Full opinion text
MEMORANDUM OPINION AND ORDER JAMES O. BROWNING, District Judge. THIS MATTER comes before the Court on: (i) The Hartford Fire Insurance Company’s Motion for Summary Judgment Declaring that the Terms of the Policy Issued to Gandy Dancer Do Not Provide Coverage for Roy D. Mercer, LLC’s Claims Against BNSF and Gandy Dancer, filed June 10, 2011 (Doc. 37)(“MSJ”); and (ii) BNSF Railway Company’s Rule 56(f) Motion and Memorandum Brief in Support to Conduct Discovery, filed July 21, 2011 (Doc. 47)(“Discovery Motion”). The Court held a hearing on January 31, 2012. The primary issues are: (i) whether Defendant Roy D. Mercer, LLC’s allegations against Defendant Gandy Dancer, LLC and Defendant/Counter-Plaintiff BNSF Railway Company in the underlying state litigation give rise to coverage under the insurance policies which Plaintiff/Counter-Defendant The Hartford Fire Insurance Company (“The Hartford”); (ii) whether any exclusion applies to preclude coverage; (iii) whether The Hartford is i estopped from denying coverage; and (iv) whether the Court should delay deciding the MSJ so that discovery may be conducted. The Court will grant in part and deny in part the MSJ. The Court finds that Mercer LLC’s allegations of property damages and negligent misrepresentation do not give rise to coverage under the insurance policies. The Court will deny the MSJ in part, however, because Mercer LLC’s allegations of trespass and nuisance trigger coverage, and because a determination of the ultimate duties under the policies is premature. The Court will deny the Discovery Motion, because additional discovery is unnecessary. FACTUAL BACKGROUND This case involves the construction of a water diversion system in 2006, over which litigation is taking place in state court. The Hartford seeks a declaratory judgment that the facts alleged in the underlying state litigation do not give rise to insurance coverage under the policies it issued. Many of the material facts are undisputed. 1. The Insurance Policies. The Hartford issued a business liability insurance policy to Gandy Dancer, Policy Number 21 UUN QZ5048, with policy dates of August 8, 2005 to August 8, 2006, and issued a second policy, 21 UUN QZ5048, with policy dates of August 8, 2006 to August 8, 2007. See 21 UUN QZ5048, Commercial General Liability Coverage Form, filed June 10, 2011 (Doc. 37-7)(“05-06 Gandy Dancer Policy”); 21 UUN QZ5048, Commercial General Liability Coverage Form, filed June 10, 2011 (Doc. 37-8)(“06-07 Gandy Dancer Policy”); MSJ ¶¶ 10-11, at 5 (setting forth these facts); BNSF Railway Company’s Response Brief in Opposition to the Hartford Fire Insurance Company’s Motion for Summary Judgment Against BNSF and Gandy Dancer ¶ 1, at 4, filed July 21, 2011 (Doc. 48)(“BNSF Response”)(not disputing this fact). The Gandy Dancer Policies provide cover for, in relevant part, “property damage” caused by an “occurrence” as those terms are defined in the Gandy Dancer Policies. 05-06 Gandy Dancer Policy; 06-07 Gandy Dancer Policy; MSJ ¶ 14, at 5 (setting forth this fact); BNSF Response ¶ 1, at 4 (not disputing this fact); Defendant Gandy Dancer’s Response to Plaintiff Hartford Fire Insurance Company’s Motion for Summary Judgment Declaring That the Terms of the Policy Issued to Gandy Dancer Do Not Provide Coverage for Roy D. Mercer, LLC’s Claims Against BNSF and Gandy Dancer at 5-6, filed July 21, 2011 (Doc. 45)(“Gandy Dancer Response”)(not disputing this portion of the fact). The Gandy Dancer Policies provide in relevant part: COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY 1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies ... b. This insurance applies to “bodily injury” and “property damage” only if: (1) The “bodily injury” or “property damage” is caused by an “occurrence” ... 05-06 Gandy Dancer Policy; 06-07 Gandy Dancer Policy; MSJ ¶ 14, at 5-6 (setting forth this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). The Gandy Dancer Policies provide that “property damage” means: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it. 21 UUN QZ5048, Commercial General Liability Coverage Form at 1, filed July 21, 2011 (Doc. 45-2)(“05-06 Gandy Dancer Policy”). “Occurrence” is defined in the Gandy Dancer Policies as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” 05-06 Gandy Dancer Policy at 15; 06-07 Gandy Dancer Policy at 17; MSJ ¶ 15, at 5-6 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). The Gandy Dancer Policies also include the following exclusions: a. Expected Or Intended Injury: “Bodily injury” or “property damage” expected or intended from standpoint of the insured. This exclusion does not apply to “bodily injury” or “property damage” resulting from the use of reasonable force to protect persons or property. j. Damage To Property: “Property damage” to: (5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or 05-06 Gandy Dancer Policy at 2; 06-07 Gandy Dancer Policy at 4; MSJ ¶ 16, at 5-6 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). The Gandy Dancer Policies distinguish between the Named Insured and additional insureds as follows: “Throughout this policy the words ‘you’ and ‘your’ refer to the named insured shown in the Declarations and any other person or organization qualifying as a Named Insured under this policy.... The word ‘insured’ means any person or organization qualifying as such under Section II — Who Is An Insured.” 05-06 Gandy Dancer Policy at 1; 06-07 Gandy Dancer Policy at 1; MSJ ¶ 17, at 5-6 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). Gandy Dancer is the only Named Insured under the Gandy Dancer Policies, and The Hartford assumes for the purposes of the MSJ only that BNSF Railway qualifies as an additional insured. See MSJ ¶ 18 and n. 2, at 7 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). 2. Facts Giving Rise to the Underlying Action. BNSF Railway owns and operates a railroad track and facilities in Socorro County, New Mexico. See MSJ ¶ 1, at 2 (setting fort this fact); Defendant Gandy Dancer’s Response to Plaintiff Hartford Fire Insurance Company’s Motion for Summary Judgment Declaring That the Terms of the Policy Issued to Gandy Dancer Do Not Provide Coverage for Roy D. Mercer, LLC’s Claims Against BNSF and Gandy Dancer at 5, filed July 21, 2011 (Doc. 45)(“Gandy Dancer Response”)(not disputing this fact); BNSF Railway Company’s Response Brief in Opposition to the Hartford Fire Insurance Company’s Motion for Summary Judgment Against BNSF and Gandy Dancer ¶ 1, at 4, filed July 21, 2011 (Doc. 48)(“BNSF Response”)(not disputing this fact). A portion of these facilities is located adjacent to a tract of land that Mercer LLC owns. See BNSF Railway Co. v. Roy D. Mercer, LLC, D-725-CV-20080092, Verified Complaint for Injunctive Relief, Declaratory Judgment, Negligence and Nuisance ¶ 8, at 2 (dated June 3, 2008), filed June 10, 2011 (Doc. 37-l)(“BNSF State Complaint”); BNSF Railway Co. v. Roy D. Mercer, LLC, D-725-CV-20080092, Amended Complaint for Declaratory Judgment and Injunctive Relief (dated August 22, 2008), filed June 10, 2011 (Doc. 37-2)(“BNSF State Am. Complaint”); Roy D. Mercer, LLC v. Gandy Dancer, LLC, D-725-CV-201100044, Complaint for Damages (dated May 21, 2011), filed