Certiorari Denied, No. 31,705, June 10, 2009
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2009-NMCA-069
Filing Date: March 30, 2009
Docket No. 28,220
TINA MARIE WILLIAMS and
RYAN JOHNSON,
Plaintiffs-Appellees,
v.
FARMERS INSURANCE CO.
OF ARIZONA,
Defendant-Appellant.
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
James A. Hall, District Judge
Law Offices of Geoffrey R. Romero
Geoffrey R. Romero
Santa Fe, NM
Garcia & Vargas, LLC
Ray M. Vargas, II
Santa Fe, NM
for Appellees
O’Brien & Ulibarri, P.C.
Daniel J. O’Brien
Albuquerque, NM
for Appellant
1
OPINION
CASTILLO, Judge.
{1} This case arises from an automobile accident between vehicles driven by Mark
Anthony Chavoya (Chavoya) and Tina Marie Williams (Williams). It is undisputed that
Chavoya’s negligence caused the accident, which resulted in Chavoya’s death and injuries
to Williams and another passenger, Ryan Johnson (collectively, Plaintiffs). The car driven
by Williams, a 2000 Kia Sephia, was owned by Misty Janati-Ataei, who is the daughter of
Sheryl Janati (Janati). Farmers Insurance Company of Arizona (Defendant) insured the Kia
Sephia with Janati as the named insured on the policy. Chavoya was underinsured, and
Defendant denied Plaintiffs’ uninsured/underinsured (UM/UIM) coverage under Janati’s
policy.
{2} This appeal arises from the district court’s order granting summary judgment in favor
of Plaintiffs and allowing the coverage. Defendant argues that Janati’s policy does not
include UM/UIM coverage for the Kia Sephia. Because we conclude that the insurance
contract did not validly reject UM/UIM coverage, we affirm.
I. BACKGROUND
{3} Plaintiffs filed a complaint for damages against Defendant, among others, and argued
that because Chavoya was uninsured or underinsured, Defendant was required to pay
damages to “the extent of the available [UM/UIM] motorist coverage” in Janati’s policy.
Defendant filed a motion for summary judgment contending, in relevant part, that Janati
unambiguously rejected UM/UIM coverage. Plaintiffs responded with a cross motion for
summary judgment in which they argued that the rejection of UM/UIM coverage was invalid
under New Mexico law.
{4} The district court held a hearing, denied Defendant’s motion for summary judgment,
and granted Plaintiffs’ opposing motion. Defendant appeals.
II. DISCUSSION
{5} The district court provided three reasons for granting Plaintiffs’ motion for summary
judgment: (1) the rejection of UM/UIM coverage did not conform to the applicable
regulation, (2) the rejection of UM/UIM coverage was not sufficiently clear, and (3) the
policy appeared to provide for UM/UIM coverage in some areas but expressly denied such
coverage in other areas. Defendant disputes these conclusions and further argues that
UM/UIM coverage cannot be imputed into the insurance contract to cover Plaintiffs because
they are Class II insureds. The parties do not argue that the material facts of this case are
disputed, and we therefore review de novo the grant of summary judgment. See State Farm
Mut. Auto. Ins. Co. v. Jones, 2006-NMCA-060, ¶ 6, 139 N.M. 558, 135 P.3d 1277 (“When
the parties agree that the material facts are not disputed, this Court reviews the question of
2
law presented de novo.”). We address the district court’s basis for summary judgment as one
argument: whether the policy adequately rejected coverage pursuant to 13.12.3.9 NMAC
(11/30/01). We then turn to consider whether Plaintiffs’ status as a Class II insured is
relevant.
A. Rejection of UM/UIM Coverage
{6} In New Mexico, automobile insurance policies are required to include UM/UIM
coverage unless the named insured rejects such coverage. NMSA 1978, § 66-5-301 (1983).
Rejection of coverage is governed by 13.12.3.9 NMAC, which states 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 . . . must be endorsed, attached,
stamped or otherwise made a part of the policy of bodily injury and property damage
insurance.” Our Supreme Court has explained that a
rejection must be made a part of the policy by endorsement on the
declarations sheet, by attachment of the written rejection to the policy, or by
some other means that makes the rejection a part of the policy so as to clearly
and unambiguously call to the attention of the insured the fact that such
coverage has been waived.
Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245 (1990).
{7} Defendant argues that the policy clearly and unambiguously alerted Janati to her
rejection of UM/UIM coverage. In addition, Defendant contends that the present case is
entirely disposed of by this Court’s recent opinion in Marckstadt v. Lockheed Martin Corp.,
2008-NMCA-138, 145 N.M. 90, 194 P.3d 121, cert. granted, 2008-NMCERT-010, __ N.M.
