Hart v. State Farm (New Mexico)
(August 2021) - New Mexico courts continue to require insurance companies to afford insureds a fair opportunity to consider the actual cost of UM/UIM coverage by reforming policies that do not accurately reflect premium costs corresponding to available levels of UM/UIM coverage.
In New Mexico, for a rejection of UM/UIM coverage to be valid, the insurer must:
- Offer the insured UM/UIM coverage equal to their liability limits;
- Inform the insured about premium costs corresponding to the available levels of coverage;
- Obtain a written rejection of UM/UIM coverage which is not equal to the liability limits; and
- Incorporate that rejection into the policy in a way that affords the insured a fair opportunity to reconsider their decision to reject UM/UIM coverage.
See Jordan v Allstate, 2010-NMSC-051, ¶¶ 22, 30. Ten years after the New Mexico Supreme Court set out the Jordan standards, the U.S. District Court for the District of New Mexico applied and interpreted them in Hart v. State Farm Mut. Auto. Ins. Co., 504 F.Supp.3d 1239 (Nov. 25, 2020), rec'd on other grounds, 2021 U.S. Dist. LEXIS 122421 (Jun. 29, 2021). In Hart, the insured sought reformation of five policies issued by State Farm. The insured’s family had five vehicles, each with its own separate State Farm policy. A separate selection form had been signed with respect to the UM selection for each vehicle rejecting UM coverage with limits equal to the limits of liability coverage.
In a detailed review of the selection forms and the policy billing documents, the court found that only two of the five selection forms contained premium charge options that matched the premiums actually charged for UM coverage on the two vehicles. The court determined that those two selections were compliant and valid under the Jordan requirements. The other three forms, however, listed premium options that did not correspond to the premiums actually charged on the three vehicles. For example, the invoice for one vehicle stated that the insured selected a UM coverage plan with a corresponding semiannual premium rate of $60.12. However, the corresponding selection form’s menu of coverage options did not include a policy choice with a $60.12 premium. The court found the failure to correctly list the premium cost for UM coverages violated the Jordan requirement (identified as requirement 2 above) providing that the insurer must inform the insured about premium costs corresponding to the available levels of coverage.
Simply providing a menu of premium and coverage options was not sufficient to comply with the strict requirements where the premium options were not accurate and did not afford the insured an opportunity to consider the actual cost of the coverage. The three policies with inaccurate premium menus were reformed to provide coverage equal to the limits of the liability coverage.