In an attempt to save $1 million, a finance and insurance corporation with $1.2 billion in assets is suing the families on both sides of a headline-grabbing Santa Fe tragedy.

Marino Leyba Jr. was working for his father’s company, USA Security & Surveillance, when he shot and killed 17-year-old Sarah Marie Lovato and her father, Bennie Ray Lovato Sr., in their home last year. In July, First Judicial District Court Judge Michael Vigil sentenced the 23-year-old to 62 years in state prison without the possibility of parole.

During the trial, jurors heard how “Reno,” as the younger Leyba was known, barged into the Lovatos’ apartment wearing his work uniform, fired his work-issued pepper spray and work-issued handgun, and fled the scene in his USA Security sport utility vehicle [News, April 28: “Tragic Trial”].

But First Mercury Insurance Co. claims in its Aug. 23 US District Court filing that USA Security’s policy didn’t cover Reno for any damages arising from the 2009 shooting. The company argues Reno was not acting within the scope of his employment at the time of the murders. That’s why USA Security and Leyba Sr. are named in First Mercury’s lawsuit.

The same lawsuit names individual members of the Lovato family—including Sarah’s mother, brothers and younger sister—because First Mercury wants the court to limit any compensation for damages that will be paid to them.

The Lovatos’ attorney, Bob Rothstein of Santa Fe, filed a claim for $2 million, the upper limit of USA Security’s policy with First Mercury. In response, First Mercury offered to settle for $1 million, an offer Rothstein rejected.

“Our position is that each separate shooting is a separate occurrence,” Rothstein tells SFR. “They’re not really arguing that they don’t have to pay the first million. The question is, do they have to pay the second?”

If Bennie, Sarah and the 9-month-developed fetus she had named Isaac Lovato had all lived to be 75, First Mercury’s settlement offer values the lost years of their lives at approximately $6,300 a year each, to be divided among their survivors, according to the New Mexico Wrongful Death Act.

“It’s enough money for Lindy [Lovato, Sarah’s mother] and the kids—who are named under the [state wrongful death] statute as getting the first share of it—to make up for the loss in some monetary senses. It’s never going to make up for the loss in terms of the emotional relationship,” Rothstein says. “It’s a terrible time—very difficult…I wouldn’t say that any of them have started to move on.”

First Mercury’s attorney, Daniel W Lewis of Albuquerque, was on vacation last week and unable to respond to SFR’s messages.

Rothstein says the case could go to arbitration. “There’s a lot of risk on both sides—maybe less for an insurance company like First Mercury than for the Lovatos,” he says. “First Mercury pays out $1 million: They raise their premiums. The Lovatos get nothing: It changes their life for the worse.”

According to its most recent financial reports, First Mercury Financial Corporation, the Illinois-based publicly traded parent company of First Mercury Insurance Co., made profits of $4.1 million in the second quarter of this year.

The $1 million at issue represent 0.3 percent of the corporation’s annual operating revenue. Last year, First Mercury’s chairman and chief executive officer, Richard H Smith, claimed total compensation of more than $3 million, according to Forbes magazine.

SFR’s past coverage of the events leading up to the Lovatos’ murder described the dilapidated single-wide trailer in which Sarah and Bennie lived for a time [Cover story, July 8, 2009: “Everyone Knew”]. Both of Sarah’s parents were unemployed and receiving state welfare benefits before the shootings.

The attorney representing the Leybas against their own insurance company, Bill Gralow of Albuquerque, tells SFR he hasn’t yet seen First Mercury’s complaint, but says it didn’t come as a surprise. The Leyba’s position, according to Rothstein, is akin to that of a driver who dutifully pays his car insurance premiums for 20 years, only to have a claim denied when he finally gets in an accident.

First Mercury’s lawsuit also names Reno. His conviction is scheduled to go before the New Mexico Court of Appeals, where he will be represented by the state public defender’s office.