Sections 66-5-201 through 66-5-239 NMSA 1978 may be cited as the "Mandatory Financial Responsibility Act".

History: 1953 Comp., § 64-5-201, enacted by Laws 1978, ch. 35, § 277; 1983, ch. 318, § 1.

Cross references. — For provisions relating to operator's and chauffeur's licenses, see 66-5-1.1 NMSA 1978 et seq.

Compiler's notes. — Many of the following cases and opinions were decided under former law.

I. GENERAL CONSIDERATION.

Scope of act's influence. — The Financial Responsibility Act, Sections 64-24-42 to 64-24-104, 1953 Comp. (similar to Sections 66-5-201 to 66-5-239 NMSA 1978), does not undertake to exert any statutory influence or compulsion upon all motorists to have and maintain proof of financial responsibility in compliance with its provisions. Its statutory influence or compulsion is exerted only upon motorists who have been involved in accidents or who fail to pay judgments rendered against them for damages resulting from the use and operation of motor vehicles. And it exerts influence or compulsion upon such motorists by denying to them driving privileges, registration certificates or plates unless and until they have and maintain such proof of financial responsibility. Farmers Ins. Exch. v. Ledesma, 214 F.2d 495 (10th Cir. 1954).

Liberal construction. — The purpose of the Motor Vehicle Safety Responsibility Law, Sections 64-24-42 to 64-24-104, 1953 Comp. (similar to Sections 66-5-201 to 66-5-239 NMSA 1978), is to provide protection to the public from injury and damage resulting from the operation of motor vehicles upon the public highways. The intended beneficiaries are the members of the general public who may be injured in automobile accidents. The act represents the considered public policy of the state, and it should be given a liberal construction to accomplish the intended objective. Farmers Ins. Exch. v. Ledesma, 214 F.2d 495 (10th Cir. 1954).

Duty to settle. — Finding against a third-party individual in her action against defendants' insurer was proper where the New Mexico Mandatory Financial Responsibility Act did not impose a duty to settle on the part of the insurer; however, such a claim existed under the unfair claims practices provisions of the Insurance Code. Hovet v. Lujan, 2003-NMCA-061, 133 N.M. 611, 66 P.3d 980, aff'd sub nom. Hovet v. Allstate Ins. Co., 2004-NMSC-010, 135 N.M. 397, 89 P.3d 69.

Uninsured motorist statutes attempt to have insurance coverage always available. — Uninsured motorist statutes direct that automobile liability policies include coverage for damages caused by uninsured motorists, unless rejected by the insured, and are intended to eliminate circumstances where the indemnification of an innocent person involved in an automobile accident depends on the chance whether the negligent party was insured or not. American Mut. Ins. Co. v. Romero, 428 F.2d 870 (10th Cir. 1970).

Limitation of insurance clause given effect when clear and unambiguous. — Where a trucking company's insurance policy covered each of its tractors and trailers, and where a tractor-trailer rig insured under the policy was involved in a single accident, the policy declaration, which stated that regardless of the number of covered "autos" or vehicles involved in the accident, the most that would be paid for any one accident was the limit of insurance for liability coverage shown in the declarations page set at $1,000,000, the policy was clear that the insurer intended its $1,000,000 each accident limitation to apply regardless of the number of covered vehicles that were involved in the accident. Lucero v. Northland Ins. Co., 2015-NMSC-011, rev'g 2014-NMCA-055, 326 P.3d 42.

Stacking precludes the aggregation of coverages applicable to vehicles not involved in the accident in question. — Stacking does not apply to covered vehicles that are both involved in an accident. Lucero v. Northland Inc. Co., 2014-NMCA-055, cert. granted, 2014-NMCERT-005.

Aggregation of coverages did not involve stacking. — Where a tractor and a trailer were negligently operated by the insured's employee and collided with a vehicle driven by plaintiff; the insured's insurance policy provided one million dollars in coverage for each covered vehicle; the tractor and trailer were separately covered vehicles; an anti-stacking clause of the policy provided that regardless of the number of covered vehicles, premiums paid or vehicles involved in an accident, the total of all damages combined resulting from one accident was one million dollars; and defendant claimed that the anti-stacking clause precluded the payment of one million dollars for each covered vehicle involved in the accident, defendant's limits of liability were two million dollars because the anti-stacking clause did not apply to covered vehicles that were both involved in an accident. Lucero v. Northland Inc. Co., 2014-NMCA-055, cert. granted, 2014-NMCERT-005.

