Court Opinion

ID: 9795258
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:23:57.947168+00
Date Added: 2024-06-11T08:28:23.908321
License: Public Domain

PRY, Judge (by designation; dissenting). {33} I respectfully dissent. While I agree that insurers should treat third-party claimants fairly, evaluate claims reasonably, and settle expeditiously, I do not agree that the Insurance Code compels such conduct. In my view, the Insurance Code evidences an intent to treat insureds and claimants differently and cannot be read to impose on insurers a duty to third-party claimants that is equal to the duty insurers owe their insureds. In addition, I do not agree that Russell’s holding applies outside the workers’ compensation context. I would reverse the Court of Appeals. {34} Our function in interpreting the Insurance Code is to determine and apply the Legislature’s intent, not to impose our own notions of policy on the statutory language. See Rutherford v. Chaves County, 2003-NMSC-010, ¶ 11, 133 N.M. 756, 69 P.3d 1199 (observing that the Court’s primary purpose in interpreting a statute is “to give effect to the Legislature’s intent”). Indeed, because the notion of an insurer owing a duty to third-party claimants is contrary to the common law, we should exercise restraint in our interpretation of the statutory language. See Sims v. Sims, 1996-NMSC-078, ¶ 22, 122 N.M. 618, 930 P.2d 153 (stating that statutes in derogation of the common law “will be interpreted as supplanting the common law only if there is an explicit indication that the legislature so intended”). {35} The language in the Insurance Code compels me to conclude that the Legislature did not intend to impose on insurers a good faith duty to settle with third-party claimants. The majority focuses on the language in Section 59A-16-30 granting “any person” who has suffered damages a private right of action against an insurer that has arguably violated the Code. Supra ¶¶ 13-14. However, Section 59A-16-30 states that “[a]ny person covered by Chapter 59A, Article 16” has such a right of action. (Emphasis added.) The emphasized language directs us to turn to Article 16 to see who is covered. When we turn to the definitions section of Article 16, we see that the Legislature attempted to distinguish between “claimants” and “insureds.” The usual rules of statutory construction should cause us to conclude that the Legislature’s use of “claimants” or “beneficiaries” in only three subsections out of fifteen, see § 59A-16-20(J), (K), and (L), signifies an intent to treat claimants and insureds differently. See Cooper v. Chevron U.S.A., Inc., 2002-NMSC-020, ¶ 16,132 N.M. 382, 49 P.3d 61 (explaining that statutory language is given “its ordinary and plain meaning unless the legislature indicates a different interpretation is necessary”). The majority sees no significance in this distinction evident in the statute’s language and in fact finds that the Legislature did not intend to distinguish between claimants and insureds. {36} The majority justifies its conclusion about legislative intent by relying on the nature of automobile liability insurance, the Court’s decision in Russell, and the policy underlying the MFRA. I find no comfort in any of these rationales. {37} First, while I agree that a third-party claimant under an automobile liability policy has a personal interest in the liability insurer’s settlement practices, I do not think that such a claimant has a legally enforceable interest. Furthermore, I do not agree that the insured’s interest in the insurer’s settlement practices is as minor as the majority suggests. The insured’s interest in settlement flows from well established mutual contractual duties and obligations. See generally Azar v. Prudential Ins. Co. of Am., 2003-NMCA-062, 133 N.M. 669, 68 P.3d 909 (discussing the various duties owed by insurers and insureds to each other). In addition, even in connection with a policy-limits claim, an insured has a critical interest in the insurer’s settlement practices. An insured’s interest in avoiding protracted litigation and the stress of trial is as tangible as the personal interest a claimant has in obtaining compensation. {38} Moreover, the majority reads Section 59A-16-20(E) as applying primarily to liability insurance. In my view, that subsection’s language could as easily apply to uninsured/underinsured motorist coverage and indemnity coverage. The subsection defines as a prohibited practice “not attempting in good faith to effectuate prompt, fair and equitable settlements of an insured’s claims in which liability has become reasonably clear[.]” § 59A-16-20(E). Thus, this subsection would permit an insured to assert a claim against the insurer if the insurer did not attempt to settle the insured’s UM claim promptly and fairly once the liability of the uninsured motorist had become reasonably clear. Similarly, an insured making a casualty claim could sue the insurer who resisted settling once it became clear that the claim was covered and the insurer was therefore liable to pay it. Consequently, I do not agree that this subsection’s language supports the majority’s interpretation of the Code. {39} Second, I do not read Russell as compelling, or even supporting, the majority’s interpretation of the Code. Even though Russell’s language is very broad, the language must bé viewed against the backdrop of Russell’s facts, especially the fact that it was decided in the context of the Workers’ Compensation Act. The Court in that case narrowly articulated the issue as “the applicability of the New Mexico Insurance Code, Article 16, ‘Trade Practices and Frauds,’ ... to the Workers’ Compensation Act.” 107 N.M. at 10, 751 P.2d at 694. The Court did not have before it the question of whether the Code provides a bad faith cause of action to third-party claimants under an automobile liability insurance policy and in my view, it cannot be read as having addressed the issue. Our jurisprudence firmly establishes that “cases are not authority for propositions not considered.” Fernandez v. Farmers Ins. Co. of Ariz., 115 N.M. 622, 627, 857 P.2d 22, 27 (1993) (internal quotation marks and citation omitted). For this reason, I do not believe the principle of stare decisis comes into play. See Padilla, 2003-NMSC-011, ¶ 5, 133 N.M. 661, 68 P.3d 901 (noting that, in contrast to the doctrine of stare decisis, “the principle that cases do not stand for propositions not considered ... is intended to dissuade a later court from attributing meaning to an earlier opinion that was not contemplated by its drafters”). {40} Third, while I agree that the MFRA expresses the policy that third-party claimants are intended beneficiaries of liability insurance contracts, I see no need to look beyond the Insurance Code to the MFRA for clues to the meaning of the Code. The Legislature’s choice of language in the Code makes it clear that the Legislature intended to afford greater rights to insureds than to claimants. In addition, as the Arizona Court of Appeals noted in Leal v. Allstate Insurance Company, Although accident victims may be intended beneficiaries of state-mandated insurance, this does not mean that they are the intended beneficiaries of every insurance policy provision. The duty of good faith and the obligation to consider the insured’s interest are to encourage settlement within policy limits and to prevent financial disaster to the insured. They are not necessarily intended to deter litigation or to help claimants quickly collect payments. 199 Ariz. 250, ¶ 25, 17 P.3d 95 (Ariz.Ct.App. 2000) (citation omitted). {41} In summary, I think Section 59A-16-20(E) provides only an insured with a cause of action to sue an insurer for “not attempting in good faith to effectuate prompt, fair and equitable settlements.” In addition, I think existing safeguards work to promote the goal of encouraging insurers to deal fairly with third-party claimants in their settlement practices. For example, unreasonable insurers may have to pay claimants’ costs pursuant to Rule 1 — 068 NMRA 2004, and prejudgment interest pursuant to NMSA 1978, § 56-8-4(B) (1993). Furthermore, the Insurance Code itself provides incentives for insurers to employ reasonable settlement practices with third-party claimants. See Section 59A-5-26(C)(2)(a) (requiring the superintendent of insurance to suspend or revoke an insurer’s certificate of authority if the insurer, as a regular business practice, “has without just cause failed to pay, or delayed payment of, claims arising under its policies, whether the claim is in favor of an insured or in favor of a third person with respect to the liability of an insured to such third person”). I therefore respectfully dissent.