Lucero v. Northland Ins. Co.

I attest to the accuracy and
integrity of this document
New Mexico Compilation
Commission, Santa Fe, NM
'00'04- 14:00:05 2015.04.21

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2015-NMSC-011

Filing Date: March 26, 2015

Docket No. 34,607

EDWARD LUCERO, JR., and
ELAINE LUCERO,

Plaintiffs-Respondents,

v.

NORTHLAND INSURANCE COMPANY,

Defendant-Petitioner.

ORIGINAL PROCEEDING ON CERTIORARI
Louis E. Depauli, Jr., District Judge

Montgomery & Andrews, P.A.
Kevin M. Sexton
Andrew S. Montgomery
Santa Fe, NM

for Petitioner

O’Connell Law, L.L.C.
Erin B. O’Connell
Albuquerque, NM

Law Offices of Geoffrey R. Romero
Geoffrey R. Romero
Albuquerque, NM

The Vargas Law Firm, L.L.C.
Ray M. Vargas, II
Albuquerque, NM

for Respondents

1
Butt, Thornton & Baehr, P.C.
Paul Trafton Yarbrough
Jane A. Laflin
Albuquerque, NM

Rodey, Dickason, Sloan, Akin & Robb, P.A.
Thomas A. Outler
Seth L. Sparks
Albuquerque, NM

Civerolo, Gralow, Hill & Curtis, P.A.
Lance Dean Richards
Albuquerque, NM

for Amici Curiae American Trucking Associations, Inc., Trucking Industry Defense
Association and New Mexico Trucking Association

OPINION

BOSSON, Justice.

{1} A trucking company purchased a liability insurance policy covering each of its
several tractors and trailers. The policy stipulated that liability coverage would be limited
to “$1,000,000 each ‘accident.’” A tractor-trailer rig insured under the policy was involved
in a single accident. The question before us is whether $1,000,000 is the limit per accident
for both vehicles (the tractor and the trailer) or whether each vehicle has liability coverage
in the amount of $1,000,000. The district court interpreted the policy to limit its coverage
to $1,000,000; our Court of Appeals disagreed and reversed. Because this dispute affects not
only the parties to this lawsuit but arguably New Mexico’s place among the many
jurisdictions that have grappled with similar policy language, we granted certiorari and now
reverse the Court of Appeals.

BACKGROUND

{2} The facts in this case are undisputed. The Luceros were severely injured when their
vehicle was hit by a tractor-trailer negligently driven by an employee of H & J Hamilton
Trucking Company, insured by Defendant Northland Insurance Company. Northland
defended Hamilton in the ensuing lawsuit. Eventually, Northland stipulated to liability, and
the Luceros agreed to dismiss all claims against Northland and its insured in exchange for
a settlement in the amount of policy limits.

{3} The parties disagreed, however, as to the policy limits. Before the district court, the
parties filed cross-motions for summary judgment seeking to answer this question. Northland
maintained that its insurance policy limits liability to $1,000,000 for each accident, an

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amount it tendered to the Luceros. The Luceros, on the other hand, interpreted the policy as
providing $1,000,000 for each covered auto. Hamilton’s tractor and trailer are both covered
autos under the policy, so the Luceros sought $1,000,000 for each, or $2,000,000 for both.
The district court agreed with Northland’s reading of the insurance policy and granted
summary judgment for $1,000,000. The Court of Appeals reversed, agreeing with the
Luceros. See Lucero v. Northland Ins. Co., 2014-NMCA-055, ¶¶ 1, 27, 326 P.3d 42.

DISCUSSION

{4} Because the insurance policy before us involves liability coverage, we interpret the
policy “in accordance with the same principles which govern the interpretation of all
contracts.” Ponder v. State Farm Mut. Auto. Ins. Co., 2000-NMSC-033, ¶ 11, 129 N.M. 698,
12 P.3d 960 (internal quotation marks and citation omitted). Our primary goal is to
determine “the intentions of the contracting parties . . . at the time they executed the
[policy].” Id. “When discerning the purpose, meaning, and intent of the parties to a contract,
the court’s duty is confined to interpreting the contract that the parties made for themselves,
and absent any ambiguity, the court may not alter or fabricate a new agreement for the
parties.” CC Hous. Corp. v. Ryder Truck Rental, Inc., 1987-NMSC-117, ¶ 6, 106 N.M. 577,
746 P.2d 1109. “Thus, when the policy language is clear and unambiguous, we must give
effect to the contract and enforce it as written.” Ponder, 2000-NMSC-033, ¶11.

