Maes v. Audubon Indemnity Insurance Group

2007 NMSC 046, 164 P.3d 934, 142 N.M. 235
CourtNew Mexico Supreme Court
DecidedJune 15, 2007
Docket29,624
StatusPublished
Cited by31 cases

This text of 2007 NMSC 046 (Maes v. Audubon Indemnity Insurance Group) is published on Counsel Stack Legal Research, covering New Mexico Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Maes v. Audubon Indemnity Insurance Group, 2007 NMSC 046, 164 P.3d 934, 142 N.M. 235 (N.M. 2007).

Opinion

OPINION

SERNA, Justice.

{1} Cora Maes (“Maes”) sued her property insurer, Audubon Indemnity Insurance Group (“Audubon”), after it originally denied her insurance claim for destroyed property. Audubon asserted immunity from suit on the basis that Maes obtained her insurance with Audubon through the New Mexico Fair Access to Insurance Requirements Plan Act (“FAIR Plan Act” or “the Act”), NMSA 1978, §§ 59A-29-1 to -9 (1985, as amended through 1999), which provides statutory immunity from suit for certain parties with respect to certain actions taken pursuant to the FAIR Plan Act. Section 59A-29-7 (or “immunity provision”). We issued a writ of certiorari to the Court of Appeals to review its opinion, which held that Audubon was statutorily immune from suit. Maes v. Audubon Indent. Ins. Group, 2006-NMCA-021, 139 N.M. 39, 127 P.3d 1126. For the reasons discussed below, we hold that the FAIR Plan Act’s immunity provision does not apply to Audubon; and, therefore, Audubon is not immune from Maes’s suit. Accordingly, we reverse the Court of Appeals and remand to the district court.

I. BACKGROUND

A. Statewide Plans to Assure Fair Access to Insurance Requirements

{2} The Legislature passed the New Mexico FAIR Plan Act in 1985 under the framework of the federal Urban Property Protection and Reinsurance Act of 1968 (“UPPRA”), see 12 U.S.C. §§ 1749bbb to 1749bbb-21 (1970) (repealed 1985-1996), which Congress promulgated following inner city rioting in the late 1960s. 1 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 4:6 (3d ed.2005). The UPPRA provided for federal reinsurance against riot and civil unrest losses to insurance companies. 12 U.S.C. § 1749bbb to § 1749bbb-21; see Russ & Segalla, supra, § 4:6. To be eligible for such reinsurance, the UPPRA required insurers to cooperate with their state insurance authorities to establish fair access to insurance requirements (“FAIR”) plans “designed to make essential property insurance more readily available.” 12 U.S.C. § 1749bbb-3(a) to (b). FAIR plans are intended to create a means for high-risk property owners to obtain essential property insurance coverage, where they would not otherwise be able to do so on the normal insurance market because their risks would be unprofitable for insurance companies to assume on a voluntary basis. See Russ & Segalla, supra, §§ 1:27; 4:6.

B. The New Mexico FAIR Plan Act

{3} The New Mexico FAIR Plan Act authorizes all insurers licensed to write essential property insurance in New Mexico to establish and maintain a FAIR plan to provide essential property insurance to responsible and qualified applicants unable to obtain insurance on the open market. Section 59A-29-2; NMPIP Bylaws, introduction, at 1, http://w ww.nmprc.state.nm.us/insuranee/pdfinmfairplanbylaws.pdf [hereinafter NMPIP Bylaws]. The Act further authorizes insurers to form the non-profit underwriting association known as the New Mexico Property Insurance Program (“NMPIP”). Id. In order to transact property insurance business in New Mexico, all insurers licensed to write essential property insurance in the state are required to become and remain members of the FAIR Plan and the NMPIP and to subscribe to the NMPIP Articles of Association. Section 59A-29-3.

{4} The NMPIP is not itself an insurance company. NMPIP Bylaws, introduction, at 1. However, the Act authorizes the NMPIP, “on behalf of its members[,] to cause to be issued property insurance policies.” Section 59A-29-4. The program operates as follows. Applicants or their representatives or insurance agents apply directly to the NMPIP for coverage. NMPIP Bylaws, introduction, at 1. If the NMPIP decides the property is eligible for insurance, it forwards the application to a “Servicing Insurer.” Id. § IV. 1, at 3. Audubon is a Servicing Insurer for the NMPIP, which means that it has contracted with the NMPIP “to issue and service policies on risks referred to it by the [NMPIP].” Id. § III.8, at 2. The Servicing Insurer then issues and delivers the actual policy directly to the applicant and services the policy, remitting the premium to the NMPIP. Id. § V.l, at 3. The NMPIP is authorized to provide reimbursement for all of the Servicing Insurer’s costs and expenses. NMPIP Bylaws, § XII.6, at 8.

{5} The FAIR Plan Act also provides a remedy for aggrieved insureds. They may appeal the actions and decisions of the FAIR Plan administrators, the NMPIP, or any insurer as a result of its participation in the FAIR Plan and the NMPIP to the New Mexico Superintendent of Insurance. Section 59A-29-6(A). Thereafter, all final orders and decisions of the Superintendent of Insurance are subject to review in district court. Section 59A-29-6(B).

{6} Finally, the Act provides immunity to certain parties for certain actions taken with respect to the FAIR Plan:

There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer, the association or its agents or employees, the governing committee or the superintendent or his representative for any action taken by them in the performance of their powers and duties under the FAIR Plan Act.

Section 59A-29-7.

{7} The NMPIP reinsures all insurance policies issued by the Servicing Insurer pursuant to the FAIR Plan. Section 59A-29-4 (authorizing the NMPIP “to rein-sure in whole or in part any such policies and to cede any such reinsurance”); NMPIP Bylaws, § VI.l, at 4. Reinsurance refers to:

the ceding by one insurance company to another of all or a portion of its risks for a stipulated portion of the premium. In a true reinsurance transaction, the liability of the reinsurer is solely to the reinsured, which retains all contact with the original insured, and handles all matters prior to and subsequent to loss.

14 Eric Mills Holmes & L. Anthony Sutin, Holmes’ Appleman on Insurance, § 102.1 (2d Ed.2000) (quoted authority omitted). We adopted an almost identical definition of reinsurance in 1973. Sierra Life Ins. Co. v. First Nat’l Life Ins. Co., 85 N.M. 409, 412, 512 P.2d 1245, 1248 (N.M.1973) (quoting similar section from an earlier edition of Appleman Insurance Law and Practice). Reinsurance essentially “operates to shift part of the risk of loss under an insurance policy from the original insurer to the reinsurer, with the original insurer remaining in privity with the insured.” Holmes & Sutin, supra, § 102.1 (internal quotation marks omitted). Indeed, one of the fundamental principles of reinsurance is that “the reinsurer ordinarily has no liability to the policyholder of the ceding insurer.” Id. § 106.7.

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Bluebook (online)
2007 NMSC 046, 164 P.3d 934, 142 N.M. 235, Counsel Stack Legal Research, https://law.counselstack.com/opinion/maes-v-audubon-indemnity-insurance-group-nm-2007.