ARIAS V. PHOENIX INDEM. INS. CO., 2014-NMCA-027,
__ P.3d __
CARMEN ARIAS,
Plaintiff/Counter-Defendant/Appellee,
v.
PHOENIX INDEMNITY INSURANCE COMPANY,
Defendant/Counter-Plaintiff/Appellant.
COURT OF APPEALS OF NEW MEXICO
2014-NMCA-027, __ P.3d __
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY, Ted
C. Baca, District Judge.
Certiorari Denied, January 28, 2014,
No. 34,490. Released for Publication February 25, 2014.
Carter & Valle Law Firm, P.C.,
Richard J. Valle, Kathryn L. Eaton, Albuquerque, NM, for Appellee.
The Law Offices of Bruce S. McDonald,
Bruce S. McDonald, Daniel P. Ulibarri, Laura K. Vega, Albuquerque, NM, for
Appellant.
RODERICK T. KENNEDY, Chief Judge. WE CONCUR:
JONATHAN B. SUTIN, Judge, J. MILES HANISEE, Judge.
AUTHOR: RODERICK T. KENNEDY.
{1} “The term
‘stacking’ refers to an insured’s attempt to recover damages in aggregate under
. . . one policy covering more than one vehicle.”
State Farm Mut. Auto. Ins.
Co. v. Safeco Ins. Co.,
2013-NMSC-006, ¶ 8,
298 P.3d 452 (internal
quotation marks and citation omitted). Plaintiff attempts to impose
intra-policy stacking of uninsured/underinsured motorist (UM/UIM) coverage into
an insurance policy we previously reformed, owing to the imperfect handling of
her rejection of UM/UIM coverage.
See Arias v. Phoenix Indem. Ins. Co.,
2009-NMCA-100,
147 N.M. 14,
216 P.3d 264. In
Arias, we held that her
rejection of UM/UIM coverage was legally deficient and required judicial
intervention to read the coverage into the policy.
Id. ¶ 18. On similar
grounds, we hold that she is also entitled to have her coverage stacked under
our Supreme Court’s opinion in
Montano v. Allstate Indem. Co.,
2004-NMSC-020,
135 N.M. 681,
92 P.3d 1255. We affirm the district court and
remand.
{2} Carmen Arias
(Plaintiff), having settled for policy limits with the insurance company of a
tortfeasor whose vehicle struck hers, attempted to pursue UM/UIM benefits under
an insurance policy that she had purchased from Phoenix Indemnity Insurance
Company (Defendant). This policy covered her liability up to the statutory
minimum and covered two vehicles but, at the time of its purchase, she rejected
UM/UIM coverage. In a previous appeal in this case, we held that, because her
rejection of UM/UIM coverage was legally invalid, she was entitled to UM/UIM
coverage as a matter of law.
See Arias,
2009-NMCA-100, ¶ 12. The issue
of whether the coverage “stacked” because two vehicles were covered under the
policy had not been addressed by the district court, and we remanded with
instructions to consider and rule on the stacking issue.
Id. ¶ 19.
{3} On remand, the
district court resolved the stacking issue on summary judgment. Plaintiff’s
judicially minted UM/UIM coverage would apply to her damages, and the coverage
would be stacked, reflecting the two vehicles covered under the policy. In
doing so, the district court first determined that reasonable expectations of
an insured in the terms of a policy are irrelevant once it was determined by
this Court that Defendant had failed to obtain a valid rejection of UM/UIM
coverage from Plaintiff. Second, interpreting the arc of New Mexico’s common
law holdings that read UM/UIM coverage into a policy in amounts equal to the
full extent of its liability limits, the district court determined that, in the
absence of any valid rejection of UM/UIM coverage in a multiple-vehicle policy,
the full coverage due is properly established by multiplying the available
liability limits of the policy by the number of vehicles insured, rather than
the number of premiums paid by an insured. The district court stated that
UM/UIM coverage had been read into the policy as a result of Defendant entirely
failing to obtain a valid rejection of coverage, and the reformation of the
policy should include reading in stacking as well. From this judgment,
Defendant now appeals. We agree with the district court.
