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Ullman v. Safeway Insurance Co.

Court of Appeals of New Mexico

June 28, 2017

BETTY E. ULLMAN, for herself and others similarly situated, Plaintiff-Appellee,
SAFEWAY INSURANCE COMPANY, Defendant-Appellant, and RICHARD BAILEY, Defendant.


          Law Offices of Geoffrey R. Romero Geoffrey R. Romero Albuquerque, NM Garcia Ives Nowara, LLC Matthew L. Garcia Albuquerque, NM Freedman, Boyd, Hollander, Goldberg, Urias & Ward, P.A. Joseph Goldberg David A. Freedman Vincent J. Ward Albuquerque, NM Vargas Law Firm, LLC Ray M. Vargas, II Albuquerque, NM O'Connell Law LLC Erin B. O'Connell Albuquerque, NM for Appellees

          Butt, Thornton & Baehr, P.C. Rheba Rutkowski James H. Johansen Albuquerque, NM for Appellant


          JONATHAN B. SUTIN, Judge.

         (1} This matter comes to us on interlocutory appeal from the denial of Safeway Insurance Company's motion for summary judgment seeking dismissal of class action claims. Safeway sought to prove that its insurance documents were legally adequate to support its rejections of claims of class members to uninsured and underinsured motorist (UM/UIM) benefits. The district court certified that the case involved "a controlling question of law as to which there is [a] substantial . . . difference of opinion and that an immediate appeal . . . may materially advance the ultimate termination of the litigation." The court identified that controlling question as "whether Safeway has complied with New Mexico law in obtaining waivers of [UM/UIM] coverage insurance, including stacked coverage, from its insureds." (2} Safeway asks this Court to (1) rule that Safeway obtained valid rejections of UM/UIM coverage in compliance with New Mexico law; (2) reverse the order denying Safeway's class-related motion for summary judgment; and (3) remand with instructions to dismiss the class claims with prejudice and de-certify the class because "a ruling on the certified question in Safeway's favor means that the alleged violation of law that grounds the class definition and class claims does not exist, leaving no common question appropriate for class litigation." We hold that Safeway obtained valid rejections of UM/UIM coverage in compliance with New Mexico law. We further hold that, on remand, the district court is to address any remaining class-related issues or concerns.

         I. THE CLASS

         {3} In pursuit of class certification in an action against Safeway, Plaintiff Betty E. Ullman stated the certified class to be:

All New Mexico residents, who are all Safeway policyholders or insureds under any Safeway policy issued, or reissued, in New Mexico where that Safeway policy did not provide the maximum amount of [UM/UIM] coverage allowed by law and for which Safeway did not obtain a valid waiver/rejection of UM/UIM coverage with limits equal to the limits of liability coverage. An invalid waiver/rejection of UM/UIM coverage is one which did not include an offer of UM/UIM limits up to the liability limits and a disclosure of premium amount for each available level of coverage, including stacked coverage.

Ullman's claims and the class membership are based on Ullman's assertion of legally inadequate Safeway UM/UIM documentation affecting all policyholders in the class.


         (4} In the district court, Ullman argued that the issue was whether Safeway's uniform documentary language complied with New Mexico law, and for that reason, the particular circumstances surrounding an ultimate rejection, including the means in which the rejection was obtained, were immaterial. Whether the documents met the legal requirements for offering and obtaining waivers of UM/UIM coverage and for stacking of benefits is a legal question resolved by interpretation of applicable statutory, regulatory, and case law, calling for de novo review. See Marckstadt v. Lockheed Martin Corp., 2010-NMSC-001, ¶ 13, 147 N.M. 678, 228 P.3d 462; Wilkeson v. State Farm Mut. Auto Ins. Co., 2014-NMCA-077, ¶ 6, 329 P.3d 749. (5} The question whether language in a document meaningfully informs a customer regarding the insurance offered requires this Court "to consider legal concepts in the mix of fact and law and to exercise judgment about the values that animate legal principles[.]" State v. Attaway, 1994-NMSC-011, ¶ 6, 117 N.M. 141, 870 P.2d 103 (internal quotation marks and citation omitted). Like the concept of reasonableness, the concept of meaningful involves the exercise of reasoned and evaluative judgment as to concepts inherently factual yet in need of appellate court de novo review. See id. ¶ 9 (discussing "rules and tests, based as they are on careful balancing of the underlying constitutional values, " serving as "a proxy for reasonableness, generally applicable, but inherently factual[, ]" yet "extend[ing] beyond fact-finding and implicat[ing] an assessment of broader legal policies . . . entrust[ed] to the reasoned judgment of the appellate courts of this state"); Randall H. Warner, All Mixed Up About Mixed Questions, 7 J. App. Prac. & Process, No. 1, at 129 (Spring 2005) ("[E]valuative determinations involve the judging of a person's conduct or belief. This is typically done by applying a standard like 'reasonable' or 'fair' that conveys to the decision-maker that he or she is judging according to a community standard."). In such instances, appellate courts are free to conclude that, as a matter of policy, the issue should be reviewed de novo in the interests of judicial administration. Attaway, 1994-NMSC-011, ¶¶ 6-8; Warner, supra, at 109-12, 118, 130-31. Thus, it is for this Court to determine whether the documents were legally adequate to meaningfully inform Ullman of required insurance information. For the purposes of our de novo review, it is to be understood that Ullman received the critical documents.


