The plaintiff, Gregory Crutcher, filed a class action lawsuit in the Second Judicial District against Safeco, Liberty Mutual Insurance Co., Liberty Personal Insurance Co. and Safeco National Insurance Co. on behalf of himself and other insureds who have found themselves with no UIM coverage, despite having paid the premiums. Crutcher alleged seven violations under New Mexico common law and consumer protection statutes.

Safeco removed the action to federal court under the Class Action Fairness Act, but both the plaintiff and the defendants later filed cross-motions to New Mexico federal court to certify a controlling question of law to the Supreme Court. The federal district court stayed the matter pending the Supreme Court's answer to certify the question.

"We wanted the Supreme Court of New Mexico to rule on New Mexico law. We didn't want to have federal courts interpreting what New Mexico courts might do," the plaintiff's attorney, Kedar Bhasker, said Tuesday. "That was our decision as to why we certified it."

According to the Supreme Court's opinion, Crutcher paid two premiums toward his Safeco Insurance Co. of America auto policy: one for liability insurance and the other for uninsured/underinsured motorists.

In 2017, an at-fault driver struck Crutcher's vehicle in Albuquerque, New Mexico, leaving him with a broken collar bone and over $50,000 in personal injuries. Like Crutcher, the tortfeasor driver carried minimal liability coverage through USAA, which ultimately paid Crutcher the $25,000 liability limit.

Crutcher then filed a claim with Safeco, assuming he would receive at least $25,000 through his uninsured/underinsured motorist benefits in order to cover the balance of his damages. But Safeco denied it.

Safeco claimed the tortfeaser was not an "uninsured motorist" under the state's UM/UIM statute, or one whose liability limits are "less than the limits of liability under the insured's uninsured motorist coverage."

The insurance company further asserted that the combined coverage provides value because the policyholder will still receive the benefits of uninsured motorist insurance if involved in a crash with a driver who has no insurance at all, consistent with New Mexico case law and the Legislature's intent.

The insurer's attorney, Meena H. Allen of Allen Law Firm, could not be reached for comment.

The majority opinion agreed that charging premiums for minimum limits UM/UIM coverage may be legally permitted, but the judges said they remain "concerned about an average policyholder's understanding of the true limits of this type of coverage."

"If a person pays for something called 'underinsured motorist' insurance, we think it reasonable for the person to be under the impression that he or she is, in fact, eligible to receive UIM coverage if involved in an accident with someone who does not have enough insurance to cover the cost of the insured's injuries," Thomson wrote.

An average insured driver likely has limited knowledge of insurance law, as well as the offset rule articulated in Schmick v. State Farm Mutual Automobile Insurance, which underinsured motorist benefits are calculated by subtracting the amount of the insured's uninsured motorist coverage from the amount of the tortfeasor's liability coverage, the court said.

"They're denying coverage and they're not telling people there's a law in New Mexico that allows [them] to offset it and pretty much when you buy minimal limits, the coverage is worthless," Bhasker said.

Additionally, Progressive Northwestern Insurance v. Weed Warrior Services found it was the obligation of the insurance company to clearly provide policyholders with the opportunity to match its UM/UIM policy with their liability coverage, according to the majority opinion.

"Consistent with this reasoning, we now conclude that the Legislature intended to place the burden on the policyholders to determine how much protection they want and are willing to pay for, and that this burden is conditioned upon the policyholders having knowledge of what they are purchasing," Thompson wrote.

However, retired sitting Judge Judith K. Nakamura filed a dissenting opinion, arguing there are circumstances in which insureds with minimum UM/UIM limits could still recover benefits. Nakamura said she saw no basis in the law for the imposition of such an explanation requirement and she fears "it will not meaningfully aid insureds in understanding and selecting" coverage options.

Going forward, Bhasker said the case will go back to the federal court to litigate these violations. The attorney said he hopes to get appropriate compensation for other drivers for the $25,000 they lost and for the premiums they've been paying, as well as damages for deceiving policyholders.

"If you were paying premiums, whether or not you were in a crash, you're still part of the class because you've been paying premiums for this worthless coverage," Bhasker said. "We're arguing that we want people to be paid back since 1985 because that's when this law was enacted and you guys knew about it and how it works, but laypeople don't."