A coverage hole in NM auto insurance - Albuquerque Journal

A coverage hole in NM auto insurance

New Mexico state law requires all motorists to carry a minimum level of liability insurance.

Then again, it also requires them to obey speed limits and stop on red, even in the first second after the light changes.

The Insurance Information Institute estimates that, nationwide, about 12.6% of motorists are uninsured. In New Mexico, the figure is 21.8%, which doesn’t even make us the worst in the nation. (Thank you, Mississippi!)

When you buy car insurance in New Mexico, you’ll get uninsured motorist coverage unless you specifically decline it.

If the high number of uninsured drivers out there isn’t reason enough for you to pay the premium, remember it can kick in after a hit-and-run collision, too. According to the AAA Foundation for Traffic Safety, about one in nine car crashes fall into that category.

Uninsured motorist insurance does exactly what the name implies, allowing a policyholder to recover if injured by a person who has no insurance, or who doesn’t stop to provide insurance information.

William Brown/tribune content agency

But in New Mexico, it’s always sold in a package with under-insured motorist coverage. What does a policyholder get in return for paying premiums for under-insured motorist coverage?

Answer: less than you might expect, and in some circumstances nothing at all.

Imagine Mary, a careful driver who owns one car. She’s purchased underinsured motorist coverage in the amount of $25,000.

As she enters an Albuquerque intersection on a green light, she’s hit by Bob, who was too drunk to notice the signal had changed. Mary’s car is totaled and an ambulance rushes her to the hospital. Thankfully after three weeks she’s recovered sufficiently to return to work.

Her total monetary damages: $60,000. Bob has liability insurance, but only in the minimum amount allowed by New Mexico’s Financial Responsibility Act, which is $25,000. His insurance company promptly pays the full $25,000 to Mary, leaving her $35,000 short.

You might think that this means Bob was “underinsured” in the amount of $35,000. But that’s not how it works in New Mexico.

In New Mexico, the critical issue isn’t the amount of damages Mary suffered, but the amount of under-insured motorist coverage she purchased. As our Supreme Court declared in 1985, “the most an insured can receive is the amount of underinsurance purchased for his [or her] benefit.”

Therefore, the $25,000 of underinsured motorist coverage that Mary purchased for herself represents the maximum benefit she’s entitled to receive. Since that sum was paid by Bob’s insurer already, Mary’s own insurance company owes her nothing at all.

That’s what she receives in exchange for faithfully paying her premiums: nothing.

The result would be different, however, if Mary owned three cars and insured each for $25,000. In that case, she could “stack” (that is, combine) her policies, which would give her coverage in the total amount of $75,000, obligating her insurance company to pay her $35,000.

If this makes no sense to you, you get it. It’s an irrational system. But it’s the system our Legislature has imposed on us, as recently confirmed by our state Supreme Court.

The recent decision, known as Crutcher vs. Liberty Mutual, answered a question posed to the court by a federal judge. Often, federal judges are required to apply state law. When state law is unclear, they can “certify” a question to the state’s highest court.

Federal District Judge Judith Herrera did so in this case, way back in January 2019. But, oddly, the Supreme Court’s opinion doesn’t quote the question it answers. Reading the opinion is like hearing only the answers at a press conference.

Although the court sat on the case for 32 months, its opinion shows signs of having been written in haste. The version I downloaded contains a conspicuous typo, suggesting reliance on spellchecker in place of a human proofreader.

The opinion uses two words with long-established technical meanings (“illusory,” a contract law term, and “exclusion,” widely used in insurance policies) in nontechnical ways. Those two words, which used to have definite and well-understood meanings in New Mexico law, are now ambiguous.

The job of an appellate court is to clarify the law. This opinion muddies it.

The opinion uses the words “never” and “always,” which lawyers generally avoid because, of course, it’s not possible to foresee every future possibility. By using those words, the opinion ranges far beyond any issue presented, for no purpose.

But for all its sloppiness, the opinion accomplishes one thing: It underscores the need for the Legislature to rewrite its old statute to ensure that New Mexicans finally start to receive value for the premiums they pay for underinsured motorist coverage.

Joel Jacobsen is an author who in 2015 retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at legal.column.tips@gmail.com.

 

Home » Business » A coverage hole in NM auto insurance

Insert Question Legislature form in Legis only stories




Albuquerque Journal and its reporters are committed to telling the stories of our community.

• Do you have a question you want someone to try to answer for you? Do you have a bright spot you want to share?
   We want to hear from you. Please email yourstory@abqjournal.com

taboola desktop

ABQjournal can get you answers in all pages

 

Questions about the Legislature?
Albuquerque Journal can get you answers
Email addresses are used solely for verification and to speed the verification process for repeat questioners.
1
Stocks fall on Wall Street, giving back some recent ...
Most Recent Biz News
NEW YORK (AP) -- Stocks fell ... NEW YORK (AP) -- Stocks fell on Wall Street Wednesday, giving back some of their recent gains as uncertainty about interest rates and inflation ...
2
Walmart near Highland High School to close next month
ABQnews Seeker
The roughly 287 employees who work ... The roughly 287 employees who work at the store are eligible for transfers to nearby Walmart locations, the company said.
3
Microsoft's Activision deal hurts gamers, UK watchdog says
Most Recent Biz News
LONDON (AP) -- Microsoft's stalled $68.7 ... LONDON (AP) -- Microsoft's stalled $68.7 billion deal to buy video game company Activision Blizzard has hit a fresh hurdle in the United Kingdom, ...
4
Asian shares mixed after Wall St gains on Fed ...
Money
BANGKOK (AP) -- Shares were mixed ... BANGKOK (AP) -- Shares were mixed in Asia on Wednesday after stocks rallied on Wall Street following comments by the chair of the Federal ...
5
Complaint lodged against energy advocacy group
ABQnews Seeker
The conservative advocacy organization Better Together ... The conservative advocacy organization Better Together New Mexico accused environmental group New Energy Economy of potentially illegal fundraising activity.
6
Fed's Powell: Strong hiring could force further rate hikes
Most Recent Biz News
WASHINGTON (AP) -- Federal Reserve Chair ... WASHINGTON (AP) -- Federal Reserve Chair Jerome Powell said Tuesday that if the U.S. job market further strengthens in the coming months or inflation ...
7
Google hopes 'Bard' will outsmart ChatGPT, Microsoft in AI
Most Recent Biz News
Google is girding for a battle ... Google is girding for a battle of wits in the field of artificial intelligence with 'Bard,' a conversational service aimed at countering the popularity ...
8
Gallup: Just 2 in 10 U.S. employees have work ...
Careers/Jobs
NEW YORK (AP) -- Crystal Powers ... NEW YORK (AP) -- Crystal Powers began a new job remotely in February 2022 as a medical records supervisor. She has yet to meet ...
9
New Mexico Legislature could expand Angel investment tax credit
ABQnews Seeker
Program is a lifeline for startups ... Program is a lifeline for startups when early investment sources run out.