The Insurance Policy

{5} Three sections of the policy before us are particularly relevant in resolving this case:
Declarations Item Two, “Schedule of Coverages and Covered Autos,” Section II(A),
“Liability Coverage,” and Section II(C), “Limit of Insurance.” We look first to the
Declarations page, Item Two, entitled “Schedule of Coverages and Covered Autos,” which
we insert from the original.

{6} We note particularly the language stating: “This policy provides only those coverages
where a charge is shown in the premium column below. Each of these coverages will apply
only to those ‘autos’ shown as Covered ‘Autos.’” As noted above, the Declarations page
then provides, and sets forth separate premiums for, various kinds of coverages including the
liability coverage for bodily injury and property damage at issue in this lawsuit. “Covered
Auto” is a defined term in the policy that refers in a separate page to Hamilton’s five tractors

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and six trailers, including both the tractor and the trailer involved in this accident.
Accordingly, Northland is clearly liable for the negligence of its insured up to any limits of
liability the policy declares. As is evident from the quoted portion of the Declarations page,
the policy limits liability coverage to a maximum of “$1,000,000 each ‘accident.’”

{7} Moving beyond the Declarations page to the main body of the policy, the next
significant provision, Section II(A) “Liability Coverage,” reads as follows:

{8} The third relevant policy provision, Section II(C) entitled “Limit of Insurance,” then
proceeds to define the limit on liability coverage:

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{9} Reading the three provisions together, we see that Northland’s promise in Section
II (A) to “pay all sums an ‘insured’ legally must pay as damages . . . caused by an ‘accident’
and resulting from the . . . use of a covered ‘auto’,” is limited by Section II(C), “the most we
will pay for . . . all damages . . . resulting from any one ‘accident.’” That limit is “$1,000,000
each ‘accident’” as stated on the Declarations page.

{10} The Luceros read the policy as promising something different. They argue that the
policy provides $1,000,000 in liability coverage for each “covered auto” involved in any one
accident. Because two “covered autos” were involved in this accident (the tractor and the
trailer) and because each “covered auto” carries $1,000,000 in liability coverage, the Luceros
contend that the policy limits in this case are $2,000,000, not $1,000,000. The Court of
Appeals agreed with the Luceros’ position. See Lucero, 2014-NMCA-055, ¶ 13 (“Defendant
is obligated to provide $1 million in coverage for the tractor involved in the accident and $1
million in coverage for the trailer involved in the same accident, for a total of $2 million in
coverage.”).

{11} As authority for their conclusion, the Luceros look first to the Declarations page
Schedule of Coverages, previously quoted, which states in part that “[e]ach of these
coverages will apply only to those ‘autos’ shown as Covered ‘Autos.’” The Luceros read this
as a grant of coverage up to the policy limits of $1,000,000 for each covered auto involved
in any accident, including this situation involving two covered autos in one accident. We
question whether the policy really grants such expansive coverage.

{12} First, the policy simply does not say that it grants coverage in the amount of policy
limits for each covered auto, each accident. The language does not read, “each of these
coverages will apply to [each of] those autos shown . . . .” The language states instead that
“[e]ach of these coverages will apply only to those ‘autos’ shown . . . .” It is as if the Luceros
would read the word “only” out of the sentence. Textually, the provision is phrased not as
a grant but as a limitation: “only” those autos shown on the list of covered autos are eligible
for $1,000,000 of liability coverage. There is a critical distinction between a grant of
coverage and “the amount of such coverage.” See Vigil v. California Cas. Ins. Co., 1991-
NMSC-050, ¶¶ 7-8, 112 N.M. 67, 811 P.2d 565 (emphasis added). Plainly, the Declarations
page makes liability coverage available for each of the covered autos, but it does not grant
policy limits for each covered auto.

