In a recent notable decision, the New Mexico Supreme Court clarified the regulations around uninsured/underinsured (UM/UIM) motorist coverage, specifically focusing on the information an insurer ought to provide for a consumer to make an informed decision on coverage amounts. The case, Ullman v. Safeway Insurance, required the court to delve into the question of what constitutes as a meaningful offer of coverage for UM/UIM insurance to warrant a consumer’s rejection of such coverage under state law, as per the court’s decision.
A key issue raised was whether insurance offers should contain information about possible aggregate benefits—commonly referred to as ‘stacked’ benefits—that insureds may stand to recover if they pay multiple premiums for UM/UIM coverage on multiple vehicles. To this effect, Justice Briana H. Zamora stated that henceforth, insurers must provide basic information about stacking to prospective insureds to ensure that any associated rejections or waivers by insureds are effective.
The decision comes from a consolidation of three separate cases, each involving an insured who purchased an automobile insurance policy covering multiple vehicles but rejected the UM/UIM coverage. After experiencing accidents with an underinsured or uninsured motorist, they sought UM/UIM benefits from their respective insurers, leading to rejections and subsequent lawsuits for breach of contract and insurance bad faith.
The New Mexico Supreme Court’s decision seeks to address the argument from the plaintiffs that for a rejection of UM/UIM coverage on multiple vehicles to be effective, an insurer must have provided information about stacked coverages in its offer, including about the potential premium costs per vehicle.
“We hold that, in recognition of the practical reality that insurers now permit stacking as a matter of course in New Mexico, offers of UM/UIM insurance going forward must include a brief discussion of stacking,” wrote Justice Zamora. Interestingly, the disclosure rule relating to stacking is to be applied prospectively based on the court’s conclusion, as insurers were not considered unreasonable for relying on previous court decisions, believing a disclosure of the effects of stacking was not necessary in offers of UM/UIM coverage.
More details about the specifics of the decision, the insurance representations, and the potential impacts of this ruling are available in the original article.