This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Plaintiff was involved in a car accident with a third-party tortfeasor. The Plaintiff, insured by the Defendant under a policy that included underinsured motorist coverage, settled with the tortfeasor without the Defendant's consent. The Defendant later denied the Plaintiff's underinsured motorist claim, citing a policy clause prohibiting settlements without the insurer's consent (paras 3-7).
Procedural History
- District Court of Bernalillo County: Granted summary judgment in favor of the Defendant, holding that the Plaintiff's settlement with the tortfeasor without the insurer's consent relieved the Defendant of its obligation to pay underinsured motorist benefits.
Parties' Submissions
- Plaintiff-Appellant: Argued that the Defendant's own settlement with the tortfeasor extinguished its subrogation rights, estopping the Defendant from relying on the consent clause to deny coverage (paras 1, 11).
- Defendants-Appellees: Contended that the consent clause was valid and enforceable, and that the Plaintiff's settlement with the tortfeasor without consent violated the policy, destroying the Defendant's subrogation rights (paras 10-11).
Legal Issues
- Whether the insurer's own settlement with the tortfeasor extinguished its subrogation rights and nullified its reliance on the consent clause (para 8).
- Whether the insured's settlement with the tortfeasor without the insurer's consent automatically releases the insurer from liability, even if the insurer was not prejudiced by the settlement (para 8).
Disposition
- The Supreme Court of New Mexico reversed the summary judgment and remanded the case to the district court for further consideration (para 1).
Reasons
Per Baca J. (Sosa C.J. and Montgomery J. concurring):
The Court held that the purpose of the consent clause is to protect the insurer's subrogation rights. If the insurer voluntarily relinquished those rights through its own settlement with the tortfeasor, it cannot rely on the consent clause to deny coverage. The Court emphasized that the insurer bears the burden of proving that its settlement did not constitute an accord and satisfaction that extinguished its subrogation rights. The case was remanded to the district court to determine whether the insurer's settlement with the tortfeasor constituted an accord and satisfaction, considering factors such as whether the insurer expressly reserved its rights and whether subsequent claims arose that were unknown at the time of settlement (paras 12-17).