakashima v. State

Farm Mut. Auto. Ins. Co., 153 P.3d 664, 668 (N.M. Ct. App. 2007); see also 2 David

Frisch, Lawrence’s Anderson on the Uniform Commercial Code § 2-202:48 (3d ed.)

(“An integration clause is indicative that the parties intended the writing to be the

exclusive statement of the parties’ agreement, and will usually be given that effect.”).

The sole and unambiguous effect of this provision is to limit the parties’ agreement to

the final written contract. There is no obligation-creating language in the clause, and




                                            9
we will not read into the CGL Policy duties not clearly contemplated by the parties.5

See Cont’l Potash, Inc. v. Freeport-McMoran, Inc., 858 P.2d 66, 80 (N.M. 1993)

(“Thus, implied covenants are not favored in law, especially when a written

agreement between the parties is apparently complete.”). To the extent the integration

clause is relevant to the issue of Mr. Christy’s duty, it dictates that any obligation to

notify Travelers about the formation of K&D, Inc. must be expressly stated in the

Policy.

      Travelers argues that such an obligation can be found in the provision stating

that the Policy is void if an insured commits fraud or “intentionally conceal[s] or

misrepresent[s] a material fact.” Travelers argues this language created an affirmative

duty for Mr. Christy to inform Travelers of the change in business form. Again, we

disagree. This provision states that the CGL Policy is void in the event of fraud or if

an insured “intentionally conceal[s] or misrepresent[s] a material fact.” By its plain

language, it does not impose a duty requiring Mr. Christy to inform Travelers of

changes to his business. It does not expressly impose affirmative obligations on

either party. Under this provision, the CGL Policy could be rendered void if Mr.

Christy made a material misrepresentation to Travelers. But, as explained below, we

      5
        In fact, had Mr. Christy wanted to change the Policy to reflect K&D, Inc. as
the named insured, this provision would have required him to do so in writing
through a suitable endorsement. See Koehlke v. City Street Inn, Inc., No. 2002-A-
0108, 2003 WL 22290888, at *2–3 (Ohio Ct. App. Sept. 30, 2003) (interpreting
identical language to require insured to notify insurer in writing of change from sole
proprietorship to corporation if she wished to bring a claim under a theory of liability
only available to her if policy was issued to a corporation). That is, the integration
clause would have precluded Mr. Christy from unilaterally altering the terms of the
Policy simply by forming K&D, Inc.
                                            10
cannot determine at this stage of the proceedings whether Mr. Christy made such a

material misrepresentation. As a result, it is uncertain whether this provision of the

CGL Policy is implicated. See discussion infra.

       The district court therefore erred in concluding the language of the CGL Policy

imposed an ongoing obligation on Mr. Christy to update Travelers about any changed

circumstances related to his business.

2. Public Policy

       Alternatively, the district court concluded Mr. Christy’s duty to inform

Travelers of the incorporation of K&D, Inc. arose as a matter of public policy.

According to the district court, such an obligation should be imposed as a matter of

public policy even in the absence of an express provision in the CGL Policy requiring

Mr. Christy to keep Travelers informed of any changes in K&D’s business structure.

       We depart from the district court’s analysis on this issue for two reasons. First,

the district court reached the conclusion that it was required to consider public policy

based on the application of tort duty analysis. Although the imposition of a legal duty

in the tort context is based, in part, on public policy, see, e.g., Calkins v. Cox Estates,

792 P.2d 36, 39 (N.M. 1990) (stating in the negligence context, “The existence of a

duty is a question of policy to be determined with reference to legal precedent,

statutes, and other principles comprising the law”), the same analytical framework

does not govern cases, like this, which sound in contract. Neither the district court

nor the parties have cited any authority supporting the idea that New Mexico courts,

in an attempt to conform the agreement to public policy, will impose on parties to a

                                            11
contract affirmative obligations other than the few well-recognized covenants implied

by law. See, e.g., Paiz v. State Farm Fire & Cas. Co., 880 P.2d 300, 309–10 (N.M.

1994) (recognizing that every contract in New Mexico contains an implied covenant

of good faith and fair dealing). Indeed, doing so would be contrary to the New

Mexico courts’ admonition against imposing contractual obligations not clearly

contemplated by the parties.6 See WXI/Z, 110 P.3d at 1083. Thus, New Mexico law

does not support the conclusion that public policy alone can form the basis for

imposing affirmative disclosure obligations on Mr. Christy that are not set forth in

the CGL Policy.

