October 7, 2019- Martin Sanchez v. Essentia Insurance Company, No. A-1-CA-35894

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Court of Appeals of New Mexico
Filed 10/7/2019 9:02 AM

Filing Date: October 7, 2019 | Ae >
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NO. A-1-CA-35894 Mark Reynolds.

MARTIN SANCHEZ, Individually and
as Personal Representative for the
ESTATE OF CLIFFORD SANCHEZ;
PHIL SANCHEZ; and STEVEN
SANCHEZ, Individually,

Opinion Number:

Plaintiffs-Appeliants,
v.

ESSENTIA INSURANCE COMPANY;
and HAGERTY INSURANCE AGENCY,
LLC,

Defendants-Appellees,
and

JOSE LUJAN and GILBERT SANCHEZ,

Defendants,

and

CENTRAL MUTUAL INSURANCE
COMPANY,

Defendant-in-Intervention.

APPEAL FROM THE DISTRICT COURT OF TAOS COUNTY
Francis J. Mathew, District Judge

Atler Law Firm, P.C.

WW NO —

Timothy J. Atler

Albuquerque. NM
veep wy Sts awiWwe

Cruz Law Office, LLC

Ernestina R. Cruz

Dn

tev

Taos, NM

Sanchez Law Firm

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Dennis T. Sanchez

Taos, NM

for Appellants

Rodey Dickason Sloan Akin & Robb PA
Jocelyn Drennan

Mark Mowery
Albuquerque, NM

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for Appellee Hagerty Insurance Agency, LLC

Modrall Sperling Roehl Harris & Sisk PA

ToL RQ 1, NA ete
PItidally INOGACIY vidal tll

8|| Michelle A. Hernandez

9| Albuquerque, NM

for Appellee Essentia Insurance Company

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IVES, Judge.

(3 Plaintiffs Phil Sanchez (Phil), Steven Sanchez, and Martin Sanchez,

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wndadially and ac the nereana L ranracantatrya nat the Fert
MIUIviaddally dla ds Ul PCrsOlldl TEPresCiildlive OF LHe Dot

sued Defendants Essentia Insurance Company and Hagerty Insurance Agency, LLC

for denying uninsured and underinsured motorist (UM/UIM) coverage for the

for summary judgment, concluding that Phil had validly rejected UM/UIM coverage.

On appeal, Plaintiffs argue, among other things, that Phil’s rejection was not valid

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because Defendants waited over seven months to incorporate the rejection into his

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insurance policy. Because we agree with Plaintiffs that Defendants’ delay deprived

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Phil of a fair opportunity to reconsider his decision to reject coverage, we reverse

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without reaching Plaintiffs’ other arguments

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BACKGROUND

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23 The pertinent facts are undisputed. On July 20, 2010, Phil and his son Philip

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visited Defendant Hagerty’s website to purchase automobile insurance for Phil’s

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Classi¢C Cars, a 1704 Ford Uadlaxie anda a 1750 FOrd ITuCk. FOHUIP Was assisting rim,

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who did not use a computer or the Internet and did not attend to his personal affairs

or pay his own bills because of his age. Phil and Philip selected UM/UIM coverage

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and $10,000 per accident for property damage. The cost of this coverage was

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ourteen dollars per month

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{3} On August 14, 2010, Phil signed a new coverage selection form rejecting all

UM/UIM coverage. More than seven months later, on March 25, 2011, Defendants

sent Phil a policy declarations form, which stated that Phil had rejected UM/UIM

coverage for bodily injury but had purchased such coverage for property damage.

The declarations form did not specify either the levels of coverage available or the

premiums associated with each level of coverage. Over the next six months,

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declarations forms, indicating that he had rejected UM/UIM bodily injury coverage.

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43 On October 12, 2011, Phil’s son Clifford, an insured under Phil’s policy, was

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Defendants denied UM/UIM coverage for damages related to Clifford’s death,

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Plaintiffs sued, asserting that the denial was improper. Defendants moved for

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full briefing and a hearing, the district court granted Defendants’ summary Judgment

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motion. Plaintiffs appeal.

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DISCUSSION

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(s} Plaintiffs argue that the district court entered summary judgment for

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Defendants based on a legal error. Specifically, Plaintiffs contend that Phil’s

| Defendants sent Phil various documents, including renewal offers and policy |

1} rejection of UM/UIM coverage is invalid because Defendants deprived him of a fair

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overage by failing to provide him

3] with a policy incorporating the rejection until over seven months after he had signed

4] the rejection form. We agree.

