Recoveries For Property Damage Under New Mexico’s Uninsured/Underinsured Motorist Statute

The Court of Appeals of New Mexico recently entered a ruling concerning the obligation of insurance companies to pay punitive damages. In its ruling, the Court of Appeals reversed a judgment entered by the trial court in favor of an insured car owner that provided the insurance company had to pay him $20,000 in punitive damages, in addition to the $10,000 the insurance company had previously paid the insured by way of compensatory damages.

The insurance coverage dispute arose following a New Mexico car accident that occurred early in the morning, when the owner of a 2001 Chevrolet Suburban was sleeping. An uninsured motorist, then fleeing from police officers, struck the insured’s car when, fortunately, no one was in the car. No one sustained any injuries to their bodies when the accident occurred. But the Chevrolet Suburban sustained disabling damage.

According to the Court of Appeals opinion, the insured incurred $3,566.24 in property damage to his vehicle, and he sought a recovery under the uninsured/underinsured (UM/UIM) property damage provision of his policy. Under his insurance policy, there were coverage limits of $25,000 per person and $50,000 per accident for bodily injury. The insurance policy also had a provision providing a recovery with coverage limits of $10,000 for property damage.

Litigation arose after the insurer limited its payout to the insured to $10,000. The insured demanded that the insurer pay a recovery of punitive damages, based on the insurance policy’s UM/UIM bodily injury coverage. The insurer denied liability for punitive damages and filed a complaint seeking a declaratory judgment that the insured was not entitled to recover under the insurance policy any amounts beyond the $10,000 limit for property damage. The insured filed a counterclaim, alleging a breach of the insurance contract and wrongful and unlawful denial of UM/UIM coverage. Each of the parties filed motions for summary judgment.

Following an arbitration that did not result in a settlement, as well as more motion practice, the district court conducted a trial and ruled thereafter that the insured was entitled to $20,000 in punitive damages in addition to the $10,000 in compensatory damages previously paid out by the insurance company. The district court focused on the events giving rise to the accident, including the behavior of the driver responsible for the accident, which occurred when the driver was fleeing from police officers. The driver was subsequently arrested. In the district court’s view, the purpose of punitive damages logically demanded access to the higher coverage limits of the insurance policy at issue. The district court subsequently awarded the insured $12,000 in attorneys’ fees after finding that the insurance company breached its duty of good faith and fair dealing.

The insurance company appealed its losses, and the New Mexico Court of Appeals was very sympathetic to the appeal. In a ruling written by the Chief Judge, the Court agreed with the insurance company on all issues raised on appeal and reversed the district court. The appellate court’s reasoning included that the predicate for an award of punitive damages can only be the same conduct that caused the actual damages. Citing rulings from courts outside New Mexico, the appellate court further reasoned that policy limits for separate types of coverage cannot be used interchangeably.

This case can be read as reflective of the difficulties inherent in trying to achieve recoveries under an insurance policy. Before trial, the parties participated in a court-ordered settlement conference. The insured alleged that the insurer offered $2,500 and failed to engage in meaningful negotiations. The insured unsuccessfully moved for sanctions. These events and the trial followed after the initial demand for payment under the insurance policy was rejected by the insurer, and the insurer filed a complaint seeking a declaratory judgment. Then, after losing at the trial, the insurance company preferred to appeal rather than pay out.

If you or a loved one sustained property damage, there may be grounds for a recovery from insurance policies, which may include yours and those providing coverage to third parties. In some cases, punitive damages are available. If your insurance company has denied your claim for property damage, or you are experiencing delays in achieving coverage, your insurance company may be dealing in bad faith. To understand more about your case, call New Mexico insurance bad faith lawyer Matthew Vance at the Law Office of Matthew Vance, P.C. We provide a free consultation and can be reached at (505) 242-6267 or online.

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