      Second, the district court’s analysis was based on its conclusion that, in the

absence of a duty to notify Travelers of the change in business structure, Mr. Christy

“would be rewarded for making a material misrepresentation, in turn incentivizing

others like [Mr. Christy] to withhold information from insurers to derive greater

benefits which honest disclosure would not have permitted.” But the district court’s



      6
        In New Mexico, express contractual provisions may be rendered
unenforceable based on public policy. See, e.g., Yedidag v. Roswell Clinic Corp., 346
P.3d 1136, 1150 (N.M. 2015) (acknowledging that parties are ordinarily allowed to
negotiate the terms of their agreements and agree to any terms not prohibited by
public policy); State ex rel. King v. B & B Inv. Grp., Inc., 329 P.3d 658, 670 (N.M.
2014) (explaining that public policy “allows courts to render unenforceable an
agreement that is unreasonably favorable to one party while precluding a meaningful
choice of the other party” (internal quotation marks omitted)); see also 5 Williston on
Contracts § 12:1 (4th ed.) (explaining that some bargains are rendered unenforceable
because enforcement is against public policy); Restatement (Second) of Contracts
§ 178 (explaining that certain terms of a contract may be unenforceable on public
policy grounds). But none of these authorities allows a court to impose affirmative
contractual obligations not bargained for by the parties based solely on public policy.
                                          12
assumption that Mr. Christy made a material misrepresentation was improper because

the facts are disputed on this point.7

                               B. Material Misrepresentation

       In addition to arguing that Mr. Christy breached a contractual and public

policy duty to notify Travelers about the incorporation of K&G, Inc., Travelers also

maintains that Mr. Christy may not recover UM benefits under the CGL Policy

because his failure to inform was a material misrepresentation.

       Under New Mexico law, a misrepresentation can be the basis for a party’s

avoidance of contractual obligations through rescission or reformation when “the

contract is based in material part” on that misrepresentation. State ex rel. State

Highway & Transp. Dep’t, 806 P.2d 32, 37 (N.M. 1991). “In order for this to occur,

the recipient of the misrepresentation must show that (1) there was a

misrepresentation that was (2) material or fraudulent and which (3) induced the

recipient to enter into the agreement and that (4) the recipient’s reliance on the

misrepresentation was justified.” Sisneros v. Citadel Broad. Co., 142 P.3d 34, 40

(N.M. Ct. App. 2006). The parties do not seriously dispute the third or fourth prongs

of the test. As such, our analysis focuses on whether Mr. Christy’s silence on the

issue of the formation of K&D, Inc. constituted a material misrepresentation under


       7
        The district court found the existence of a legal duty to inform Travelers of
the incorporation of K&D, Inc. based in part on its conclusion that Mr. Christy
engaged in a material misrepresentation. But, as explained below, Mr. Christy’s
silence on the status of his business organization constitutes a material
misrepresentation only if we first conclude he had a duty to inform Travelers of the
change in business structure.
                                           13
the facts of this case. The district court assumed Mr. Christy’s silence on the changed

form of his business was a misrepresentation under New Mexico law. Then, having

assumed the existence of a misrepresentation, the district court considered whether it

was material. But on these facts, we cannot conclude as a matter of law that Mr.

Christy’s silence rose to the level of a misrepresentation or that it was material.

1. Material Misrepresentation Standard

      “A misrepresentation is an assertion that is not in accord with the facts.”8

Restatement (Second) of Contracts § 159. When Mr. Christy first purchased the CGL

Policy, K&D was a sole proprietorship, and Travelers drafted the CGL Policy to

reflect that status. Thus, Mr. Christy’s original representation as to the form of his

business was in accord with the facts. The issue here then is whether, during the

subsequent renewal periods, Mr. Christy’s silence about the change in his business

structure qualified as “an assertion that is not in accord with the facts.” See

Restatement (Second) of Contracts § 159.

      As explained below, to determine whether silence rises to the level of a

misrepresentation, we must first analyze materiality. If information is not material, an

insured has no duty to disclose in the absence of a specific inquiry. And if the insured

has no duty to disclose, mere nondisclosure will not be considered an affirmative




      8
         New Mexico courts have adopted the Restatement’s formulation of law
related to material misrepresentations. See Sisneros, 142 P.3d at 38. Accordingly, in
the absence of New Mexico authority to the contrary, our discussion similarly relies
on the Restatement, as well as decisions from the New Mexico courts.
                                           14
representation. Thus, the question before us is: When does an insured have a duty to

disclose changes in circumstances that occur after issuance of a policy?

