Romero v. Dairyland Ins. Co., 18779

• Decision Date: 12 December 1990
• Docket Number: No. 18779,18779
• Parties: Josie ROMERO, Plaintiff-Appellant, v. DAIRYLAND INSURANCE COMPANY and Mitch Melnick, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 243

803 P.2d 243

111 N.M. 154

Josie ROMERO, Plaintiff-Appellant, v. DAIRYLAND INSURANCE COMPANY and Mitch Melnick,

Defendants-Appellees.

No. 18779.

Supreme Court of New Mexico.

Dec. 12, 1990.

[111 NM 155] James A. Burke, Santa Fe, for plaintiff-appellant.

Butt, Thornton & Baehr, David Houliston, Montgomery & Andrews, Robert Mroz, Albuquerque, for defendants-appellees.

OPINION

RANSOM, Justice.

In this case we address the effect of a regulation of the New Mexico Department of Insurance regarding the rejection of uninsured motorist coverage. Josie Romero, the insured of Dairyland Insurance Company, claims that her written rejection of such coverage at the time of her application for automobile insurance was invalid. We agree. Applicable regulations of the superintendent of insurance require that a rejection of uninsured motorist coverage be attached to, or otherwise made a part of, the policy. We hold that unless the named insured rejects such coverage in a manner consistent with the requirements imposed by the superintendent of insurance, uninsured motorist coverage will be read into the insured's automobile liability insurance policy regardless of the intent of the parties or the fact that a premium has not been paid.

Josie Romero was seriously injured while riding as a passenger in a vehicle struck by an uninsured motorist. Dairyland denied uninsured motorist coverage. Romero sued Dairyland and its agent, Mitch Melnick, claiming in her suit against the latter that he was guilty of misrepresentation and breach of a fiduciary duty with respect to the signing of a rejection of uninsured motorist coverage in her application for insurance. Romero appeals from a summary judgment entered in favor of defendants.

Romero does not dispute that she signed the following rejection form at the time she applied for insurance.

UNINSURED MOTORISTS REJECTION

I have had Uninsured Motorists Coverage explained to me and fully understand it. I hereby reject such coverage and understand that my policy will not contain this coverage when issued or renewed. I also understand that I may add this coverage to my policy at any future date.

_______________

Signature

_______________

Date

However, the rejection form admittedly was not attached to the liability policy that the company subsequently issued. The uninsured motorist statute of the Motor Vehicle Code provides that no automobile liability policy shall be delivered unless uninsured motorist coverage is provided therein according to the rules and regulations promulgated by the superintendent of insurance, and under provisions filed with and approved by the superintendent. NMSA 1978, Sec. 66-5-301(A) (Repl.Pamp.1989). Subsection (C) of the uninsured motorist statute gives the named insured the right to reject uninsured motorist coverage. No particular manner of rejection is specified. In this regard the superintendent of insurance promulgated the following regulation:

Rejection of Uninsured Motorist Coverage. The rejection of the provisions covering damage caused by an uninsured or unknown motor vehicle as required in writing by the provisions of Section 66-5-301 New Mexico Statutes Annotated, 1978 Compilation, must be endorsed, attached, stamped or otherwise made a part of the policy of bodily injury and property damage insurance.

Regulations of the New Mexico Department of Insurance, Art. 5, Part 4, Chp. 66, Rule 1, Sec. 5-1-4 (undated).

In addition to arguing that the rejection of uninsured motorist coverage did not comply with the regulations of the superintendent of insurance, because it was not made a part of the policy, Romero argues that her testimony establishes a triable issue of fact on whether uninsured motorist coverage was explained to her, and whether she fully understood such coverage despite the express language to that effect in the application. Romero claims that she had no understanding of what she was signing. She claims the rejection of uninsured motorist coverage was not explained to her and she only signed various forms where indicated by the agent. Romero, a fifty-nine-year-old widow, was purchasing automobile insurance for the first time and did not at that time have a driver's license. She purchased minimum liability coverage consistent with the Mandatory Financial Responsibility Act. See NMSA 1978, Secs. 66-5-201 to -5-239 (Repl.Pamp.1989). Because we find the rejection of uninsured motorist coverage was ineffective in that it did not comply with the regulations promulgated by the superintendent of insurance, we do not address whether there exists a genuine issue of material fact concerning Romero's state of mind when she signed the rejection form.