June 10, 2011 (Doc. 37-3)(“Mercer State Complaint”); MSJ ¶ 1, at 2 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). Mercer LLC’s land lies within a silty basin for the Brown Arroyo, also known as the Matanza Arroyo. See generally BNSF State Complaint ¶ 8, at 2; BNSF State Am. Complaint; Mercer State Complaint; MSJ ¶ 1, at 2 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). On September 23, 1936, the Middle Rio Grande Conservancy District (“MRGCD”) granted to BNSF Railway’s predecessor, the Atchison, Topeka, and Santa Fe Railway Company, a right to enter upon lands described in the easement and use so much of the natural material as such earth, rock, wood, etc. as it may elect or desire to remove for the purposes of constructing a surface ditch, dykes [sic] and spoil banks, together with any other facilities or structures necessary for the protection of the railroad or other property of the part of the second part from surface or other water, said tracts, or parcels of land. Easement at 38 (executed September 23, 1936), filed July 21, 2011 (Doc. 48-l)(“1936 Easement”); BNSF Response ¶ 12, at 7 (setting forth this fact); The Hartford Fire Insurance Company’s Reply in Support of Motion for Summary Judgment Declaring that the Terms of the Policy Issued to Gandy Dancer Do Not Provide Coverage for Roy D. Mercer, LLC’s Claims Against BNSF and Gandy Dancer at 2, filed September 2, 2011 (Doc. 52)(“Reply”)(not disputing this fact). On December 29, 2003, Mercer LLC acquired the Brown Arroyo property through a deed filed in the Office of the County Clerk of Socorro County. ■ See BNSF State Complaint ¶ 11, at 2; MSJ ¶ 2, at 2 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). At the time that Mercer LLC acquired the Brown Arroyo property, a water diversion system went through the property to control flood water 'flowing down the Brown Arroyo. See BNSF State Complaint ¶ 17, at 3; MSJ ¶ 3, at 2 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). BNSF Railway’s 1936 Easement grants to BNSF Railway the right to use the natural material as it may desire for the construction of ditches, dikes, spoil banks, and other necessary facilities and structure to protect the railroad from Brown Arroyo’s flood waters. See BNSF State Complaint ¶ 14, at 3; MSJ ¶ 4, at 3; Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). Gandy Dancer has been a BNSF Railway’s contractor for several years, and has performed a variety of work involving the use of heavy equipment, including responding to derailments, and to damages to railroad tracks, cars, roadbed, and structures associated with the provisions of the railroad freight service. See Affidavit of Phillip Gallegos ¶ 4, at 1 (executed July 12, 2011), filed July 21, 2011 (Doc. 45-3)(“Gallegos Aff.”); Gandy Dancer Response ¶ 1, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). In August 2006, there was unprecedented rainfall in Socorro County that caused severe flood damage to BNSF Railway’s property and to other property in Luis Lopez, New Mexico and other areas of the county. See Gallegos Aff. ¶ 5, at 1-2; Gandy Dancer Response ¶ 2, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). As a consequence of the flooding, BNSF Railway’s tracks, roadbed, and adjacent structures were washed out, and freight services near the Brown Arroyo stopped for several days. See Gallegos Aff. ¶ 5, at 1-2; Gandy Dancer Response ¶ 2, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). Around August 2006, BNSF Railway hired Gandy Dancer to reconstruct the diversion system by clearing vegetation, building up the levees, expanding the diversion channel, and constructing piers to control flood waters to minimize the likelihood of additional breaches and flood damage. See BNSF State Complaint ¶ 22, at 4; Complaint for Declaratory Judgment ¶ 17, at 3, filed February 16, 2010 (Doc. l)(“Complaint”); Defendant Gandy Dancer, LLC’s Answer to Complaint for Declaratory Judgment ¶ 17, at 3, filed March 28, 2010 (Doc. 12)(“Gandy Dancer Answer”); Defendant Roy D. Mercer’s Answer to Plaintiffs Complaint for Declaratory Judgment ¶ 17, at 3, filed April 5, 2010 (Doc. 14)(“Mercer Answer”); Defendant BNSF Railway Company’s Amended Answer to Complaint for Declaratory Judgment and Counterclaim ¶ 17, at 3, filed April 13, 2010 (Doe. 15)(“BNSF Answer”); MSJ ¶ 5, at 3 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). This work also involved rebuilding track, roadbed, and adjacent structures, including the dikes, berms, and ditches that were part of the Brown Arroyo diversion system. See Gallegos Aff. ¶ 5, at 1-2; Gandy Dancer Response ¶ 3, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). For several weeks, Gandy Dancer worked, along with heavy-equipment operators for the MRGCD and for the Bureau of Reclamation, to rebuild the dikes and ditches, and other parts of the Brown Arroyo diversion system. See Gallegos Aff. ¶ 4, at 7; Gandy Dancer Response ¶ 4, at 7 (setting forth this fact); BNSF Response ¶ 9, at 6-7; Reply at 2 (not disputing this fact). Some of the work performed by Gandy Dancer was done on the Brown Arroyo property. See BNSF State Complaint ¶ 22, at 4; Complaint ¶ 17, at 3; Gandy Dancer Answer ¶ 17, at 3; BNSF Answer ¶ 17, at 3; MSJ ¶ 5, at 3 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). BNSF Railway and Gandy Dancer knew that they were re-constructing the diversion system on the Brown Arroyo property, and using dirt and other resources from the Brown Arroyo property, but contend that they had the legal right and authority to do so. See BNSF State Complaint ¶¶ 14, 22, at 3-4; BNSF Railway Co. v. Roy D. Mercer, LLC, D-725-CY-20080092, Reply and Affirmative Defenses to the Counterclaim Filed by Defendant/Counter-Plaintiff Roy D. Mercer ¶¶ 6, 14, at 2-3 (dated August 14, 2008), filed June 10, 2011 (Doc. 37-4)(“BNSF State Counterclaim Reply”); BNSF Railway Co. v. Roy D. Mercer, LLC, D-725-CV-20080092, Memorandum Brief in Opposition to Plaintiffs Application for Temporary Restraining Order and Preliminary Injunction at 1-3 (dated June 26, 2008), filed June 10, 2011 (Doc. 37-5)(“Mercer State Opposition to TRO”); MSJ ¶ 6, at 3 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). In addition to natural materials available at the site, Gandy Dancer used materials that the Bureau of Reclamation provided. See Gallegos Aff. ¶ 4, at 7; Gandy Dancer Response ¶ 4, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). Gandy Dancer understood that BNSF Railway had the right to rebuild and to rehabilitate the dikes, ditches, and other works. See Gallegos Aff. ¶ 6, at 2; Gandy Dancer Response ¶ 5, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). BNSF Railway advised Gandy Dancer that the 1936 Easement specifically authorized and allowed Gandy Dancer to rebuild the railway beds, dikes, and ditches using available natural materials at the site. See Affidavit of Jamin Hutchens ¶ 6, at 1 (executed July 8, 2011), filed July 21, 2011 (Doc. 45-4)(“Hutchens Aff.”); Gandy Dancer Response ¶ 6, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). BNSF Railway subsequently provided Gandy Dancer with a copy of the 1936 Easement. See 1936 Easement at 38; Hutchens Aff. ¶ 7, at 2; Gandy Dancer