       The Restatement distinguishes between an affirmative misrepresentation, an

act of concealment that rises to the level of an affirmative misrepresentation, and

mere nondisclosure, which may be the equivalent of an affirmative misrepresentation

under certain circumstances. Id. §§ 159–61. In cases like this involving a mere

nondisclosure, the party failing to disclose must know or have reason to know that

the undisclosed fact will influence the decisionmaking of the other party before the

nondisclosure will be treated as an affirmative misrepresentation. Id. § 161; see also

id. § 161 cmt. b (“In order to make the contract voidable . . . the non-disclosure must

be either fraudulent or material. . . . [O]ne is expected to disclose only such facts as

he knows or has reason to know will influence the other in determining his course of

action.”).

       A leading treatise on insurance contracts similarly distinguishes between an

affirmative misrepresentation, concealment, and mere failure to disclose:

       In the law of insurance, “concealment” is the designed and intentional
       withholding of any fact material to the risk which the insured in honesty
       and good faith ought to communicate to the insurer but which the
       insured designedly and intentionally withholds. Mere silence, however,
       is not concealment, at least in the absence of a specific inquiry, for it is
       the context of the surrounding circumstances which determines the legal
       significance of such silence.

6 Couch on Insurance § 81:21 (emphasis added). “A party applying for insurance is

bound to answer truthfully all questions concerning facts material to the risk but

generally has no duty where the application makes no specific inquiries.” Id. § 84:2.

                                           15
And although the materiality of a particular fact is a factor in deciding whether the

insured should have disclosed it, “a prospective insured has no duty to inform an

insurer even with respect to a material factor unless the insured has been asked about

it or otherwise made to know that it is a material basis for issuance of the policy.” Id.

§ 84:6. “Also, because the insured normally is a lay individual and not particularly

knowledgeable in the field of insurance risks, it is unreasonable to impose on the

insured a continuing duty to notify the insurer of any change which would materially

affect the acceptance or continuation of the risk.” Id. § 84:9.

      For Mr. Christy’s mere silence on the change in his business structure to rise

to the level of an affirmative misrepresentation, Travelers must have made a specific

inquiry or Mr. Christy must have known or should have known the structure of his

business was material to Travelers’ decision to renew the CGL Policy. Under the

Restatement and Couch, the insurer has the obligation to inquire about those facts it

considers material to its risk, rather than placing the burden on the untrained insured

to disclose any and all changed circumstances that his insurer may consider

significant. New Mexico’s general adherence to the Restatement convinces us that its

courts would place the onus of inquiry on Travelers as the insurer, rather than

expecting Mr. Christy as the lay insured to divine which facts might be material to

Travelers’ decision to issue or renew a policy. That is, unless Mr. Christy had

knowledge that the information was material to Travelers.

      The Massachusetts Court of Appeals reached a similar conclusion in Quincy

Mutual Fire Insurance Co. v. Quisset Properties, Inc., 866 N.E.2d 966 (Mass. App.

                                           16
Ct. 2007). In Quincy, the insured purchased a commercial auto insurance policy

through his corporation. Id. at 968–69. At the time the insured purchased the policy,

the application accurately reflected all material facts. Id. at 969. The insured renewed

the policy for the next nine years, but at no time did the insurer require the insured to

complete a renewal application or questionnaire. Id. At the renewal period, the

insurer sent the insured a copy of the new policy and a letter that stated “in the event

of a loss or if there is any change in conditions existing at the time this policy was

written, please notify our office.” Id. Six years after purchasing the initial policy, the

insured’s corporation was dissolved. Id. But the insured did not notify the insurer of

the dissolution. Id. at 969–70. Subsequently, the insured made a claim on the

commercial policy, which was denied for failure to notify the insurer of the

dissolution of the company.