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{13} The Declarations page then stipulates that its limit of liability is “$1,000,000 each
‘accident.’” Clearly then, liability coverage is not boundless; the policy does not say
“$1,000,000 each covered auto each accident.” The limitation on the Declarations page
apparently applies as an outside limit per “accident” without regard to the number of covered
autos involved.

{14} Even, however, if there were reasonable grounds for disagreement over the terms of
the Declarations page, language in the body of the policy settles the matter. Section II(A) of
the policy, previously quoted, states: “Our duty to defend or settle ends when the Liability
Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.”
As previously discussed, the Declarations page provides that this limit is $1,000,000 each
accident. Section II(C) of the policy then says the same thing in terms of a “per accident”
outside limit on what Northland will pay. It states: “Regardless of the number of covered
‘autos’ . . . or vehicles involved in the ‘accident’,” the most Northland will pay “for the total
of all damages . . . resulting from any one ‘accident’ is the Limit of Insurance for Liability
Coverage shown in the Declarations [$1,000,000 each accident].” Therefore, the argument
advanced by the Luceros that the policy provides $1,000,000 in coverage for “each covered
auto in each accident” simply does not find support in the language of the policy. The policy
limits Northland’s exposure to $1,000,000 per accident regardless of the number of covered
autos involved in any one accident.

{15} Importantly, we observe that other jurisdictions interpreting similar insurance clauses
have reached a similar conclusion. See Grinnell Select Ins. Co. v. Baker, 362 F.3d 1005,
1006 (7th Cir. 2004) (“This is the most we will pay regardless of the number of: 1.
‘Insureds’; 2. Claims made; 3. Vehicles or premiums shown in the Declarations; or 4.
Vehicles involved in the auto accident.”); Auto-Owners Ins. Co. v. Munroe, 614 F.3d 322,
324-25 (7th Cir. 2010) (“The ‘Combined Limit of Liability’ provision . . . provides that the
per-occurrence limit—$1,000,000—is the most that Auto-Owners will pay, ‘regardless of
the number of automobiles shown in the Declarations . . . or automobiles involved in the
occurrence.’” (second omission in original)); Suh v. Dennis, 614 A.2d 1367, 1370 (N.J.
Super. Ct. Law Div. 1992) (“Regardless of the number of covered ‘autos’, ‘insureds’,
premiums paid, claims made, or vehicles involved in the ‘accident’, the most we will pay for
all damages resulting in any one ‘accident’ is the Limit of Insurance for Liability Coverage
shown in the Declarations.”); United Servs. Auto. Ass’n v. Baggett, 258 Cal. Rptr. 52, 54 (Ct.
App. 1989) (“This is the most we will pay regardless of the number of: 1. Covered persons;
2. Claims made; 3. Vehicles or premiums shown in the Declarations; or 4. Vehicles involved
in the auto accident.” (internal alterations omitted)); United Servs. Auto. Ass’n v. Wilkinson,
569 A.2d 749, 751-52 (N.H. 1989) (“Regardless of the number of covered autos, insureds,
claims made or vehicles involved in the accident, our limit of liability is as follows: . . . The
most we will pay for all damages resulting from bodily injury to any one person caused by
any one accident is the limit shown in this endorsement for ‘each person’.”); Banner v.
Raisin Valley, Inc., 31 F. Supp. 2d 591, 592 (N.D. Ohio 1998) (“The limitation of liability
section clearly states that the limit applies regardless of the number of vehicles involved in
the accident.”). The Luceros offer little contrary authority.

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{16} The Luceros, focusing on the precise language and phrasing of Section II(C), put
forward a different theory of that section’s intent, essentially arguing that the limits of that
section simply do not apply when two covered autos are involved in one accident. For ease
of reference, we state the Limitation of Insurance clause once more.

