FILED
                                                               United States Court of Appeals
                                                                       Tenth Circuit

                                                                     March 10, 2014
                      UNITED STATES COURT OF APPEALS Elisabeth A. Shumaker
                                                                       Clerk of Court
                                     TENTH CIRCUIT



 WESTERN HERITAGE BANK, f/k/a
 Mesilla Valley Bank; JERRY W.
 BELL, III; LUCINDA LOVELESS,

          Plaintiffs - Appellants,
 v.                                                      No. 13-2077
 FEDERAL INSURANCE COMPANY,                 (D.C. No. 2:11-CV-00630-MV-WPL)
                                                         (D. N.M.)
           Defendant - Appellee.



                              ORDER AND JUDGMENT *


Before BRISCOE, Chief Judge, EBEL and PHILLIPS, Circuit Judges.



      In this diversity action arising out of a denial of insurance coverage,

Western Heritage Bank (“WHB”) and two of its employees (collectively, “WHB

parties”) appeal the district court’s grant of summary judgment to defendant

Federal Insurance Company (“FIC”). They argue the district court erred in

concluding FIC had no duty to defend the bank, or its employees, in an action

which had been brought against them in state court. FIC opposes the policy


      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
interpretation of the WHB parties and also contends the district court’s judgment

can be affirmed on the alternative grounds that WHB colluded with the plaintiffs

in the underlying state action both in their settlement and determination of

damages. The WHB parties have also filed a motion to certify a question to the

New Mexico Supreme Court.

      We deny the motion to certify and affirm.

      I. BACKGROUND

      The instant action was brought by Western Heritage Bank and two of its

employees, Jerry Bell and Lucinda Loveless, against FIC. The WHB parties filed

a declaratory judgment action asking the court to rule that FIC owed them a duty

to defend and indemnify for damages in an underlying Texas state court action

brought by Hawkins Boulevard, LLC (“Hawkins”). The WHB parties also

brought claims for bad faith and breach of the duties to investigate, defend,

indemnify, and settle within the policy limits; a claim under the New Mexico

Unfair Insurance Practices Act; and a claim under the Unfair Trade Practices Act.

      Hawkins filed its suit against Mesilla Valley Bank (“Mesilla”), WHB’s

predecessor in interest, on January 24, 2008, in Texas state court. R. Vol. IV at

626; R. Vol. V at 656 (Original Hawkins Petition). Hawkins amended the petition

several times, adding Loveless, Bell, and the Bank’s attorneys as defendants. R.

Vol. V at 663 (Second Amended Petition); 

(Third Amended Petition);

(Fourth Amended Petition). The Fourth Amended Petition named as

                                         2
defendants only Mesilla, n/k/a WHB, and Jo Ann Miller. 

The factual

allegations in each petition are basically the same, but the most detailed petition

is the Third Amended Petition. 1 The defendants named in the Third Amended

Petition were Mesilla, n/k/a WHB; current and former Bank officials: Jo Ann

Miller, Joe H. Morales, Jerry Bell, Lucinda Loveless; and the Bank’s outside

counsel, Victor M. Firth and his firm, Firth Johnson Martinez. 

2

Hawkins’ main allegation was that Mesilla, Morales, Loveless, Bell, Firth, and

Firth’s firm, prepared and executed on Hawkins’ property “fraudulent Deeds of

Trust purporting to encumber a non-existent ‘Ground Lease’ and all

improvements to the Property with a security interest in favor of the Bank.” 

      The Hawkins lawsuit arose out of the business relationship between Mesilla

and Lujo Corporation and Lujo Investments, Ltd. (“Lujo”). In August 2004, Lujo

used a loan from Mesilla to renovate Hawkins’ property in El Paso, Texas, for use

as an El Pollo Loco restaurant. Hawkins’ petition alleged that its lease with Lujo

      1
         The duty to defend is determined by looking to “the facts actually known”
by the insurer “at the time of demand.” Valley Imp. Ass’n, Inc. v. U.S. Fid. &
Guar. Corp., 

, 1117 (10th Cir. 1997) (citing Am. Gen. Fire & Cas.
Co. v. Progressive Cas. Co., 

, 1116 (N.M. 1990)). Therefore,
although the Fourth Amended Petition was the operative document at the time the
Hawkins suit settled, the WHB parties filed their claims for defense based on the
prior petitions. Because the Third Amended Petition has the most detailed facts,
it is used to describe Hawkins’ allegations against the WHB parties.
      2
         Only Western Heritage Bank, Jerry Bell, and Lucinda Loveless are
plaintiffs-appellants in this appeal.

