Court Opinion

ID: 9784071
Source: CourtListenerOpinion
Date Created: 2023-08-30 20:36:53.496115+00
Date Added: 2024-06-11T07:35:48.169618
License: Public Domain

ALARID, Judge (specially concurring). {29} I concur in the result reached by the majority opinion. I offer a few additional observations. {30} Before a court can apply the doctrine of reasonable expectations to a corporation, it must identify the person or persons whose expectations about coverage are to be treated as the insured’s expectations. I am concerned that the reader of the majority opinion may come away with the impression that this Court has independently concluded that Simms is the person whose expectations are controlling, when in fact, the Court has focused on Simms’s expectations solely because Running Elk has emphasized Simms’s state of mind in its effort to invoke the doctrine of reasonable expectations. While Simms, as general manager of the Lodge, most certainly played a role in obtaining insurance coverage for the Lodge, there is no evidence that the Tribe or the management of Running Elk had delegated ultimate decision-making authority to Simms. The record before us presents a serious, unresolved question as to whether Simms’s understanding of coverage constitutes Running Elk’s understanding for purposes of the doctrine of reasonable expectations. {31} There is, of course, a good reason why Running Elk has looked to Simms’s state of mind and has attempted to gloss over Bundy’s understanding of the transaction: Bundy testified that he knew prior to the accident that injured Nicholas Berlangieri that the Western renewal policy excluded saddle animal liability coverage. Bundy also testified that he had no contractual relationship with Floyd West and that when he obtained insurance through them, it was “strictly on a ... come-as-you-are, negotiate-type deal” in which he was representing his clients in trying to get the most coverage for the lowest price he could find. The only supportable conclusion is that Bundy was the “producing broker” with respect to the Western policy. NMSA 1978, § 59A-14-2(C) (1991); Barth, 118 N.M. at 5, 878 P.2d at 323. Bundy, as producing broker, is presumed to have been Running Elk’s agent. NMSA 1978, § 59A-18-24 (1984) (“[A]ny broker licensed to transact insurance business in this state, in any controversy between any insured or his beneficiary and the insurer issuing the insurance through its licensed agent at the request of the broker, shall be held to be the agent of the insured, ... unless under particular circumstances it is found that the broker is representing the insurer.”). Notwithstanding statements in Barth seemingly to the contrary, I do not believe that Barth precludes a straightforward application of agency law in the present case. Therefore, because Bundy clearly acted as Running Elk’s agent in procuring renewals of the Western policy, I would impute Bundy’s knowledge of the saddle animal liability coverage exclusion to his principal, Running Elk,3 Restatement (Second) of Agency §§ 272, 275 (1958), thereby negating any reasonable expectation of coverage for saddle animal liability. Pope v. The Gap, Inc., 1998-NMCA-103, ¶ 13, 125 N.M. 376, 961 P.2d 1283 (quoting Restatement (Second) of Contracts § 20(1) (1981) (codifying principle that party seeking to enforce contract according to meaning attached by that party must show that it neither knows nor has reason to know of any different meaning attached by the other party)). {32} The last point I wish to make concerns the trial court’s decision to disregard Simms’s affidavit. I do not understand the doctrine of reasonable expectations to be a departure from the general contract principle that a party is not bound by an interpretation of a contract of which he neither knew nor had reason to know. Pope, 1998-NMCA-103, ¶ 13, 125 N.M. 376, 961 P.2d 1283. Barth recognizes that evidence of the “dynamics of the insurance transaction” may be admitted to prove that the insurer knew or had reason to know of the insured’s expectation of coverage. 118 N.M. at 5, 878 P.2d at 323. Barth did not hold that the “dynamics of the insurance transaction” extend to circumstances of which the insurer has no reason to know. Running Elk’s attempt to invoke the doctrine of reasonable expectations foundered because Running Elk did not establish a genuine issue of fact that Western, or anyone whose knowledge is imputable to Western, had reason to know of Simm’s undisclosed subjective belief that Running Elk had purchased saddle animal liability coverage. Pope, 1998-NMCA-103, ¶ 13, 125 N.M. 376, 961 P.2d 1283 (quoting Restatement (Second) of Contracts § 20(1) (1981) (codifying principle that party seeking to enforce contract according to meaning attached by that party must show that other party knew or had reason to know of that meaning)). Simms’s “subjective but unexpressed intention” was therefore immaterial, Pope, 1998-NMCA-103, ¶ 14, 125 N.M. 376, 961 P.2d 1283, and the trial court did not err by disregarding Simms’s affidavit.  . The only evidence that conceivably could have allowed Bundy to he considered Western's agent was evidence that Bundy’s commission was paid by Western out of the premium it collected. However, "almost all insurance brokers are actually compensated for their services through commissions that are paid by the insurers.” Robert E. Keeton & Alan I. Widiss, Insurance Law § 2.5, at 84 (Student ed.1988). The fact that NMSA 1978, § 59A-14-9(A) (1984) (permitting surplus line broker to compensate producing agent) and Section 59A-18-24 were both enacted as part of 1984 N.M. Laws ch. 127 strongly suggests that the Legislature was familiar with this usage of the insurance industry when it enacted Section 59A-18-24. Thus, the fact that Bundy received his commission out of the premium paid to Western cannot by itself provide a basis for disregarding the statutory presumption that Bundy was Running Elk’s agent.