Regardless of the number of covered “autos”, “insureds”, premiums paid,
claims made or vehicles involved in the “accident”, the most we will pay for
. . . any one “accident” is the Limit of Insurance for Liability Coverage
shown in the Declarations [$1,000,000 each accident].

{17} The Luceros point out that “[r]egardless of the number of covered ‘autos’” as stated
in Section II(C) does not say “regardless of the number of covered autos involved in the
accident.” The Luceros argue that since the phrase is not tied to covered autos involved in
the accident, then the phrase should be read as, “regardless of the number of covered autos
not involved in the accident.”

{18} This interpretation, according to the Luceros, makes the phrase an anti-stacking
clause and not a limit on per-accident liability. Anti-stacking clauses are typically designed
to prevent the insured from aggregating (stacking) policy limits that apply to covered
vehicles that are not involved in the particular accident. See Lucero, 2014-NMCA-055, ¶ 19.
Here, the Luceros are not trying to aggregate (or stack) policy limits for covered autos not
involved in the accident; they seek to aggregate the limits provided for each of the covered
autos that is involved in the accident. Therefore, the Luceros argue that the limits referred
to in Section II(C) do not apply to this particular circumstance where more than one covered
auto is involved in a single accident.1

{19} Of course, the Limitation of Insurance clause does use the term “involved in the
accident” after the word “vehicles” (“[r]egardless of the number of . . . vehicles involved in
the ‘accident’”). The Luceros argue that the term “involved in the ‘accident’” only modifies
“vehicles” and not any of the antecedent terms before it—like covered autos (“[r]egardless
of the number of covered ‘autos’”). The Luceros note the absence of a comma between
“claims made” and “or vehicles involved in the accident.”2 The Luceros point out that

1
We note that while stacking generally involves aggregating the policies of the
vehicles not involved in the accident, merely saying a clause is an anti-stacking clause is not
alone dispositive. A court should look to the facts of the case and the language as a whole
to determine if a clause is actually an anti-stacking clause. See Progressive Premier Ins. Co.
of Ill. v. Kocher ex rel. Fleming, 932 N.E.2d 1094, 1098 (Ill. App. Ct. 2010).
2
According to the Doctrine of the Last Antecedent, “[e]vidence that a qualifying
phrase is supposed to apply to all antecedents instead of only to the immediately preceding
one may be found in the fact that it is separated from the antecedent by a comma.” Terri
LeClercq, Doctrine of the Last Antecedent: The Mystifying Morass of Ambiguous Modifiers,

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“covered autos” is specifically defined in the policy whereas the term “vehicles” is not, and
therefore, “vehicles” is intended to refer to something other than “covered autos.” Instead,
the Luceros argue that “vehicles” is a generic term that refers to all autos and not “covered
autos,” a debatable assertion given that all “covered autos” must as well be “vehicles.”

{20} Thus, argue the Luceros, by putting the term “vehicles” instead of “covered autos”
right before the phrase “involved in the accident,” Northland must have intended the clause
“involved in the ‘accident’” to mean that the limits in the Declarations page apply regardless
of the number of other vehicles involved or claims made against the insured. For example,
the limit of liability would be the same if the insured was in an accident with one other
vehicle or one hundred other vehicles. Similarly, the limit of liability would be the same
whether there were one hundred claims against the insured or one.

{21} But, according to the Luceros, this clause was not intended to modify or limit liability
for multiple “covered autos” involved in the accident. In that case, there would be no limit.
Northland would have to pay $2,000,000 for two covered autos in one accident, $6,000,000
for six covered autos, even $11,000,000 if all eleven covered autos were somehow involved
in a single accident. At the very least, the Luceros’ interpretation suggests ambiguity, and
ambiguity in contracts should be interpreted in favor of the insured.

