Jordan v. Allstate Insurance

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2010-NMSC-051

Filing Date: October 18, 2010

Docket No. 32,063

ROSEMARY JORDAN, SCOTT JORDAN,
TRACEY JORDAN, DONALD ROMERO,
and THERESA ROMERO,

Plaintiffs-Respondents,

v.

ALLSTATE INSURANCE COMPANY,

Defendant-Petitioner.

Consolidated with:

Docket No. 32,065

DONALD ROMERO and THERESA ROMERO,

Plaintiffs-Respondents,

v.

PROGRESSIVE NORTHWESTERN
INSURANCE COMPANY,

Defendant-Petitioner.

Consolidated with:

Docket No. 32,203

CONSUELO LUCERO,

Plaintiff-Respondent,

v.

1
DAVID TRUJILLO, SAFECO INSURANCE
COMPANY OF AMERICA, and PROGRESSIVE
HALCYON INSURANCE COMPANY,

Defendants-Petitioners.

ORIGINAL PROCEEDINGS ON CERTIORARI
Eugenio S. Mathis, James A. Hall, and Theodore C. Baca, District Judges

Modrall, Sperling, Roehl, Harris & Sisk, P.A.
Lisa Mann
Jennifer A. Noya
Albuquerque, NM

for Petitioner Allstate Insurance Company

Simone, Roberts & Weiss, P.A.
Meena H. Allen
Albuquerque, NM

for Petitioner Progressive Northwestern Insurance Company

Modrall, Sperling, Roehl, Harris & Sisk, P.A.
Douglas G. Schneebeck
Alex C. Walker
Albuquerque, NM

for Petitioner Progressive Halcyon Insurance Company

Berardinelli Law Firm, L.L.C.
David J. Berardinelli
Santa Fe, NM

O’Friel and Levy, P.C.
Daniel J. O’Friel
Pierre Levy
Santa Fe, NM

for Respondents Rosemary Jordan, Scott Jordan, Tracey Jordan, Donald Romero, and
Theresa Romero

Garcia & Vargas, L.L.C.
Ray M. Vargas, II
Santa Fe, NM

2
Law Office of Geoffrey R. Romero
Geoffrey R. Romero
Albuquerque, NM

Bach & Garcia, L.L.C.
Matthew L. Garcia
Albuquerque, NM

for Respondent Consuelo Lucero

OPINION

DANIELS, Chief Justice.

{1} The plaintiff insureds (Plaintiffs) in these three consolidated cases were issued
uninsured/underinsured motorist (UM/UIM) coverage in amounts less than the liability
coverage provided by their automobile insurance policies. See Progressive Nw. Ins. Co. v.
Weed Warrior Servs., 2010-NMSC-050, ¶ 15, ___ N.M. ___, ___ P.3d ___ (No. 32,220, Oct.
18, 2010) (holding that New Mexico’s uninsured motorist statute, NMSA 1978, Section 66-
5-301 (1983), “requires an insurer to offer UM/UIM coverage in an amount equal to the
liability limits of the policy and that the choice of the insured to purchase any lower amount
functions as a rejection of that maximum amount of coverage statutorily possible”). The
Court of Appeals concluded that none of the defendant insurers obtained valid rejections of
UM/UIM coverage as required by statute, Section 66-5-301, and by regulation, 13.12.3.9
NMAC, and that the appropriate remedy was to reform the policies to provide UM/UIM
coverage equal to the liability limits.

{2} We affirm the Court of Appeals and hold that a rejection of UM/UIM coverage equal
to the liability limits in an automobile insurance policy must be made in writing and must
be made a part of the insurance policy that is delivered to the insured. In order to honor
these requirements effectively, insurers must provide the insured with the premium charges
corresponding to each available option for UM/UIM coverage so that the insured can make
a knowing and intelligent decision to receive or reject the full amount of coverage to which
the insured is statutorily entitled. If an insurer fails to obtain a valid rejection, the policy will
be reformed to provide UM/UIM coverage equal to the limits of liability.

I. BACKGROUND

{3} We granted writs of certiorari in three cases, Jordan v. Allstate Insurance Co., No.
32,063, Romero v. Progressive Northwestern Insurance Co., No. 32,065, and Lucero v.
Trujillo, No. 32,203, and held them in abeyance pending our resolution of Weed Warrior,
2010-NMSC-050, filed on the same date as this Opinion. In their petitions for certiorari, the
insurers collectively raise six issues: (1) whether insurers must affirmatively offer UM/UIM
coverage in an amount equal to the liability coverage selected by an insured; (2) whether an

3
insured’s selection of less UM/UIM coverage than liability coverage constitutes a rejection
of UM/UIM coverage equal to the liability limits; (3) if such a selection is a rejection, what
form and manner must a valid rejection take; (4) whether our Court of Appeals erred in its
interpretation of Section 66-5-301; (5) whether our holding in this case should be applied
prospectively or retroactively; and (6) whether our Court of Appeals erred by reforming the
automobile liability policies in these cases to provide UM/UIM coverage equal to the
liability limits.