{4} The facts of this
case are not in issue and were discussed fully in our previous opinion. The
question is solely one involving interpretations of law, which we review de
novo.
Jordan v. Allstate Ins. Co.,
2010-NMSC-051, ¶ 14,
149 N.M. 162,
245 P.3d 1214;
City of Albuquerque v. BPLW Architects & Eng’rs, Inc.,
2009-NMCA-081, ¶ 7,
146 N.M. 717,
213 P.3d 1146 (holding that, in such a
situation, we apply de novo review and are not required to view the appeal in
the light most favorable to the party opposing summary judgment).
{5} In
Romero v.
Dairyland Insurance Co., our Supreme Court observed that unless rejection
is accomplished in a manner consistent with the requirements imposed by the
statute and regulations, UM/UIM coverage will be read into the policy
“regardless of the intent of the parties.”
1990-NMSC-111, ¶ 1,
111 N.M. 154,
803 P.2d 243. Our Supreme Court further stated that the UM/UIM statute
“embodies a public policy of New Mexico to make uninsured motorist coverage a
part of every automobile liability insurance policy issued in this state,” and
“[t]he statute was intended to expand insurance coverage and to protect
individual members of the public against the hazard of culpable uninsured
motorists.”
Id. ¶ 6. Finally, our Supreme Court stated that the statute
should be liberally interpreted in order to implement its remedial purpose, and
the language in the statute that provides for an exception to UM/UIM coverage
should be construed strictly to protect the insured.
Id.;
Farmers
Ins. Co. of Ariz. v. Chen,
2010-NMCA-031, ¶ 25,
148 N.M. 151,
231 P.3d 607.
{6} Our courts have a
continuing interest in implementing the legislative goal to direct New Mexicans
to insure for damages caused by uninsured and underinsured motorists. In
Arias,
we followed
Romero to implement the strong expansive legislative and
public policy in New Mexico favoring insurance coverage to protect members of
the public against losses caused by uninsured and underinsured motorists.
Arias,
2009-NMCA-100, ¶ 7. We recognize that the Legislature enacted NMSA 1978,
Section
66-5-301(A) and (C) (1983) to provide that every insurance policy in
the state is to include UM coverage and, if the insured does not want the
coverage, it should be specifically rejected in writing.
Marckstadt v.
Lockheed Martin Corp.,
2010-NMSC-001, ¶¶ 16-17, 25-26,
147 N.M. 678,
228
P.3d 462 (expressing the written rejection and attached notification
requirements). Under our law, the insurer offers the maximum amount of UM/UIM
coverage to the insured based on the liability limits of the policy and, in no
event, less than the statutory minimum.
Progressive Nw. Ins. Co. v. Weed
Warrior Servs.,
2010-NMSC-050, ¶ 12,
149 N.M. 157,
245 P.3d 1209;
Romero
v. Progressive Nw. Ins. Co.,
2010-NMCA-024, ¶ 16,
148 N.M. 97,
230 P.3d
844. Such coverage may only be foregone by an insured’s express and legally
satisfactory rejection of it.
{7} The history of our
case law considering the offer and rejection of UM/UIM coverage is extensive.
See Weed Warrior,
2010-NMSC-050, ¶ 4 (listing cases that constitute the
evolution of jurisprudence in this area). The default position of our courts is
that any rejection of coverage that is found to be invalid under Section
66-5-301 results in courts reforming the insurance policy in question by
reading into it UM/UIM coverage as if it was fully provided at the level of
policy limits to the insured in the first instance.
Romero,
2010-NMCA-024, ¶ 16;
see Jordan,
2010-NMSC-051, ¶ 2. “Where a valid
rejection of UM/UIM coverage has not been obtained by the insurer, New Mexico
law requires UM/UIM coverage to be read into the policy at the liability
limits, regardless of the intent of the parties or the fact that a premium has
not been paid.”
Chen,
2010-NMCA-031, ¶ 27 (noting that the de-emphasis
on premium payment becomes significant when dealing with an invalid rejection
of both coverage and stacking).
