Padilla v. Dairyland Ins. Co.

• Decision Date: 26 February 1990
• Docket Number: No. 18575,18575
• Citation: 109 N.M. 555,1990 NMSC 25,787 P.2d 835
• Parties: Henry PADILLA, Virginia Padilla, individually and as next friend of Christina Padilla, a minor, Plaintiffs-Appellees, v. DAIRYLAND INSURANCE COMPANY, Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 835

787 P.2d 835

109 N.M. 555

Henry PADILLA, Virginia Padilla, individually and as next

friend of Christina Padilla, a minor, Plaintiffs-Appellees, v. DAIRYLAND INSURANCE COMPANY, Defendant-Appellant.

No. 18575.

Supreme Court of New Mexico.

Feb. 26, 1990.

[109 NM 555] Butt, Thornton, & Baehr, P.C., David M. Bhouliston and John A. Klecan, Albuquerque, for defendant-appellant.

Thomas C. Esquibel and William A. Sanchez, Los Lunas, for plaintiffs-appellees.

William H. Carpenter and Michael B. Browde, Albuquerque, for amicus curiae, NM Trial Lawyers Ass'n.

OPINION

SOSA, Chief Justice.

Defendant-appellant, Dairyland Insurance Company (Dairyland), appeals a summary judgment granted to plaintiffs-appellees, Henry and Virginia Padilla, who had filed suit individually and as next friend of Christina Padilla, their daughter and member of their household. Christina was injured to the extent of more than $100,000 in a one-car automobile accident. The vehicle involved was owned by Henry Padilla and driven by Christina's sister, Florence, who was killed in the accident. Henry Padilla was the named insured of an insurance policy sold to him by Dairyland covering the accident vehicle up to $25,000 for bodily injury liability, and up to an additional $25,000 for uninsured/underinsured motorist protection. Florence was a named insured under the liability provision of the policy and was also a member of the Padilla household. Christina, as a passenger and member of the household, was insured under the uninsured/underinsured motorist provision of the policy. Henry Padilla similarly had insured two other vehicles he owned. All three vehicles were covered by a single Dairyland policy.

Dairyland conceded it owed Henry Padilla $25,000 under the liability coverage, but denied that it owed him anything under the uninsured/underinsured motorist coverage. The Padillas filed suit, seeking to stack the benefits under the uninsured/underinsured motorist coverage for all three cars, arguing that the negligent driver, Florence, was underinsured. The trial court agreed with the Padillas. It permitted them to stack their coverage, deducted $25,000 for the liability payment Dairyland had already made, and awarded the Padillas $50,000. On appeal, Dairyland argues that the trial court in effect used the uninsured/underinsured motorist provisions of the policy to increase the liability limit on the accident vehicle to $75,000, thereby ignoring the contract entered into between the parties. Dairyland also points to an exclusion in the policy which reads as follows: "A motor vehicle owned by [Mr. Padilla] or furnished for [Mr. Padilla's] regular use isn't an uninsured motor vehicle [under the policy]."

The Padillas argue that under our prior holdings on stacking of uninsured/underinsured coverage, the exclusionary language in the policy should be invalidated as contrary to public policy. We frame the issue before us as a tripartite question: (1) Does the uninsured/underinsured motorist coverage on a vehicle owned by the named insured entitle an insured family member to recover for an accident involving the insured vehicle, as opposed to a vehicle owned by a third party, when the insurance policy attempts to exclude coverage for any vehicle owned by the named insured? (2) If the insured family member is otherwise entitled to recover, may she recover when the negligent driver was also an insured family member? (3) If the answer to the first two questions is yes, may the named insured stack benefits available to him under the uninsured/underinsured motorist coverage for two other vehicles covered by the same policy?

This is not an issue of first impression. Rather, it is an issue with which we were once presented but failed to resolve. In Estep v. State Farm Mut. Auto. Ins. Co., 103 N.M. 105, 703 P.2d 882 (1985), we were faced with a similar factual situation. Appellant was injured in an automobile accident in which her husband was the driver and owner of the accident vehicle and which was caused by the husband's negligence. One of the issues raised on appeal was whether appellant could recover under the insurance policy's uninsured motorist coverage. In reversing a summary judgment for the insurance company on other grounds, we stated, as to the issue of possible benefits under the uninsured motorist coverage of the policy:

We need not at this time decide [appellant's] alternative argument that ... in some instances a plaintiff in the circumstances of [appellant] might be able to claim coverage for damages under the "uninsured motorist" provisions of her husband's policy. Suffice it to say that the legislature clearly expressed its purpose in [NMSA 1978, Section 66-5-201.1]:

The legislature is aware that motor vehicle accidents in the state of New Mexico can result in catastrophic financial hardship. The purpose of the Mandatory Financial Responsibility Act [NMSA 1978, Sections 66-5-201 to -239] is to require and encourage residents of the state of New Mexico who own and operate motor vehicles upon the highways of the state to have the ability to respond in damages to accidents arising out of the use and operation of a motor vehicle. It is the intent that the risks and financial burdens of motor vehicle accidents be equitably distributed among all owners and operators of motor vehicles within the state.