{4} Weed Warrior, 2010-NMSC-050, ¶¶ 13-15, answers the first two questions, holding
that insurers must affirmatively offer UM/UIM coverage in an amount equal to the policy’s
liability limits and that an insured’s decision to purchase a lesser amount of UM/UIM
coverage constitutes a rejection. This Opinion addresses the remaining questions. Before
discussing these issues, we summarize the background of each case.

a. Jordan v. Allstate Insurance Company

{5} Two sets of insureds, Scott, Tracey, and Rosemary Jordan (the Jordans) and Donald
and Theresa Romero (the Romeros)1 had policies with Allstate Insurance Company that
provided liability limits of $100,000 per person and UM/UIM bodily injury coverage of
$25,000 per person. During the application process, Scott Jordan and Theresa Romero each
signed and dated an Allstate UM/UIM Selection/Rejection form. The UM/UIM
Selection/Rejection forms provided a list of coverage options ranging from $25,000 per
person/$50,000 per accident to $2,000,000 per person/$2,000,000 per accident. The forms
signed by Jordan and Romero have a checkmark next to the lowest available UM/UIM
coverage level, $25,000 per person/$50,000 per accident, and a checkmark next to the
following option: “I want to purchase Uninsured Motorists Insurance for Bodily Injury at
the [coverage] limits which I have indicated below. I understand that I may only purchase
Uninsured Motorists Insurance for Bodily Injury up to my Bodily Injury Liability . . . limits.”

{6} Allstate periodically delivered declarations pages to the Jordans and the Romeros that
indicated the amounts of liability and UM/UIM coverage provided under the policies.
According to the last page of declarations, the Jordans’ and Romeros’ policies consisted of

1
Donald Romero and Theresa Romero are plaintiffs in both Jordan v. Allstate
Insurance Co., No. 32,063, and Romero v. Progressive Northwestern Insurance Co., No.
32,065. Both cases concern an accident involving Donald Romero and an uninsured
motorist. The Allstate policy covered the vehicle in which Romero was riding, making
Allstate the primary insurer on the UM/UIM risk. See State Farm Mut. Auto. Ins. Co. v.
Jones, 2006-NMCA-060, ¶ 12, 139 N.M. 558, 135 P.3d 1277 (“In making the distinction
between primary and secondary insurers . . . the automobile policy ‘closest to the risk’ ranks
ahead of other policies insofar as priority for payment is concerned, and thus is the primary
insurer.”). Romero also had a commercial policy with Progressive Northwestern, which was
the secondary insurer.

4
these declarations pages and two forms, each indicated by form number only, that are not
included in or described by the record before this Court. The signed UM/UIM
Selection/Rejection forms were not attached to the declarations pages, and the declarations
pages did not expressly inform the Jordans and the Romeros that UM/UIM coverage equal
to the limits of liability had been rejected.

{7} Allstate also sent the Jordans and the Romeros generic (that is, not policy specific)
“Important Notice” forms, instructing the recipients to review their policies’ declarations
pages to verify that UM/UIM coverage had been issued as requested. The Important Notice
forms explained that policyholders may purchase UM/UIM coverage “equal to, but not
greater than, [their] limits for Bodily Injury Liability Insurance and Property Damage
Liability Insurance [and] . . . at limits less than [their] BI and PD limits, but not less than the
minimum limits required by law in New Mexico[,] . . . [or they] may reject UM coverage
entirely.”

