This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
A passenger was seriously injured in a car accident when the driver of the vehicle she was in rear-ended a truck. The driver’s insurance policy provided $60,000 in liability coverage and $60,000 in underinsured motorist coverage. The insurer paid the passenger the liability coverage limit, minus an amount paid to the truck owner. The passenger’s damages exceeded the liability coverage, and she sought additional compensation under the underinsured motorist coverage. The insurer denied the claim, citing a policy provision that offsets underinsured benefits by amounts already paid under liability coverage.
Procedural History
- District Court, January 6, 1993: Granted summary judgment in favor of the insurer, upholding the liability offset provision in the insurance policy.
Parties' Submissions
- Appellant (Passenger): Argued that the policy’s offset provision limiting underinsured motorist coverage violates public policy and is unenforceable. Claimed that underinsured motorist benefits should be available regardless of liability payments, particularly for passengers who are Class II insureds.
- Appellee (Insurer): Contended that the offset provision is enforceable under contract law and does not contravene public policy. Asserted that the statute primarily protects Class I insureds (policyholders and their families), not Class II insureds (passengers), and that the offset provision aligns with legislative intent.
Legal Issues
- Does public policy allow a guest passenger to recover under both the liability and underinsured motorist provisions of a negligent driver’s insurance policy despite a contractual offset provision?
Disposition
- The Supreme Court of New Mexico affirmed the trial court’s decision, upholding the enforceability of the liability offset provision in the insurance policy.
Reasons
Per Frost J. (Baca and Franchini JJ. concurring):
The Court held that the offset provision in the insurance policy was enforceable and did not violate public policy. The Court reasoned that the statutory purpose of underinsured motorist coverage is to protect Class I insureds (policyholders and their families), not Class II insureds (passengers). The passenger, as a Class II insured, did not pay premiums for the coverage and had no reasonable contractual expectation of underinsured benefits. Allowing recovery under both liability and underinsured provisions would effectively transform underinsured motorist coverage into liability coverage, increasing costs and discouraging its purchase. The Court found that the offset provision was consistent with legislative intent and did not interfere with the passenger’s ability to recover compensation from other sources.
Special Concurrence by Ransom C.J.:
Ransom C.J. concurred with the majority but emphasized that the case primarily involved the Class II coverage of $60,000. He noted that the passenger, as a Class I insured under her parents’ policies, could recover additional underinsured motorist benefits. He also clarified that the pro rata credit issue raised by the passenger had been rejected in a recent case, and the Court’s decision did not address whether her Class I coverage would be reduced by the liability payment.