The uninsured motorist statute, Section 66-5-301, embodies a public policy of New Mexico to make uninsured motorist coverage a part of every automobile liability insurance policy issued in this state, with certain limited exceptions. The statute was intended to expand insurance coverage and to protect individual members of the public against the hazard of culpable uninsured motorists. Chavez v. State Farm Mut. Auto. Ins. Co., 87 N.M. 327, 533 P.2d 100 (1975); Sandoval v. Valdez, 91 N.M. 705, 580 P.2d 131 (Ct.App.1978). Because we liberally interpret the statute in order to implement its remedial purpose, Chavez, 87 N.M. at 329, 533 P.2d at 102, language in the statute that provides for an exception to uninsured coverage should be construed strictly to protect the insured. Cf. Roger v. Estate of Moulton, 513 So.2d 1126, 1130 (La.1987); Employers Casualty Co. v. Sloan, 565 S.W.2d 580, 581 (Tex.Ct.App.1978).

To effectuate the purpose of the statute, the superintendent of insurance is granted the power to make rules and regulations. Sandoval, 91 N.M. at 709, 580 P.2d at 135 (Sutin, J., specially concurring). If not in conflict with legislative policy, legislatively authorized rules and regulations have the force of law. See Jaramillo v. Fisher Controls Co., 102 N.M. 614, 698 P.2d 887 (Ct.App.), cert. denied, 102 N.M. 613, 698 P.2d 886 (1985). We have decided that the authority of the superintendent of insurance in this area is a lawful delegation of legislative authority to an administrative agency, justified by the impracticability of enacting comprehensive statutes relating to uninsured motorist coverage. Willey v. Farmers Ins. Group, 86 N.M. 325, 523 P.2d 1351 (1974) (recognizing that superintendent's regulations in this area must be consistent with legislative objectives in passing uninsured motorist statute), rev'd on other grounds, Foundation Reserve Ins. Co. v. Marin, 109 N.M. 533, 787 P.2d 452 (1990).

An insured may reject uninsured motorist coverage, but the rejection must satisfy the regulations promulgated by the superintendent of insurance. The 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.

The regulation that the rejection be made a part of the policy delivered to the insured quite apparently is to ensure that the insured has affirmative evidence of the extent of coverage. Upon further reflection, consultation with other individuals, or after merely having an opportunity to review one's policy at home, an individual may well reconsider his or her rejection of uninsured motorist coverage. Providing affirmative evidence of the rejection of the coverage comports with a policy that any rejection of the coverage be knowingly and intelligently made. Any individual rejecting such coverage should remain well informed as to that decision. We find that the regulation of the superintendent of insurance furthers a legislative purpose to provide for the inclusion of uninsured motorist coverage in every automobile liability policy unless the insured has knowingly and intelligently waived such coverage. For that reason uninsured motorist coverage will be read into an insured's liability policy when a rejection of such coverage does not comply with those regulations.

Here, Romero had no independent way of knowing what she had signed. The application was never attached to the policy; Romero was never given a copy of the application containing the rejection; and the declarations sheet that she later received made no mention of the rejection of uninsured motorist coverage. The only documentation of the rejection of uninsured motorist coverage consisted of two copies of Romero's application for insurance, one that stayed in the agent's files and another that was sent to Dairyland's home office. Under these circumstances we hold that the rejection of uninsured motorist coverage was invalid and ineffective as a matter of law.

Our conclusion that the rejection was invalid is consistent with the decisions of a number of other jurisdictions regarding nonconformance with administrative rules or statutory requirements for the rejection of uninsured motorist coverage. See generally Annotation, Construction of Statutory Provision Governing Rejection or Waiver of Uninsured Motorist Coverage, 55 A.L.R.3d 216 (1974). For example, in Employers Casualty Co. v. Sloan, 565 S.W.2d 580 (Tex.Ct.App.1978), the Texas Court of Civil Appeals concluded that an insured could not orally waive uninsured motorist coverage when the State Board of Insurance had adopted a rule that required a written rejection. The insured in that case had orally rejected the coverage and was fully aware that the policy did not specifically provide for uninsured motorist coverage. See also Insurance Co. of N. Am. v. Thomas, 337 So.2d 365 (Ala.Civ.App.1976) (oral rejection invalid when memorandum of insurance commissioner required rejection of uninsured motorist coverage to be in writing); Northern Ins. Co. of New York v. Hiers, 504 So.2d 1382 (Fla.Dist.Ct.App.1987) (...