Rugge, Roslaes & Associates, P.C.

Recent Cases of Interest

May 17, 2010 – Volume 49, No. 20 

From the New Mexico Court of Appeals (Cert. Granted)
2010-NMCA-031, No. 32,243: Farmers Ins. Co. of Arizona v. Chen

This is another UM/UIM “equalization” case where the District Court granted summary judgment that Mr. Chen’s UM/UIM would be increased to equal his BI limits. Mr. Chen’s wife had signed “election agreements” selecting UM/UIM coverage of 30/60, but these agreements were not attached to the policies Farmers issued to the Chens. Citing the recent Supreme Court decision in Marckstadt, the Court analyzed election of UM/UIM limits less than BI limits as a form of rejection of UM/UIM coverage, and stated that to be valid, an insurer must obtain an written rejection, and must also notify the insured of the rejection in some manner by attachment of notice of rejection to the policy - which the Court called the “attached notification” requirement. The Court said the “written rejection” requirement is subject to the further requirement that it must constitute a knowing and intelligent rejection of coverage, which must at a minimum inform the insured of: 1) the amount of coverage they were entitled to purchase; 2) the amount they have in fact purchased; and 3) the fact that they have rejected some amount of coverage. Noting that none of the three documents used by Farmers alone met the requirements of a knowing and intelligent rejection, and that none stated the Chens had rejected some amount of UM/UIM coverage, the Court held that Farmers did not meet the knowing and intelligent requirement. The Court next said that to meet the “attached notification” requirement, that whatever is attached to the policy must clearly and unambiguously call to the attention of the insured the fact that some amount of UM/UIM coverage has been rejected, provide evidence of the amount rejected sufficient to permit the insured to reconsider the decision at a later date. The Court then held that the Declarations Page an Endorsement that was attached to the policy did not meet these requirements.


  • NOTE: The Supreme Court has granted review of this case, so the Court of Appeals opinion is not necessarily the final word.

April 12, 2010 – Volume 49, No. 15

From the New Mexico Supreme Court 
2010-NMSC-009, No. 31,013: Truong v. Allstate Insurance Company 


A certified class of Allstate insureds sued Allstate for alleged violations of the Unfair Practices Act (UPA), claiming that Allstate improperly used computer programs (Colossus) to underestimate and underpay first party insurance claims. At issue was whether a Market Conduct Examination (MCE) authorized by the Superintendant of Insurance constituted express permission to use Colossus exempted Allstate from claims under the UPA. In a lengthy opinion, Justice Daniels held that the MCE did not create the express permission necessary to exempt Allstate from UPA claims for the use of Colossus

 

2010-NMSC-010, No. 31,549: City of Santa Fe v. Travelers Casualty & Surety Company

The City of Santa Fe sued Travelers under a performance bond after declaring Lone Mountain Contracting in default under a contract with the City  to repair a water tank. Travelers obtained summary judgment because the City did not sue within the two-year time to sue provisions of the performance bond Lone Mountain purchased from Travelers. In an opinion by Justice Chavez, the Supreme Court reversed, holding that allowing Lone Mountain and Travelers to unilaterally contract for a two-year limitation period on the bond (where a six-year statute of limitations applied between the City and Lone Mountain) would be contrary to the purpose of the Little Miller Act, NMSA §13-4-18(A)(1), to protect the public and assure performance of government contracts.


April 5, 2010 – Volume 49, No. 14 

From the New Mexico Court of Appeals 
2010-NMCA-024, No. 32,065: Romero v. Progressive Northwestern Insurance 


--Donald Romero, owner of AllTech Electric, purchased a liability policy, listing 3 vehicles, with liability limits of $100,000 for each accident and UM/UIM of $50,000 per person and $100,000 per accident. The policy that was issued did not contain a rejection of any amount of UM/UIM coverage. Mr. Romero was subsequently involved in an accident  with an uninsured motorist and made a claim under the policy for UM coverage equal to the liability limits of coverage, citing Progressive’s failure to obtain a valid written rejection of UM coverage. Dist. Ct. held Plaintiff’s purchase of uninsured motorist coverage (UM) in amounts lower than liability limits of policy was a rejection of UM coverage. Progressive Insurance appealed the S/J for Plaintiff. The Court of Appeals affirmed. In New Mexico, the purchase of a lesser amount of UM/UIM coverage by an insured constitutes a rejection of UM/UIM coverage. New Mexico requires insurers to affirmatively offer UM/UIM coverage equal to the amount of liability coverage in an automobile insurance policy.  

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