Editorial: Lawmakers must fix the insurance hole you can walk through
Gov. Michelle Lujan Grisham should add the correction of a serious flaw in coverage in NM’s law requiring motorists to purchase third party liability insurance and uninsured / underinsured motorist insurance to the to-do list of the upcoming session – since it controls most of what goes into the limited agenda devoted primarily to developing a state budget. And New Mexico lawmakers must make it a priority.
Why is this important?
That’s because a state Supreme Court ruling last month made it clear that many New Mexicans reasonably think they have insurance coverage – and why wouldn’t they since they paid it? – could well be hung out to dry rather than being protected from financial losses suffered by crashed cars and injuries in certain crash scenarios. In fact, the court concluded that the coverage of these cases in New Mexico was “illusory.”
The ruling came in a case called Crutcher v Liberty Mutual, in which a federal judge sought clarification on a state law issue. Gregory Crutcher had raised state minimum insurance limits required on his auto policy since 2006, paying premiums for third party liability and uninsured / underinsured motorist coverage of up to $ 25,000. In 2017, he was involved in an accident with another driver who blew through a traffic light. Crutcher suffered injuries with total damages in excess of $ 50,000. The driver who hit him had liability coverage of $ 25,000, so Crutcher reasonably assumed that his underinsured motorist coverage of $ 25,000 would come into play and cover the difference. The insurance company, at that time Safeco, denied the claim.
The Supreme Court upheld this ruling, finding that under New Mexico law, the benefits of underinsured motorists in a case like this where both drivers have minimum coverage limits are calculated by subtracting the amount of underinsured motorist coverage of the insured the amount of liability coverage of the other driver. . Since the other driver had liability insurance of $ 25,000, the underinsured amount Crutcher could collect was ZERO. “An important consequence of this rule is that, if the injured people bought only the legal minimum policy, the person’s policy will not cover losses for damages exceeding $ 25,000,” the court wrote. “The collection of UIM (underinsured motorist) insurance is therefore practically impossible for motorists with minimum insurance, and collection is not possible in the case of Mr. Crutcher. (It should also be noted that the amount of uninsured / underinsured coverage that can be purchased is tied to the liability coverage you purchase – in a state where nearly 22% of motorists are not at all If that sounds crazy, that’s because it is.
The court notes that in other jurisdictions, lawmakers have adopted a policy that would allow a person paying for underinsured motorist coverage to collect it in these cases. But the court wrote that New Mexico follows what is called the “gap” theory rather than a fairer theory in which the injured insured “collects all products for which … a premium has been paid.”
In New Mexico, the court wrote, lawmakers have deliberately chosen a legal regime in which the sale of the type of policy purchased by Crutcher “is permitted although it is misleading.” The judges also wrote that the legislature has the power to deal with all of this by amending the law.
The judges said that since insurance companies charge a premium for this coverage, they will now have the onus of disclosing to motorists who buy policies that they could end up with thousands of dollars out of pocket, as was the case. case with Crutcher. This, of course, means another disclaimer that people won’t read or understand, and those who do will just have to decide if they can afford higher policy limits at any level or level. ‘they risk falling into financial ruin on highways and secondary roads. from New Mexico.
It’s a choice New Mexico drivers shouldn’t have to make. And they won’t have to do that at some point if the legislature and governor are doing their job.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned because it represents the opinion of the journal rather than that of the authors.