Coverage gap in auto insurance in New Mexico

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

Then again, this also forces them to obey speed limits and stop at red, even within the first second after the light change.

The Insurance Information Institute estimates that nationally about 12.6% of motorists are uninsured. In New Mexico, the number is 21.8%, which doesn’t even make us the worst in the country. (Thanks, Mississippi!)

When you buy auto insurance in New Mexico, you get coverage for uninsured motorists, unless you specifically decline it.

If the high number of uninsured drivers is not a sufficient reason for you to pay the premium, keep in mind that it can also happen after a hit and run collision. According to the AAA Road Safety Foundation, about one in nine car crashes fall into this category.

Uninsured Motorist Insurance does exactly what the name suggests, allowing an insured to recover if injured by someone who has no insurance or who does not stop to provide information. on insurance.

But in New Mexico, it’s still sold in a package with coverage for the underinsured motorist. What does a policyholder get in return for paying premiums for coverage for underinsured motorists?

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

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

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

His total pecuniary damages: $ 60,000. Bob has liability insurance, but only for the minimum amount allowed by New Mexico’s financial liability law, which is $ 25,000. Her insurance company quickly pays Mary the full $ 25,000, leaving her with $ 35,000 missing.

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

In New Mexico, the critical issue is not the amount of damage Mary suffered, but the amount of underinsured motorist coverage she purchased. As our Supreme Court stated in 1985, “the maximum an insured can receive is the amount of underinsurance taken out for his [or her] benefit to. “

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

This is what she receives in exchange for the faithful payment of her bonuses: nothing.

The outcome would be different, however, if Mary owned three cars and insured them each for $ 25,000. In this case, she could “stack” (that is, combine) her policies, which would give her coverage totaling $ 75,000, forcing her insurance company to pay her $ 35,000. .

If that doesn’t make sense to you, you’ll understand. It is an irrational system. But this is the system that our legislature has imposed on us, as recently confirmed by our state’s Supreme Court.

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

Federal District Judge Judith Herrera did so in this case, in January 2019. But, oddly enough, the Supreme Court opinion does not cite the question it is answering. Reading the notice 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 drafted in a rush. The version I downloaded contains an obvious typo, suggesting relying on the spell checker instead of a human proofreader.

The notice uses two words with long-established technical meanings (“illusory”, a contract law term and “exclusion”, widely used in insurance policies) in a non-technical manner. These two words, which had a definite and well understood meaning in New Mexico law, are now ambiguous.

The job of an appeals court is to clarify the law. This opinion confuses him.

The notice uses the words “never” and “always”, which lawyers generally avoid because, of course, it is not possible to foresee all future possibilities. By using these words, opinion goes far beyond any question presented, aimlessly.

But despite all of its negligence, the advisory accomplishes one thing: it underscores the need for the Legislature to rewrite its old law to ensure New Mexicans finally begin to receive value for the bonuses they pay. for coverage of underinsured motorists.

Joel Jacobsen is an author who retired in 2015 after a 29-year legal career. If there are topics you would like to see covered in future columns, write to him at [email protected].

The post A Coverage Hole in NM Auto Insurance first appeared on the Albuquerque Journal.

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