Response ¶ 7, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). When an official from the MRGCD called Mike Mechenbier, the sole member of Mercer LLC, and asked for permission to enter his property to rebuild the diversion system, Mechenbier gave consent. See Hutchens Aff. ¶ 8, at 2; Gallegos Aff. ¶ 6, at 2; Gandy Dancer Response ¶¶ 8-9, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). For several weeks, Gandy Dancer, MRGCD, and the Bureau of Reclamation personnel were working to restore the dikes and ditches. See Gallegos Aff. ¶ 6, at 2; Gandy Dancer Response ¶ 10, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). The work was conducted under emergency conditions, and additional rainfall not only destroyed some of the completed work, but also caused additional damages to diversion system components. See Gallegos Aff. ¶ 6, at 2; Gandy Dancer Response ¶ 10, at 7-8 (setting forth this fact); Reply at 2 (not disputing this fact). Gandy Dancer disputes that Mercer LLC lost any use of its property or water rights as a consequence of Gandy Dancer’s work. See Gallegos Aff. ¶ 9, at 3; Gandy Dancer Response ¶ 11, at 8 (setting forth this fact); Reply at 2 (not disputing this fact). The Mercer LLC land “has been fallow for over a decade and was choked throughout by heavy vegetation including cottonwoods, salt cedar and other brush,” and all of Mercer LLC’s property “in the Brown Arroyo was subject to being inundated with floodwaters for weeks at a time and was unusable for any farming or ranching.” Gallegos Aff. ¶ 9, at 3; Gandy Dancer Response ¶ 12, at 8 (setting forth this fact); Reply at 2 (not disputing this fact). Gandy Dancer intended to restore and reinforce pre-existing dikes and ditches that have historically protected BNSF Railway’s railroad track and track bed from flood damage. See Gallegos Aff. ¶ 10, at 3; Gandy Dancer Response ¶ 13, at 8 (setting forth this fact); BNSF Response ¶ 10, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). Gandy Dancer did not expect, intend, or anticipate that its work would result in any harm or loss of use of the adjacent Mercer LLC property or cause flooding of that property. See Gallegos Aff. ¶ 11, at 3; Gandy Dancer Response ¶ 14, at 8 (setting forth this fact); BNSF Response ¶ 11, at 7 (setting forth this fact); Reply at 2 (not disputing this fact). Gandy Dancer contends that the dikes and ditches it reconstructed on the Brown Arroyo did not harm Mercer LLC’s property, but efficiently facilitated the flow of flood waters from the Brown Arroyo away from the Mercer LLC property. See Gallegos Aff. ¶ 12, at 3; Gandy Dancer Response ¶ 15, at 8 (setting forth this fact); BNSF Response ¶ 11, at 8 (setting forth this fact); Reply at 2 (not disputing this fact). 3. History of the Underlying Action. There are currently pending in the Seventh Judicial District Court, Socorro County, State of New Mexico, two actions: (i) BNSF Railway Company v. Roy D. Mercer, LLC, D-725-CV-200800092; and (ii) Roy D. Mercer, LLC v. Gandy Dancer, LLC, D-725-CV-201100044. BNSF commenced the underlying action, BNSF Railway Company v. Roy D. Mercer, LLC, D-725-CV-200800092, when it filed the BNSF State Complaint on June 3, 2008 and obtained a temporary injunction preventing Mercer, LLC from disturbing remedial work performed on the levees. See MSJ ¶ 6, at 3 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). On July 8, 2008, Mercer LLC filed an answer and counterclaim. See BNSF Railway Company v. Roy D. Mercer, LLC, D-725-CV-200800092, Answer to Verified Complaint for Injunctive Relief, Declaratory Judgment, Negligence, and Nuisance and Counterclaim (dated July 8, 2008), filed February 16, 2010 (Doc. 1-1)(“Mercer State Counterclaim”); MSJ ¶ 8, at 4; Gandy Dancer Response at 5 (not disputing this portion of fact 8); BNSF Response ¶ 1, at 4 (not disputing this portion of fact 8). On September 15, 2008, Mercer LLC filed an answer to the BNSF State Am. Complaint. See BNSF Railway Company v. Roy D. Mercer, LLC, D-725-CV-200800092, Answer to Amended Complaint for Declaratory Judgment and Injunctive Relief and Counterclaim (dated September 15, 2008), filed February 16, 2010 (Doc. 1-2)(“Mercer Am. State Counterclaim”); MSJ ¶ 8, at 4 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this portion of fact 8); BNSF Response ¶ 1, at 4 (not disputing this portion of fact 8). The Mercer Am. State Counterclaim incorporated “each and every allegation ... in its entirety” contained within the Mercer State Counterclaim “as though more fully set forth herein,” and asserts additional claims for declaratory judgment and “modification of the easement by estoppel.” Mercer Am. State Counterclaim at 1, 2-3, 4-5. On June 24, 2009, Mercer LLC filed a second amended counterclaim against BNSF Railway. See Defendant/Counter-Plaintiffs 2nd Amended Counterclaim Against Plaintiff/Counter-Defendant BNSF (dated June 24, 2009), filed February 16, 2010 (Doc. 1-4)(“Mercer 2nd Am. State Counterclaim”); MSJ ¶ 8, at 4 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this portion of fact 8); BNSF Response ¶2, at 4 (not disputing this portion of fact 8). Mercer LLC alleges that the reconstruction of the water diversion system and use of the Brown Arroyo property resources constitutes damage to Mercer LLC’s property. See Mercer State Counterclaim; Mercer Am. State Counterclaim; Mercer 2nd Am. State Counterclaim; MSJ ¶ 9, at 4 (setting forth this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). Mechenbier testified that the complaint against Gandy Dancer is based on “loss of use of property and possible forfeiture of water rights,” and admitted that Gandy Dancer did not “touch” parts of the property which are alleged to have been lost. Mechenbier Depo. at 141:22-142:16; Gandy Dancer Response at 5 (setting forth this fact); Reply at 2 (not disputing this fact). BNSF Railway argues that Mercer LLC’s only recourse is for inverse condemnation. See BNSF Railway Co. v. Roy D. Mercer, LLC, No. 09-0733, Plaintiff/Counter-Defendant BNSF Railway Company’s Reply and Affirmative Defenses to Defendant/Counter-Plaintiff s Second Amended Counterclaim Against Plaintiff/Counter-Defendant BNSF (dated August 3, 2009), filed June 10, 2011 (Doc. 37-6)(“BNSF Reply 2nd Am. Counterclaim”); MSJ ¶ 9, at 4 (setting forth this fact); Gandy Dancer at 5 (not disputing this portion of fact 9); BNSF Response ¶ 1, at 4 (not disputing this fact). Mercer LLC alleges that a “poorly constructed berm” rendered the property unusable for irrigation purposes. Roy D. Mercer, LLC v. Gandy Dancer, LLC, D-725-CV-201100044, Roy D. Mercer LLC’s Answer Brief in Opposition to BNSF’s Motion to Dismiss Counterclaims (dated June 24, 2011), filed July 21, 2011 (Doc. 48-l)(“Mereer Opposition”); BNSF Response ¶ 5, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). Mercer LLC alleges that Gandy Dancer and BNSF constructed the diversion channel “without reviewing or determining the natural water flow,” and “without the proper, necessary and/or required designs, plans, permits, and/or the like to do so.” Mercer 2nd Am. State Counterclaim ¶¶ 11-12 at 3; Contract for Construction or Other Work § 7, at 3-4 (dated March 16, 2001), filed February 16, 2010 (Doc. 1-5)(“Contract”); BNSF Response ¶¶ 6-7, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). Mercer LLC asserts that the diversion project caused the discharge of storm water onto Mercer LLC’s property and damaged it. See Mercer 2nd Am. State Counterclaim ¶ 13, at 3; BNSF Response ¶ 8, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). 