{8} Rosemary Jordan and Donald Romero were injured by uninsured/underinsured
motorists in two separate accidents while their Allstate policies were in effect. Allstate paid
the Jordans and the Romeros UM/UIM benefits in the amounts specified by their policies.

b. Romero v. Progressive Northwestern Insurance Company

{9} At the time of his accident, Donald Romero, as sole proprietor of AllTech Electric,
had a commercial automobile insurance policy with Progressive Northwestern Insurance
Company, in addition to his personal Allstate policy. The Progressive policy contained
single liability limits of $100,000 and UM/UIM limits of $50,000 per person. Romero
attested by affidavit that during the application process he never signed a document rejecting
higher limits of UM/UIM coverage and was not told he could obtain UM/UIM coverage
equal to his liability limits. There is no other evidence in the record concerning his
application process. The policy Progressive delivered to Romero contained declarations
pages listing the amounts of liability and UM/UIM coverage provided by the policy. The
policy did not indicate that any amount of UM/UIM coverage had been rejected. After
Donald Romero’s accident, Progressive, as Romero’s secondary insurer, paid Romero
$50,000 in UM/UIM coverage stacked for each of the three vehicles insured by the policy,
for a total of $150,000.

c. Lucero v. Trujillo

{10} Diana Lucero purchased her insurance through Progressive Halcyon Insurance
Company’s website. Progressive Halcyon’s website uses customer-entered information to
suggest an insurance package, which the customer can alter using “pull-down menus.” In
her online application, Diana Lucero clicked on liability limits of $50,000 per person. While
Progressive Halcyon’s suggested packages provide default UM/UIM coverage equal to the
liability limits, customers can purchase lesser amounts of UM/UIM coverage by using a pull-
down menu. Diana Lucero clicked on the minimum amount of UM/UIM coverage available,

5
$25,000 per person.

{11} After purchasing a policy from Progressive Halcyon, Diana Lucero’s selections were
listed on declarations pages. Further contract terms were provided in a generic New Mexico
Motor Vehicle Policy. Toward the end of the forty-nine-page policy, a short paragraph
states that the online application “is made a part of this policy as if attached hereto.” The
record does not show whether Diana Lucero printed the declarations pages and policy at
home or whether Progressive Halcyon delivered them in some other way. Neither the
declarations pages nor the policy expressly alerted Diana Lucero to the fact that she had
rejected UM/UIM coverage equal to her liability limits.

{12} Consuelo Lucero, who was covered by the Progressive Halcyon policy, was injured
in an accident with an underinsured motorist. Progressive paid Consuelo Lucero $50,000
in UM/UIM benefits, computed by stacking $25,000 for each of three cars, from which the
other driver’s $25,000 policy coverage was deducted.

II. DISCUSSION

{13} The insureds in each of these cases brought suit against their insurers in a New
Mexico district court, arguing that each insurer failed to obtain a valid rejection of UM/UIM
coverage equal to the limits of liability. The Court of Appeals concluded in each case that
the insurer failed to obtain a valid rejection and that the policy should be reformed to provide
UM/UIM coverage equal to the liability limits. Jordan v. Allstate Ins. Co., No. 28,638, slip.
op. at 10 (N.M. Ct. App. Oct. 29, 2009), cert. denied, 2010-NMCERT-001, 147 N.M. 673,
227 P.3d 1055, reh’g granted, 2010-NMCERT-003, ___ N.M. ___, ___ P.3d ___ (No.
32,063, Mar. 1, 2010); Romero v. Progressive Nw. Ins. Co. (Romero v. Progressive),
2010-NMCA-024, ¶ 2, 148 N.M. 97, 230 P.3d 844, cert. denied, 2010-NMCERT-001, 147
N.M. 673, 227 P.3d 1055, reh’g granted, 2010-NMCERT-003, ___ N.M. ___, ___ P.3d ___
(No. 32,065, Mar. 1, 2010); Lucero v. Trujillo, No. 29,859, slip op. at 2 (N.M. Ct. App. Jan.
7, 2010), cert. granted, 2010-NMCERT-003, ___ N.M. ___, ___ P.3d ___ (No. 32,203, Mar.
1, 2010). We consolidated these cases and resolve them through this single Opinion in order
to provide guidance on the technical requirements for valid offers and rejections of UM/UIM
coverage.

a. Standard of Review

{14} Our resolution of these cases requires us to interpret Section 66-5-301 and 13.12.3.9
NMAC in order to determine the form and manner that offers and rejections of UM/UIM
coverage must take in light of Weed Warrior, 2010-NMSC-050. The relevant facts in each
case are undisputed. Accordingly, these cases present questions of law, which we review
de novo. See Marckstadt v. Lockheed Martin Corp., 2010-NMSC-001, ¶ 13, 147 N.M. 678,
228 P.3d 462.

{15} This Court’s primary goal when interpreting statutes is to further legislative intent.

