Equalization of UM Limits 2014
I have often tried to impress upon clients, friends and family the importance of uninsured/underinsured motorist coverage. Uninsured motorist coverage is insurance you buy through your own insurance company. If you are involved in a car crash, you are hurt, and the other driver does not have insurance, then your insurance company steps in to protect you. Your own insurance company will then almost act like the insurance company for the at-fault, uninsured driver and they will work to fix and make for the harms caused by the at-fault, uninsured driver.
Underinsured motorist coverage and uninsured motorist coverage will appear as the same thing on your policy. Underinsured motorist coverage is designed to help you when the other driver did not have enough coverage. If you are involved in a car crash, you are hurt, the other driver does not have enough insurance and you had uninsured/underinsured motorist coverage in an amount higher than the at-fault driver's liability coverage, then your insurance company steps in to pay after the at-fault driver has paid their limits.
The law in New Mexico says the automobile insurance companies have to offer you uninsured/underinsured motorist coverage as part of your policy. However, the law also says you can reject uninsured/underinsured motorist coverage. People can and do outright reject the coverage. Others may decide to have high limits on their liability coverage, the coverage that pays when you are at-fault for a crash, but have lower limits on their uninsured/underinsured coverage. The Supreme Court's decision in October 2010 dealt directly with the situation where uninsured/underinsured motorist coverage limits are lower than liability limits.
Prior to the Supreme Court's decision, there was no clear ruling on what to do when a person selected uninsured/underinsured motorist coverage in an amount lower than their liability limits. The law was clear in the situation where a person elected to have no uninsured/underinsured motorist coverage - the insurance company had to have the rejection in writing and it had to be made a conspicuous part of the policy. However, the law was not clear where a person did have uninsured/underinsured motorist coverage, (they had not outright rejected it), but had limits lower than their liability limits.
What was new about the Supreme Court's decision was that they ruled that where an insured elects uninsured/underinsured motorist coverage in an amount lower than liability limits, they have "rejected" some amount of uninsured/underinsured motorist coverage. Because this now constituted a rejection, it meant the insurance companies had to comply with certain requirements. The Supreme Court ruled that insurance companies have a statutory obligation to offer uninsured/underinsured motorist coverage in the same amount as the liability limits under the policy. If an insurance company; (1) does not offer uninsured/underinsured coverage equal to the liability limits, or (2) does not inform the insured about the premium costs for available levels of uninsured/underinsured motorist coverage, or (3) does not obtain a written rejection of uninsured/underinsured motorist coverage equal to the liability limits, or (4) does not incorporate that rejection into the policy in a way that affords the individual insured a fair opportunity to reconsider the decision to reject some level of uninsured/underinsured coverage, then the insurance company will be required to provide uninsured/underinsured coverage at the same amount of liability limits.
The result of the Supreme Court's decision is that some people may be able entitled to recover addition money from their insurance company. If someone had an automobile insurance policy with uninsured/underinsured motorist coverage lower than their liability limits, if someone made a claim under that policy for uninsured/underinsured benefits, and if that claim was valued in excess of the policy limits, then they may be entitled to have that policy legally changed so the uninsured/underinsured motorist coverage is at the higher amount and may be able to recover additional money under the policy.
The Supreme Court's decision is a significant development or change in the law. The Supreme Court did not put a time limit on its decision either. They didn't say that the decision only applied to cases occurring after September 2010. To the contrary, their decision applies to claims that were made in the past with insurance companies. For our former clients, we are going through our files and trying to find any cases which could be affected by the decision. We are only aware of one insurance company, (State Farm Insurance Company), which is going back through its claims history to find claims that may be affected by the decision.
If you think your old claim might be affected by the Supreme Court's decision, let us know. If you know of someone that has a claim that might be affected and they need help, let us know. If you just want to discuss the decision and make sure you know what it means, contact us.