4. Insurance Policy Application. BNSF Railway sought coverage under the Gandy Dancer Policies for Mercer LLC’s claims. See BNSF Answer; MSJ ¶ 12, at 5 (setting forth this fact); Gandy Dancer Response at 5 (not disputing this fact); BNSF Response ¶ 1, at 4 (not disputing this fact). The Hartford filed its Complaint on February 16, 2010. See Complaint; MSJ ¶ 13, at 5 (setting forth this fact); Gandy Dancer Response (not disputing this fact); BNSF Response (not disputing this fact). BNSF Railway notified The Hartford of Mercer LLC’s claim for damages after receiving notice in November 2006 of Mercer LLC’s intent to assert claims against BNSF Railway, and requested that The Hartford defend and indemnify BNSF Railway under the Gandy Dancer Policies. See Declaration of David A. Fortis ¶ 3, at 1-2, filed July 21, 2011 (Doc. 48-l)(“Fortis Decl.”); BNSF Response ¶ 1, at 5 (setting forth this fact); Reply at 2 (not disputing this fact). BNSF Railway pressed The Hartford “numerous times over many months” for a decision regarding coverage, because it was attempting to negotiate with Mercer LLC to resolve the claim. Fortis Decl. ¶¶ 4-5, at 2; BNSF Response ¶ 1, at 5 (setting forth this fact); Reply at 2 (not disputing this fact). BNSF Railway provided The Hartford with all of the information it requested concerning the claim and progress of negotiations with Mercer LLC. See Fortis Decl. ¶¶ 4-5, at 2; BNSF Response ¶ 1, at 5 (setting forth this fact); Reply at 2 (not disputing this fact). On October 2, 2007, Donald Kieffer, the Claim Consultant for The Hartford, notified BNSF Railway that BNSF Railway was entitled to a defense and indemnification under the Gandy Dancer Policies. See Electronic Mail Transmission from Donald Kieffer to Earl E. Debrine at 4 (dated October 2, 2007), filed July 21, 2011 (Doc. 48-l)(“Oct. 2, 2007 Kieffer Email”); BNSF Response ¶ 2, at 5 (setting forth this fact); Reply at 2 (not disputing this fact). The Kieffer Email states: Please provide me with the contact information for Mr. Mercer’s attorney. We will contact him directly regarding the claim. Currently we are reviewing the materials which you have provided to clarify the nature, extent and value of the damages. We have confirmed that BNSF is entitled to a defense and indemnification under our policy, subject to the terms and conditions of our policy. Please notify us immediately if BNSF is served with a lawsuit in connection with this loss, so that we can refer their defense to counsel. If BNSF is served with a lawsuit in this matter, we will forward defense of this claim to The Law Offices of Eva Rappaport in Albuquerque. Oct. 2, 2007 Kieffer Email at 4; BNSF Response ¶ 2, at 5 (setting forth this fact); Reply at 2 (not disputing this fact). Before making this determination, The Hartford had in its possession: (i) an electronic mail transmission from Mercer LLC’s attorney offering to settle the claim; (ii) maps of the property at issue; (iii) a copy of the 1936 Easement; (iv) documents pertaining to Mercer LLC’s purchase of the property; and (v) an appraisal of Mercer LLC’s property. See Electronic Mail Transmission from Earl DeBrine to Donald Kieffer at 5 (dated September 6, 2007), filed July 21, 2011 (Doc. 48-1)(“Sept. 6, 2007 DeBrine Email”); BNSF Response ¶ 3, at 5. After informing BNSF Railway that it was entitled to an indemnification and a defense, The Hartford directed it to allow The Hartford and its appointed attorneys to determine whether settlements were appropriate, and directed BNSF Railway not to settle with Mercer LLC without The Hartford’s consent. See Kieffer Email at 4; Electronic Mail Transmission from Earl DeBrine to Donald Kieffer at 9 (dated October 2, 2007), filed July 21, 2011 (Doc. 48-l)(“Oct. 2, 2007 DeBrine Email”); Electronic Mail Transmission from Donald Kieffer to J.K. Hollowwa at 10 (dated March 7, 2008), filed July 21, 2011 (Doc. 48-l)(“Mar. 7, 2008 Kieffer Email”); Electronic Mail Transmission from Donald Kieffer to Earl DeBrine at 15 (dated May 15, 2008), filed July 21, 2011 (Doc. 48-1) (“May 15, 2008 Kieffer Email”); BNSF Response ¶ 4, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). The Hartford’s subsequent attempt to reserve its rights did not mention the “Expected or Intended Injury” exclusion set forth in section 2(a) of its insurance policy with Gandy Dancer. Letter from Donald Kieffer to Earl DeBrine at 1-4 (dated November 13, 2007), filed July 21, 2011 (Doc. 48-2) (“Kieffer Letter”); BNSF Response ¶ 4, at 6 (setting forth this fact); Reply at 2 (not disputing this fact). PROCEDURAL BACKGROUND On February 16, 2010, The Hartford filed its Complaint. The Hartford requests a declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. See Hartford’s Complaint at 1. The Hartford requests that the Court declare that The Hartford owes no insurance obligations to indemnify, or to defend, BNSF Railway or Gandy Dancer in connection with the rehabilitation work that is the subject of Mercer LLC’s suit against BNSF and Gandy Dancer. See Hartford’s Complaint ¶ 1, at 1. On March 28, 2010, Gandy Dancer filed its Answer to Complaint for Declaratory Judgment. Doc. 12 (“Gandy Dancer’s Answer to Hartford”). Gandy Dancer asserts that the doctrines of waiver, delay and/or laches, bad faith, inequitable conduct and/or unclean hands, and “mend and hold” bar The Hartford’s claims. Gandy Dancer’s Answer to Hartford ¶¶ 1-7, at 9. Gandy Dancer requests that the Court grant a declaratory judgment against The Hartford, declaring that The Hartford has a duty to defend and indemnify Gandy Dancer in the underlying suit. See Gandy Dancer’s Answer to Hartford at 10. Mercer LLC responded, similarly asserting that the doctrines of laches, estoppel and/or waiver, comparative fault, acquiescence, and The Hartford’s failure to join a necessary party bar The Hartford’s claims. See Mercer’s Answer to Hartford ¶ 46, at 7. BNSF Railway responded, asserting that the doctrines of waiver, estoppel, estoppel by contract, bad faith, inequitable conduct, unclean hands, laches, and “mend the hold” bar Hartford’s claims. See BNSF’s Answer at 7. BNSF Railway asserted counterclaims for bad faith, breach of contract, violation of the Unfair Insurance Practices Act, and violation of the New Mexico Unfair Practices Act, N.M.S.A.1978, §§ 57-12-1 to 57-12-30. See BNSF’s Answer at 14-16. The Hartford filed an answer to BNSF Railway’s counterclaims on May 13, 2010. See The Hartford Insurance Company’s Answer to BNSF Railway Company’s Counterclaim at 1, filed May 13, 2010 (Doc. 19)(“Hartford’s Response to Counterclaims”). The Hartford denied most of BNSF Railway’s allegations and asserted that BNSF Railway’s counterclaims were barred to the extent that others’ fault caused the injuries and to the extent that BNSF Railway failed to mitigate damages. See Hartford’s Response to Counterclaim at 7. The Hartford also contended