Phoenix Indem. Ins. Co. v. Pulis

• Citation: 9 P.3d 639,129 N.M. 395,2000 NMSC 23
• Decision Date: 06 July 2000
• Docket Number: No. 25,978.,25,978.
• Parties: PHOENIX INDEMNITY INSURANCE COMPANY, Plaintiff-Respondent, v. Lynette PULIS and Larry Pulis, individually and Lynette Pulis, mother, parent and natural guardian of Steven Reese, a minor, Defendants-Petitioners.
• Court: Supreme Court of New Mexico

9 P.3d 639

129 N.M. 395

2000 NMSC 23

PHOENIX INDEMNITY INSURANCE COMPANY, Plaintiff-Respondent, v. Lynette PULIS and Larry Pulis, individually and Lynette Pulis, mother, parent and natural guardian of Steven Reese, a minor, Defendants-Petitioners.

No. 25,978.

Supreme Court of New Mexico.

July 6, 2000.

Rehearing Denied August 17, 2000.

Berardinelli & Associates, David J. Berardinelli, Santa Fe, NM, for Petitioners.

Law Offices of Bruce S. McDonald, Bruce S. McDonald, Albuquerque, NM, for Respondent.

OPINION

MINZNER, Chief Justice.

{1} Appellants Larry and Lynette Pulis appeal from the district court's order granting summary judgment in favor of Appellee Phoenix Indemnity Insurance Company. Phoenix filed a complaint for declaratory relief alleging that Lynette Pulis's minor son, Steven, was not entitled to class-one uninsured motorist (UM) coverage for injuries sustained in an automobile accident. The Pulises counterclaimed. The Pulises and Phoenix both moved for summary judgment. The district court granted Phoenix's motion on the basis that the endorsed named-driver-exclusion provision in the Pulises' policy excluded all coverage if Michael, Steven's older minor brother, were driving. The Court of Appeals affirmed. See Phoenix Indem. Ins. Co. v. Pulis, No. 20,343 slip op. at 1 (NMCA Sept. 17, 1999). On appeal, the Pulises contend that (1) exclusion of a minor driver based solely on age violates public policy; (2) the driver exclusion is not applicable because Steven is a class-one insured under the Pulises' UM coverage; and (3) Phoenix's policy is ambiguous as a matter of law. We hold that the named-driver exclusion in this case does not preclude Steven from recovery under the UM coverage provision of the policy. In this case, the driver exclusion was an ineffective rejection of coverage for a class-one insured because the insured had no notice that class-one insureds lacked UM coverage. The provisions for class-one-insured coverage suggested all exclusions were expressed, and UM coverage for class-one insureds was not expressly excluded. We therefore reverse and remand. We do not address the first issue.

I.

{2} The facts are undisputed. Lynette Pulis and Donald Reese are the biological parents of Michael and Steven, who reside with their mother and her husband, Larry Pulis. On October 28, 1996, the Pulises purchased an automobile insurance policy from Phoenix. Prior to purchasing the policy, the Pulises completed Phoenix's New Mexico auto application. The application contained three separate endorsements titled: New Mexico Agreement to Delete Uninsured/Underinsured Motorists Coverage, Business Use Warranty, and Exclusion of Named Driver. The driver-exclusion provision states:

In consideration of the premium for which the policy is written, it is agreed that the insurance company shall not be liable and no liability or obligation of any kind shall be attached to the insurance company for losses or damages sustained after the effective date of this endorsement while any motor vehicle is driven or operated by....

By endorsing this section of the application, the Pulises elected to exclude Michael from the policy. The Pulises also elected to purchase UM coverage. The portion of the application describing UM coverage provides "that if [the insured] suffer[s] bodily injury or sickness including death, resulting from an accident with a person who does not carry liability insurance, and that driver is at fault, you may make a claim against your own insurance company for general and special damages."

{3} The application also included certain provisions explaining an insured's duties, applicable coverage, applicable exclusions, and limits of liability. The policy was silent on the effect of the named-driver exclusion on an insured's UM coverage. The Pulises' policy went into effect on October 28, 1996 and was therefore in effect on the date of the accident.

{4} On November 5, 1996, during a scheduled visitation, Reese took Michael, fourteen years old, and Steven, ten years old, on an overnight deer-hunting trip without notifying the Pulises. Reese also brought along another boy, Kevin, who was fifteen years old. During the trip, Michael was driving Reese's uninsured Toyota pickup truck. Steven was sitting in the passenger side of the cab and Kevin was standing in the bed of the truck scouting deer with a loaded 30:30 rifle. Michael accelerated and then immediately stopped the pickup truck causing Kevin to fall into the bed of the truck; as he fell, his rifle accidentally discharged. The bullet struck Michael in the head, fatally wounding him. Steven ran from the truck in an effort to obtain help, but Michael was already dead. Steven was spattered with Michael's blood and sustained emotional injuries.