__, 201 P.3d 855. We begin with the language of the policy.
1. Language of the Policy
{8} The policy attached to the Kia Sephia contains a declarations page, a page explaining
coverage designations and loss payable provisions, several pages of policy provisions, and
twelve endorsements. Although the record indicates that Janati signed a waiver of UM/UIM
coverage, the parties agree that the waiver was not attached to the policy. We therefore do
not consider the waiver to be a valid rejection of UM/UIM coverage. See Kaiser v.
DeCarrera, 1996-NMSC-050, ¶ 14, 122 N.M. 221, 923 P.2d 588 (holding that a signed
waiver of UM/UIM coverage was insufficient evidence of rejection of such coverage when
the insured did not receive a copy of the waiver).
{9} Defendant argues that on the declarations page and in one of the attached
endorsements, the policy clearly informed Janati that she had rejected UM/UIM coverage.
Plaintiffs disagree, and they argue that the policy read as a whole fails to “clearly and
unambiguously call to the insured’s attention that [UM/UIM] coverage ha[d] been waived.”
We thus turn to examine the policy provisions.
{10} On the declarations page, under coverage for “Uninsured Motorist,” the policy has
3
the notation “NC*.” There is no asterisk on the face of the page referring to or defining
“NC,” although directly above the columns listing coverage is an asterisk explaining that “*
ENTRIES IN THOUSANDS OF DOLLARS.” On the back of the declarations page, the
policy explains that “‘NC’ or ‘NOT COV’ means ‘NOT COVERED.’” Elsewhere on the
front page is the notation “*NOC.” An explanation at the bottom of the page indicates that
“*NOC” refers to “NOT ON COMPUTER.” Plaintiffs argue that these codes and asterisks
are confusing, inconsistent, and subject to alternate interpretations.
{11} Also on the declarations page are a number of endorsement codes—apparently
indicating, by number, which endorsements are attached to the policy. Plaintiffs point out
that three of the endorsements refer to UM/UIM coverage. The first endorsement appears
to amend certain exclusions from general UM/UIM coverage, which is listed in the policy’s
general provisions. The second endorsement amends one of the limits on liability for
UM/UIM recovery. The third endorsement explains that UM/UIM coverage “is deleted from
this policy.”
{12} Plaintiffs contend that the confusing declarations page and the conflicting
endorsements render the policy “inadequate on its face” to effectuate a rejection of UM/UIM
coverage. We are not persuaded that the coding on the declarations page is unclear. The
endorsements, however, are another matter. Even if a reasonable insured were to interpret
the coding on the declarations page to mean that an accident with an uninsured or
underinsured motorist was “not covered,” that interpretation is at odds with two of the
attached endorsements. Despite the final endorsement deleting UM/UIM coverage from the
policy, the other two endorsements assume that UM/UIM recovery was available in some
form.
{13} Defendant does not dispute this and points out that limited UM/UIM coverage was
available because Janati carried UM/UIM coverage on another vehicle—a Pontiac Grand
Am—that was also insured by Defendant. The UM/UIM coverage on the Pontiac Grand Am
could be used to cover Janati and her family members (and no one else) in the event that they
were in an accident with an uninsured or an underinsured motorist while driving the Kia
Sephia. The second endorsement, amending the limits on liability for UM/UIM coverage,
explains this “portability” concept.
{14} While Defendant’s explanation for the inclusion of the second endorsement appears
to make sense, it nevertheless fails to eliminate the resulting ambiguity from the contract.
The requirement under Romero is that the rejection of coverage “clearly and unambiguously
call to the attention of the insured the fact that such coverage has been waived.” 111 N.M.
at 156, 803 P.2d at 245. In the policy at issue, the declarations page suggests that Janati is
“not covered,” and one endorsement says that UM/UIM coverage is “deleted.” At the same
time, another endorsement indicates—and Defendant does not dispute—that UM/UIM
coverage is sometimes available. Although Defendant can explain the reasons for these
conflicting provisions, the reasons are not clear from the policy, and these endorsements
create an ambiguity. See Rodriguez v. Windsor Ins. Co., 118 N.M. 127, 130, 879 P.2d 759,
762 (1994) (“Not many people who purchase automobile insurance comprehend esoteric
legal and insurance concepts[.]”), modified on other grounds by Montano v. Allstate Indem.
4
Co., 2004-NMSC-020, ¶ 1, 135 N.M. 681, 92 P.3d 1255.