                                          3
“contained express terms barring the use of the Lease and the improvements as

collateral.” 

Hawkins contends that Mesilla’s attorney, Firth, and his

law firm were aware that the lease contained this restriction. In spite of this

knowledge, the attorney and firm “prepared a fraudulent Deed of Trust purporting

to encumber the ‘leasehold and other interests’ of LUJO in and to the Property

and also encumbering ‘all buildings and other improvements.’” 

Ultimately, three such deeds were filed in the El Paso County records to secure

Mesilla’s liens.

      Lujo vacated the Hawkins property in April 2007, but Mesilla’s Deeds and

liens were not released. Hawkins asked Mesilla to remove the encumbrances, but

Mesilla refused to do so unless it was paid hundreds of thousands of dollars. The

liens were ultimately released in October 2008. Hawkins alleged this delay

resulted in lost business opportunities for a long-term lease with a new tenant.

The Third Amended Petition brought claims for slander of title; tortious

interference with Hawkins’ Lease Agreement; tortious interference with expectant

contracts and business relations; fraudulent claim against real property; breach of

contract; and declaratory judgment.

      Mesilla had purchased an insurance policy from FIC, No. 6801-4792, with

a policy period of September 22, 2005 to June 30, 2008. This policy included

several subparts with separate premiums. All parties agree that the Bankers

Professional Liability (“BPL”) section does not apply to this case. What the

                                          4
parties contest and what has become the focus of this litigation is the coverage of

the Director and Officers Liability (“DOL”) section.

      The DOL section has three insuring clauses. Insuring Clauses 1 and 2

concern claims against an Insured Person, which “means any natural person who

was, now is or shall become . . . a duly elected or appointed director, officer or

the in-house general counsel of any Organization chartered in the United States

of America. . . .” R. Vol. II at 177, 193. Insuring Clause 3 covers Loss that the

Organization becomes legally obligated to pay because of an Organization

Claim. 

Organization Claim includes “a civil proceeding commenced

by the service of a complaint . . . against the Organization for a Wrongful Act,

including any appeal therefrom.” 

“those organizations

designated in ITEM 5 of the Declarations of this Coverage Section.” 

ITEM 5 lists Mesilla Valley Bank, Inc. 

The DOL section has a list of

exclusions. For the purposes of this litigation, the exclusion that is at the center

of the parties’ dispute is 4.j., which excludes coverage “for Loss on account of

any Claim . . . based upon, arising from, or in consequence of the performing or

failure to perform Professional Services or Lending Services.” 

184.

                The District Court’s Ruling on Summary Judgment

      Both the WHB parties and FIC filed motions for summary judgment. FIC

moved for summary judgment for two independent reasons: 1) the plain terms of

the DOL policy precluded coverage, and 2) the WHB parties colluded with

                                          5
Hawkins in the settlement and damages phase of the Hawkins litigation. The

WHB parties moved for partial summary judgment on the grounds that the DOL

policy arguably covered the Hawkins suit, triggering FIC’s duty to defend.

      The district court granted summary judgment to FIC on the basis that the

DOL policy did not cover the Hawkins lawsuit. R. Vol. VII at 1218. After

reciting the uncontroverted facts, the district court quoted the DOL general

coverage clause: FIC “shall pay, on behalf of each of the Insured Persons, Loss

for which the Insured Person is not indemnified by the Organization on account of

any Claim first made against the Insured Person, individually or otherwise during

the Policy Period . . . for a Wrongful Act . . . .” 

The court quoted the

definitions for “Claim,” “Insured Person,” “Loss,” and “Wrongful Act.” 

court then quoted Exclusion 4.j. and the policy’s definition of “Lending

Services.” 