{22} We note that “a contract is ambiguous if a genuine doubt appears as to its meaning,
that is, if after applying established rules of interpretation, the written instrument remains
reasonably susceptible to at least two reasonable but conflicting meanings . . . .” 11 Williston
on Contracts: Ambiguity as a prerequisite to interpretation and construction § 30:4 (4th ed.
2014) (emphasis added) (footnotes omitted). This does not mean that every possible
interpretation will lead to an ambiguity. While the Luceros’ reading is not entirely
implausible, it relies in part on a very technical rule of English known as the Doctrine of the
Last Antecedent. See LeClercq, supra, at 201-02. Such rules may inform our analysis, but
they are merely a guide to discerning legislative intent. Hale v. Basin Motor Co., 1990-
NMSC-068, 110 N.M. 314, 795 P.2d 1006. We believe our duty is not to impose hyper-
technical rules of grammar when interpreting the true intentions of parties to a contract. If
that were our duty, then most contracts would be ambiguous.

{23} From the text of Section II(C), considered as a whole and not parsed too finely, we
believe it is clear that Northland intended its “$1,000,000 each ‘accident’” limitation to
apply “[r]egardless of the number of covered ‘autos’ . . . or vehicles” that are “involved in
the ‘accident’.” Regardless of that number, not the number of covered autos not involved in
the accident, the policy proclaims its limit: “[T]he most we will pay for the total of all
damages . . . resulting from any one ‘accident’” is $1,000,000.

{24} Reading Section II(C) as a per-accident limit of liability regardless of the number of

40 Tex. J. Bus. L. 199, 210 (2004) (footnote, internal quotation marks and citation omitted).

8
covered autos involved in the accident appears to be consistent with the majority of
jurisdictions that have addressed this issue. It is also consistent with similar cases in which
the tractor and the trailer are both involved in a single accident. See Munroe, 614 F.3d at 325
(following the accident of a tractor trailer, the policy unambiguously limits coverage to
$1,000,000); Canal Ins. Co. v. Blankenship, 129 F. Supp. 2d 950, 953 (S.D. W. Va. 2001)
(the policy liability for the truck and trailer was properly limited to $1,000,000 and did not
provide for $2,000,000 policy limits); Carolina Cas. Ins. Co. v. Estate of Karpov, 559 F.3d
621, 625 (7th Cir. 2009) (although the accident involved a covered tractor and trailer, “[t]he
insurance policy clearly and expressly limited [the insurer’s] liability to a maximum of
$1,000,000 per accident”).

{25} We note three cases that are particularly helpful in deciding this issue. First, in Auto-
Owners Ins. Co. v. Anderson, 756 So. 2d 29 (Fla. 2000), the Florida Supreme Court
construed a limit of liability clause after a tractor-trailer rig caused an accident with a single
car. Id. at 31-32. Although the Court found that the language of the limitation-of-liability
clause in that particular policy was ambiguous, it turned to several cases from other
jurisdictions as an example of what the insurer should have done to make its liability limit
unambiguous. Id. at 33-36. The Florida Court stated:

In contrast to the clause drafted by Auto-Owners in this case, the limiting
provisions of the insurance policies set forth in the recent reported decisions
include an introductory qualifying clause that clearly and unambiguously
explains that liability coverage is limited to a certain amount “regardless” of
the number of vehicles involved in the accident.

Id. at 36. See also State Auto Ins. Co. v. Stinson, 142 F.3d 436 (6th Cir.1998) (unpublished
table decision); Weimer v. Country Mut. Ins. Co., 575 N.W.2d 466, 469 n.6 (Wis. 1998);
Dennis, 614 A.2d at 1370. The limiting phrase “regardless of the number of vehicles
involved in the accident” is of course strikingly similar to Northland’s language in this very
case.

{26} Referring to these other cases, the Florida Court then observed,

The presence of these qualifying clauses evidences an established custom in
the insurance industry as to the language used by insurers in drafting clauses
where the intent is to limit liability coverage to a single amount, even though
multiple insured vehicles are involved in an accident. As these out-of-state
cases demonstrate, when multiple insured vehicles are involved in a single
accident, a limitation of liability can be achieved by the simple use of a
qualifying clause.

Anderson, 756 So. 2d at 36 (citation omitted).

{27} We regard this reference to a “custom in the insurance industry” as significant.

