Insurance companies in New Mexico may no longer exclude family members from coverage under so-called umbrella policies, the state Supreme Court has ruled in two cases involving auto accidents.
Such exclusions “are unenforceable as a violation of New Mexico public policy,” the court held in a unanimous ruling this week.
The ruling was issued in cases involving a Santa Fe area woman injured while her husband was at the wheel, and an Albuquerque area boy killed in a car driven by his sister.
Household exclusions typically mean that injured spouses or other household members aren’t covered if they make claims for damages arising from the allegedly negligent operation of motor vehicles.
The state Supreme Court had previously ruled that such exclusions in the mandatory auto liability policies required by the state were unjust and invalid.
At issue in the case just decided was whether such exclusions also were invalid in the optional umbrella policies that provide extra liability coverage.
The insurers in the two cases, GEICO and State Farm, had argued that the court’s earlier decisions should not be extended to optional policies.
But the court said once a company offers insurance that is in excess of the limits required by law, whether it’s extra primary vehicle coverage or umbrella policies that include coverage for motor vehicle accidents, “the coverage applies equally to the victims of such accidents whether or not they are family members.”
The court also made clear that its ruling did not address other types of household exclusions, for example in homeowners’ policies.
Daniel Lewis, the lawyer representing GEICO, said the ruling conceivably could result in premium increases for umbrella coverage, although he stressed he was speaking generally and not about plans by GEICO or any other company.
“Every time an exclusion is eroded, there is greater coverage for the insured, but also a greater risk for insurance companies,” Lewis said in an interview on Friday.
Robert Rothstein, the lawyer representing the Santa Fe couple, said claims by one spouse against another are “relatively rare” occurrences and he doubted the ruling would have a significant impact on the industry.
In the Santa Fe case, Shirley Welch was seriously injured when the car driven by her husband, James Welch, left a road in Eldorado in February 2003. Rothstein said their car was forced off the road by another driver. GEICO asked a federal judge to declare that Mrs. Welch could not recover damages under their umbrella policy, and the federal court referred the case to the state Supreme Court.
The Albuquerque case involves a claim by the mother of Tyler Heckl, a 12-year-old who was killed in October 2001 when the car driven by his 16-year-old sister collided with another just outside Albuquerque Academy.
Vicki Heckl had bought a personal liability umbrella policy from State Farm that included extra coverage for injuries caused by owners or operators of uninsured and underinsured vehicles.
Arguing that her daughter was underinsured, she asked a state district court to rule that her claim on her son’s behalf was covered by the umbrella policy. The court ruled in her favor, and State Farm appealed to the Court of Appeals, which forwarded the case to the Supreme Court. The Supreme Court combined the cases.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Auto Mexico New Mexico
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