Court Opinion

ID: 9797907
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:31:50.014257+00
Date Added: 2024-06-11T08:59:48.721266
License: Public Domain

FRY, Judge (dissenting). {41} I respectfully dissent. I would affirm the district court’s summary judgment in favor of Plaintiffs on the ground that the definition of “insured” in the UM endorsement is ambiguous and should be construed according to the reasonable expectations of the insured. {42} In determining whether an insurance policy provision is ambiguous, we consider whether the language “is susceptible to more than one meaning, when the structure of the contract is illogical, or when a particular matter of coverage is not explicitly addressed by the policy.” Rummel, 1997-NMSC-041, ¶ 19, 123 N.M. 752, 945 P.2d 970. We engage in this analysis by asking “what understanding a reasonably intelligent, non-lawyer lay person might glean from the policy, in light of the usual meaning of the words and the circumstances leading to purchase of the policy.” Berry v. Fed. Kemper Life Assur. Co., 2004-NMCA-l 16, ¶ 61, 136 N.M. 454, 99 P.3d 1166. “Specialized knowledge of the insurance industry case law, academic treatments, and industry norms or standards should not enter into the inquiry.” Id. {43} Referencing Rummel’s definition of ambiguity, I am convinced the UM endorsement is ambiguous because the structure of the endorsement’s definitions is illogical, and the definitions do not explicitly address the particular matter of coverage for family members when the insured is a closely held corporation. Reading the endorsement as a whole, it is clear that Allstate tried to establish two classes of insureds by reference to whether the “named insured” is an individual or a business organization, but it failed to communicate to a reasonable hypothetical insured an intelligible distinction between the two classes. {44} If the named insured is an individual, the endorsement plainly states in Section (B)(1)(a) that an “insured” includes “[a]ny Class 1 ‘insured’, meaning the Named Insured and any ‘family members’.” Majority opinion, ¶ 16. There is nothing confusing about this definition of a Class 1 insured. The endorsement then goes on to provide in Section (B)(2)(a) that if the named insured is “[a] partnership, limited liability company, corporation or any other form of organization,” then an insured includes “[a]ny Class 2 ‘insured’, meaning the Named Insured is not an individual Named Insured.” Majority opinion, ¶ 16. This language is far from clear. If the sentence had read, “any Class 2 ‘insured’, meaning the Named Insured,” it would be clear that a Class 2 insured is the business organization listed on the policy as the named insured. But the sentence does not read this way, and the purported definition of “Class 2 insured” adds language that creates confusion. The endorsement defines a Class 2 insured as “the Named Insured is not an individual Named Insured.” This sentence appears to be a statement of fact rather than a definition; consequently, a reasonable insured may well surmise that a “Class 2 insured” has a separate, unstated meaning. The insured would then flip through the remaining pages of the policy, looking in vain for a definition of “Class 2 insured.” {45} The majority’s approach to this difficult language is one familiar to lawyers and members of the insurance industry: it overlooks the absence of a definition for Class 2 insured and fills in the blanks by resorting to an approach that probably makes no sense to “a reasonably intelligent, non-lawyer lay person.” Berry, 2004-NMCA-116, ¶ 61, 136 N.M. 454, 99 P.3d 1166. The majority first appropriately concludes that Son is not a Class 1 insured because the family business was a corporation. The majority then concludes that Class 2 must not include family members because only Class 1 does. This approach would be fine if the endorsement actually defined Class 2 insureds in some intelligible fashion. It is certainly possible to draft an intelligible definition, as illustrated by the definitions discussed in other cases. For example, in Bogdahn, 2004 OK 9, ¶ 7, 89 P.3d 1051, the policy defined “AN INSURED” as “1. You[; and] 2. If you are an individual, any ‘family member.’ ” The term “You” refers to the named insured, and the second paragraph makes it clear that family members are included only if the named insured is an individual. See also Benns, 982 F.2d at 462 (quoting the same definition as in Bogdahn). Here, however, the endorsement provides no definition of Class 2 at all. Instead, it provides an ambiguous statement that the majority must interpret through extensive legal analysis. {46} Our Supreme Court has noted that “the insurer who drafts the policy must reasonably anticipate ... the effect of the language used upon an untrained mind, or ... how the language is understood by the ordinary person.” Rodriguez, 118 N.M. at 131, 879 P.2d at 763 (internal quotation marks and citation omitted). “[T]he insurer has the responsibility of issuing an intelligible policy.” Id. The insurer did not issue an understandable policy in this case; despite my legal training, even I could make no sense of the endorsement’s definition of Class 2 insureds. And, while my legal training allows me to follow the majority’s interpretive path, it is unfair to expect a lay person to be able to negotiate the necessary twists and turns. {47} Given the ambiguity created by the endorsement’s inscrutable definition of Class 2 insureds, we should give effect to the insured’s reasonable expectations. See id. at 130, 879 P.2d at 762 (“Giving effect to the insured’s reasonable expectations, in cases of policy ambiguity, is of course a well-settled approach to construing and applying language in insurance policies.” (internal quotation marks and citation omitted)). In this endeavor, we consider “what the hypothetical reasonable insured would glean from the wording of the policy and the kind of insurance at issue,” rather than the expectations of the specific insured who purchased the policy. Id. In this ease, a hypothetical reasonable insured would be able to glean little from reading the UM endorsement’s definition of “insured.” But we must consider the kind of insurance being purchased, ’ so we assume the existence of the same circumstances surrounding Parents’ purchase of insurance. Thus, we assume the hypothetical insured had purchased a policy when he was a sole proprietor and understood from the intelligible language of Section (B)(1)(a) of the definition of “insured” that family members were covered. We then assume the hypothetical insured changed his form of business to a corporation. Although the record does not contain a complete copy of the policy that was in effect before the change in business form, there is no evidence suggesting that anything significant changed about the policy except the description of the form of the business on the declarations page and a minor change in the premiums charged. No one notified the insured that coverage had changed materially. Because the language of the policy did not intelligibly convey anything different, a reasonable insured could expect that UM coverage remained the same and that family members were still covered. Because Allstate failed its responsibility to communicate clearly to its insured, we should give effect to these expectations and conclude that Son is an insured under the UM endorsement. {48} In my view, our courts should not endeavor to make sense of language that is not sensible because “by doing so we encourage the perpetuation of ... unintelligible language” in insurance policies. Computer Corner, Inc. v. Fireman’s Fund Ins. Co., 2002-NMCA-054, ¶ 21, 132 N.M. 264, 46 P.3d 1264. The concepts insurers seek to communicate to insureds are not beyond understandable expression. By our holdings, we should discourage insurers from using obfuscation in drafting and encourage them to communicate clearly.