The courts are obliged to accede to the legislative purpose in applying the statutory law governing mandatory insurance.

Id. at 111, 703 P.2d at 888. We note that the quoted statute is identical to NMSA 1978, Section 66-5-201.1 (Repl.Pamp.1989), the law presently in effect.

We need not make an exhaustive review of our holdings in this area of the law. Instead, a brief summary of the direction in which those holdings have evolved will suffice. In Chavez v. State Farm Mut. Auto. Ins. Co., 87 N.M. 327, 533 P.2d 100 (1975), we held that the uninsured motorist statute must be liberally construed to implement its purpose of compensating those injured through no fault of their own. We invalidated an insurance policy's exclusionary clause that we found to be in conflict with the statute's purpose.

We are mindful here of our holding in State Farm Auto. Ins. Co. v. Kiehne, 97 N.M. 470, 641 P.2d 501 (1982), wherein we held valid an unambiguous exclusionary clause stating that uninsured motorist benefits were not available for damage sustained while any motor vehicle was being driven by the named insured. The distinction between Kiehne and Chavez lies in the nature of the exclusions in each case. In the former, the insurer excluded all coverage if Mr. Kiehne were the driver, while in the latter the insurer provided coverage to Mr. Chavez and then limited it. Thus Kiehne and Chavez stand for the proposition that an insurer's decision not to contract at all with a given person is allowable, while an insurer's contract entered into with a given person cannot be limited except where permitted by statute or regulation.

In Lopez v. Foundation Reserve Ins. Co., 98 N.M. 166, 646 P.2d 1230 (1982), we held that an insured must be permitted to stack uninsured motorist coverages for separately owned vehicles where an insurance company charges a full premium for each vehicle. In Konnick v. Farmers Ins. Co. of Arizona, 103 N.M. 112, 703 P.2d 889 (1985), we extended our ruling in Lopez to underinsured motorist protection and clarified the classes of insureds who may be covered under uninsured motorized provisions. Class I insureds (household members) are entitled to stack benefits under such policies, while Class II insured (third-party passengers) are not. In Schmick v. State Farm Mut. Auto. Ins. Co., 103 N.M. 216, 704 P.2d 1092 (1985), we held invalid an ambiguous exclusionary clause in an insurance policy that would have prevented the insured from stacking two policies providing underinsured motorist coverage. We held that:

[T]he only limitations on protection are those specifically set out in the statute itself: that the insured be legally entitled to recover damages and that the negligent driver be uninsured * * * * In the context of underinsured motorist protection, a subcategory of uninsured motorist coverage, the requirements are that the insured be legally entitled to recover damages and that the negligent driver be inadequately insured.

Id. at 219, 704 P.2d at 1096.

In Jimenez v. Foundation Reserve Ins. Co., 107 N.M. 322, 757 P.2d 792 (1988), we extended our ruling in Schmick to an exclusionary clause that was not ambiguous, holding that:

Even though [the insurer's] liability limitation clause is unambiguous, that is not determinative.

....

[W]hen public policy embraces the stacking concept, policy language limiting recovery to one vehicle's coverage (although premiums have been paid on more than one vehicle) shall be struck as null and void no matter how clear and unambiguous the limiting language.

....

The trial court correctly determined that [the insured] could stack his policies to establish whether the negligent driver was underinsured. Because [the insured] had $50,000 in underinsured/uninsured motorists coverage and the negligent driver had only $25,000, the driver was underinsured to the extent of $25,000. [The insured] was entitled to recover $25,000 from [the insurer].

107 N.M. at 324-326, 757 P.2d at 794-796.

We note that the facts of coverage in Jimenez are the same as in the case before us, except that in the instant case the "negligent driver" is from the same family as the injured insured and was driving a vehicle owned by the named insured. The driver in the case at bar was likewise underinsured.

In Sanchez v. Herrera, 109 N.M. 155, 783 P.2d 465 (1989), we considered a case involving stacking of payments under the medical coverage provision of an automobile insurance policy. We agreed with the insurance company that the stacking of uninsured motorist benefits is "distinguishable from the [stacking of medical payments] ...