Opinion ID: 2607677
Heading Depth: 1
Heading Rank: 7

Heading: Standard for ambiguity in the context of insurance contracts.

Text: When this court reviews a contract for ambiguity, it examines the entire document in an attempt to ascertain the intent of the parties, and it will not find ambiguity unless the contract is reasonably and fairly susceptible of different constructions. Levenson v. Mobley, 106 N.M. 399, 401, 744 P.2d 174, 176 (1987). If the contract is unambiguous, the court is bound to enforce its terms. CC Housing Corp. v. Ryder Truck Rental, Inc., 106 N.M. 577, 746 P.2d 1109 (1987). When a court examines the words of an insurance contract for ambiguity, a particular concern arises due to the nature of the contract. Modern contract theory emphasizes the importance of the bargain as an element of a typical contract. See e.g. Restatement (Second) of Contracts § 17 (1981). This model of a bargained-for enterprise carried out by, if not equally shrewd, at least free-willed parties, does not fit insurance contracts. The typical insured does not bargain for individual terms within policy clauses; the insured makes only broad choices regarding general concepts of coverage, risk, and cost. Not only does the insurance company draft the documents, but it does so with far more knowledge than the typical insured of the consequences of particular words. New Mexico law recognizes the special nature of insurance contracts and has developed principles of construction that favor both the insured and the avowed purpose of insurance, the provision of coverage. See e.g. King v. Travelers Ins. Co., 84 N.M. 550, 505 P.2d 1226 (1973) (if one party prepares an instrument, ambiguities construed against drafter); Anaya v. Foundation Reserve Ins. Co., 76 N.M. 334, 414 P.2d 848 (1966) (ambiguities construed in favor of the insured). See also 7 S. Williston, A Treatise on the Law of Contracts, § 900 (3d ed. 1963) (courts construe insurance contracts in favor of their purpose  coverage of the insured). Thus, our analysis of the insurance contract at issue turns on whether the relevant provisions create an ambiguity or a reasonable expectation that coverage will be stacked. If they do, we interpret the contract against the insurer; if not, absent any countervailing legislative pronouncement evincing public policy regarding medical payments, we interpret the contract according to its plain meaning.