       The Massachusetts Court of Appeals reviewed “whether [the insured’s] failure

to notify [the insurer] of [the company’s] dissolution represents a material

misrepresentation that increased the risk of loss to the insurer.” Id. at 970. It

answered that question in the negative, concluding that an insurer has a duty to

inquire into facts and circumstances it deems material to its coverage decisions. Id. at

971–74. The court explained:

       Insureds are not in a position to recognize risk-enhancing circumstances
       as readily as the insurer, who can more easily identify and evaluate
       circumstances that are material to the decision to underwrite and insure
       the risk. Information not asked for is presumably deemed immaterial.
       Moreover, imposing the burden of inquiry on the insurer poses no undue
       burden and reduces, if not eliminates, the difficult determination of


                                            17
       what is, or is not, material to the risk of loss from the perspective of an
       insurer.

Id. at 973 (citation omitted).

       We conclude that the Quincy court’s analysis is consistent with the

Restatement and most likely to reflect New Mexico’s views on this issue.

Furthermore, the cases Travelers cites as support for its argument that New Mexico

would place the burden on the insured are inapposite. For example, Travelers relies

on Rael v. American Estate Life Insurance Co., 444 P.2d 290 (N.M. 1968), for the

proposition that a failure to disclose material information constitutes a

misrepresentation. But in Rael, the insurer’s application specifically asked whether

any family member had undergone any “medical or surgical advice or treatment or

operations in the past 5 years.” Id. at 291 (internal quotation marks omitted). Despite

the fact that, during the five-year period, the insured’s wife and daughter had both

received medical treatment, including surgeries, the insured answered “No.” Id. at

291–92. Not surprisingly, the New Mexico Supreme Court held that an insurer is

entitled to true and complete answers to the questions it asks before issuing a policy.

Id. at 292. But Rael did not address a situation, like the present, in which the insured

truthfully answers the application questions, circumstances later change, and the

insurer arguably does not make further inquiry. Because Rael addressed only an

insured’s obligation not to lie in response to a direct question from the insurer, it is

not controlling here.




                                            18
       Travelers’ reliance on Rehders v. Allstate Insurance Co., 135 P.3d 237 (N.M.

Ct. App. 2006), is similarly misplaced. Travelers argues Rehders stands for the

proposition that an insured is presumed to know and understand the insurance

significance of changing his business from a sole proprietorship to a corporation. But

Rehders cannot be read so broadly. Rehders involved a commercial insurance policy

issued in the name of a sole proprietorship from 1983 until 2001. Id. at 239–40. In

September 2001, the sole proprietors notified Allstate that they had changed their

business from a sole proprietorship to a corporation and requested that their policy be

modified to reflect that change. Id. at 240. Allstate issued a new policy in the name of

the corporation. Id. Subsequently, the proprietors’ son was injured in an accident

with an uninsured driver. Id. Under the prior policy, the son was arguably covered

under the provisions relating to sole proprietorships. Id. But under the new policy

issued to the corporation, Allstate denied coverage, asserting the son was not an

insured. Id. The New Mexico Court of Appeals agreed with Allstate, holding the

proprietors could not have reasonably expected that coverage for their son would

remain the same after changing their business organization and obtaining a new

policy. Id. at 247.

       Travelers relies on Rehders to argue that insureds are always presumed to

understand a change in business form will have insurance implications. But the

Rehders court’s holding is limited by the facts at issue there. Specifically, the

insureds changed their business organization, obtained a new insurance policy that

unambiguously did not provide coverage for the subsequent accident, and then

                                           19
attempted to negate the change they had requested to obtain more favorable coverage

after an accident. The Rehders court did not consider a situation like this case, where

the same policy is in place but there has been a change in the business form of the

insured. As a result, it is not controlling.

       In sum, the CGL Policy may only be reformed or rendered void if Mr. Christy

made a material misrepresentation by failing to disclose the change to his business

form. Mr. Christy’s nondisclosure will only be considered a misrepresentation if he

had a duty to inform Travelers of the change. And Mr. Christy only had such a duty if

the incorporation of his business was material. A finding of materiality depends on

whether Mr. Christy knew or should have known that changing his business form

would affect Travelers’ decision to renew. Accordingly, we now consider whether the

evidence presented of Mr. Christy’s knowledge on this point was undisputed or

instead created a material issue of fact which precludes summary judgment.

2. Evidence

       Mr. Christy averred by affidavit that he was never informed that changing his

business form could affect Travelers’ decision to renew his insurance coverage.

