On August 14, 2010, Phil signed a new coverage selection form rejecting all UM/UIM coverage.

More than seven months later, on March 25, 2011, Essentia Insurance Company and Hagerty sent Phil a policy declarations form that stated that Phil had rejected UM/UIM coverage for bodily injury but had purchased such coverage for property damage. The declarations form did not specify either the levels of coverage available or the premiums associated with each level of coverage.

Over the following six months, Essentia and Hagerty sent Phil various documents, including renewal offers and policy declarations forms, indicating that he had rejected UM/UIM bodily injury coverage.

On October 12, 2011, Phil's son Clifford, an insured under Phil's policy, was killed in an accident during an elk hunting excursion.

After Essentia and Hagerty denied UM/UIM coverage for damages related to Clifford's death, Phil, Philip, and Martin Sanchez, individually and as the personal representative of Clifford's estate, sued Essentia and Hagerty, asserting that the denial was improper.

Essentia and Hagerty, arguing that Phil had validly rejected UM/UIM coverage, moved for summary judgment.

The trial court granted their motion, and the Sanchezes appealed. They contended that Phil's rejection of UM/UIM coverage was invalid because Essentia and Hagerty had deprived him of a fair opportunity to reconsider his decision to reject coverage by failing to provide him with a policy incorporating the rejection until over seven months after he had signed the rejection form.

The Appellate Court's Decision

The appellate court reversed.

In its decision, the appellate court explained that a rejection of UM/UIM coverage was valid only if the insurer:

• Offered the insured UM/UIM coverage equal to his or her liability limits;
• Informed the insured about premium costs corresponding to the available levels of coverage;
• Obtained a written rejection of UM/UIM coverage equal to the liability limits; and
• Incorporated that rejection into the policy in a way that afforded the insured a "fair opportunity to reconsider the decision to reject."

Here, the appellate court ruled, Essentia failed to provide Phil with a fair opportunity to reconsider his decision to reject UM/UIM coverage

The appellate court rejected the argument put forth by Essentia and Hagerty that the delayed incorporation only should render Phil's rejection invalid during the seven months that passed between the rejection and the incorporation and that Phil's rejection became valid when they finally incorporated his rejection into the policy.

In the appellate court's opinion, that argument failed "to account for the need for the insured to have the decision to reject and the reasons for making that decision fresh in his or her mind at the time of incorporation." Under the approach proposed by Essentia and Hagerty, the appellate court reasoned, an insurer could transform a rejection that was invalid for an extended period of time into a valid rejection whenever the insurer decided to incorporate the rejection into the policy, "no matter how long the delay and no matter the likely effect of that delay on the ability of a reasonable insured to 'full reconsider.'"

The law did "not countenance" a ruling that would allow an insurer's delay "to prevent an insured from knowingly and intelligently making the final decision about whether to reject coverage," the appellate court concluded.

The case is Sanchez v. Essentia Ins. Co., No. A-1-CA-35894 (N.M. Ct. App. Oct. 7, 2019). Attorneys involved include: Atler Law Firm, P.C., Timothy J. Atler, Albuquerque, NM; Cruz Law Office, LLC, Ernestina R. Cruz, Taos, NM; Sanchez Law Firm, Dennis T. Sanchez, Taos, NM, for Appellants. Rodey Dickason Sloan Akin & Robb PA, Jocelyn Drennan, Mark Mowery, Aldbuquerque, NM, for Appellee Hagerty Insurance Agency, LCC. Modrall Sperling Roehl Harris & Sisk PA, Tiffany Roach Martin, Michelle A. Hernandez, Albuquerque, NM, for Appellee Essentia Insurance Company.