Hovet v. Allstate Ins. Co.

• Decision Date: 08 April 2004
• Docket Number: No. 009., No. 969, No. 27, No. 28
• Citation: 135 N.M. 397,89 P.3d 69,2004 NMSC 10
• Parties: Jane HOVET, Plaintiff-Respondent, v. ALLSTATE INSURANCE COMPANY, Defendant-Petitioner. Lesvia Maritza Reynoso, individually and as mother, natural guardian, and next friend of Mynor C. and Mynor C., her minor child, Plaintiffs-Respondents, v. Allstate Insurance Company, Defendant-Petitioner.
• Court: New Mexico Supreme Court

89 P.3d 69

135 N.M. 397

2004 NMSC 10

Jane HOVET, Plaintiff-Respondent, v. ALLSTATE INSURANCE COMPANY, Defendant-Petitioner.

Lesvia Maritza Reynoso, individually and as mother, natural guardian, and next friend of Mynor C. and Mynor C., her minor child, Plaintiffs-Respondents, v. Allstate Insurance Company, Defendant-Petitioner.

Nos. 27,969, 28,009.

Supreme Court of New Mexico.

April 8, 2004.

Modrall, Sperling, Roehl, Harris & Sisk, P.A., Jennifer Noya, Lisa Mann, Simone, Roberts & Weiss, P.A., David W. Frizzell, Albuquerque, NM, Steptoe & Johnson, L.L.P., Bennett Evan Cooper, Phoenix, AZ, for Petitioner.

Grisham & Lawless, P.A., Thomas L. Grisham, Albuquerque, NM, for Respondent Hovet.

Peter V. Culbert, Santa Fe, NM, for Respondent Reynoso.

Montgomery & Andrews, P.A., Gary Kilpatrick, Jennifer L. Weed, Santa Fe, NM, for Amicus Curiae Association of Commerce and Industry of New Mexico and the American Legislative Exchange Council.

Berardinelli & Associates, David Berardinelli, Santa Fe, NM, for Amicus Curiae New Mexico Trial Lawyers Association.

Huffaker & Conway, P.C., Ann Maloney Conway, Deron B. Knoner, Miller, Stratvert, Alice Tomlinson Lorenz, Albuquerque, NM, for Amicus Curiae American Insurance Association, et al.

Eaton & Krehbiel, P.C., P. Scott Eaton, Keleher & McLeod, P.A., Kathleen M. Wilson, Albuquerque, NM, for Amicus Curiae New Mexico Defense Lawyers Association.

OPINION

BOSSON, Justice.

{1} Section 59A-16-20 of the Trade Practices and Fraud Article (Article 16) of the Insurance Code prohibits insurance companies from engaging in certain "unfair and deceptive practices," which include "not attempting in good faith to effectuate prompt, fair and equitable settlements of an insured's claims in which liability has become reasonably clear." NMSA 1978, § 59A-16-20 and -20(E) (1997) (hereafter "unfair claims practices section"). Further, Section 59A-16-30 of the same article grants a right of action to any person covered by Article 16 "who has suffered damages as a result of a violation of that article by an insurer or agent." NMSA 1978, § 59A-16-30 (1990). Given these statutory provisions, we examine whether Article 16 confers upon a victim of an automobile accident a direct right of action against the insured's automobile liability insurance company, when the liability insurer fails to make good-faith efforts, as defined by Section 59A-16-20(E), to settle a liability claim. Subject to certain stipulations set forth in this opinion, we hold that the unfair claims practices section of the Insurance Code creates such a right of action. In so holding, we affirm the Court of Appeals and remand to the district court for further proceedings consistent with this opinion.

BACKGROUND

Hovet's Claims

{2} In March 1995, Jane Hovet was injured when a vehicle driven by Steven Lujan and owned by Arthur Lujan struck her vehicle from behind at high speed. Hovet filed a complaint for negligence against the Lujans in February 1997, and later amended it to join the Lujans' insurer, Allstate Insurance Co. (Allstate), as a defendant. At a hearing on summary judgment, the Lujans admitted liability. Hovet later added a claim against Allstate for "failing to mediate, resolve and settle" her negligence action against the Lujans, as required by the unfair claims practices section of the Insurance Code. See § 59A-16-20. Although Hovet's medical expenses alone exceeded $11,000, and the Lujans had conceded liability for all of Hovet's damages proximately caused by the collision, Allstate's highest settlement offer before trial was only $7,200.

{3} The district court bifurcated the claims against Allstate from the underlying negligence action against the Lujans, which was tried in July 2000. The jury returned a verdict in Hovet's favor for $62,050, which Allstate paid together with Hovet's costs. In March 2001, the district court dismissed Hovet's claims against Allstate with prejudice. The court determined inter alia that, even if Allstate's conduct violated the unfair claims practices section of the Insurance Code by unreasonably failing to mediate, resolve and settle Hovet's claims, a third party to an insurance contract has no claim for relief under the statute.