         A. UM/UIM Coverage and Rejection of Coverage

         {6} UM/UIM coverage and rejection of coverage are subjects of NMSA 1978, Section 66-5-301 (1983), and its implementing regulation, NMAC. Section 66-5-301 reads:

A. No motor vehicle or automobile liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person and for injury to or destruction of property of others arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in New Mexico with respect to any motor vehicle registered or principally garaged in New Mexico unless coverage is provided therein or supplemental thereto in minimum limits for bodily injury or death and for injury to or destruction of property as set forth in Section 66-5-215 NMSA 1978 and such higher limits as may be desired by the insured, but up to the limits of liability specified in bodily injury and property damage liability provisions of the insured's policy, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, and for injury to or destruction of property resulting therefrom, according to the rules and regulations promulgated by, and under provisions filed with and approved by, the superintendent of insurance.
B. The uninsured motorist coverage described in Subsection A of this section shall include underinsured motorist coverage for persons protected by an insured's policy. For the purposes of this subsection, "underinsured motorist" means an operator of a motor vehicle with respect to the ownership, maintenance or use of which the sum of the limits of liability under all bodily injury liability insurance applicable at the time of the accident is less than the limits of liability under the insured's uninsured motorist coverage. . . .
C. The uninsured motorist coverage shall provide an exclusion of not more than the first two hundred fifty dollars ($250) of loss resulting from injury to or destruction of property of the insured in any one accident. The named insured shall have the right to reject uninsured motorist coverage as described in Subsections A and B of this section; provided that unless the named insured requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured has rejected the coverage in connection with a policy previously issued to him by the same insurer.

         The regulation states: "The rejection of the provisions covering damage caused by an uninsured . . . 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." NMAC; see Romero v. Dairyland Ins. Co., 1990-NMSC-111, ¶ 8, 111 N.M. 154, 803 P.2d 243 ("An insured may reject [UM] coverage, but the rejection must satisfy the regulations promulgated by the superintendent of insurance.").

         {7} In Montano v. Allstate Indemnity Co., 2004-NMSC-020, ¶¶ 17, 20, 135 N.M. 681, 92 P.3d 1255, our Supreme Court charted a "new course" in UM/UIM law, which, among other rulings, required insurers in multiple-vehicle policies to "declare the premium charge for each of the . . . coverages" as a means of ensuring that consumers get what they pay for. In Progressive Northwestern Insurance Co. v. Weed Warrior Services, 2010-NMSC-050, ¶¶ 8, 14-15, 149 N.M. 157, 245 P.3d 1209, our Supreme Court required that insurers offer UM/UIM coverage that includes "the maximum amount statutorily available" equal "to the liability limits of the policy[.]" Further, the Court explained the insured's choice to purchase any lower amount functions as a rejection of that maximum amount of coverage statutorily possible. Id. ¶ 14.

         (8} With respect to obtaining valid rejections of UM/UIM coverage, several New Mexico Supreme Court cases have stated what constitutes compliance, starting with Romero, 1990-NMSC-111, and then later Marckstadt, 2010-NMSC-001, and Jordan v. Allstate Insurance Co., 2010-NMSC-051, 149 N.M. 162, 245 P.3d 1214. Romero explained that "[t]he 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." 1990-NMSC-111, ¶ 8. Further, under Romero, "[p]roviding affirmative evidence of the rejection of the coverage comports with a policy that any rejection of the coverage be knowingly and intelligently made." Id. ¶ 9. And UM/UIM coverage will be read into the policy "when a rejection of such coverage does not comply with [the] regulation[]." Id.