that BNSF Railway’s claim for punitive damages violates the Constitution of the United States as well as the Constitution of the State of New Mexico. See Hartford’s Response to Counterclaim at 7. The Hartford argued that BNSF Railway knowingly brought a groundless action under the Unfair Practices Act. See Hartford’s Response to Counterclaim at 7. The Hartford once again asserted that BNSF Railway is not entitled to coverage under the policies and requests that the Court dismiss BNSF Railway’s counterclaims with prejudice. See Hartford’s Response to Counterclaim at 8. On March 30, 2011, the Court denied BNSF Railway’s and Gandy Dancer’s request to stay the proceedings before the Court. See Memorandum Opinion and Order, filed March 30, 2011 (Doc. 35)(“MOO”). The Court found that the issues pending before the Court, whether BNSF Railway’s and Gandy Dancer’s actions were “expected and intended,” is distinct from the tort questions before the state court. MOO at 18-19. The Court also found that, “under New Mexico law, the Court determines whether The Hartford has a duty to defend based on the State Court Complaint and the insurance policies, and The Hartford has represented that it will seek a decision based only on those documents.” MOO at 19. The Hartford moves the Court for summary judgment, requesting the Court to declare that the Gandy Dancer Policies do not provide coverage for the damages that Mercer LLC seeks in the consolidated state actions. See The Hartford Fire Insurance Company’s Memorandum in Support of Its Motion for Summary Judgment Declaring that the Terms of the Policy Issued to Gandy Dancer Do Not Provide Coverage for Roy D. Mercer, LLC’s Claims Against BNSF and Gandy Dancer at 1-2, filed June 10, 2011 (Doc. 38)(“MSJ Memo”). The Hartford asserts that, in the underlying state actions, Mercer LLC contends that BNSF Railway directed Gandy Dancer to reconstruct a water diversion project on Mercer LLC’s land and that “the renovations themselves damaged its property.” MSJ Memo at 2 (emphasis original). It argues that the damages sought are not covered under the Gandy Dancer Policies, because they were not caused “by an ‘occurrence,’ ” as defined in the policies. MSJ Memo at 2. The Hartford also contends that two coverage exclusions apply to exclude the damages from coverage: (i) the work performed on Mercer LLC’s property was “expected or intended” by BNSF Railway; and (ii) the claimed property damage is to real property on which Gandy Dancer' conducted operations at BNSF Railway’s direction. MSJ Memo at 2. The Hartford asserts that, in New Mexico, a liability insurer’s obligation is contractual and the terms of the policy control. See MSJ Memo at 3 (citing Miller v. Monumental Life Ins. Co., 376 F.Supp.2d 1238, 1245 (D.N.M.2005)(Browning, J.) rev’d on other grounds by 502 F.3d 1245 (10th Cir.2007)). It argues that the Gandy Dancer Policies do not cover reconstructing the water diversion project, because it was not “damaged” by an “occurrence.” MSJ Memo at 4. It contends that ■ the material facts demonstrate “the complete absence of any accidental injury to the property,” and that BNSF Railway and Gandy Dancer cannot meet their burden of establishing a covered event within the grant of coverage. MSJ Memo at 4. The Hartford asserts that the New Mexico courts define “accident” in terms of an “insured’s intent to commit an act — not to achieve a specific result.” MSJ Memo at 4 (citing Vihstadt v. Travelers Ins. Co., 103 N.M. 465, 466, 709 P.2d 187, 188 (1985)). It argues that the Supreme Court of New Mexico has also held that the term “accident” expresses “the thought of an event occurring without design or purpose, or unintentionally on the part of the assured [and] ... does not include the result of willful design.” MSJ Memo at 4-5 (citing Vihstadt v. Travelers Ins. Co., 103 N.M. at 466, 709 P.2d at 188). The Hartford contends that there is a difference between accidental means and accidental result, and that the “precise event or act causing the injury” in this case was not accidental. MSJ Memo at 5. It argues that BNSF Railway and Gandy Dancer intended the reconstruction which Mercer LLC alleges damaged the property, and asserts that Mercer LLC “does not allege that the water diversion project was constructed negligently or that it was not constructed precisely where BNSF intended.” MSJ Memo at 5. The Hartford contends that there was no additional, independent, or unforeseen event which caused damages to the Mercer LLC property. See MSJ Memo at 5. The Hartford further asserts that it does not matter whether BNSF Railway and Gandy Dancer had, or believed they had, legal authority to reconstruct the water diversion system, because a misunderstanding of legal rights does make the property damage an accident. See MSJ Memo at 6 (citing Fire Ins. Exchange v. Superior Court, 181 Cal.App.4th 388, 104 Cal.Rptr.3d 534 (Cal.Ct.App. 2010)). The Hartford also argues that BNSF Railway’s and Gandy Dancer’s reconstruction of the water diversion project was “expected or intended,” such that the resulting damage is excluded under the Gandy Dancer Policies. MSJ Memo at 7. It asserts that, under New Mexico law, exclusionary definitions are “to be enforced so long as their meanings are clear and they do not conflict with statutory law.” MSJ Memo at 7 (citing Safeco Ins. Co. v. McKenna, 90 N.M. 516, 518, 565 P.2d 1033, 1035 (1977)). The Hartford contends that BNSF Railway and Gandy Dancer intended to reconstruct the water diversion system on the Brown Arroyo property and that Mercer LLC alleges that this construction damaged its property. See MSJ Memo at 8. It compares the events in this case to Knowles v. United Servs.Auto. Ass’n, 113 N.M. 703, 832 P.2d 394 (1992), and asserts that the Supreme Court of New Mexico held that a similar exclusion would apply where, although the insured did not expect or intend harm, he intended the act which caused the damages. See 113 N.M. at 708, 832 P.2d at 399. The Hartford argues that, as in Knowles v. United Sews.Auto. Ass’n, while BNSF Railway and Gandy Dancer may not have intended to harm Mercer LLC, “they intended to do , exactly what Mercer claims caused it harm, such that indemnification for Mercer’s damages is excluded under the clear and unambiguous terms of the Gandy Dancer Policies.” MSJ Memo at 8-9. The Hartford also contends that exclusion j(5), which addresses damages to real property, applies, because “to the extent a contractor’s work can be said to be the cause of damage to property, it is excluded.” MSJ Memo at 9. Mercer LLC filed a response indicating that it takes no position on the MSJ. See Roy D. Mercer, LLC’s Response to The Hartford Fire Insurance Companies’ Motion for Summary Judgment [Doc. #37], filed June 24, 2011 (Doc. 42). On July 21, 2011, Gandy Dancer filed the Gandy Dancer Response. See Doc. 45. Gandy Dancer argues that: (i) an “occurrence,” as the Gandy Dancer Policies define that term, caused the damage which Mercer LLC alleges; (ii) in analyzing whether the loss was “expected or intended,” The Hartford has mischaracterized Mercer LLC’s alleged property damage as consisting of the dikes and ditches themselves; (iii) Mercer LLC’s loss of use claims