Boradiansky v. State Farm Mut. Auto. Ins., 30,031.

• Decision Date: 26 March 2007
• Docket Number: No. 30,031.,30,031.
• Citation: 2007 NMSC 015,156 P.3d 25
• Parties: Christina BORADIANSKY, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
• Court: New Mexico Supreme Court

156 P.3d 25

2007 NMSC 015

Christina BORADIANSKY, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

No. 30,031.

Supreme Court of New Mexico.

March 26, 2007.

Bennett & Kosh, Merit Bennett, Talia Kosh, Santa Fe, NM, for Plaintiff.

Guebert, Bruckner & Bootes, P.C., Christopher J. DeLara, Terry R. Guebert, RaMona G. Bootes, Albuquerque, NM, for Defendant.

OPINION

MINZNER, Justice.

{1} Plaintiff Christina Boradiansky filed a civil action against Defendant State Farm Mutual Automobile Insurance in the First Judicial District Court on December 22, 2005, alleging causes of action arising out of a car accident in Santa Fe, New Mexico. State Farm removed the matter to the United States District Court for the District of New Mexico on January 20, 2006. Both Plaintiff and Defendant filed dispositive motions in the federal district court. Based on those motions, United States District Judge Black certified two questions to this Court pursuant to NMSA 1978, § 39-7-4 (1997), and Rule 12-607 NMRA. They are:

(1) Whether Defendant's insurance policy provision, excluding all government-owned vehicles from the definition of an "uninsured motor vehicle," is unenforceable because it violates public policy as established by New Mexico's Uninsured Motorist Act, NMSA 1978, § 66-5-301 (1983);

(2) Whether an insured carrying underinsured-motorist coverage is "legally entitled to recover" damages exceeding the limits established by the New Mexico Tort Claims Act, NMSA 1978, § 41-4-19 (2004), when the insured is injured by a government employee driving a government-owned vehicle and makes a claim against her insurer for damages that exceed those limits.

{2} We conclude that the exclusion of all government-owned vehicles from the definition of an "uninsured motor vehicle" is unenforceable because it violates the public policy illustrated within New Mexico's Uninsured Motorist Act. Further, we conclude Plaintiff is legally entitled to recover damages in this case within the meaning of Section 66-5-301, notwithstanding the limitations imposed by the Tort Claims Act on recovery against the State. We therefore answer both questions in the affirmative.

I.

{3} On November 5, 2000, Plaintiff was severely injured in a motor vehicle accident when a Sandoval County Sheriff's deputy ran a red light, while driving a government vehicle, and broad sided her vehicle. At the time of the accident, Plaintiff carried uninsured/underinsured motorist coverage of $500,000 as a part of her motor vehicle policy and an additional $2,000,000 under her umbrella policy. Plaintiff settled her claim against the governmental defendant for less than the cap under the Tort Claims Act, and she requested additional payments from Defendant in excess of the limits imposed by the Act. See § 41-4-19.

{4} Defendant denied coverage. Defendant argues, as it did in federal district court, that Plaintiff's policies contained an express exclusion; the policies provided that an "uninsured motor vehicle" does not include a vehicle "owned by a government or any of its political subdivisions or agencies" and, in addition, the New Mexico Tort Claims Act does not allow a plaintiff to recover any amount of damages greater than the limits set forth in the statute. Therefore, Defendant reasons, Plaintiff was not "legally entitled to recover" damages greater than those limits, and she should not recover under the Uninsured Motorist Act. See § 66-5-301 (providing that uninsured motorist coverage is offered "for the protection of persons insured . . . who are legally entitled to recover damages from owners or operators of uninsured motor vehicles") (emphasis added). Plaintiff contends that the government-owned vehicle exclusion is unenforceable because it violates public policy. Further, she argues that the phrase "legally entitled to recover" simply means that she must establish fault on behalf of the other driver.

II.

{5} These are questions of first impression in New Mexico and are reviewed de novo. "Appellate courts review questions of law de novo." Hasse Contracting Co. v. KBK Fin., Inc., 1999-NMSC-023, ¶ 9, 127 N.M. 316, 980 P.2d 641. The initial inquiry in this case is whether the Uninsured Motorist Act permits State Farm to exclude coverage for government-owned vehicles under its policy.

A.

