The New Mexico Supreme Court recently clarified the question of what information an insurer must provide to a consumer make an informed decision on how much uninsured/underinsured motorist coverage to purchase.

In Ullman v. Safeway Insurance, the New Mexico high court revisited the question of what an insurer must provide in an offer of insurance following its December 2010 decision in Jordan v. Allstate Insurance Co. In Jordan, the court sought to settle the issue by prescribing "workable requirements" which insurers must meet to insure their UM/UIM offers of insurance are meaningful, such that an insured's rejection of such coverage will be deemed effective under state law, according to the opinion.

"Nonetheless, we conclude that further clarification is needed," Justice Briana H. Zamora wrote on behalf of the court. "The primary issue before us is whether insurers, in their offers of coverage, must include information about stacked (or aggregated) benefits insureds may be entitled to recover if they pay multiple premiums for UM/UIM coverage on multiple vehicles.

"We hold that, going forward, insurers must provide basic information about stacking to prospective insureds so that insurers' offers are meaningful and any associated rejections or waivers by insureds are effective," Zamora said.

Three cases were consolidated by the court, each of which concerned a consumer who purchased an automobile insurance policy providing liability coverage for multiple vehicles, but rejected the UM/UIM coverage. Each insured was involved in an accident with an underinsured or uninsured motorist, and all sought the UM/UIM benefits from their insurer. In each of those cases, Ullman v. Safeway, Lueras v. GEICO, and Van Epps v. GEICO, the insurer denied the claim on the basis that the insured rejected UM/UIM coverage.

Each insured sued for breach of contract, insurance bad faith, and other causes of action, and argued that they should have been provided benefits because their rejections of the UM/UIM coverage were legally deficient.

"More specifically, the plaintiffs in these cases argued that, for a rejection of UM/UIM coverage on multiple vehicles to be effective, an insurer must have provided information about stacked coverages in its offer, including information about the premium costs per vehicle," Zamora wrote. "According to the insureds, the defendant-insurers' failures to include such information meant, as a matter of law, that their offers of UM/UIM coverage were not meaningful and the rejections the plaintiffs submitted were ineffective."

The New Mexico Supreme Court granted certiorari to provide clarification on the question of what constitutes a valid offer and waiver of UM/UIM coverage in the state. In prior cases, the court has addressed aspects of both policy "stacking," and the rejection of UM/UIM benefits. In Montano v. Allstate Indem. Co., the court declined to declare all anti-stacking language void, but reiterated the state's strong public policy in favor of the practice, according to the opinion.

In Marckstadt v. Lockheed Martin Corp., the court addressed what constituted a secure, valid waiver of UM/UIM coverage and held that an insurer must obtain a written rejection from the insured because, even though that requirement "'does not appear on the face of the statute,' it clearly advances its purpose," according to the opinion.

In Progressive Northwestern Insurance Co. v. Weed Warrior Services, the court expanded the concept of a meaningful offer of UM/UIM coverage and concluded that it must include, not only the minimum amount of UM/UIM coverage permitted by statute, but also "'the maximum amount of UM/UIM coverage permitted by the statute, e.g., the liability limits of the policy,'" according to the opinion.

"We hold that, in recognition of the practical reality that insurers now permit stacking as a matter of course in New Mexico, offers of UM/UIM insurance going forward must include a brief discussion of stacking," Zamora wrote. "However, insurers need not set out a matrix of all stacking possibilities in their offers of UM/UIM coverage to adequately inform insureds of the potential effects of stacking."

As to whether this new rule will be applied retroactively or prospectively, Zamora held that the insurers were not unreasonable in relying on the court's prior opinions in their determination that a disclosure of the effects of stacking was not required in offers of UM/UIM coverage, Zamora said, with Justices Michael E. Vigil and Ninth Judicial District Judge Drew D. Tatum, sitting by designation, concurring.

"On balance, we conclude that the stacking disclosure rule we announce in this opinion should be applied prospectively," Zamora wrote. "However, we have recognized that pure prospectivity—where a new rule of law is applied only to conduct arising after the issuance of our mandate—is rarely appropriate."

Sixth Judicial District Chief Judge Jarod K. Hofacket, sitting by designation, issued a specially concurring opinion to point out that the precedent in Jordan v. Allstate Insurance Co., might be the cause of the confusion. Twelfth Judicial District Chief Judge Angie K. Schneider, also sitting by designation, concurred in Hofacket's opinion.

"Three cases are consolidated for ruling in this matter," Hofacket wrote. "Jordan was also a consolidated case. The district courts, the Court of Appeals, the United States Court of Appeals for the Tenth Circuit, and this Court in prior opinions have all labored on this and similar questions."

Hofacket held that it was "unwise" for the Jordan court to have provided workable requirements and instead stated that the superintendent of insurance should have done so. The judge stated that he would have used this case to overrule Jordan as to workable requirements instead of extending and clarifying them in this opinion. Otherwise, Hofacket concurred in the opinion.