{8} We have already
reformed Plaintiff’s insurance contract to include UM/UIM coverage to the
liability limits of her policy because Section 66-5-301 and
13.12.3.9 NMAC
(5/14/2004) provide that automobile liability policies shall contain UM/UIM
coverage in the absence of an appropriate rejection.
Arias,
2009-NMCA-100, ¶ 15. Now that the district court on remand has separately
considered whether Plaintiff’s two insured vehicles’ coverage should be
stacked, we review this remaining question.
A. Insufficient
Rejections of Coverage Result in Reading in UM/UIM Coverage to Policy Limits
{9} There is no
question that, in the absence of a valid rejection of UM/UIM coverage, such
coverage will be read into the insured’s coverage as if there was no rejection
at all. That is the law of the case here.
Id. ¶ 12. The invalid
rejection of partial UM/UIM stacking, or the ambiguous subjecting of a policy
to a limitation on stacking, was similarly held in
Montano to be no rejection
at all, resulting in stacking to the policy limits for each covered vehicle
being read into the policy. The question here is simply whether a complete
reading of UM/UIM coverage where none had been before also requires the reading
in of stacking of coverage if multiple vehicles are insured.
{10} Plaintiff insured
two vehicles under her policy. By our earlier decision in
Arias, she is
entitled to UM/UIM coverage to the limits of her liability under the policy
irrespective of her intention to reject coverage or whether separate premiums
were paid.
Chen,
2010-NMCA-031, ¶ 27. To begin answering the question of
whether stacking applies here, we will first assess the circumstances under
which common law imposition of stacking upon insurance policies has occurred.
B. Stacking
in New Mexico
{11} Montano holds
that insurers must obtain written rejections of stacking to avoid liability.
2004-NMSC-020,
¶ 1. UM/UIM coverage as required by statute is a mandatory component of an
insurance policy. In
Montano, the policy provided for some, but not all,
covered vehicles’ coverage to be stacked. As a result, our Supreme Court’s
pronouncements in
Montano treated the stacking issue as a
“judicially-created doctrine, which thus far has not met the disapproval of the
Legislature[,]”
id. ¶ 17, but also something that had been predicated on
the insured’s payment of “a separate premium for the uninsured motorist
coverage on each car insured under the policy[,]”
id. ¶ 12 (internal
quotation marks and citation omitted). Given that the
Montano policy had
stacked coverage subject to a separate premium, this language does not apply
well to our case, where all UM/UIM coverage was judicially created. In the
present case, there was a single policy, but no premium paid at all for UM/UIM
coverage owing to our reading it into the policy. Following
Montano, our
Supreme Court was providing UM/UIM coverage up to liability limits, they were
silent on whether this judicially created coverage was to be stacked.
Jordan,
2010-NMSC-051. We first conclude that the rationale expressed in
Chen that
payment of any premium is irrelevant to our reading coverage into a policy in
general should be extended to the question of stacking where the policy itself
was silent, but coverage is read in the contract by the courts.
{12} Despite
Montano’s
discussion of stacking as “extra coverage for which the parties have
contracted,” it is clear that, absent the execution of a sufficient rejection
of each and every possible combination of stacking, stacking is something “to
which the insured is entitled by default[.]”
2004-NMSC-020, ¶ 18 (internal
quotation marks and citation omitted). Defendant’s attempts to rely on
Montano
to limit stacking only to where “those who want stacked coverage pay for it,
and those who don’t want it don’t pay for it” is inapposite.
Id. (internal
quotation marks and citation omitted). Separate premiums are extraneous to
Montano’s
strong dicta indicating a preference for policies to treat vehicles
individually and, hence, requiring a policyholder’s specific rejection of
stacked coverage for each and every vehicle owned before stacking is validly
rejected.
Id. ¶ 19.