are not limited to land on which Gandy Dancer performed work; (iv) Mercer LLC’s trespass allegations also trigger coverage under the Gandy Dancer Policies; and (v) The Hartford has prematurely filed its MSJ, before any of the parties have made initial disclosures pursuant to rule 26(a)(1) of the Federal Rules of Civil Procedure. Gandy Dancer Responses at 3-4. Gandy Dancer argues that The Hartford mischaracterizes the “property damage” that forms the basis of Mercer LLC’s claims against Gandy Dancer as consisting solely of the construction of the water diversion system. Gandy Dancer Response at 10. It asserts that Mechenbier clarified, in his deposition, that “he is alleging that he . has been damaged by permanently losing the use of Mercer’s 60 acre tract for farming and/or grazing, and not just the use of property that the dikes and ditches occupy.” Gandy Dancer Response at 10 (citing Mechenbier Depo. at 17:19-18:2; id. at 141:22-142:16). It argues that Mechenbier testified that he could not graze cattle on the property, because he “would be afraid that if we had a large storm event, you’d lose the cattle with the amount [of] water getting channeled through there.” Gandy Dancer Response at 10 (citing Mechenbier Depo. at 28:13-17). Gandy Dancer also represents that Mechenbier has never attempted to graze cattle on or irrigate the property. See Gandy Dancer Response at 11 (citing Mechenbier Depo. at 141:22-142:16). Gandy Dancer argues that Mechenbier admitted that the water diversion system that Gandy Dancer re-built in 2006 was designed to divert flood waters in the Brown Arroyo in the same southernly direction as had historically been the case. See Gandy Dancer Response at 11 (citing Mechenbier Depo. at 63:20-66:3). It asserts that the Gandy Dancer Policies define an occurrence as “an accident” and that, in King v. Travelers Ins. Co., 84 N.M. 550, 505 P.2d 1226 (1973), the Supreme Court of New Mexico held: “Accident, as a source and cause of damage to property, within the terms of an accident policy, is an unexpected, unforeseen, or undesigned happening or consequence from either a known or unknown cause.” Gandy Dancer Response at 11 (quoting King v. Travelers Ins. Co., 84 N.M. at 553-54, 505 P.2d at 1229-30)(emphasis original). Gandy Dancer further argues that the Supreme Court of New Mexico found that “an insurance policy designed to compensate for damages suffered by ‘accidental means’ is no less effective when the damages result from negligence.” Gandy Dancer Response at 11 (quoting King v. Travelers Ins. Co., 84 N.M. at 553, 505 P.2d at 1229). It contends that allegations of negligence do not preclude the alleged harm from being accidental and that there is a dispute as to the material fact whether the alleged harm was unexpected. Gandy Dancer Response at 12. Gandy Dancer argues that The Hartford’s reliance on Vihstadt v. Travelers Ins. Co. is misplaced, because Vihstadt v. Travelers Ins. Co. dealt with bodily injury rather than property damage and did not address the body of case law “peculiar to an insurance company’s duty to defend under a liability insurance policy.” Gandy Dancer Response at 12. It asserts that at issue in Vihstadt v. Travelers Ins. Co. was whether the aspirin poisoning that resulted from the intentional digestion of fifty aspirin was an “accident” under a health insurance policy. Gandy Dancer Response at 12. It further asserts that, in Vihstadt v. Travelers Ins. Co., the Supreme Court of New Mexico relied on Hayden v. Insurance Co. of North America, 5 Wash.App. 710, 490 P.2d 454 (1971), for the proposition that “an accident is never present when a deliberate act is performed, unless some additional, unexpected, independent and unforeseen happening occurs,” and that the Supreme Court of New Mexico held that, because there was no unforeseen happening, there was no accident or coverage. Gandy Dancer Response at 12. It contends that Mercer LLC’s alleged loss was not “the natural result of Gandy Dancer’s work and certainly was not expected or the result of some willful design,” and that “the unexpected, unforeseen happening that brought about the alleged property damage is Mercer’s unsupported and irrational fear that flooding of the same magnitude ... will suddenly become commonplace.” Gandy Dancer Response at 12-13. Gandy Dancer also argues that this case is unlike Albuquerque Gravel Products Co. v. American Employers Ins. Co., 282 F.2d 218 (10th Cir.1960), because there the defendants built a new dam that caused normal rains to flood nearby properties. See Gandy Dancer Response at 13. It contends that it is undisputed that Gandy Dancer’s work was intended to ensure that future flood waters would be drained toward the Rio Grande River more efficiently and with less resulting erosion. See Gandy Dancer Response at 13. Gandy Dancer asserts that the Court should reject The Hartford’s argument that, “[b]e-cause BNSF and Gandy Dancer expected and intended to reconstruct the water diversion project, the damages it allegedly cause[d] Mercer are excluded.” Gandy Dancer Response at 14. It argues that The Hartford has mischaracterized Mercer LLC’s alleged property damage as consisting only of the actual work that Gandy Dancer performed, whereas Mechenbier’s deposition makes clear that the alleged damages are the complete and permanent loss of use of the sixty-acre tract. See Gandy Dancer Response at 14. Gandy Dancer contends that The Hartford’s reliance on Knowles v. United Services Automobile Ass’n is also misplaced, because, there, the Supreme Court of New Mexico, relying on United Services Automobile Ass’n v. Elitzky, 358 Pa.Super. 362, 517 A.2d 982 (1986), found that “expected or intended” meant that the exclusion applies to harm of the “same general type” that the insured intends and that, under Knowles v. United Services Automobile Ass’n, The Hartford must show that there are no disputed issues of fact that Gandy Dancer intended to cause harm of the “same general type” that Mercer LLC alleges. Gandy Dancer Response at 15. It contends that, unlike Knowles v. United Services Automobile Ass’n, where the insured intended to limit access to a road, Gandy Dancer “was simply restoring the pre-flood status quo ... in a way that ostensibly benefits the Mercer Property.” Gandy Dancer Response at 16. Gandy Dancer also argues that Mercer LLC’s claims do not fall “completely within exclusion j(5),” because, “[b]y its plain terms, the exclusion is limited to property damage to the particular part of the real property where operations are being performed.” Gandy Dancer Response at 16. It asserts that Mercer LLC’s claims extend to the entire sixty-acre tract and are not limited to where Gandy Dancer worked. See Gandy Dancer Response at 17. It contends that Advantage Home-building, LLC v. Maryland Casualty, Co., 470 F.3d 1003 (10th Cir.2006) is distinguishable, because, there, the damages to a home were limited to “the particular part of the real property on which the contractor was performing operations and it was undisputed that all of the damage occurred while the operations were ongoing.” Gandy Dancer Response at 17. Gandy Dancer also argues that Interstate Properties v. Prasanna, Inc., 2006 WL 1474235, 