Arias v. Phoenix Indemnity Insurance

Citations: 5 N.M. 486; 2014 NMCA 027Docket: No. 34,490; Docket No. 31,571

Court: New Mexico Court of Appeals; January 28, 2014; New Mexico; State Appellate Court

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Stacking refers to an insured's attempt to aggregate damage recovery under a single policy covering multiple vehicles. In this case, the plaintiff seeks intra-policy stacking of uninsured/underinsured motorist (UM/UIM) coverage after the court previously ruled her rejection of such coverage was legally invalid. The plaintiff, Carmen Arias, had settled with a tortfeasor's insurance but then pursued UM/UIM benefits under her policy with Phoenix Indemnity Insurance Company, which covered two vehicles. The prior ruling mandated that UM/UIM coverage be read into her policy. 

On remand, the district court granted summary judgment, asserting that the plaintiff's UM/UIM coverage would be applicable to her damages and would be stacked due to the two vehicles covered. The court reasoned that the reasonable expectations of the insured regarding the policy terms were irrelevant once it was established that the defendant did not secure a valid rejection of UM/UIM coverage. Additionally, the court interpreted New Mexico's common law to conclude that, without a valid rejection in a multiple-vehicle policy, the coverage amount should equal the liability limits multiplied by the number of vehicles, not the premiums paid. The court ruled that the reformation of the policy should include stacking, leading to the defendant's appeal, which was ultimately affirmed by the reviewing court. The legal interpretations involved were reviewed de novo, with no factual disputes present.

In Romero v. Dairyland Insurance Co., the New Mexico Supreme Court reaffirmed that unless a rejection of uninsured/underinsured motorist (UM/UIM) coverage is executed according to statutory and regulatory requirements, such coverage will automatically be included in the insurance policy, regardless of the parties' intentions. The court emphasized that New Mexico's UM/UIM statute reflects a public policy aimed at expanding insurance coverage to protect individuals from the risks posed by uninsured motorists and should be interpreted liberally to fulfill its remedial purpose. 

The court reiterated that every insurance policy must include UM coverage unless explicitly rejected in writing by the insured. This written rejection must meet specific notification requirements, as established in previous cases. Insurers are required to offer the maximum UM/UIM coverage based on the policy's liability limits, with coverage being mandatory unless a legally valid rejection is documented. 

The case law surrounding UM/UIM coverage has evolved to the point where any invalid rejection of coverage leads to the automatic inclusion of UM/UIM coverage to the policy's maximum limits, irrespective of the insured's intent or premium payment status. The court has previously reformed insurance contracts to include UM/UIM coverage as mandated by statute when no appropriate rejection exists. The current focus is on whether the coverage for the plaintiff's two insured vehicles should be stacked, as reviewed by the district court on remand.

Insufficient rejections of Uninsured Motorist/Underinsured Motorist (UM/UIM) coverage lead to the automatic inclusion of such coverage in an insurance policy, effectively treating it as if no rejection occurred. According to legal precedent, specifically the Montano case, insurers must secure a valid written rejection of stacking to avoid liability. In New Mexico, UM/UIM coverage is mandated by statute, and any ambiguity regarding stacking in a policy can result in the imposition of stacking as a default entitlement for the insured.

In this case, the plaintiff insured two vehicles under a single policy. The prior ruling in Arias established that the plaintiff is entitled to UM/UIM coverage up to her policy's liability limits, irrespective of any intention to reject coverage or separate premium payments. The determination of stacking applicability requires examining the common law conditions under which stacking has been enforced.

The Montano ruling emphasized that insurers must have explicit rejections of stacking to limit their liability. It indicated that the payment of separate premiums for each vehicle is generally a prerequisite for stacking; however, this principle does not apply when coverage is judicially created without corresponding premiums. The court reaffirmed that in the absence of a sufficient rejection of stacking, the insured is entitled to stacking by default, regardless of whether premiums were paid or not. The Montano case illustrates that when there is an invalid rejection of stacking, courts will favor imposing full stacking for all insured vehicles.

The Legislature mandates that uninsured/underinsured motorist (UM/UIM) coverage must be provided for any vehicle registered or garaged in New Mexico. Stacking of coverage is considered a default entitlement for all vehicles under a policy unless there is a clear rejection of stacking. The case references Montano, which asserts that an unambiguous rejection is necessary to negate stacking, a requirement not met in this instance. Consequently, the lack of a valid rejection leads to the inclusion of coverage and stacking by default.

The court also acknowledges that ambiguities in the policy regarding coverage necessitate judicial intervention to impose both UM/UIM coverage and stacking per vehicle. This is supported by prior findings in Bird v. State Farm, which state that if a policy is silent on coverage terms, courts will read coverage into the policy. The absence of a valid rejection means that full stacking of coverage is mandated for each insured vehicle.

The conclusion affirms that the district court's summary judgment in favor of the Plaintiff is correct and orders the resumption of proceedings consistent with this ruling, confirming the imposition of both UM/UIM coverage and stacking as legal requirements.