6
Jolley v. Associated Elec. & Gas Ins. Servs. Ltd., 2010-NMSC-029, ¶ 8, 148 N.M. 436, 237
P.3d 738. When construing the legislative intent behind our UM/UIM statute, this Court has
long applied a “qualitatively different analysis” than we use when construing many other
types of statutes and insurance policies. Padilla v. Dairyland Ins. Co., 109 N.M. 555, 558,
787 P.2d 835, 838 (1990). In a consistent line of cases, this Court has liberally interpreted
Section 66-5-301 and its implementing regulation, now codified as 13.12.3.9 NMAC, for
their remedial purposes. See Phoenix Indem. Ins. Co. v. Pulis, 2000-NMSC-023, ¶ 7, 129
N.M. 395, 9 P.3d 639; Romero v. Dairyland Ins. Co. (Romero v. Dairyland), 111 N.M. 154,
155-56, 803 P.2d 243, 244-45 (1990). The provision of the maximum possible amount of
UM/UIM coverage in every insurance policy is the default rule, and any exception to that
rule must be “construed strictly to protect the insured.” Romero v. Dairyland, 111 N.M. at
156, 803 P.2d at 245; see also Weed Warrior, 2010-NMSC-050, ¶ 14 (explaining that our
statutory scheme requires that insurers offer the maximum amount of UM/UIM coverage
possible).

b. A Rejection of UM/UIM Coverage Equal to the Liability Limits Must Be Made in
Writing and Must Be Meaningfully Incorporated into the Policy Delivered to the Insured.

{16} Section 66-5-301 governs UM/UIM insurance coverage in New Mexico. Subsection
A entitles the insured to UM/UIM coverage “in minimum limits . . . and such higher limits
as may be desired . . . up to the limits of liability.” The minimum limits are set forth in the
Mandatory Financial Responsibility Act, NMSA 1978, Section 66-5-215 (1983). Section
66-5-301(A); see also Weed Warrior, 2010-NMSC-050, ¶ 5. Section 66-5-301(B) provides
that “uninsured motorist coverage . . . shall include underinsured motorist coverage.”
Section 66-5-301(C) provides that the “insured shall have the right to reject” the uninsured
motorist coverage or underinsured motorist coverage that is “described in Subsections A and
B.” Section 66-5-301 does not expressly specify the form or manner that a rejection must
take in order to be effective. Romero v. Dairyland, 111 N.M. at 155, 803 P.2d at 244.

{17} The form and manner of a valid rejection are established by “the rules and
regulations promulgated by the superintendent of insurance.” Kaiser v. DeCarrera, 1996-
NMSC-050, ¶ 8, 122 N.M. 221, 923 P.2d 588. Regulation 13.12.3.9 NMAC provides that
“[t]he rejection of the provisions covering damage caused by an uninsured or unknown
motor vehicle as required in writing by the provisions of Section 66-5-301 NMSA 1978 must
be endorsed, attached, stamped or otherwise made a part of the policy of bodily injury and
property damage insurance.” (Emphasis added.)

{18} This Court has determined that 13.12.3.9 NMAC contains two distinct requirements:
(1) the rejection must be in writing and (2) the rejection must be made a part of the policy.
See Marckstadt, 2010-NMSC-001, ¶ 20 (explaining that 13.12.3.9 NMAC explicitly requires
the rejection to be in writing); Romero v. Dairyland, 111 N.M. at 156, 803 P.2d at 245
(“[T]he rejection [must] be made a part of the policy delivered to the insured.”). By
requiring insurance carriers to offer UM/UIM coverage in a meaningful way and to obtain
any rejections of the statutorily authorized coverage in writing, 13.12.3.9 NMAC and

7
Section 66-5-301 ensure that rejections of the authorized coverage are knowingly and
intelligently made. See Marckstadt, 2010-NMSC-001, ¶¶ 16-17. Once an insurer has
obtained a written, objective manifestation of the insured’s decision to reject, that rejection
must be incorporated into the policy in a way that will “clearly and unambiguously call to
the attention of the insured the fact that such coverage has been waived.” Romero v.
Dairyland, 111 N.M. at 156, 803 P.2d at 245. The rejection must “be made a part of the
policy delivered to the insured . . . to ensure that the insured has affirmative evidence of the
extent of coverage.” Id. Incorporating the rejection into the policy keeps the insured well-
informed about the decision to reject coverage and allows the insured to reconsider his or
her rejection after “further reflection, consultation with other individuals, or after merely
having an opportunity to review one’s policy at home.” Id.

