|
Personal Injury Lawyer Robert (Tito) Meyer, Las Cruces New Mexico
|
|
|
|
|
|
|
|
Two recent court decisions from our State Supreme Court and Court Of Appeals reveals two more ways some insurance companies take
advantage of their own insureds, and what can be done about it.
Insurers Must Make Fair And Honest Disclosure Even Before It Sell Its Policy: In the first case, life insurance
policy holders alleged that their insurers had failed to adequately warn them that paying their insurance premiums in installments would cost more than paying the premium in a lump sum once a
year. The Court Of Appeals found that insurers have a duty to deal fairly and honestly with customers even before the insurance policy is purchased. Also, an insurer has a duty to disclose
important information to customers under New Mexico’s Unfair Practices Act (AUPA; NMSA 1978, Sections 57-12-1 to -22) and under our Unfair Insurance Practices Act (AUIPA; NMSA Sections 59A-16-1
to 30).
Both trade practices statutes specifically prohibit the making of any untrue, misleading, or deceptive statements in connection with the sale of any product. See ''
57-12-2(D); 59A-16-4; 59A-16-5. Under the UIPA, this includes the failure to disclose material facts reasonably necessary to prevent other statements made from being misleading. Section
59A-16-4(G). Under the UPA, this includes >using exaggeration, innuendo or ambiguity as to a material fact or failing to state a material fact if doing so deceives or tends to
deceive. Section 57-12-2(D)(14)@
Insurers Should Not Take Advantage Of Their Unfair Bargaining Position When Writing The Insurance Policy:
In the second case, Frieda Padilla was in an auto accident and the negligent driver only had $25,000 liability insurance, not enough to pay for all of Ms. Padilla’s injuries. So, Ms. Padilla made a claim against her insurer, State Farm Insurance, under her own $100,000 underinsured motorist coverage (AUIM coverage).
The trouble was that State Farm, like many insurers, had written the insurance policy to make it hard for its insured to collect. The policy required mandatory arbitration of UIM claims
(in other words, the insured can not take the claim to a court and jury). The arbitrator’s decision would be binding on both State Farm and its insured for any award of damages of $25,000
or less, but for awards over $25,000, either party could get a new trial in court (thus wiping out the arbitrator’s decision). This is called a de novo appeal.
If you
think about it, this is really unfair. If the insured loses, or only gets a small arbitration award, she is stuck with it B there is no right to appeal and get a trial. If the insured gets
a bigger arbitration award because she was more seriously hurt, State Farm can have that award wiped out and make its insured go through the whole thing over again, this time in court. Lots more
expense and delay before the insured gets anything or finds out she gets nothing. Oh, sure, the policy tries to make it look fair by saying either party can get a trial if the arbitration award
is over $25,000 but in practice, the insured is not likely to want to do that, it is the insurer who then wants two bites out of the apple.
Our Supreme Court found this provision creates
an unfair limitation on an insured’s access to a de novo appeal and creates an inequity in the certainty of an arbitration award.
Although facially equal, such escape hatch clauses are
not truly equal in their effect on the parties. This is true because both parties are bound by a low award, when an insurance company is unlikely to appeal, and not bound when there is a high
award, when an insurance company is more likely to appeal. Thus, the benefits of the clause truly only favor the insurer, which can use the clause to escape the unwary claimant.
We
believe that this inequity only serves to exacerbate the already unequal bargaining position occupied by the insured, and gives the insurer undue leverage to compel an insured to accept an
unfavorable settlement.
The de novo appeal provision forces an insured to undergo costly sequential litigation in order to secure an award of damages, without also receiving the corresponding
benefit of being able to seek relief from an unfavorable judgment.
We conclude that the limited de novo appeal provision in the insurance contract violates public policy and is therefore
void. AWe hold that the unequal access to an appeal is unenforceable and that the contract thus provides for voluntary binding arbitration.
The first case is Azar vs. Prudential Life
Insurance Co., 2003-NMCA-062. The second case is Padilla vs. State Farm Mutual Insurance Co., 2003-NMSC-011.
|
|
|
|
|
|
|
The information contained in this site is not, nor is it intended to be, legal advice.
You should consult an attorney for individual advice regarding your own situation.
Copyright © 2008 by Robert (Tito) Meyer, Personal Injury Lawyer, Las Cruces NM. All rights reserved.
|
|
Web Design & Hosting by Art Schobey Interactive - Las Cruces
|
|
|