S| “e j i when there are no genuine issues of

6| material fact and the movant is entitled to judgment as a matter of law.” Arias v.

7| Phoenix Indem. Ins. Co., 2009-NMCA-100, 4 6, 147 N.M. 14, 216 P.3d 264. We

8|| review the district court’s summary judgment ruling de novo. Romero v. Philip

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Morris Inc., 2010-NMSC-035, § 7, 148 N.M. 713, 242 P.3d 280.

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101 (73 NMSA 1978, Section 66-5-301 (1983) governs UM/UIM coverage in New

11] Mexico. Subsections (A) and (B) of the statute require insurance companies to

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13} statutory limits... up to the limits of liability coverage contained in a policy.” Arias,

14 2009-NMCA-100, § 7 (citation omitted). The purpose of this requirement “is to put

16] liability coverage equal to the UM/UIM protection as provided by the insured's

17| policy.” Jd. The requirement thus “embodies a strong public policy to expand

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19 hazard of culpable uninsured and underinsured motorists.” /d. (alteration, internal

20] quotation marks, and citation omitted). Consistent with this public policy,

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Subsection (C) allows an insured to reject the UM/UIM coverage described in
Subsections (A) and (B) only if the rejection “satisflies] the regulations promulgated
by the superintendent of insurance.” Arias, 2009-NMCA-100, { 8.
{8} Interpreting Section 66-5-301 and the applicable insurance regulations, our
Supreme Court has held that a rejection of UM/UIM coverage is valid only if the
insurer meets four “workable requirements” designed to ensure that rejections are
the product of “realistically informed choice[s]” by insureds. Jordan v. Allstate Ins.
Co., 2010-NMSC-051, 20, 149 N.M. 162, 245 P.3d 1214. The insurer must:
(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|.]
Id. § 22. If the insurer fails to comply with one or more of these requirements, the
insured’s rejection of coverage is invalid, and “the policy will be reformed to provide
UM/UIM coverage equal to the liability limits.” Jd.
{9} At issue here is the fourth requirement. We must determine whether, as a
matter of law, the undisputed facts established that Defendants incorporated Phil’s
rejection into the policy in a manner that “afford[ed him] a fair opportunity to
reconsider [his] decision to reject.” Jordan, 2010-NMSC-051, | 22. Whether an

insurer’s delayed incorporation may render a rejection invalid is a question of first

impression in New Mexico.

{10} The incorporation requirement is based on Regulation 13.12.3.9 NMAC.

Jordan, 2010-NMSC-051, 418. The regulation provides that “[t]he rejection of the

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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.” 13.12.3.9 NMAC. Our Supreme Court has explained

how this regulation serves the purpose of ensuring that a rejection of UM/UIM

coverage is knowingly and intelligently made:

The regulation that the rejection be made a part of the policy delivered
to the insured quite apparently is to ensure that the insured has

affirmative evidence of the extent of coverage. Upon further reflection,

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Cofsurtation” wit oimner” indaiviauais, or aiter merely having an
opportunity to review one’s policy at home, an individual may well

reconsider his or her rejection of uninsured motorist coverage.

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I POUVINITT ES QITITITIAaAtIVe CVIQCTO UT UI IOJOCuorr UT Lit LUVElTAEY
comports with a policy that any rejection of the coverage be knowingly

and intelligently made. Any individual rejecting such coverage should

remain_well informed qathy tha t daria;

remain werHintormec as to that aectston.

Romero v. Dairyland Ins. Co., 1990-NMSC-111, § 9, 111 N.M. 154, 803 P.2d 243;

accord Jordan, 2010-NMSC-051, ¥ 18.

interpret and apply the incorporation requirement. See Romero v. Progressive Nw.

Ins, Co., 2010-NMCA-024, 4 32, 148 N.M. 97, 230 P.3d 844, aff'd sub nom. Jordan,

2010-NMSC-051; see also id. J§_27-39. For example, we have held that an insurer

failed to satisfy this requirement when the language in a policy “conveyed

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conflicting information.” Williams v. Farmers Ins. Co., 2009-NMCA-069,

N.M. 515, 212 P.3d 403. Both our Supreme Court and this Court have concluded

that rejections were invalid when insurers failed to physically attach rejections to the

Arias, 2009-NMCA-100, $f 1, 4, 12-13. And our Supreme Court has invalidated a

rejection when the insurer “[i]ncorporat[ed] an on-line application into an insurance

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Jordan, 2010-NMSC-051, § 35. These precedents establish that an insurer’s choices

regarding the language used to incorporate a rejection and the placement of that

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language ay deprive an insured of a fair opportunity to reconsider the decision to

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reject coverage.