{6} Over the years, our courts have considered various exclusions listed in insurance policies. See Gov't Employees Ins. Co. v. Welch, 2004-NMSC-014, 135 N.M. 452, 90 P.3d 471 (household exclusions of liability and underinsured motorists from umbrella coverage); State Farm Mut. Auto. Ins. Co. v. Ballard, 2002-NMSC-030, 132 N.M. 696, 54 P.3d 537 (family exclusion step down provision); Phoenix Indem. Ins. Co. v. Pulis, 2000-NMSC-023, 129 N.M. 395, 9 P.3d 639 (named-driver exclusion); Found. Reserve Ins. Co. v. Marin, 109 N.M. 533, 787 P.2d 452 (1990) (exclusion from uninsured motorist coverage for uninsured vehicles owned by insured or any family member); Chavez v. State Farm Mut. Auto. Ins. Co., 87 N.M. 327, 533 P.2d 100 (1975) (exclusion of uninsured motorist coverage in an automobile policy when insured was occupying an uninsured motor vehicle owned by him); Demir v. Farmers Tex. County Mut. Ins. Co., 2006-NMCA-091, 140 N.M. 162, 140 P.3d 1111 (exclusion of uninsured motorist coverage for accidents not involving physical contact with uninsured vehicle); Martinez v. Allstate Ins. Co., 1997-NMCA-100, 124 N.M. 36, 946 P.2d 240 (household exclusion under liability coverage); Sandoval v. Valdez, 91 N.M. 705, 580 P.2d 131 (Ct.App.1978) (one year limitation of time provision for claiming of uninsured motorist coverage). Throughout, our courts have invalidated exclusions that they determined were in conflict with the underlying purpose of the Uninsured Motorist Act.

{7} Our rationale has varied, or seems to have varied, perhaps because we were considering in some cases whether applying New Mexico law was appropriate because the law of the place where the contract was formed was contrary to New Mexico public policy, see, e.g., Ballard, 2002-NMSC-030, ¶ 18, 132 N.M. 696, 54 P.3d 537, or whether the rights of a class-one insured were at issue. See Phoenix, 2000-NMSC-023, ¶ 26, 9 P.3d 639; Martinez, 1997-NMCA-100, ¶ 18, 124 N.M. 36, 946 P.2d 240. We have referred several times to the exclusion of a discrete group as improper. See Welch, 2004-NMSC-014, ¶ 8, 135 N.M. 452, 90 P.3d 471; Ballard, 2002-NMSC-030, ¶ 13, 132 N.M. 696, 54 P.3d 537. We have been clearest about limitations on the rights of a class-one insured to recover. See Phoenix, 2000-NMSC-023, ¶ 26, 9 P.3d 639; Martinez, 1997-NMCA-100, ¶ 18, 124 N.M. 36, 946 P.2d 240. We have identified on occasion what we described as a gap in coverage the Legislature did not intend. See Phoenix, 2000-NMSC-023, ¶ 20, 9 P.3d 639; Found. Reserve, 109 N.M. at 535, 787 P.2d at 454; Chavez, 87 N.M. at 330, 533 P.2d at 103. We have struggled with the difference between valid contractual limitations on an insured's right to recover, see Hartford Ins. Co. v. Cline, 2006-NMSC-033, ¶ 15, 140 N.M. 16, 139 P.3d 176, and those that are clearly inconsistent with the Legislature's intent in enacting the Uninsured Motorist Act. See Sandoval, 91 N.M. at 708, 580 P.2d at 134.

{8} This Court in Chavez took the opportunity to discuss the legislative intent and purpose behind the Uninsured Motorist Act. In Chavez, State Farm argued that in ascertaining the object of uninsured motorist statute, the court need look no further than the text of the statute. 87 N.M. at 328, 533 P.2d at 101. We noted that "`the legislative purpose in creating compulsory uninsured motorist coverage was to place the injured policyholder in the same position, with regard to the recovery of damages, that he would have been in if the tortfeasor had possessed liability insurance.'" Id. at 329, 533 P.2d at 102 (quoting Bartlett v. Nationwide Mut. Ins. Co., 33 Ohio St.2d 50, 294 N.E.2d 665, 666 (1973)). Our cases suggest the text of the statute has not proved as easy to apply in some circumstances as others.

{9} Because this Court has cautioned on several occasions against reading the Uninsured Motorist Act to create unintended gaps in coverage, we believe seeking to avoid such gaps is an appropriate rationale on which we may rely in resolving the certified questions before this Court. "[T]he Legislature did not intend to allow the creation of a gap in coverage which is contrary to the purpose of the statute." Id. at 330, 533 P.2d at 103. Reading the Uninsured Motorist Act to allow an exclusion of certain vehicles creates the type of impermissible gap the Legislature sought to avoid. We also have said "it is not the intent of the statute to limit coverage for an insured to a particular location or a particular vehicle." Id. The main focus behind the Uninsured Motorist Act was to allow for coverage to be provided for innocent motorists injured through the fault of uninsured or underinsured motorists in New Mexico. It seems counterintuitive to suggest that the Legislature intended to create a gap in coverage by permitting a contractual exclusion of government-owned vehicles from uninsured or underinsured motorist claims. It also seems inconsistent with our concern for excluding coverage for discrete groups. If coverage is intended to be broad, then the exclusion of discrete groups of defendants seems as anomalous as discrete groups of plaintiffs.

{10} A majority of the other states that have dealt with government-owned vehicle exclusions have found them contrary to the purpose of uninsured motorist coverage statutes. Cropper v. State Farm Mut. Auto. Ins. Co., 671 A.2d 423, 426-27 (Del.Super.Ct.1995). "Once uninsured motorist coverage is purchased, the insurance consumer is entitled to secure the full extent of the benefit which the law requires to be offered. Attempts by insurers to reduce this benefit by exclusion clauses are repugnant to the public policy of protecting...