Although the district court agreed with WHB that the

duty to defend under New Mexico law is broader than the duty to indemnify, the

court held that Exclusion 4.j. clearly excluded the Hawkins lawsuit from

coverage. 

The court stated:

             [The WHB parties] fail to acknowledge that the Hawkins
             Complaints allege that Hawkins’ damages resulted both
             from the Bank’s fraudulent recording of the liens and its
             subsequent refusal to remove them, and the allegations
             in the Complaints establish that both actions arose from,
             or were in consequence of, the Bank’s and its Officers
             performance, and failure to properly perform, Lending
             Services. The Plaintiffs point to no other facts causing
             Hawkins’ injury and damages that do not fall within

                                           6
             Exclusion 4.j.

(emphasis in original).

      The district court also evaluated the WHB parties’ arguments that refusing

to release the liens was an independent intervening cause that resulted in part of

the Hawkins lawsuit being based on non-Lending Services. 

The

court noted that “arising from” is broadly construed under New Mexico insurance

law. 

broad language does not require a lending activity to

be the direct cause of injuries - it requires only that the ‘claim [be] . . . based

upon, arising from, or in consequence of the performing or failure to perform . . .

Lending Services.’” 

Thus, according to the district court’s ruling,

the “intervening cause” argument was “misplaced” because it was the placement

of the liens and subsequent refusal to remove them “in the course of, and as a

direct result of, the Bank’s lending services and activities,” that formed the basis

of the Hawkins lawsuit. 

held that “[a]s a matter of law, Hawkins’

claims arose from, and in consequence of, the Plaintiffs’ lending services and

activities, and the D&O Section Exclusion 4.j expressly precludes coverage on

those claims.” 

court did not mention the WHB parties’ argument that the

definition of “Professional Services” adds back two categories (legal services and

post control actions) because they are exceptions to Exclusion 4.j. The district

court did not analyze whether these exceptions to the exclusion made the policy

                                            7
ambiguous, as WHB argued, but instead the court stated that “contrary to the

Plaintiffs’ bald assertions, there are no material questions of fact regarding

causation or whether the exclusion applies, nor is there any ambiguity in the

meaning of Exclusion 4.j.” 

result of these rulings, it was unnecessary

for the court to reach FIC’s collusion argument.

      II. ANALYSIS

      “We review a grant of summary judgment de novo, applying the same

standard as the district court. . . . We view all facts and evidence in the light most

favorable to the party opposing summary judgment.” Schrock v. Wyeth, Inc., 

, 1279 (10th Cir. 2013). Summary judgment should be granted when

“there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a).

      A. Does Exclusion 4.j. Have Any Exceptions?

      The WHB parties’ first argument is that Exclusion 4.j. has three carve-outs

that add back coverage. “In diversity cases, the substantive law of the forum state

governs the analysis of the underlying claims . . . but federal law controls the

ultimate, procedural question whether judgment as a matter of law is appropriate.”

Haberman v. Hartford Ins. Grp., 

, 1264 (10th Cir. 2006). The

forum state’s substantive laws include choice of law rules. Elliot v. Turner

Const. Co., 

, 1001 (10th Cir. 2004). The district court assumed New

Mexico’s law governs the interpretation of the contract, and the parties have not

                                          8
raised any arguments to the contrary. Unlike jurisdictional issues, choice of law

need not be raised sua sponte. See Flying J Inc. v. Comdata Network, Inc., 

, 831 n.4 (10th Cir. 2005). As a result, we also will apply New Mexico

law in interpreting the insurance contract at issue.

         Under New Mexico law, “[i]t is well settled that, absent a statute to the

contrary, ‘insurance contracts are construed by the same principles which govern

the interpretation of all contracts.’” Rummel v. Lexington Ins. Co., 

,

976 (N.M. 1997) (quoting 2 Lee R. Russ & Thomas F. Segalla, Couch on

Insurance 3D § 21:1 (1996)). The court’s “primary objective” in interpreting a

contract “is to give effect to the intent of the parties.” Benz v. Town Center

Land, LLC, 

, 694 (N.M. Ct. App. 2013) (quoting Hansen v. Ford

Motor Co., 

, 960 (N.M. 1995)). “[T]he interpretation of terms

within an insurance policy is ‘a matter of law about which the court has the final

word.’” United Nuclear Corp. v. Allstate Ins. Co., 

, 647 (N.M.

