Opinion ID: 1163429
Heading Depth: 3
Heading Rank: 1

Heading: Contractual Offset

Text: Our determination whether both a statutory offset and a contractual offset may be applied against the liability payment made to an injured party by a Class II insurer necessarily requires us to determine what UIM benefits were available to Samora in this case. Samora contends that the State Farm UIM coverage of $25,000 and the American States UIM coverage of $50,000 should be stacked for a total of $75,000 available coverage. Samora reasons that the American States contractual offset of $50,000 should be applied against the $50,000 liability payment, relieving American States of any further obligation and leaving $25,000 in UIM benefits to be paid by State Farm. In contrast, State Farm argues that $75,000 is not the total available UIM coverage. State Farm reasons that the offset clause contained in the American States policy reduced the UIM coverage to zero under that policy because Samora was paid the liability limit of $50,000. Thus, there is no coverage to stack with the coverage provided under the State Farm policy. State Farm further reasons that since there is no UIM coverage under the American States policy, there is nothing against which the mandatory statutory offset may be applied. As a result, State Farm argues that it is entitled to the offset, meaning that it is not required to pay any additional amount to Samora. We have stated in earlier decisions that public policy favors the stacking of coverage in underinsured/uninsured motorist cases, see, e.g., Jimenez v. Foundation Reserve Ins. Co., 107 N.M. 322, 325, 757 P.2d 792, 795 (1988); therefore, we understand how Samora arrived at the figure of $75,000 as the amount of UIM coverage available. However, we believe State Farm's calculation of available UIM coverage more accurately reflects our reasoning in Mountain States Mutual Casualty Co. v. Martinez . In that case we upheld a contractual exclusion contained in an insurance policy under which UIM coverage was offset by the amount paid under the liability portion of the policy. We determined that the exclusion did not violate public policy because it affected a Class II insured rather than a Class I insured. 115 N.M. at 142, 848 P.2d at 528. In this case, since Samora is a Class II insured under the policy issued by American States and held by the negligent driver, the contractual offset provision contained in the American States policy is valid and enforceable and is not in violation of public policy. Because of the American States policy exclusion, no UIM benefits were available to Samora under the policy because he was paid the liability limit of $50,000.