Update of Retroactive Application of New Mexico Underinsured Coverage Case-Law Developments

There have a series of New Mexico Supreme Court opinions over the last 10 years expanding the duties on insurers to obtain proper rejection of uninsured/underinsured coverage motorist coverage (UIM).

The first of the opinions during that time was the 2004 case of Montano v. Allstate, which dealt with the proper rejection of stacking coverage.  Following on that opinion, there were a series of other opinions addressing the proper rejection of UIM coverage.

Retroactivity of Cases on Rejection of UIM Coverage 

The cases and the expanding obligations on insurance companies were made retroactive in Jordan v. Allstate.  However, the Court did not indicate how far back retroactive application of the new obligations would go.

The most recent case of Whelan v. State Farm addresses this issue along with a very good discussion of the evolution of rules regarding the rejection of UIM coverage.

Statute of Limitations 

First, it should be noted that the statute of limitations on written contracts in New Mexico is 6 years.  Because underinsured motorist coverage is a written contractual provision, a breach of this provision would have a 6-year statute of limitations.

The question then becomes when does the statute of limitations begin to run?  The Whelan case addresses this issue consistently with prior cases holding that the statute of limitations begins to run on the date that an uninsured or underinsured motorist claim is denied.

In the Whelan case, the insurer had attempted to limit the statute of limitations by inserting a provision in the contracts stating that it would be begin to run on the date of the accident.  The court refused the argument since the insured party likely would not know of the need for a UIM claim at that time, so it would be unjust to allow the statute of limitations to begin running on this earlier date.

The Court, recognizing the 6-year statute of limitations and it commencement upon rejection of coverage, then had to determine how far back retroactivity would apply.

Retroactivity Back Only to 2004 Montano Decision 

The Court, after lengthy discussion, found that the spate of cases expanding the duties of insurers on the proper rejection of UIM coverage would only go back to 2004, the date of the Montano decision.

The Court acknowledged that the laws regarding UIM and the laws and regulations over the insurance industry were meant to protect the consumer insured, not the insurance companies.  On the other hand, the Court found that it would be unjust to allow retroactivity beyond 2004 since the insurance companies had no reason to know of the enhanced requirements regarding the rejection of UIM coverage until the Montano decision.

Retroactivity Will Not Apply to Policies Entered Prior to 2004 

Based upon its analysis of the evolution of the law on the rejection of UIM coverage, the law on statutes of limitations and statutes of repose, and the retroactive application of civil case law, the Court determined that the heightened obligations on the proper rejection of UIM coverage would not apply to policies entered in prior to the 2004 Montano decision.

Review Your Prior Settlement

If you had an auto accident claim, and there was a UIM claim made, and your policy was entered after 2004, it is advisable to have an experienced automobile insurance attorney review your file.

Most insurance companies have been sending out notices to its auto insurance customers who had auto accident claims.  It is not clear how far back they have gone to notify these customers.  It appears that they would have the obligation to notify all such drivers with policies dated after the 2004 Montano decision.

However, do not wait for notice from your insurance company.  It is also not clear that all insurance companies are sending out these notices.  It is important to take action as soon as possible.  The statute of limitations is always running so it is never a good idea to delay.