2012).

         The first step in interpreting policy terms is to look at the language of the

contested term itself, as well as other parts of the policy. 

“Insurance

policy terms ‘cannot be analyzed in a vacuum,’ and a policy ‘must be construed in

its entirety, with each clause interpreted in relation to others contained therein.’”

excludes coverage “for Loss on account of any Claim . . .

based upon, arising from, or in consequence of the performing or failure to

                                             9
perform Professional Services or Lending Services.” R. Vol. II at 182, 184.

FIC emphasizes strongly that the term “arising from” indicates that this is a

“broad form exclusion” that “as a matter of law must be interpreted in a manner

that gives effect to the broad language of exclusion intentionally used.”

Appellee’s Br. at 19. But without knowing the definitions of “Professional

Services” and “Lending Services,” it cannot be determined whether the Hawkins

lawsuit falls under Exclusion 4.j.

      FIC argues that the Hawkins lawsuit falls under the definition of “Lending

Services” because WHB “placed liens on the Hawkins leasehold to secure and/or

restructure Lujo’s credit, and it therefore is incontrovertible that the liens about

which Hawkins complained, and demanded release, ‘arose from’ and were ‘in

consequence of’ Lending Services provided by the Bank.” Appellee’s Br. at 18.

The policy defines Lending Services as “any act performed by an Insured for a

Lending Customer of the Organization in the course of extending or refusal to

extend credit or granting or refusal to grant a loan or any transaction in the nature

of a loan, including any act of restructure, termination, transfer, repossession or

foreclosure.” R. Vol. II at 180. If only this language is considered, WHB’s

actions in placing the liens and refusing to release them falls under Lending

Services. However, the definition section also states that “Lending Services

shall not include any Professional Service.” 

Services” is listed in Exclusion 4.j., and as noted above, New Mexico law looks

                                          10
to how clauses are understood when read together, as well as how the clauses are

understood when read in the context of the entire policy. See United 

. Therefore, when determining whether the Hawkins allegations in

fact “arise from” Lending Services, we must also consider the definition of

Professional Services.

      Our analysis then should not end with the definition of Lending Services,

but should also include the definition of Professional Services, both because it is

mentioned in the definition of Lending Services and because it is the other part

of Exclusion 4.j. The DOL section defines Professional Services as:

             Loan Servicing and only those services performed or
             required to be performed by an Insured for or on behalf
             of a Customer of an Insured:
             a. for a fee, commission or other monetary
             consideration;
             b. where a fee, commission or other monetary
             consideration would usually be received by the Insured
             but for business or other reasons is waived by the
             Insured; or
             c. for other remuneration which inures to the benefit of
             such Insured.

R. Vol. II at 181. Loan Servicing does not include “any act of restructure,

termination, transfer, repossession or foreclosure . . . .” 

3 Professional

      3
        “Loan Servicing means the servicing of any loan, lease or extension of
credit (whether consumer, commercial, mortgage banking or otherwise, but not
including financing for investment banking, or for leveraged management
buyouts). Loan Servicing includes the following servicing activities: record
keeping, billing and disbursements of principal or interest, receipt or payment of
insurance premiums and taxes, credit reported or statements of creditworthiness,
                                                                       (continued...)

                                          11
Services does not include: “(1) . . . the practice of law or the rendering of legal

services; (2) services performed by any entity which the Insured shall have

acquired ownership or control as security for a loan, lease or other extension of

credit; or (3) Lending Services.” 

In the discussion that follows, we

will refer to the first exception as “legal services” and the second as “post-control

actions.”

      Under the policy’s plain language, legal services and post-control actions

are exceptions to Exclusion 4.j. The definition of Professional Services sets out

three exceptions: legal services, post-control actions, and Lending Services.