According to Mr. Christy, the annual discussions with his insurance agent focused on

the number of employees and the types of vehicles used by the business. And the

insurance agent testified by deposition that, although he asked Mr. Christy whether

there had been any changes in the business’s “operations,” he never expressly asked

whether the business form had changed. But Travelers points to the cover letter sent

with the annual renewal notice, which states, “Please review your policy for accuracy

                                               20
and advise . . . if any changes or additional coverages are needed.” According to

Travelers, this letter was sufficient to notify Mr. Christy that he should inform

Travelers of any changed circumstances that might warrant a corresponding revision

of the CGL Policy. It was precisely this type of generic inquiry that the Quincy court

rejected as insufficient to place the burden on the insured to determine which specific

changes might be material to his insurer. See Quincy Mut. Fire Ins. Co., 866 N.E.2d

at 973. And to hold otherwise would turn the Restatement approach on its head by

placing the burden on Mr. Christy, the lay insured, to divine what new circumstances

might necessitate “changes or additional coverages” under the existing CGL Policy.

      In short, viewing all facts and taking all reasonable inferences in the light most

favorable to Mr. Christy—as we must—we hold there are material facts in dispute as

to whether Mr. Christy knew or should have known Travelers would consider the

change in his business form material to its decisions to renew the CGL Policy.

Although the undisputed facts show Travelers never specifically asked Mr. Christy

about changes to his business form, the trier of fact could reasonably conclude that

the annual cover letter, together with Mr. Christy’s annual discussions with his

insurance agent, were sufficient to place him on notice that such information would

be material to Travelers. But on the summary judgment record presented to the

district court, we cannot conclude as a matter of law that Mr. Christy knew of the

material nature of the change in his business structure. As such, we also cannot

conclude that he owed a duty to inform Travelers and, in turn, that his failure to

speak in light of such a duty constituted a material misrepresentation. Accordingly,

                                           21
the district court erred in concluding on summary judgment that Mr. Christy engaged

in a material misrepresentation and in reforming the Policy on that basis. We

therefore reverse the grant of summary judgment in Travelers’ favor and remand for

further proceedings.

           C. Breach of the Implied Covenant of Good Faith and Fair Dealing

      Finally, Mr. Christy argues the district court erred in granting summary

judgment on his claim for breach of the covenant of good faith and fair dealing. New

Mexico law recognizes that every contract imposes an implied duty of good faith and

fair dealing on the parties. Sanders v. FedEx Ground Package Sys., Inc., 188 P.3d

1200, 1203 (N.M. 2008). “The breach of this covenant requires a showing of bad

faith or that one party wrongfully and intentionally used the contract to the detriment

of the other party.” Id. (internal quotation marks omitted).

      Mr. Christy argues the district court erred in granting summary judgment on

this claim because of the inherently factual analysis necessary for a finding of bad

faith. But Mr. Christy has not satisfied his burden in opposing summary judgment on

this claim. A party opposing summary judgment must do more than assert allegations

constituting a claim. See Travis v. Park City Mun. Corp., 565 F.3d 1252, 1257–58

(10th Cir. 2009). To survive summary judgment, a nonmoving party “must set forth

specific facts showing that there is a genuine issue for trial as to those dispositive

matters for which he carries the burden of proof.” Id. (internal quotation marks and

brackets omitted). Mr. Christy has made no effort to set forth any facts demonstrating



                                            22
bad faith on the part of Travelers. Mr. Christy has made no effort to set forth any

facts demonstrating bad faith on the part of Travelers.

      Although Mr. Christy asserts a reversal of the district court’s decision

“necessarily requires the reinstatement of the entirety” of his complaint, Mr. Christy

has failed to meet his burden in opposing summary judgment on his bad faith claim.

We therefore affirm the district court’s grant of summary judgment as to this claim

but reverse and remand for consideration of Mr. Christy’s remaining claims.

                                  III.   CONCLUSION

      Because there is a material factual dispute as to whether Mr. Christy knew or

should have known Travelers would have considered the formation of K&D, Inc.

material to its decision to renew the Policy, summary judgment based on Mr.

Christy’s legal duty to speak was inappropriate. And because the existence of a legal

duty governs whether Mr. Christy engaged in a material misrepresentation by not

informing Travelers he had formed K&D, Inc., we hold the district court erred in

reforming the Policy on that basis at this stage of the proceedings. Accordingly, we

reverse the district court’s grant of summary judgment and remand for further

proceedings consistent with this decision. But because Mr. Christy has not met his

burden to come forward with evidence in support of his claim for breach of the

implied covenant of good faith and fair dealing, we affirm the district court’s grant of

summary judgment on that claim.




                                          23
