N.M. Court of Appeals Rejects Auto Liability Stacking

The New Mexico Court of Appeals recently rejected the theory of liability stacking with regard to automobile insurance, the American Insurance Association (AIA) reported.

In the case of Linda Ann Slack, et al. v. James Robinson, et al., the court rejected the plaintiff’s liability stacking argument and affirmed the summary judgments in favor of Hartford Insurance Company and Colonial Penn Franklin Insurance Company (the defendants).

In states where stacking, a practice that increases the money available to pay auto liability claims is permitted by law, courts may allow policyholders who have several cars insured under a single policy, or multiple vehicles insured under different policies, to add up the limit of liability available for each vehicle.

“This is a victory for the insurance consumers of New Mexico. This decision should help restore balance in New Mexico and help lead to a more favorable insurance market in the state,” said David Snyder, AIA assistant general counsel and vice president. “The court’s ruling will help restrain costs and enable more policyholders to comply with laws relating to motor vehicle insurance.”

AIA filed an amicus brief in support of the defendants and showed that if the court’s decision had gone the other way, insurance costs would have reportedly increased up to one-third for single vehicle policies and would have more than doubled for multiple vehicle policies.

The court’s decision is reportedly consistent with the law in most states, which provides that a person is entitled to one coverage limit when he/she is driving someone else’s car, not the coverage limits multiplied by the number of cars the person owns. The court rejected a theory that would have multiplied coverage and costs and provided more coverage to a policyholder when driving someone else’s vehicle other than his/her own.

“This is an important decision for New Mexico insurance consumers because it disallowed a novel theory that would have provided windfall lawsuit recoveries for a few at the expense of all auto insurance policyholders,” added Snyder. “Allowing more stacking of coverage limits would have mandated coverages and costs that people neither expected nor wanted.”