Unless excluded by other language, these exclusions to the definition of

Professional Services are not part of Exclusion 4.j. Of course, Lending Services

is excluded by Exclusion 4.j. Although the first two exceptions (legal services

and post-control actions) could conceivably fit under the definition of Lending

Services, the structure of Exclusion 4.j. discourages this reading. If legal services

and post-control actions are merely subcategories of Lending Services, then it

would be unnecessary to list them separately from Lending Services. The policy

could have stated that Professional Services does not include the following kinds

      3
        (...continued)
determination of the depreciation amount of property (but not projections of or an
appraisal for residual or future value of property). Loan Servicing shall not
include any act of restructure, termination, transfer, repossession or foreclosure,
or any act arising out of the operation or control of any entity or property that the
Insured acquired as security or collateral for any loan, lease or extension of
credit.” 

Lending Services: 1) legal services, 2) post-control actions, and 3) all others

under the policy definition of Lending Services. However, Exclusion 4.j. did not

do this. Instead, it listed them as if they were three separate categories.

      FIC makes several arguments against this reading. FIC admits that the

definition of Professional Services is to be read into Exclusion 4.j., but argues

against reading in “the second part of the relevant definitional language, which

lists what things are ‘not’ included within Professional Services,” because FIC

believes the three listed items “merely narrow[] the definition of Professional

Services,” instead of “affirmatively provid[ing] coverage under the D&O Section

for the items listed.” Appellee’s Br. at 27. But the purpose of defining

Professional Services in the policy is to determine what Exclusion 4.j. excludes.

If X does not fall under the definition of Professional Services, then it is not

excluded by 4.j. If X otherwise meets the policy requirements, then it is covered.

      When FIC argues that “[a]n exclusion cannot create coverage if coverage

did not exist in the first instance under the insuring agreement,” it is technically

correct. Appellee’s Br. at 28 n.7. What FIC misses is that the policy definition

of Professional Services takes legal services and post-control actions out of

Exclusion 4.j. Therefore, if they otherwise would be covered by the policy, then

they are covered because Exclusion 4.j. is not a bar. Cf. Greystone Const., Inc. v.

Nat’l Fire & Marine Ins. Co., 

, 1289 (10th Cir. 2011) (“Exceptions

to exclusions [in commercial general liability insurance policies] narrow the


                                          13
scope of the exclusion and, as a consequence, add back coverage. But it is the

initial broad grant of coverage, not the exception to the exclusion, that ultimately

creates (or does not create) the coverage sought.”) (quoting David Dekker et al.,

The Expansion of Insurance Coverage for Defective Construction, 28 Constr.

Law, Fall 2008, at 19-20).

      Despite FIC’s protestations to the contrary, the text of Exclusion 4.j.

supports reading legal services and post-control actions as exceptions, which

means a loss stemming from either of those two that otherwise meets the policy’s

terms is covered. See, e.g., Erwin v. United Benefit Life Ins. Co., 

,

794 (N.M. 1962) (“By every sound rule of construction, [an] instrument should be

interpreted . . . if possible to give a sensible meaning and effect to all its

provisions; and so as to avoid rendering portions of it contradictory and

inoperative, by giving effect to some clauses to the exclusion of others.”)

(internal quotations and citations omitted); 

(“We view the

contract as a harmonious whole, give meaning to every provision, and accord

each part of the contract its significance in light of other provisions.”) (quoting

Pub. Serv. Co. of N.M. v. Diamond D Constr. Co., 

, 659 (N.M. Ct.

App. 2001)).

      B. Does the Hawkins Lawsuit Cover an Exception to Exclusion 4.j.?

      Having determined that Exclusion 4.j. contains two exceptions, our next

step is to analyze whether there is a genuine dispute of material fact as to whether


                                           14
any of the allegations or underlying facts in the Hawkins lawsuit constitute legal

services or post-control actions. However, the WHB parties have not presented

any arguments relating to how the policy covers claims against the individual

WHB employees under either the “legal services” or “post-control actions”

exceptions.