Montano dealt with a policy that specifically
sought to limit stacking by its terms, but wound up having those limitations
struck down and full per-vehicle stacking imposed on the policy when an
ambiguity resulted in an invalid rejection of stacking. In the absence of any
such terms or premiums to be paid for stacking in this case,
Montano demonstrates
that, when invalid rejection of stacking exists, our courts favor and extend
stacking to all vehicles covered by the policy.
See id. ¶ 1.
{13} This returns us to the
expansive policy perspective of the Legislature as to this issue and our common
law that no liability policy may issue, except that it provides “
any vehicle
registered or . . . garaged in New Mexico” is to be covered by UM coverage.
Id.
¶ 19; § 66-5-301(A). Stacking must then be a default entitlement with
regard to all individual vehicles covered under a policy where no sufficient
rejection of stacking exists. Although
Montano indicates the possible
propriety of a stacking exclusion when under a policy only a single premium is
paid and a specific rejection is properly executed, that is not the case here.
Montano
clearly requires an unambiguous rejection to defeat stacking as well and, in
this case, we have neither a rejection of coverage or stacking as a matter of
law. The lack of a valid rejection of UM/UIM coverage in this case led us to
read coverage into the insurance contract. It appears we must now do the same
with stacking of coverage as it would apply to each covered vehicle. The
judicial imposition of stacking, like imposing coverage when an insured did not
validly reject it, must inure exclusively to the benefit of the insured as a
default position.
Montano,
2004-NMSC-020, ¶ 19 (stating that the statute
required each vehicle covered under a policy be covered by one minimum
coverage, together with the requirement of written rejection of UM/UIM coverage
combine to defeat an insurance company’s attempt to limit liability by avoiding
stacking). Unless a policy “notif[ies] the insured that only one premium has
been charged for one insurance coverage[,]” full stacking is read into the
policy.
Id. ¶ 27 (internal quotation marks and citation omitted). Where
courts confer UM/UIM coverage where a policy is silent on the matter, it
follows that each vehicle covered also acquires coverage, and those coverages
are to be stacked.
{14} Our opinion in
Arias
left the stacking issue open as to the coverage we imposed on the insurance
contract between the parties. We acknowledge that, by creating the coverage
without reference to stacking, we created a legal ambiguity as to the extent of
that coverage that also has implications for the question of whether to order
stacking. “A court may find that an ambiguity exists if separate sections of
the policy conflict, if the language may have more than one meaning, if the
structure of the contract is not logical, or if a relevant matter of coverage
is not explicitly addressed in the policy.”
Bird v. State Farm Mut. Auto.
Ins. Co.,
2007-NMCA-088, ¶ 11,
142 N.M. 346,
165 P.3d 343.
Bird held
that, in the absence of such terms, coverage is to be read into the policy by
our courts. We hold that, as much as coverage itself to the maximum limit of
liability must be read into her policy, stacking of coverage for each of the
two vehicles thus insured must now follow suit absent valid rejection, and we
affirm the district court.
C. Failing
to Adequately Reject Stacking Results in the Imposition of Stacking
{15} Thus, we conclude
that as we inject UM/UIM coverage into a policy as a matter of law for failure
of any rejection of coverage, the law also requires the imposition of a
per-vehicle stacking of coverage into a single policy. In this case,
ambiguities arose in Arias’s policy’s language, owing first to the defective
rejection of coverage requiring that coverage be read into the policy. Second,
the requirement noted above that coverage applies to
any vehicle demands
stacking of coverage in the absence of indications to the contrary. Having
extended to her the availability of UM/UIM coverage as a matter of law, we also
include per-vehicle stacking. We believe that, in the absence of a rejection of
coverage altogether, the coverage that must be extended is the full measure
accorded her by the default positions afforded by law. This includes UM/UIM
coverage generally, specifically to be stacked as to each of her insured
vehicles.
{16} We hold that the
district court was correct as a matter of law and affirm its grant of summary
judgment to Plaintiff and remand for resumption of proceedings in accordance
with our ruling today.
RODERICK T. KENNEDY, Chief Judge
Topic Index for Arias v. Phoenix Indem. Ins. Co.,
No. 31,571
Uninsured or Underinsured Motorist