{15} Defendant points out that even if one endorsement does grant UM/UIM coverage
under some circumstances, the endorsement deleting coverage contains language at the
bottom that informs the insured that the restriction in the endorsement “supersedes and
controls anything to the contrary.” However, we fail to see how such language clears up any
ambiguity created by the competing endorsements because each of the twelve attached
endorsements contains the identical language at the bottom of the particular endorsement.
{16} Defendant also argues that reading the endorsements in the present case to create an
ambiguity imposes “impossible burdens” on insurance companies to “make no mention of
coverages rejected by the insured.” Defendant points to the general policy provisions, which
include UM/UIM coverage, and argues that including the general provisions ostensibly
creates an ambiguity with the final endorsement deleting UM/UIM coverage. We are
unpersuaded. The final endorsement refers to the coverage included in the general
provisions of the policy and deletes that coverage. There is no cause for confusion with
those two provisions because the endorsement unambiguously deletes the coverage referred
to in the general policy provisions. The endorsement acknowledging UM/UIM coverage
under certain circumstances, however, is in direct conflict with the endorsement that purports
to entirely delete such coverage. It is reasonable to expect an insurance company to provide
its insureds with consistent information: either UM/UIM coverage is deleted “in its entirety”
or the coverage is available under some circumstances. See Romero, 111 N.M. at 156, 803
P.2d at 245 (identifying the policy behind UM/UIM coverage as “to expand insurance
coverage and to protect individual members of the public against the hazard of culpable
uninsured motorists”).
{17} Accordingly, we conclude that the policy did not unambiguously convey to Janati
the extent of her UM/UIM coverage. As a result, the rejection was not in accordance with
the requirements of 13.12.3.9 NMAC, and UM/UIM coverage “will be read into the . . .
automobile liability insurance policy regardless of the intent of the parties or the fact that a
premium has not been paid.” Romero, 111 N.M. at 155, 803 P.2d at 244.
2. Marckstadt
{18} Defendant also argues that our recent holding in Marckstadt requires us to conclude
that the endorsement deleting coverage in the present case was sufficient to satisfy 13.12.3.9
NMAC. In Marckstadt, the insurer issued a policy to the insured, which included an
endorsement rejecting UM/UIM coverage. 2008-NMCA-138, ¶ 3. Before the insured
signed a UM/UIM rejection form, the plaintiff was injured. Id. ¶ 5. The plaintiff sued both
the insured and the insurer. Id. ¶ 6. The defendants argued that an endorsement, without a
signature, was sufficient to reject UM/UIM coverage. Id. ¶¶ 6-7. This Court held that the
unsigned endorsement was sufficient to satisfy the regulation
because [the insured] maintains that it always believed it had rejected
UM/UIM coverage under the [p]olicy, and because the [e]ndorsement
provided [the insured] with affirmative evidence of that rejection from the
5
date the [p]olicy went into effect, we conclude that the rejection complied
with the regulation and was therefore valid.
Id. ¶ 24. Defendant argues that because the policy in the present case included an
endorsement deleting UM/UIM coverage, Marckstadt controls and requires us to hold that
Defendant sufficiently complied with 13.12.3.9 NMAC. We disagree for two reasons.
{19} First, in Marckstadt, the insured “always maintained that it understood it had waived
UM/UIM coverage under the [p]olicy.” 2008-NMCA-138, ¶ 22. In the present case, Janati
testified that although she rejected UM/UIM coverage on the Kia Sephia, she believed that
anyone riding in that car was covered by the UM/UIM coverage that she had purchased for
the Pontiac Grand Am. Defendant contends that we should not consider Janati’s deposition
testimony because it constitutes extrinsic evidence that contradicts the terms of the
agreement. Janati’s testimony does not conflict with the terms of the agreement—the
endorsements conflict with themselves. In addition, it is well settled that courts are
permitted to “consider extrinsic evidence in determining whether an ambiguity exists in the
first instance, or to resolve any ambiguities that a court may discover.” See Ponder v. State
Farm Mut. Auto. Ins. Co., 2000-NMSC-033, ¶ 13, 129 N.M. 698, 12 P.3d 960. We observe
that the insurance agent indicated in his deposition that it was his practice to explain that
only the insured and family members are covered when the insured pays for UM/UIM
coverage on a different vehicle, as was the case with Janati’s coverage on the Pontiac Grand
Am. Nevertheless, Defendant does not argue—and has never argued—that there exist
disputed issues of material fact. Both parties submitted their motions for summary judgment
for determination as a matter of law, and we consider the issue as such. See Hydro Res.
Corp. v. Gray, 2007-NMSC-061, ¶¶ 14, 47, 143 N.M. 142, 173 P.3d 749.