9
Because Northland can justifiably rely on limiting phraseology accepted elsewhere to
achieve its desired objective, we should proceed cautiously before creating different
expectations solely for our state.

{28} Similarly, the United States Court of Appeals for the Seventh Circuit interpreted a
limit-of-liability clause after three sets of tractor-trailers, all owned by the insured, were
involved in one accident. Munroe, 614 F.3d at 323. The policy contained a combined limit
of liability of $1,000,000 per occurrence “‘regardless of the number of automobiles shown
in the Declarations . . . or automobiles involved in the occurrence.’” Id. at 325 (omission in
original). The Court found no ambiguity: “While the Munroes attempt to find ambiguity,
including in the terms ‘automobiles’ and ‘combined,’ these contortions merit little discussion
here: applied to the facts of this case, the unambiguous terms of the policy limit the coverage
to $1,000,000 for each occurrence, notwithstanding the involvement of three . . . tractor-
trailers.” Id.

{29} Finally, the United States District Court for the Southern District of West Virginia
interpreted a limit of liability clause after a tractor and trailer were involved in a deadly
accident. Blankenship, 129 F. Supp. 2d at 952. The sole question was whether the policy
limit provided $1,000,000 total liability coverage or $1,000,000 for each vehicle. Id. The
policy contained a clause that read “[r]egardless of the number of . . . automobiles to which
this policy applies, . . . [t]he limit of liability stated in the schedule of the policy as applicable
to ‘each occurrence’ is the total limit of the company’s liability . . . .” Id. The injured parties
claimed that this language was ambiguous “because it does not limit liability to one million
dollars per occurrence when more than one covered vehicle is involved in the accident.” Id.
at 953. They suggested that the insurance company should have added the language
“‘regardless of the number of vehicles involved in the accident.’” Id. (emphasis added). The
Court held that the insurance policy was not ambiguous and provided coverage up to
$1,000,000 per occurrence. Id. at 956. The Court noted that “[a] court should read policy
provisions to avoid ambiguities and not torture the language to create them.” Id. at 953
(internal quotation marks and citation omitted).

{30} Thus, we are satisfied that Northland’s position appears to be more in line with the
“custom” within the industry and the jurisprudence construing it. While that observation is
not necessarily dispositive, it does inform our deliberations. The Luceros’ position, on the
other hand, appears to be almost without supporting authority, at least in terms of cases
interpreting similar policy language. In its briefing to this Court, Northland asserted that the
Luceros’ interpretation of the policy, as adopted by our Court of Appeals, “stands alone
among the 50 state judicial systems.” See Grinnell, 362 F.3d at 1007. Though perhaps
somewhat hyperbolic, that statement remains largely unchallenged, and the Luceros have not
done much to discredit it.3

3
The Fifth District Court of Appeals for Illinois has found policies ambiguous despite
a similar limit of liability clause. See Kocher, 932 N.E.2d at 1096 (“‘The limit of liability

10
CONCLUSION

{31} We hold that Northland limited its liability to $1,000,000 for each accident regardless
of the number of insured vehicles involved. Accordingly, we reverse the Court of Appeals
and affirm the district court’s grant of summary judgment in favor of Northland.

{32} IT IS SO ORDERED.

____________________________________
RICHARD C. BOSSON, Justice

WE CONCUR:

____________________________________
BARBARA J. VIGIL, Chief Justice

____________________________________
PETRA JIMENEZ MAES, Justice

____________________________________
EDWARD L. CHÁVEZ, Justice

____________________________________
JERRY H. RITTER, Judge
Sitting by Designation

shown on the Declarations Page is the most we will pay regardless of the number of: 1.
claims made; 2. covered vehicles; 3. trailers shown on the Declarations Page; 4. insured
persons; 5. lawsuits brought; 6. vehicles involved in an accident; or 7. premiums paid.’”).
However, the court found the policy ambiguous because the amount in the limit liability in
the declarations page was listed more than once. The court specifically distinguished its case
with those cases where the amount in the declarations page was listed only once. Id. at 1102.
In our case, Northland’s policy only states the limit of liability once.

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