{4} After Hovet appealed the dismissal of her claims against Allstate, our Court of Appeals affirmed in part and reversed in part. Hovet v. Lujan, 2003-NMCA-061, 133 N.M. 611, 66 P.3d 980. In reversing the district court, the Court of Appeals held that Hovet, as a third-party claimant, stated a claim for relief under the Insurance Code for Allstate's alleged failure to make good-faith efforts to settle. We granted Allstate's petition for certiorari to review that portion of the opinion.

Reynoso's Claims

{5} Maritza Reynoso and her son, Mynor C., were in an automobile accident with Laura Waller in December 1998. Waller was insured by Allstate, which paid Reynoso's property damage and offered to settle her bodily injury claims for $3,000. The combined medical expenses of the plaintiffs were $5,410. Although Reynoso made several settlement proposals of her own, Allstate never increased its offer. Reynoso then filed a complaint against Waller and Allstate in June 2000, alleging that Waller had been negligent and that Allstate had violated the Insurance Code by refusing to settle or adjust Reynoso's claims.

{6} In October 2000, the district court bifurcated the negligence claim against Waller from the statutory claims against Allstate. Before trial, Waller admitted liability, and conceded that Reynoso was not comparatively at fault, but denied that she was the proximate cause of all of the injuries. Ten days before trial on the negligence claim, Allstate increased its settlement offer to $5,250 for Reynoso and $2,000 for her son. At trial, the jury returned a verdict against Waller in the amounts of $7,180 for Reynoso and $1,520 for her son. Allstate paid the judgment, as well as costs and pre-judgment interest.

{7} In March 2002, the district court dismissed the claims against Allstate under the unfair claims practices section of the Insurance Code. See § 59A-16-20. On appeal, the Court of Appeals filed a memorandum opinion reversing the district court, relying on its opinion in Hovet, 2003-NMCA-061, 133 N.M. 611, 66 P.3d 980.

{8} Following Hovet, Allstate petitioned for a writ of certiorari. We granted certiorari and consolidated both petitions to decide a question common to both: whether third-party claimants of automobile liability insurance policies have a statutory cause of action under the Insurance Code when the liability insurer fails to make good-faith efforts to settle the underlying claim.

DISCUSSION

The Unfair Claims Practices Section of the Insurance Code

{9} The issue before this Court is the interpretation of the unfair claims practices section, and the private right of action afforded in the Insurance Code, in relation to claims for automobile liability insurance. See §§ 59A-16-20 and -30. Relying upon Russell v. Protective Insurance Co., 107 N.M. 9, 751 P.2d 693 (1988), the Court of Appeals upheld a third-party's claim under the unfair claims practices section. Hovet, 2003-NMCA-061, ¶ 26, 133 N.M. 611, 66 P.3d 980. We are asked to disregard the prior holding of this Court in Russell, and conclude that the Insurance Code does not confer upon third-party claimants a direct cause of action for unfair claims practices. In the specific context presented to us, which is statutorily mandated automobile liability insurance, we decline to do so. For the reasons stated below, we believe the Legislature intended to provide a statutory cause of action under the Insurance Code to third-party claimants just like Hovet and Reynoso. We also conclude that precedent and public policy fully support such an action.

{10} Statutory interpretation is a question of law, which we review de novo. See Bd. of Comm'rs of Rio Arriba County v. Greacen, 2000-NMSC-016, ¶ 4, 129 N.M. 177, 3 P.3d 672

. The guiding principle of statutory construction is that a statute should be interpreted in a manner consistent with legislative intent. State ex rel. Newsome v. Alarid, 90 N.M. 790, 794, 568 P.2d 1236, 1240 (1977). To determine legislative intent, we look not only to the language used in the statute, but also to the purpose to be achieved and the wrong to be remedied. State ex rel. Helman v. Gallegos, 117 N.M. 346, 353, 871 P.2d 1352, 1359 (1994); Miller v. N.M. Dep't of Transp., 106 N.M. 253, 254, 741 P.2d 1374, 1375 (1987).

{11} The unfair claims practices section, Section 59A-16-20, is part of the Trade Practices and Fraud Article (Article 16) of the Insurance Code. NMSA 1978, §§ 59A-16-1 to -30 (as amended through 2003). The purpose of Article 16 is "to regulate trade practices in the insurance business." Section 59A-16-2 (1984). The unfair claims practices section was patterned after the National Association of Insurance Commissioners' Model Act. In adopting a version of the Model Act in 1984, however, the New Mexico Legislature made significant changes, such as adding a private right of action against insurers that commit the unfair claims practices defined in Article 16. See § 59A-16-30; cf. Patterson v. Globe Am. Cas. Co., 101 N.M. 541, 543, 685 P.2d 396, 398 (Ct.App.1984)

(holding under a prior insurance code that did not contain a private cause of action that a third party does not have a claim against an insurer for unfair practices). Thus, New Mexico now stands in a position unique to the overwhelming majority of other states, in which courts have struggled over whether they should imply a private right of action from legislative silence. See, e.g., Royal Globe Ins. Co. v. Superior Court, 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329, 332 (1979) (holding that violations of the state's unfair settlement practices statute support private actions for insured persons or injured third parties), overruled by Moradi-Shalal v. Fireman's Fund Ins. Cos., 46...