{19} Section 66-5-301’s plain language and underlying policy dictate that the
requirements for a valid rejection found in 13.12.3.9 NMAC must be complied with when
an insured purchases some UM/UIM coverage but rejects UM/UIM coverage equal to the
liability limits, because any other outcome would create an unprincipled anomaly in the
fabric of our law. See § 66-5-301(B) (“uninsured motorist coverage . . . shall include
underinsured motorist coverage”); § 66-5-301(C) (providing that the insured has a right to
reject UM/UIM coverage); Weed Warrior, 2010-NMSC-050, ¶ 10 (explaining the difference
between underinsured and uninsured motorist coverage). We hold that a rejection of
UM/UIM coverage equal to the limits of liability is valid only if it is obtained in writing and
made a part of the policy that is delivered to the insured.

c. Insurance Carriers Must Provide the Insured with the Premium Charges
Corresponding to Each Available Coverage Option.

{20} Despite this Court’s repeated pronouncements that an insured’s decision to reject
UM/UIM coverage must be knowing and intelligent in order to effectuate New Mexico’s
public policy, see, e.g., Marckstadt, 2010-NMSC-001, ¶ 16; Romero v. Dairyland, 111 N.M.
at 156-57, 803 P.2d at 245-46, these consolidated cases indicate that insurers continue to
offer UM/UIM coverage in ways that are not conducive to allowing the insured to make a
realistically informed choice. Accordingly, we find it necessary to prescribe workable
requirements for a valid and meaningful rejection of UM/UIM coverage in amounts
authorized by statute.

{21} When issuing an insurance policy, an insurer must inform the insured that he or she
is entitled to purchase UM/UIM coverage in an amount equal to the policy’s liability limits
and must also provide the corresponding premium charge for that maximum amount of
UM/UIM coverage. The premium cost for the minimum amount of UM/UIM coverage
allowed by Section 66-5-301(A) must also be provided, as well as the relative costs for any
other levels of UM/UIM coverage offered to the insured. The insured must be informed that
he or she has a right to reject UM/UIM coverage altogether. Providing the insured with a
menu of coverage options and corresponding premium costs will enable the insured to make
an informed decision about the level of UM/UIM coverage he or she wants to purchase and

8
can afford and will minimize uncertainty and litigation with regard to the coverage that the
insured has obtained.

d. If an Insurer Does Not Obtain a Valid Rejection of UM/UIM Coverage, the Policy Will
Be Reformed to Provide UM/UIM Coverage Equal to the Liability Limits.

{22} Insurers have statutory obligations to offer UM/UIM coverage up to the liability
limits of the policy, see Weed Warrior, 2010-NMSC-050, ¶ 14, and to obtain a valid
rejection before excluding UM/UIM coverage from the policy, see Marckstadt, 2010-
NMSC-001, ¶ 16. If an insurer does not (1) offer the insured UM/UIM coverage equal to
his or her liability limits, (2) inform the insured about premium costs corresponding to the
available levels of coverage, (3) obtain a written rejection of UM/UIM coverage equal to
the liability limits, and (4) incorporate that rejection into the policy in a way that affords the
insured a fair opportunity to reconsider the decision to reject, the policy will be reformed to
provide UM/UIM coverage equal to the liability limits. These requirements are consistent
with those we articulated in Marckstadt, 2010-NMSC-001, ¶ 18 (“Unless the rejection
requirements of 13.12.3.9 NMAC are strictly met, UM/UIM coverage will be read into an
automobile liability policy.”).

{23} Progressive argues that reforming policies to provide UM/UIM coverage equal to the
liability limits would undermine freedom of contract. We disagree. As this Court has
explained, “although . . . public policy generally supports freedom of contract, the necessity
of meeting the statutory and regulatory requirements plainly conditions freedom of contract”
in the context of UM/UIM insurance. Marckstadt, 2010-NMSC-001, ¶ 18 (citation omitted).
We seek an approach to UM/UIM coverage that “best balances the interests in permitting
private contractual relations between the parties, and honoring the broad intent of the
[UM/UIM] statute.” Montano v. Allstate Indem. Co., 2004-NMSC-020, ¶¶ 18-19, 135 N.M.
681, 92 P.3d 1255 (internal quotation marks and citation omitted) (holding that “an insurance
company should obtain written rejections of stacking in order to limit its liability based on
an anti-stacking provision”).

{24} In Montano, this Court struck that balance by requiring insurance carriers to provide
insureds with the premium costs for each available level of stacked coverage in order to
allow insureds to contract for the amount of coverage they can afford and want to purchase.
2004-NMSC-020, ¶ 20. Likewise, by including premium prices for each available UM/UIM
coverage level, insurance carriers meaningfully enable consumers to make a knowing and
intelligent purchase or rejection of UM/UIM coverage. Requiring insurers to provide a list
of coverage options with corresponding costs actually enhances freedom of contract because
insureds’ expectations will be met and they will get exactly what they consciously choose
to pay for. Id. ¶¶ 18-20. Insurers benefit because they will not face the risk of providing
coverage for which they are not compensated.

e. Our Holding in These Cases Is Not Limited to Prospective Application.