{20} Second, in Marckstadt, there was no evidence of conflicting endorsements. This
Court therefore had no reason to conclude other than it did—that the single endorsement
provided the insured with affirmative evidence that it had rejected UM/UIM coverage.
2008-NMCA-138, ¶ 24. As we have explained, the policy in the present case did not
adequately inform Janati that she had rejected UM/UIM coverage because the attached
endorsements conveyed conflicting information. For these reasons, we consider Marckstadt
to be distinguishable, and we are therefore not bound by its conclusions.
B. Class I v. Class II Insureds
{21} Defendant’s final argument rests on the distinction between a Class I and a Class II
insured. In order to qualify as an “insured” under an insurance policy, “a party must either
be a ‘named insured’ (Class I) or establish that they were a driver or occupant of a covered
vehicle involved in the accident (Class II).” Archunde v. Int’l Surplus Lines Ins. Co., 120
N.M. 724, 727, 905 P.2d 1128, 1131 (Ct. App. 1995). Our Supreme Court has further
explained that “named insureds, their spouses, and relatives who live in the same household
are [Class I] insureds” and that “[p]ersons who have no familial relationship to the named
insured and are mere occupants of a vehicle covered by an [UM/UIM] policy are [Class II]
insureds.” Schmick v. State Farm Mut. Auto. Ins. Co., 103 N.M. 216, 220, 704 P.2d 1092,
1096 (1985). In the present case, Janati and her family members are Class I insureds, while
Plaintiffs are Class II insureds.
6
{22} Unless the Class I insured rejects UM/UIM coverage in accordance with the
governing regulations, such coverage is read into the insured’s automobile liability insurance
policy irrespective of the intent of the parties or the lack of a paid premium. Romero, 111
N.M. at 155, 803 P.2d at 244. A Class II insured, however, is generally restricted “to
recovering under the policy on the car in which they rode because the purchaser of the policy
only intended occupants to benefit from that particular policy.” Schmick, 103 N.M. at 220,
704 P.2d at 1096. Defendant argues that because the Kia Sephia carried no UM/UIM
coverage, Plaintiffs, as Class II insureds, have no right or entitlement to recover.
Specifically, Defendant cites Mountain States Mutual Casualty Co. v. Martinez (Martinez),
115 N.M. 141, 848 P.2d 527 (1993), and contends that UM/UIM coverage cannot be read
into an insurance contract to cover Class II insureds—regardless of “any technical failure
to comply with the [UM/UIM] statu[t]e and regulation.”
{23} In Martinez, the plaintiff argued that as a Class II insured, she was entitled to recover
under both the liability and the UM/UIM provisions of the insurance contract. Id. at 141-42,
848 P.2d at 527-28. The insurance contract included a liability offset provision, which
required that any proceeds paid under the liability coverage be offset from the available
UM/UIM benefits. Id. at 142, 848 P.2d at 528. Our Supreme Court concluded that “[t]his
sort of contractual limitation does not breach public policy as applied to a Class II insured[.]”
Id. at 143, 848 P.2d at 529. In the present case, because we have already determined that the
insurance contract does not include a valid rejection of UM/UIM coverage, there is no valid
contractual limitation on Class II recovery that is similar to the offset provision in Martinez.
{24} Instead, based on Defendant’s failure to comply with 13.12.3.9 NMAC, UM/UIM
coverage is provided under the insurance contract. See Romero, 111 N.M. at 155, 803 P.2d
at 244. The Kia Sephia thus carried UM/UIM coverage, and Plaintiffs, as Class II insureds,
are able to recover under the policy on the car in which they were riding. See Schmick, 103
N.M. at 220, 704 P.2d at 1096 (restricting recovery for Class II insureds to “the policy on
the car in which they rode”). We therefore see no error in the district court’s conclusion that
Class II insureds should not be “treated differently [than Class I insureds] when there is a
failure to comply with the regulations regarding uninsured motorist[s].”
III. CONCLUSION
{25} We affirm the district court.
{26} IT IS SO ORDERED.
CELIA FOY CASTILLO, Judge
WE CONCUR:
JAMES J. WECHSLER, Judge
7
LINDA M. VANZI, Judge
Topic Index for Williams v. Farmers Insurance Co., No. 28,220
CP CIVIL PROCEDURE
CP-SJ Summary Judgment
CN CONTRACTS
CN-AM Ambiguous Contracts
IN INSURANCE
IN-IC Insurance Contract
IN-MV Motor Vehicle Insurance
IN-RI Regulation or Insurance
IN-UM Uninsured or Underinsured Motorist
8