Conflicting State Policies on Stacking
December 8, 2014
The insured brought an action against the auto insurer to recover stacked uninsured motorists (UM) benefits under policies issued in California. This case is Wilkeson v. State Farm Mut. Auto. Ins. Co., 329 P.3d 749 (N.M App. 2014).
Wilkeson and Baca were involved in an auto accident in New Mexico. Baca was uninsured, and Wilkeson had two separate auto policies written by State Farm (separate premiums were paid for these two policies). Both policies provided UM coverage subject to limits of liability of $50,000 per person and $100,000 per accident.
The claims against Baca were settled and he was dismissed from the case. State Farm paid the $50,000 UM benefit and filed a motion for summary judgment, arguing that its auto policy did not permit the stacking of UM benefits. Wilkeson responded with a cross-motion for summary judgment. The district court sided with State Farm and this appeal followed.
The Court of Appeals of New Mexico noted that generally, in determining the appropriate law to apply when an accident occurs in one state (New Mexico, in this instance) and an insurance contract has been entered in another (California, in this instance), the law of the place of the accident applies to determine the plaintiff's right to recover from the negligent party, and the law of the place of the contract applies to interpret the terms of the contract. Thus, in this case, New Mexico law applies concerning issues of negligence and damages, and California law governs as to issues pertaining to the insurance policies, including the scope of the language limiting plaintiff's ability to stack UM coverages.
Wilkeson argued that, notwithstanding the law of California as the place of the contract, which would recognize the liability limitation of her policies, New Mexico's public policy favoring stacking requires the court to apply that public policy as opposed to California law. The appeals court said that stacking is a judicially-created doctrine. In New Mexico, the courts have consistently upheld the availability of stacking as a matter of public policy when the insured has paid multiple premiums. However, in California, the law prohibits stacking, and, when interpreting insurance contract law, it is the law of the place of the contract that applies. In this case, the insurance contracts were issued in California when Wilkeson lived there and so, the California law prevails.
California law permitted the UM carrier to prohibit stacking and this governed the validity of anti-stacking language in the auto policies. The New Mexico policy in favor of stacking was important, but not fundamental for purposes of a choice-of-law analysis. The ruling of the trial court was affirmed.
Editor's Note: The Court of Appeals of New Mexico ruled that the stacking of insurance coverage is a question of contract interpretation, not one of fundamental interests. In this case, California was the state where the insurance contract was issued, and California insurance codes have been interpreted to prohibit stacking. Therefore, even though the auto accident occurred in New Mexico, where public policy allows stacking, the California viewpoint prevailed.