9
{25} In these cases, we detail for the first time the technical requirements for a valid
rejection of UM/UIM coverage in an amount equal to liability limits. By requiring insurance
carriers to list premium costs corresponding to each available UM/UIM coverage level, we
are providing specific guidance concerning the form and manner that valid offers and
rejections of UM/UIM insurance must take to comply with controlling statutory and
regulatory provisions. We therefore consider whether or not our holding should be limited
to prospective application only, and not to policies, like those in the cases before us, that
were issued before the date of this Opinion. Allstate argues that our Opinion should be given
selective prospectivity, which occurs when a judicial decision is applied to the parties before
the court in a case adopting a new rule and to parties whose conduct occurs after the
announcement of the new rule but not to other parties whose conduct occurred before the
announcement of the new rule. See Beavers v. Johnson Controls World Servs., Inc., 118
N.M. 391, 397 n.7, 881 P.2d 1376, 1382 n.7 (1994). Progressive contends that this Opinion
should be followed purely prospectively, applying the rule only to conduct occurring after
our decision is announced. Id.

{26} This Court has declined to follow the federal courts’ bright-line rule applying
appellate court decisions retroactively in all civil cases. Id. at 393, 881 P.2d at 1378
(declining to follow the federal rule); see also Harper v. Va. Dep’t of Taxation, 509 U.S. 86,
86, 90 (1993) (establishing the retroactivity rule for federal cases). In lieu of a bright-line
rule, New Mexico follows “a presumption that a new rule adopted by a judicial decision in
a civil case will operate retroactively.” Beavers, 118 N.M. at 398, 881 P.2d at 1383. The
presumption of retroactive application “can be overcome by an express declaration, in the
case announcing the new rule,” that the rule is intended to operate with selective
prospectivity or pure prospectivity. Id.

{27} This Court uses three factors to determine whether the presumption of full retroactive
application has been overcome. Under the first factor, “‘the decision to be applied
nonretroactively must establish a new principle of law, either by overruling clear past
precedent on which litigants may have relied, or by deciding an issue of first impression
whose resolution was not clearly foreshadowed.’” Marckstadt, 2010-NMSC-001, ¶ 31
(quoting Beavers, 118 N.M. at 398, 881 P.2d at 1383). Progressive contends that insurers
historically have relied on their understanding that 13.12.3.9 NMAC does not apply to an
insured’s decision to purchase UM/UIM coverage in less than maximum amounts. We
believe such reliance is unreasonable in light of the plain language of Section 66-5-301 and
13.12.3.9 NMAC. Section 66-5-301(C) states that the insured “shall have the right to reject
uninsured motorist coverage as described in Subsections A and B.” (Emphasis added.)
Subsection B makes it clear that uninsured motorist coverage includes underinsured motorist
coverage. These provisions, read together, plainly state our Legislature’s intent to give each
insured the right to reject UM coverage in its entirety or a portion of the maximum coverage
to which an insured is entitled. Insurers were on notice that 13.12.3.9 NMAC applies to all
rejections of UM/UIM coverage. Additionally, although in the past we have not expressly
articulated the need for insurers to provide premium costs for each available UM/UIM
coverage level, our holding is based on settled principles articulated in twenty years of

10
UM/UIM jurisprudence. See, e.g., Montano, 2004-NMSC-020, ¶ 20 (requiring insurers to
provide premium costs for each available level of stacked UM/UIM coverage); Romero v.
Dairyland, 111 N.M. at 156, 803 P.2d at 245 (explaining that any rejection must be
“knowingly and intelligently made” and requiring the insurer to give the insured “affirmative
evidence of the extent of coverage”). We conclude that the first Beavers factor weighs
against limiting our holding to a prospective application.

{28} Second, when deciding whether a decision should be limited to a prospective
application, this Court must “weigh the merits and demerits in each case by looking to the
prior history of the rule in question, its purpose and effect, and whether retrospective
operation will further or retard its operation.” Marckstadt, 2010-NMSC-001, ¶ 31 (quoting
Beavers, 118 N.M. at 398, 881 P.2d at 1383). We conclude that retroactive application will
provide meaningful enforcement of the requirements of Section 66-5-301 and 13.12.3.9
NMAC, ensuring that every insured has been afforded his or her statutory right to either
obtain UM/UIM insurance coverage equal to the liability limits of the policy or to make a
knowing and intelligent rejection of part or all of that coverage. As we noted in Marckstadt,
“[t]he Legislature and the superintendent of insurance intended their rules to take effect
immediately, and we will not second-guess them.” 2010-NMSC-001, ¶ 31.