{5} The Pulises filed a UM claim under their Phoenix policy for Steven's injuries. Phoenix denied coverage contending that the named-driver exclusion excludes all coverage when an excluded driver is operating any motor vehicle. The district judge agreed and granted Phoenix summary judgment.

II.

{6} "Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. On appeal, we review de novo the district court's decision to grant summary judgment. See Hasse Contracting Co. v. KBK Fin., Inc., 1999-NMSC-023, ¶ 9, 127 N.M. 316, 980 P.2d 641. The question we address is whether the district court erred in granting summary judgment on the basis that the named-driver exclusion within the Pulises' policy barred Steven from recovery under the UM provision of the policy. This appeal does not raise an issue of first impression for this Court; however, it does provide us with an opportunity to revisit our case law on UM coverage and driver exclusions. We first examine the text of the controlling statutes and our cases interpreting them.

A.

{7} In the Uninsured Motorist Statute, NMSA 1978, § 66-5-301 (1983), the Legislature has provided:

No motor vehicle or automobile liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person ... shall be delivered or issued for delivery in New Mexico ... unless coverage is provided therein or supplemental thereto ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury... resulting therefrom, according to the rules and regulations promulgated by, and under provisions filed with and approved by, the superintendent of insurance.

Section 66-5-301(A). This section incorporates UM coverage into every automobile liability insurance policy issued in the state. UM coverage is divided into three distinct classes of insureds: "(1) the named insureds and members of a named insured's household [(class-one insureds)], (2) persons who are injured while occupying an insured vehicle [(class-two insureds)], and (3) persons who sustain consequential damages as a result of personal injuries sustained by persons who are `class (1)' or `class (2)' insureds." Robert E. Keeton & Alan I. Widiss, Insurance Law § 4.9(e), at 400 (1988); see also Konnick v. Farmers Ins. Co., 103 N.M. 112, 115, 703 P.2d 889, 892 (1985)

(defining class-one insured as "the named insured as stated in the policy, the spouse, and relatives residing in the household" and class-two insured as "any person while occupying an insured motor vehicle"). The objective of compulsory UM coverage is "to protect individual members of the public against the hazard of culpable uninsured motorists." Romero v. Dairyland Ins. Co., 111 N.M. 154, 156, 803 P.2d 243, 245 (1990). "[C]ases involving uninsured motorist coverage must be given a qualitatively different analysis by this court than cases which do not involve such coverage." Padilla v. Dairyland Ins. Co., 109 N.M. 555, 558, 787 P.2d 835, 838 (1990). We interpret Section 66-5-301 liberally to implement its remedial purpose; any provision allowing for an exception to uninsured coverage is strictly construed to protect the insured. See Romero, 111 N.M. at 156,

803 P.2d at 245.

{8} Nevertheless, by express statutory provision, an insured has the right to reject UM coverage. See § 66-5-301(C). To be valid, the method of rejection must comply with the regulations promulgated by the New Mexico Superintendent of Insurance. See Romero, 111 N.M. at 156,

803 P.2d at 245. Those regulations require that

[t]he rejection must be made a part of the policy by endorsement on the declarations sheet, by attachment of the written rejection to the policy, or by some other means that makes the rejection a part of the policy so as to clearly and unambiguously call to the attention of the insured the fact that such coverage has been waived.

Id. Because we strictly construe exceptions to UM coverage, unless the named insured rejects UM coverage in a manner consistent with the rules and regulations established by the Superintendent of Insurance, deviations will be invalid, and UM coverage will be deemed part of an insured's liability policy. See id. at 157, 803 P.2d at 246.

{9} Further, by express statutory provision, an insured may elect to exclude a driver from coverage under the policy. See NMSA 1978, § 66-5-222 (1998). Section 66-5-222 provides a sample form for use as a driver-exclusion provision which states:

In consideration of the premium for which the policy is written, it is agreed that the company shall not be liable and no liability or obligation of any kind shall be attached to the company for losses or damages sustained after the effective date of this endorsement while any motor vehicle insured hereinunder is driven or operated by....

The driver-exclusion provision signed by the Pulises parallels the language provided by the Legislature in Section 66-5-222....