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{12}. The same deleterious consequence can flow from an insurer’s choice

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regarding the timing of the incorporation. New Mexico law seeks to protect the

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ability of insurance consumers to “knowingly and intelligently” make decisions

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about whether to purchase or reject UM/UIM coverage. Romero, 1990-NMSC-111,

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4.9. The incorporation requirement cannot serve that purpose if an incorporation

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does not do what it is designed to do: provide the insured with a fair “opportunity

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... to fully reconsider any rejection of UM[/UIM] coverage.” Arias, 2009-NMCA-

100, 4] 13. An unreasonable delay between rejection and incorporation deprives the

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|| clear recollection of the reasons for rejecting coverage may eventually be supplanted

3}, so. The longer the delay, the more likely it 1s that the insured will no longer be able

4! to recall information—such as coverage options and their respective costs—

S| pertinent to the decision to reject, and the more likely it is that the incorporation,

6| rather than enabling reconsideration, will do nothing more than remind the insured

7|| of a decision that has already ossified.

81 4133 It follows that an insured will be able to reconsider the initial decision in a

9 meaningful way only if the insured receives the policy incorporating the rejection

10] promptly after deciding to reject UM/UIM coverage. Prompt incorporation allows

11] the insured to “fully reconsider,” id. § 13, the rejection at a time when the insured

13] well as to the considerations that produced it. By contrast, unreasonable delay

14|| defeats the purpose of the incorporation requirement: “afford[ing] the insured a fair

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16] (emphasis added).

17] 1443 Defendants argue that the delayed incorporation should only render the

19] incorporation. Thus, Defendants contend, Phil’s rejection became valid when

20| Defendants finally incorporated Phil’s rejection into the policy, and, because that

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incorporation occurred before the accident that caused the death of Phil’s son, Phil

had no UM/UIM coverage at that time. We are not persuaded. Defendants fail to

account for the need for the insured to have the decision to reject and the reasons for

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Defendants’ approach, an insurer could transform a rejection that is invalid for an

extended period of time into a valid rejection whenever the insurer decides to

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the likely effect of that delay on the ability of a reasonable insured to “fully

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reconsider,” Arias, 2009-NMCA-100, 4 13.! New Mexico’s UM/UIM legislation,

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allow an insurer’s delay to prevent an insured from knowingly and intelligently

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making the final decision about whether to reject coverage. That consequence would

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consider the hypothetical case of an insured who rejects UM/UIM coverage when

purchasing a one-year insurance policy and an insurer that delays incorporating the

insured’: retection into the nolicyv until two dave hefore the nolicv 1S set to lance or
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be renewed. Then, the day after the incorporation, the insured is injured in an

accident with an uninsured motorist. In such a case, Defendants’ approach would

insured a fair opportunity to reconsider the decision to reject, ” Jordan, 2010-NMSC-

051, § 22, even though the insured had just one day to do so, and even though that

one_day followed _almost_a year during which the insured lacked evidence of the

We May

decision to reject. That result cannot be reconciled with the policies underlying the

law of UM/UIM coverage in New Mexico.

undermine the legislative purpose of including UM/UIM coverage in every policy

2|| absent a knowing and intelligent waiver. See Romero, 1990-NMSC-111, 19.
3} (153 The delay between rejection and incorporation in this case deprived Phil of
4) the fair opportunity to reconsider that New Mexico law guarantees to insureds.
5|| Seven months is too long a span of time to expect an insured to remember the initial
6 reasons for rejecting coverage, the available UM/UIM coverage options, and the
7| premium amount for each option. We hold that Defendants’ delay rendered Phil’s
8] rejection invalid.
9; CONCLUSION
10] 416; We reverse and remand for further proceedings consistent with this opinion.
11] a7 IT ISSO ORDERED.
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141 WE CONCUR:
5| ashe Boel
16] KRISTINA BOGARDUS, Judge
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18] MICHAEL D. BUSTAMANTE, Judge Pro Tempore