{29} Third, this Court must consider “the inequity imposed by retroactive application, for
where a decision of this Court could produce substantial inequitable results if applied
retroactively, there is ample basis in our cases for avoiding the ‘injustice or hardship’ by a
holding of nonretroactivity.” Marckstadt, 2010-NMSC-001, ¶ 31 (quoting Beavers, 118
N.M. at 398, 881 P.2d at 1383). These cases illustrate that in many instances, insurers have
been neither providing premium information nor collecting premiums for the full amount of
statutorily authorized insurance coverage. Reforming the policies to provide the statutorily
authorized coverage will necessarily result in an unplanned cost to insurers who have not
secured meaningful rejection and who have not collected appropriate premiums for full
coverage. On balance, we deem it more equitable to let the financial detriments be borne by
insurers, who were in a better position to ensure meaningful compliance with the law, than
to let the burdens fall on non-expert insureds, who are the Legislature’s intended
beneficiaries. See id. Declining prospective application also will ensure that similarly
situated insureds will be treated equally. See Beavers, 118 N.M. at 398, 881 P.2d at 1383
(adopting the presumption of retroactivity “[b]ecause of the compelling force of the
desirability of treating similarly situated parties alike”). On balance, the equities do not
favor any form of prospective-only application.

f. The Insurers in These Cases Did Not Obtain Valid Rejections of UM/UIM Coverage.

{30} UM/UIM coverage equal to the liability limits is the default coverage unless an
insurer (1) offers the insured UM/UIM coverage equal to the policy’s liability limits, (2)
provides premium costs corresponding to the available levels of UM/UIM coverage, (3)
obtains a written rejection of UM/UIM coverage equal to the liability limits, and (4) makes
that rejection a part of the policy that is delivered to the insured. In each of the consolidated

11
cases before us, we affirm the Court of Appeals’ conclusion that the requirements for a valid
rejection of UM/UIM coverage were not met, and we agree that the proper remedy in each
case is to reform the policies to provide UM/UIM coverage equal to the liability limits.

{31} In Jordan v. Allstate Insurance Co., we conclude that Allstate offered UM/UIM
coverage equal to the liability limits in Plaintiffs’ policies because the UM/UIM
Selection/Rejection forms included a menu of coverage options ranging from the statutory
minimum up to $2 million, along with a statement informing the insureds that they could
“only purchase Uninsured Motorists Insurance for Bodily Injury up to [the] Bodily Injury
Liability . . . limits.” Scott Jordan and Theresa Romero signed Allstate’s forms that
purportedly rejected their statutorily authorized UM/UIM coverage.2

{32} The rejections were insufficient as a matter of law, however, both because the
UM/UIM Selection/Rejection forms did not provide the premium costs for each available
coverage option and because the rejections were not made a part of the policies delivered to
the Jordans and the Romeros. Allstate does not dispute that the UM/UIM
Selection/Rejection forms were never attached to the Romero or Jordan policies. Instead,
Allstate argues that the signed forms show that the Jordans and the Romeros “knowingly and
intelligently elected to purchase minimum UM/UIM coverage limits.” In so arguing,
Allstate ignores 13.12.3.9 NMAC, which states that a rejection “must be endorsed, attached,
stamped or otherwise made a part of the policy.” (Emphasis added.) The insurance policy
delivered to the insureds needed to expressly state that UM/UIM coverage had been rejected.
Although the declarations pages sent to the Romeros and the Jordans listed the amounts of
liability and UM/UIM coverages provided by the policies, “the pages did not contain specific
references to Plaintiffs’ rejection of UM/UIM coverage” and therefore did not satisfy
13.12.3.9 NMAC. Jordan, No. 28,638, slip op. at 10. Allstate could have incorporated the
rejection into the policy by clearly stating on the declarations pages that UM/UIM coverage
equal to the policies’ liability limits had been rejected. Accord Vigil v. Rio Grande Ins. of
Santa Fe, 1997-NMCA-124, ¶¶ 7, 11, 24, 124 N.M. 324, 950 P.2d 297 (holding that the
rejection was made a part of the policy because the declarations pages included the
statements “UNINSURED MOTORIST COVS REJECTED” and “UNINSURED
MOTORISTS COVERAGES HAVE BEEN REJECTED”). We affirm the Court of
Appeals’ holding that “the district court was correct in reading UM/UIM coverage at the
liability limits into the policies.” Jordan, No. 28,638, slip op. at 10.