As an additional resource, below please find a quick jot-list of relevant authority and legal propositions. Please be reminded though, this jot-list may not contain the latest cases and may not be applicable to your situation. It is only a starting point for information into UM/UIM equalization. Please review our disclaimer. Every case is different and the unique facts of your situation will need to be compared with and analyzed in light of the relevant statutory, rule, administrative codes, and case law.UM/UIM - EQUALIZATION - (a quick list of legal authorities)
Did insured purchase UM/UIM coverage in an amount less than liability limitis?
If yes, then…..
Made a clear part of the policy?
UM/UIM coverage governed by §66-5-301 NMSA 1978, which provides in relevant part, that insurers must provide UM coverage in,
. . . minimum limits . . . as set forth in Section §66-5-215 NMSA 1978 and such higher limits as may be desired by the insured, but up to the limits of . . . liability provisions of the insured's policy. . .
Where the liability limits are greater than the statutory minimum this effectively places an affirmative duty on the insurer to offer UM/UIM coverage up to the level of the liability limits of an automobile insurance policy. Romero v. Progressive Northwestern Ins. Co., 2009 N.M. App. Unpub. LEXIS 447.
§66-5-301 creates an unambiguous requirement that insurers must offer UM/UIM coverage and that they must offer such coverage at an amount equal to the liability limits of the policy. Romero v. Progressive Northwestern Ins. Co., 2009 N.M. App. Unpub. LEXIS 447.
A purchase of an amount less than the liability limit by the insured is a rejection of UM/UIM coverage that is statutorily available to the insured. Romero v. Progressive Northwestern Ins. Co., 2009 N.M. App. Unpub. LEXIS 447.
When an insured purchases UM/UIM coverage in and amount less than their liability coverage, the insured has rejected some or all of the available UM/UIM coverage; the amount of the rejected coverage is equal to the difference between the amount of the UM/UIM coverage and the amount of the liability coverage purchased. Romero v. Progressive Northwestern Ins. Co., 2009 N.M. App. Unpub. LEXIS 447.
Section 66-5-301(C) does allow an insured to reject UM/UIM coverage, subject to the regulations promulgated by the superintendent of insurance.
Any rejection of UM/UIM coverage must be knowingly and intelligently made. Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245.
Any rejection of UM/UIM coverage must be made in writing. Marckstadt v. Lockheed Martin Corp., 2008 NMSC 1, ¶ 16.
Co-extensively, any insurance company seeking to limit its liability based on an anti-stacking provision, must obtain a written rejection of stacking. Montano v. Allstate Indemnity Company, 2004 NMSC 20, ¶19, 135 N.M. 681, 686, 92 P.3d 1255, 1260.
Any insured rejecting UM/UIM coverage should remain well informed as to that decision. Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245.
The requirements for a rejection to be valid are found in §66-5-301(C) and the corresponding regulations from the superintendant of insurance, 18.104.22.168 NMAC.
22.214.171.124 NMAC (11/30/02), states that "[t]he rejection of the provisions of Section 66-5-301 . . . must be endorsed, attached, stamped or otherwise made a part of the policy of bodily injury and property damages insurance."
The rejection must be made part of the policy by endorsement on the declarations sheet, by attachment of the written rejection, or by some other means that makes the rejection a part of the policy. Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245.
In order for a rejection to be valid, it must clearly and unambiguously call to the attention of the insured the fact that such coverage has been waived to ensure that the insured has affirmative evidence of the extent of coverage sufficient to permit the individual to reconsider the rejection at a later date. Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245.
A declarations page which lists the amount of liability and UM/UIM coverage does not meet the requirement of valid rejection because it does not provide an insured with any specific reference to their rejection of UM/UIM coverage. Romero, 111 N.M. at 159, 803 P.2d at 248. Jordan v. Allstate Insurance Company, 2009 N.M. App. Unpub. LEXIS 446.
Where a valid rejection of UM/UIM coverage has not been obtained by the insurer, UM/UIM coverage will be read into the policy at the liability limits of the policy, regardless of the intent of the parties or the fact that a premium has not been paid. Romero v. Dairyland Ins. Co., 111 N.M. 154, 155, 803 P.2d 243, 244.