2006 Ohio 2686, 2006 Ohio App. LEXIS 2521 (Ohio App. May 21, 2006), is distinguishable, because that court held: Collateral damage is not the actual poor work product; rather it consequentially flows from it. Examples of collateral damage include the additional property damage that results from subsequent rain or other external factors, such as damage to the interior of a home or surrounding landscape caused by a leaky roof or a poorly installed drainage system. Gandy Dancer Response at 18 (citing Interstate Properties v. Prasanna, Inc., 2006 WL 1474235, at *10, 2006 Ohio App. LEXIS 2521, at *27). Alternatively, Gandy Dancer argues that Mercer LLC’s allegations of trespass trigger a duty to defend under the “personal and advertising injury” policy provision, because it does not condition coverage on there being “an occurrence,” and because other courts have held that trespass constitutes wrongful entry under similar provisions. Gandy Dancer Response at 18-19. Finally, Gandy Dancer argues that The Hartford filed its motion for summary judgment at a point in the case where none of the parties have made initial disclosures under rule 26(a) of the Federal Rules of Civil Procedure. See Gandy Dancer Response at 20. It asserts that “Rule 56(f) provides that if a party opposing a motion for summary judgment shows by affidavit that, for specific reasons, it cannot present facts essential to justify its opposition, then the Court in its discretion may deny the motion or order a continuance.” Gandy Dancer Response at 20. Gandy Dancer contends that “it should be allowed to conduct additional discovery because there are unresolved factual issues as to whether Gandy Dancer should have known that its work would lead to the complete loss of use of Mercer’s property due to flooding or otherwise.” Gandy Dancer Response at 21. It attaches the Rule 56(f) Affidavit of Robert P. Warburton, filed July 21, 2011 (Doc. 45-5)(“Warburton Aff.”), in support of its argument and in compliance with rule 56(f). It also argues that, because New Mexico law requires the Court to look beyond the allegations in the Complaint when evaluating an insurer’s duty to defend, Gandy Dancer should be given the opportunity to develop additional facts through discovery that may impact the Court’s analysis on the MSJ. See Gandy Dancer Response at 21. On July 21, 2011, BNSF Railway filed the BNSF Response. See Doc. 48. BNSF Railway first argues that The Hartford is estopped from denying coverage or that it has waived its claim of non-coverage. See BNSF Response at 1. BNSF Railway argues that The Hartford is es-topped from denying coverage, because it recognized that there was coverage under the policy and because The Hartford’s “belated attempt to reserve its rights to contest coverage was not only ineffective, but constitutes prima facie bad faith.” BNSF Response at 8. It asserts that, under New Mexico law, when an insurance carrier “assumes and conducts the defense of an action brought against the insured ... without disclaiming liability or giving notice of a reservation of right to deny coverage,” the insurance carrier is estopped from later denying coverage, because “the insurer’s unconditional defense of an action brought against its insureds constitutes a waiver of the terms of the policy.” BNSF Response at 8 (citing Pendleton v. Pan Am. Fire & Cas. Co., 317 F.2d 96, 99 (10th Cir.1963); Am. Gen. Fire & Cas. Co. v. Progressive Cas. Co., 110 N.M. 741, 745, 799 P.2d 1113, 1117 (1990)). BNSF Railway argues that, when an insurer unconditionally accepts a defense, the insured is no longer required to show prejudice, “because he is presumed to have been prejudiced by virtue of the insurer’s assumption of the defense.” BNSF Response at 8 (citing Pendleton v. Pan Am. Fire & Cas. Co., 317 F.2d at 99). It contends that The Hartford has forfeited its ability to assert that the policy does not provide coverage. BNSF Railway further argues that all of the undisputed facts upon which The Hartford bases its MSJ were known to The Hartford at the time it accepted coverage, and that The Hartford assumed BNSF Railway’s defense “with knowledge of a ground of forfeiture or noncoverage under the policy.” BNSF Response at 9 (citing Pendleton v. Pan Am. Fire & Cas. Co., 317 F.2d at 99). It asserts that it was prejudiced, because The Hartford’s control of the litigation prejudiced BNSF Railway’s ability to resolve the litigation at an early stage and forced BNSF Railway to undertake action while The Hartford “delayed its investigation of BNSF’s claim for coverage.” BNSF Response at 9. It represents that, at the time The Hartford accepted its defense, BNSF Railway was attempting to settle the case with Mercer LLC and that The Hartford mandated that BNSF Railway not settle any claims. See BNSF Response at 9. Consequently, BNSF Railway argues that The Hartford’s unreasonable delay in responding and attempting to negotiate a settlement with Mercer LLC has prejudiced BNSF Railway’s ability to resolve the case. See BNSF Response at 9-10. BNSF Railway also asserts that Mercer LLC’s damages claims are covered under the Gandy Dancer Policies. See BNSF Response at 10. It contends that, under New Mexico law, the duty to defend is separate from, and broader than, the duty to indemnify. See BNSF Response at 10 (citing Knowles v. United Servs. Auto. Ass’n, 113 N.M. at 704, 832 P.2d at 395). It argues that the duty to defend arises when a complaint states facts which bring the case within coverage of the policy and that it can be based on the “potential” for coverage. BNSF Response at 10 (citing Valley Improvement Assoc., Inc. v. U.S. Fid. and Guar. Corp., 129 F.3d 1108, 1116 (10th Cir.1997); Am. Gen. Fire & Cas. Co. v. Progressive Cas. Co., 110 N.M. at 744, 799 P.2d at 1116; Knowles v. United Servs. Auto. Ass’n, 113 N.M. at 704, 832 P.2d at 395). BNSF Railway asserts that, an insurer must “fulfill its promise to defend even though the complaint fails to state facts with sufficient clarity ..., provided the alleged facts tend to show an occurrence within the coverage,” BNSF Response at 10 (quoting Found. Reserve Ins. Co. v. Mullenix, 97 N.M. 618, 620, 642 P.2d 604, 606 (1982))(citing Valley Improvement Assoc., Inc. v. U.S. Fid. and Guar. Corp., 129 F.3d at 1116), and that any doubt regarding the scope of coverage is resolved in favor of the insured, see BNSF Response at 11 (citing Sprintcom, Inc. v. Clarendon Nat’l Ins. Co., No. 06-702, Memorandum Opinion and Order at 10, filed August 2, 2007 (Doc. 90)(Black, C.J,)(“Sprintcom MOO”); State Farm Fire & Cas. Co. v. Ruiz, 36 F.Supp.2d 1308, 1312 (D.N.M.1999)(Vazquez, J.); Valley Improvement Assoc., Inc. v. U.S. Fid. and Guar. Corp., 129 F.3d at 1116). BNSF Railway argues that “the mere existence of a purposeful act in relation to an occurrence does not destroy coverage,” and that the Court should look to whether BNSF Railway and Gandy Dancer intended to inflict the alleged injuries. BNSF Response at 11 (citing Lumber Ins. Cos., Inc. v. Allen, 820 F.Supp. 33, 35 (D.N.H. 1993)). It contends that the Supreme Court of New Mexico has held that an intentional act, negligently performed, does not preclude the “accident” from coverage and that “negligence would be the predicate of any likely liability insured against.” BNSF Response at 12 (citing King v. Travelers Ins. Co., 84 N.M. at 553, 505 P.2d at 1228). BNSF Railway also points to the Sprintcom MOO, where the Honorable Bruce D. Black, Chief United States District Judge for the District of New Mexico, held that, in New Mexico, “when a complaint is framed in terms of an insured’s negligence ... there is a duty to defend.” BNSF Response at 12 (citing Sprintcom MOO at 15-16). It argues that Mercer LLC’s claims are “primarily based upon BNSF’s and Gandy Dancer’s alleged negligence and give rise to the duty of defend because they clearly support an ‘occurrence.’ ” BNSF Response at 12. In reliance on Vihstadt v. Travelers Ins. Co., BNSF Railway asserts that The Hartford incorrectly states that the Court should look only at the underlying act and not at the harm. See BNSF Response at 13. It argues that, in Vihstadt v. Travelers Ins. Co., the Supreme Court of New Mexico “was not only reviewing the underlying action of the insured taking 50 pills, but was looking at the ‘natural result’ of taking the 50 pills.” BNSF Response at 13 (citing Vihstadt v. Travelers Ins. Co., 103 N.M. at 467, 709 P.2d at 189). It contends that, because the flooding was not a foreseen or expected consequence of rehabilitating the diversion system, Mercer LLC’s claims meet the Vihstadt v. Travelers Ins. Co. definition of an accident. See BNSF Response at 13-14. BNSF Railway argues that, in Albuquerque Gravel Products Co. v. American Employers Ins. Co., the United States Court of Appeals for the Tenth Circuit determined that the insured “should have known that the said ramp so constructed and maintained by it in said arroyo would prevent the flow of water in said arroyo from following a course down said arroyo ... but would back up and retard the water.” BNSF Response at 14 (quoting Albuquerque Gravel Prods. Co. v. Am. Emp’rs Ins. Co., 282 F.2d at 221). It asserts that Gandy Dancer’s work was performed following the destruction of a pre-existing water diversion system and with the purpose of repairing that system. See BNSF Response at 14. BNSF Railway points the Court to Frederick v. Farm Bureau Ins., No. 280629, 2008 WL 5046869, 2008 Mich.App. LEXIS 2379 (Mich.App. Nov. 25, 2008), and Clarendon National Ins. v. Smead, No. 06-0434, 2007 WL 1670112, 2007 U.S. Dist. LEXIS 42017 (D.Haw. June 7, 2007), where the Court of Appeals of Michigan and the United States District Court for the District of Hawaii both held that, when the insureds’ efforts to landscape to remove water from their land resulted in flooding on adjacent land, the resultant flooding was an “accident” and came within the “occurrence” language of an insurance contract. BNSF Response at 15 (citing Clarendon National Ins. v. Smead, 2007 WL 1670112, at *7-9, 2007 U.S. Dist. LEXIS 42017, at *21-26; Frederick v. Farm Bureau Ins., 2008 WL 5046869, at *3-4, 2008 Mich.App. LEXIS 2379, at *8-9). It contends that, even if the Court looks to the underlying act rather than the injury to determine whether the allegations support an occurrence, Mercer LLC’s allegations contend that negligent design or planning were the cause of its consequential damages. See BNSF Response at 17. BNSF Railway argues that the damages alleged were not expected or intended, such that they would fall within the Gandy Dancer Policies’ exclusionary provision. It asserts that, in Knowles1 v. United Services Automobile Ass’n, the Supreme Court of New Mexico held that, to fall within a similar exclusionary clause, the insured must have some intent beyond the intent necessary to commit the act. See BNSF Response at 18 (citing Knowles v. United Services Automobile Ass’n, 113 N.M. at 705, 832 P.2d at 396). It contends that other New Mexico cases and cases from other states also demonstrate that the focus should be on the harm caused.' See BNSF Response at 19 (citing Lyons v. State Farm Fire & Cas. Co., 349 Ill.App.3d 404, 285 Ill.Dec. 231, 811 N.E.2d 718, 727 (Ill.Ct.App.2004); Computer Corner, Inc. v. Fireman’s Fund Ins. Co., 132 N.M. 264, 46 P.3d 1264 (Ct.App.2002); Turner v. Burch, 156 Mich.App. 303, 401 N.W.2d 355 (Mich.Ct.App.1986)). BNSF Railway argues that the relevant inquiry is not whether it intended to rehabilitate the components of the' diversion system, but whether BNSF Railway intended the same harm that Mercer LLC has alleged. See BNSF Response at 20. It asserts that, had the Supreme Court of New Mexico intended the focus of this inquiry to be on the underlying act, then it would have adopted the approach that it rejected, and that, in rejecting the underlying-act approach, the Supreme Court of New Mexico chose to focus on whether the harm was intended. See BNSF Response at 20 (citing Knowles v. United Services Automobile Ass’n, 113 N.M. at 706, 832 P.2d at 397). BNSF Railway argues that The Hartford’s expansive reading of this exclusion provision would preclude coverage of almost every property damage, because the underlying act is almost always intended. See BNSF Response at 21. BNSF Railway further asserts that the exclusion set forth in j(5) does not apply, because the majority of the alleged property damage was not on the real property where the work took place. See BNSF Response at 21. It represents that Mercer LLC has alleged that Gandy Dancer’s work “rendered 60 acres of [Mercer LLC’s] property worthless,” and that Mercer LLC has alleged that it sustained damages as a result of an alleged negligent misrepresentation, a “discharge” of water on to its property, and loss of its water rights. BNSF Response at 21 (citing Mercer State Counterclaim ¶25, at 7; Mercer 2nd Am. State Counterclaim ¶¶ 9, 12, at 3 — 4). BNSF Railway argues that Mercer LLC is “plainly seeking consequential damages for loss of use of real and other property other than the real property on which Gandy Dancer performed its work,, and therefore is seeking damage which are not excluded by section j(5) of the policy.” BNSF Response at 21 (emphasis original). It asserts that The Hartford’s contention that, “to the extent a contractor’s work can be said to be the cause of the damage to property, it is excluded,” misstates both the plain terms of the exclusion and the holding of the case which it cites, Advantage Homebuilding, LLC v. Maryland Ca sualty, Co. BNSF Response at 22. It argues that The Hartford fails to mention that the exclusion refers to “that particular part of real property” and that the Tenth Circuit held that “the exclusion applies only to damage from ongoing work, and not damage after completion.” BNSF Response at 22 (citing Advantage Home-building, LLC v. M.D. Cas., Co., 470 F.3d at 1011). Finally, BNSF Railway argues that the Gandy Dancer Policies’ coverage for personal and advertising injury provides coverage, because it is not dependent on there being an “occurrence,” and is not subject to the “expected or intended” exclusion. BNSF Response at 22. BNSF Railway asserts that this provision covers “[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” BNSF Response at 23 (citing 06-07 Gandy Dancer Policy at 15). It contends , that courts in other states have held that this provision establishes coverage for c