         (9} In Marckstadt, our Supreme Court clarified that "an insurer must obtain a written rejection of UM/UIM coverage . . . in order to exclude it[, ]" but that "neither the statute nor the regulation requires that the insured's written rejection be signed[, ]" and "the written rejection itself need not be made part of the policy." 2010-NMSC-001, ¶ 4; see id. ¶¶ 23-26, 32. The Court further clarified that "the rejection which the regulation requires to be in writing must be the act of rejection described in the statute and not the evidence of that act mandated by the regulation itself." Id. ¶ 22. Marckstadt explained that this requirement assures "that the insured is sufficiently informed before rejecting coverage, alerting the insured to the importance of the decision, and providing clear evidence of a decision to reject[.]" Id. ¶ 21. The Marckstadt Court stated, "[W]e cannot hold that the regulation may only be satisfied by the attachment of the written rejection provided to the insurer by the insured[, ]" id. ¶ 25, and that "other forms of notification could function equally well to clearly and unambiguously call to the attention of the insured the fact that such coverage has been waived." Id. (internal quotation marks and citation omitted). In sum, under Marckstadt, "the insurer must obtain a written rejection from the insured, . . . the written rejection need not be signed or attached to the policy[, ]" and the regulation "requires that some evidence of the insured's written rejection of UM/UIM coverage must be made part of the policy by endorsement, attachment, or some other means that calls the insured's attention to the fact that such coverage has been waived." Id. ¶ 26. (10} Almost a year after Marckstadt, Jordan decided that the "Court's repeated pronouncements" in Marckstadt and Romero, "indicate[d] that insurers continue[d] to offer UM/UIM coverage in ways that are not conducive to allowing the insured to make a realistically informed choice." Jordan, 2010-NMSC-051, ¶ 20. The Court therefore proceeded to "prescribe workable requirements for a valid and meaningful rejection of UM/UIM coverage in amounts authorized by statute." Id. The Court stated:

When issuing an insurance policy, an insurer must inform the insured that he or she is entitled to purchase UM/UIM coverage in an amount equal to the policy's liability limits and must also provide the corresponding premium charge for that maximum amount of UM/UIM coverage. The premium cost for the minimum amount of UM/UIM coverage allowed by Section 66-5-301(A) must also be provided, as well as the relative costs for any other levels of UM/UIM coverage offered to the insured. The insured must be informed that he or she has a right to reject UM/UIM coverage altogether. Providing the insured with a menu of coverage options and corresponding premium costs will enable the insured to make an informed decision about the level of UM/UIM coverage he or she wants to purchase and can afford and will minimize uncertainty and litigation with regard to the coverage that the insured has obtained.

Id. ¶ 21. More recently, in Whelan v. State Farm Mutual Automobile Insurance Co., 2014-NMSC-021, ¶ 25, 329 P.3d 646, our Supreme Court confirmed Montano's having imposed a requirement "that insurers disclose the premium costs for each available level of stacked coverage as a means of guaranteeing that consumers can knowingly exercise their statutory rights to UM/UIM coverage." And Whelan further confirmed that "Jordan followed Montano by requiring similar premium disclosure as to the premium charges corresponding to each available [UM/UIM] option[.]" Whelan, 2014-NMSC-021, ¶ 25 (internal quotation marks and citation omitted). (11} Jordan sets out the consequences stemming from an insurer's failure to abide by the requirements.

If an insurer does not (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, the policy will be reformed to provide UM/UIM coverage equal to the liability limits.

Jordan, 2010-NMSC-051, ¶ 22.

         B. Stacking (12}

         Stacking rules were substantially clarified in Montano, 2004-NMSC-020, and were also discussed in Jordan, 2010-NMSC-051. Montano addressed "whether an insurance company effectively precluded its insured from stacking the policy limits of all of his vehicles insured under the policy for his [UM] claim[, ]" where the plaintiff insured four vehicles under a policy, paid a single premium for UM coverage, and limited stacking to two coverage limits. 2004-NMSC-020, ¶¶ 1, 3-4, 6. The plaintiff asked the Court to declare all anti-stacking clauses void as against public policy, and alternatively, that he be permitted to stack four coverage limits under the circumstances. Id. ¶ 7. Our Supreme Court did not expand its public policy favoring stacking to require stacking in all cases, stating, "[w]e have always understood stacking to be the remedy for an ambiguous contract or the charging of multiple premiums." Id. ¶ 9. And after reviewing prior cases, the Court stated that it had "never held that anti-stacking clauses violate public policy when unambiguous and when only one premium has been charged for the coverage." Id. ¶ 15. The Court explained that to declare all anti-stacking clauses void as against public policy

would expand the public policy in favor of stacking beyond what [the] earlier cases have declared it to be. Our public policy in support of stacking, rather, has always been tied to the notion that it is unfair not to allow stacking when multiple premiums are paid or when the policy is otherwise ambiguous. It would thus be an expansion of that policy to also require stacking when the policy clearly only charges a single premium and unambiguously precludes stacking. We decline to modify our case law in order to expand our expression of the public policy underlying stacking.
. . . Further, requiring stacking in all cases on a take-it-or-leave-it basis would reduce the freedom of the parties to contract for less coverage and thus their freedom to decide how much coverage they can afford. This could frustrate, rather than advance, the legislative intent behind the UM statute. . . . [and] . . . result in some lower-income insureds who own multiple vehicles being effectively "priced out" of UM coverage.

Id. ¶¶ 15-16.