{33} In Romero v. Progressive, none of the requirements for a valid rejection of UM/UIM
coverage were met. The record contains no evidence that Progressive offered Romero
UM/UIM coverage equal to his liability limits, that Progressive informed Romero how much
UM/UIM coverage would cost, or that Romero rejected UM/UIM coverage in writing.
Although the declarations pages delivered to the Romeros listed the amounts of liability and

2
Although a signed written rejection is not required, see Marckstadt, 2010-
NMSC-001, ¶ 24, a signature is one way to meet the writing requirement.

12
UM/UIM coverage provided by the policy, Progressive should have expressly stated in the
policy that higher levels of UM/UIM coverage had been rejected. We agree with the Court
of Appeals that “the district court was correct in reading [UM/UIM] coverage at the liability
limits into the Policy.” Romero v. Progressive, 2010-NMCA-024, ¶ 39.

{34} The rejection of UM/UIM coverage in Lucero v. Trujillo also was invalid.
Progressive Halcyon’s website offered UM/UIM coverage equal to the liability limits by
setting the default amount of UM/UIM coverage equal to the amount of liability coverage.
Additionally, it appears from the record that the pull-down menus on Progressive Halcyon’s
website did provide price quotations for each available coverage option. We conclude that
Diana Lucero rejected coverage in writing, recognizing that in the twenty-first century
actively selecting an amount of UM/UIM coverage on an insurance website constitutes a
“writing.” See Marckstadt, 2010-NMSC-001, ¶ 24 (quoting Black’s Law Dictionary 1748
(9th ed. 2009) (defining “‘writing’ as ‘[a]ny intentional recording of words that may be
viewed or heard with or without mechanical aids’”)).

{35} Despite Progressive Halcyon’s commendable system of offering meaningful choices
to its insureds, full compliance with the requirements of the law was not achieved because
the rejection was never made a part of Diana Lucero’s written policy. Progressive points to
the short paragraph at the end of its forty-nine page fine-print policy, which “expressly
integrated” the insured’s application and declarations pages into the policy. Incorporating
an on-line application into an insurance policy via buried language toward the end of a
generic forty-nine page policy does not allow for meaningful reconsideration of the decision
to reject coverage. Insureds are “only bound to make such examination of such documents
as would be reasonable . . . under the circumstances.” Pribble v. Aetna Life Ins. Co., 84
N.M. 211, 216, 501 P.2d 255, 260 (1972). Nothing in the application, declarations pages,
or policy provided Diana Lucero evidence of her rejection for later reference or reflection.
Furthermore, it is not established in the record before us whether Progressive Halcyon
actually delivered the policy and declarations pages to the insured. Progressive Halcyon
should have delivered a policy that expressly alerted Ms. Lucero to the fact that she had
rejected a portion of the UM/UIM coverage to which she was entitled. We conclude that
Diana Lucero’s rejection was not “endorsed, attached, stamped or otherwise made a part of
the policy” as required by 13.12.3.9 NMAC, and accordingly we affirm the Court of
Appeals. See Lucero, No. 29,859, slip op. at 2.

III. CONCLUSION

{36} We affirm the Court of Appeals’ holdings that the insurers in these consolidated
cases failed to obtain valid rejections of UM/UIM coverage and that the proper remedy in
each of these cases is reformation of Plaintiffs’ automobile liability policies to provide
UM/UIM coverage equal to the liability limits.

{37} IT IS SO ORDERED.
____________________________________

13
 CHARLES W. DANIELS, Chief Justice

WE CONCUR:

____________________________________
PATRICIO M. SERNA, Justice

____________________________________
PETRA JIMENEZ MAES, Justice

____________________________________
RICHARD C. BOSSON, Justice

____________________________________
EDWARD L. CHÁVEZ, Justice

Topic Index for Jordan v. Allstate, Docket No. 32,063, Romero v. Progressive, Docket
No. 32,065, and Lucero v. Trujillo, Docket No. 32,213

IN INSURANCE

IN-CV Coverage
IN-GL General Liability Insurance
IN-RI Regulation of Insurance
IN-UM Uninsured or Underinsured Motorist

CP CIVIL PROCEDURE

CP-PA Prospective Application
CP-RT Retroactivity

ST STATUTES

ST-IP Interpretation
ST-LI Legislative Intent

14