      Nor have they explained how they meet the “legal services” exception for

the claims against the bank. They merely state that the Hawkins lawsuit included

claims “for the wrongful acts of [the bank’s] attorneys, while rendering legal

services,” and the attorneys’ negligence was then “imputed to the Bank” under

agency law. Appellants’ Br. at 14, 43. WHB argues that “[w]hether the Bank

performed legal services through its agents by failing to release the liens is a

question of fact,” and that “FIC agrees that the Legal Services exception does not

require that the Legal Services be performed by the Bank.” 

44.

      Although the question of whether the alleged wrongful acts of WHB fall

within the “legal services” exception is fact intensive, the WHB parties are still

obligated on appeal to present more than conclusory statements about how they

meet this exception and Insuring Clause 3. They have presented no argument as

to what constitutes the “practice of law” or “legal services.” They have not

provided support for their contention that the Hawkins petition alleged wrongful

acts that were based on the “practice of law.” Although the Hawkins suit

involves actions taken by an attorney, the mere recording of liens and subsequent


                                          15
refusal to release them would not inherently require a license to practice law.

Further, Insuring Clause 3 requires a claim against the organization for a

wrongful act, and the definition of wrongful act requires that the error, act,

omission, etc. be “attempted, or allegedly committed or attempted” by the

organization. R. Vol. II at 197, 199. The WHB parties rely on the attorney’s

recording and failure to release the liens as the bank’s “wrongful act,” but without

explaining how there are facts to support this argument. Without any developed

argument as to how some of the allegations in the Hawkins complaint are covered

under Insuring Clause 3, the WHB parties’ assertion that they meet the “legal

services” exception to Exclusion 4.j. is without any factual support and is

therefore waived. See United States v. Magnesium Corp. of Am., 

,

1137 n.7 (10th Cir. 2010) (“‘[I]ssues adverted to’ but ‘unaccompanied by some

effort at developed argumentation, are deemed waived.’”) (quoting Murrell v.

Shalala, 

, 1389 n.2 (10th Cir. 1994)).

      The WHB parties also argue that the Hawkins lawsuit covers the second

exception for post-control actions because the allegations concern what the Bank

did after it foreclosed on the loan. According to the WHB parties, there is a

disputed issue of fact for this exception:

             Assuming the second carve-out required ownership or
             control of the LUJO security, FIC should have defended
             if the Hawkins complaint was unclear on that issue of
             fact. Plaintiffs need not at this stage respond to FIC’s
             factual coverage argument, which is evidence of


                                             16
             questionable coverage and a duty to defend. However,
             Plaintiffs’ refer to the Bank Demand Letter, which
             states: “The Franchise personalty and equipment in the
             Hawkins location were foreclosed upon...and were
             made available for WKS to continue to operate the
             LUJO franchise and leasehold estate.”

Appellants’ Br. at 44-45 (internal citations omitted) (emphasis in original). The

WHB parties further contend that because the bank “repossessed the personal

property and foreclosed on the loan equipment pursuant to Article IV of the

Uniform Commercial Code, the actions by the Bank were services performed by

an entity over which the Bank acquired ownership or control.” 

(emphasis added). The WHB parties’ next statement reveals why their argument

is without merit, however: “Because the Bank was conducting post-control

actions over the collateral, the Claims against the Bank are re-included into

coverage.” 

actions” exception to Exclusion 4.j. does not refer to

actions taken by the insured, in this case WHB, but instead to actions that

constitute “services performed by any entity” that the bank owns or controls. R.

Vol. II at 181. Therefore, to survive summary judgment, there must be factual

support for the assertion that the bank took control of an “entity,” and the “entity”

then performed a “service.” There are no allegations here to support that theory.

The Hawkins suit is clearly outside of this area of coverage, and thus there was no

duty to defend or indemnify.



                                         17
      Because the WHB parties have failed to explain how the Hawkins petition

could arguably fall within either exception to Exclusion 4.j., the remaining

arguments in this appeal are moot, including FIC’s collusion argument.

      AFFIRMED. The WHB parties’ motion to certify is DENIED.


                                              Entered for the Court


                                              Mary Beck Briscoe
                                              Chief Judge




                                         18