         (13} Stacking is not a statutorily mandated UM coverage level but "a judicially-created doctrine[.]" Id. ¶ 17; Wilkeson, 2014-NMCA-077, ¶ 8 ("In New Mexico, stacking is 'a judicially-created doctrine' that has arisen in cases in which our Supreme Court has needed to determine whether insurance policy limitations of liability provisions restrict or permit stacking." (quoting Montano, 2004-NMSC-020, ¶ 17). Because the "traditional case-by-case ambiguity analysis has proved unworkable" and "[b]earing in mind that [stacking] is a judicial doctrine, " the Montano Court determined that a "new approach" was needed "to protect the reasonable expectations of insureds and to ensure that they get what they pay for." 2004-NMSC-020, ¶ 17. Taking "guidance" from a concurrence in an out-of-state decision stating that stacking should be treated as "extra coverage for which the parties have contracted, " and also from Section 66-5-301(A) and (C), the Court "discern[ed] a solution to the seemingly inherent ambiguities in anti-stacking clauses: an insurance company should obtain written rejections of stacking in order to limit its liability based on an anti-stacking provision." Montano, 2004-NMSC-020, ¶¶ 18-19 (internal quotation marks and citation omitted); see also Whelan, 2014-NMSC-021, ¶ 1 (confirming Montano as requiring insurers to "obtain explicit written rejections of stacking in order to limit their statutory obligations"). (14} The Court in Montano illustrated its holding:

[I]n a multiple-vehicle policy insuring three cars, the insurer shall declare the premium charge for each of the three UM coverages and allow the insured to reject, in writing, all or some of the offered coverages. Thus, hypothetically, in the case of a $25, 000 policy, if the premium for one UM coverage is $65, two coverages is an additional $60, and three coverages $57 more, the insured who paid all three (for a total premium of $182) would be covered up to $75, 000 in UM bodily injury coverage. However, the insured may reject, in writing, the third available coverage and pay $125 for $50, 000 of UM coverage; or the insured may reject, in writing, the second and third coverages and pay $65 for $25, 000 of UM coverage; or the insured may reject all three UM coverages. In any event, the coverage would not depend on which vehicle, if any, was occupied at the time of the injury. Thus, the insured's expectations will be clear, and an insured will only receive what he or she has paid for.

2004-NMSC-020, ¶ 20. The Court followed with: "In all future cases, an insurance policy that complies with this requirement will avoid the conclusion we now draw from the history of stacking litigation in this State, namely, that anti-stacking clauses are almost inherently ambiguous and are no longer effective at precluding stacking. With written waivers, insureds will know exactly what coverage they are receiving and for what cost[.]" Id. ¶ 21. Having "set forth the policy language requirements for future stacking cases, " the Court relied on its "traditional ambiguity analysis" to resolve the case, reasoning that "it would be inequitable to apply [the new requirements] against [the insurer] before it has had an opportunity to alter its policy language[.]" Id. ¶ 22. Applying that analysis, the Court held that the plaintiff was "entitled to stack his four coverages" because the policy did not meet the requirements "for a truly unambiguous policy[.]" Id. ¶¶ 27-28. (15} In regard to the phrase "rejections of stacking" in Montano, as we state later in this opinion, because an insurer has no duty to offer or explain stacking to a customer, we construe the phrase "rejections of stacking" to mean rejection of UM/UIM coverage which, if valid, necessarily precludes court-imposed stacking.[1] Id. ¶ 19. Thus, where stacking is not otherwise lawfully precluded, UM/UIM coverages that have not been rejected can be stacked. There exists no required express stacking rejection independent of coverage rejection.


         Several documents used in Ullman's insurance purchase appear in the record. Safeway's documents include the following forms: Application, Selection/Rejection, Endorsement Page, Declarations Page, and the standard form policy. Also in the record are insurance agency forms used by the insurance agency in the process of contracting for the insurance with Ullman. The parties agree that the critical and operative documents on the issue of legal adequacy are the Safeway documents and that the agency's documents are not relevant on the issue of legal adequacy. We nevertheless set out the agency's documents that were signed by Ullman so that the reader has a full understanding of what Ullman had before her.

         A. New Mexico Automobile Insurance Application (17}

         Ullman signed a New Mexico Automobile Insurance Application form on November 12, 2011. The application asks the insured to "please read" certain matters set out in the application, one of which reads, in part, "I understand that I have only the coverages indicated in Section 5. All of the coverages shown in Section 5 have been explained. I understand the various coverages and that I have only those coverage [sic] which have been completed. I have rejected all coverages not completed in Section 5." Under Section 5, "Coverages, " the document states, "No coverage unless checked or premium shown[.]" The application shows bodily injury limits of $25, 000/$50, 000 for each insured vehicle, listing the premium amount of $79.00 for each. And the application has a ...

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