Ambiguity in policy was resolved in favor of the insured. — Where a tractor and a trailer were negligently operated by the insured's employee and collided with a vehicle driven by plaintiff; the insured's insurance policy provided one million dollars in coverage for each covered vehicle; the tractor and trailer were separately covered vehicles; and the policy contained an anti-stacking clause which limited liability coverage to one million dollars for each accident, if the anti-stacking clause were read to preclude liability coverage on one of the covered vehicles involved in the accident, the anti-stacking clause would conflict with the liability coverage provisions of the policy, creating an ambiguity in the policy that would be construed in favor of plaintiffs to give effect to the reasonable expectations of the insured that the policy provided one million dollars in liability coverage for each covered vehicle involved in an accident, even if it was the same accident. Lucero v. Northland Inc. Co., 2014-NMCA-055, cert. granted, 2014-NMCERT-005.

Policy as proof of future financial responsibility. — Policy covering insurance for future constituted proof of driver's future financial responsibility necessary to his continued operation of a vehicle. Larson v. Occidental Fire & Cas. Co., 1968-NMSC-160, 79 N.M. 562, 446 P.2d 210, overruled on other grounds by Estep v. State Farm Mut. Auto. Ins. Co., 1985-NMSC-069, 103 N.M. 105, 703 P.2d 882.

Applicable to uninsured coverage. — A driver exclusion agreement applies to uninsured motorist coverage as well as liability coverage. Moore v. State Farm Mut. Auto. Ins. Co., 1994-NMCA-165, 119 N.M. 122, 888 P.2d 1004, cert. denied, 889 P.2d 203.

No direct claim. — The Mandatory Financial Responsibility Act does not state that a person who suffers damages has a direct claim against an insurance company. Little v. Gill, 2003-NMCA-103, 134 N.M. 321, 76 P.3d 639.

Joinder of insurance company. — Under former Section 66-5-221 NMSA 1978 (repealed), accident victim could properly join insurance company as a defendant; an insurance company is a proper party defendant if (1) the coverage was mandated by law, (2) it benefits the public, and (3) no language of the law expresses an intent to deny joinder. Raskob v. Sanchez, 1998-NMSC-045, 126 N.M. 394, 970 P.2d 580.

Joinder of insurance company. — Absent clear language to the contrary from the legislature, the repeal of former 66-5-201 NMSA 1978 does not negate the test set out in Raskob v. Sanchez, 1998-NMSC-045, 126 N.M. 394, 970 P.2d 580, for joinder of an insurance company in an action arising out of an automobile accident. Martinez v. Reid, 2002-NMSC-015, 132 N.M. 237, 46 P.3d 1237.

Uninsured motorist coverage under a newly acquired car provision. — Where the insured's insurance policy was ambiguous in regard to the limits of coverage on a newly acquired car and the insured purchased a new car which became the named vehicle under the policy; the insured retained his old vehicle that was originally the named vehicle under the policy; the old vehicle was insured under the policy for a period of thirty days; the insured was killed in the new car within the thirty-day period, and the evidence established that the insured reasonably expected uninsured motorist coverage on the old vehicle to be separate and apart from the coverage on the new car; the policy provided additional uninsured motorist coverage on the newly acquired car and that coverage could be stacked. Bird v. State Farm Mut. Auto. Ins. Co., 2007-NMCA-088, 142 N.M. 346, 165 P.3d 343, cert. denied, 2007-NMCERT-007, 142 N.M. 329, 165 P.3d 326.

Policy complying with any state's responsibility laws effectively incorporates New Mexico's. — Where a motor vehicle liability insurance policy provided in clear terms that the insurance which it afforded shall comply with the provisions of the Motor Vehicle Financial Responsibility Law of any state or province which shall be applicable with respect to any such liability arising out of the ownership, maintenance or use of the automobile to the extent of the coverage and limits of liability required by such law, but in no event in excess of the limits of liability stated in the policy, the pertinent provisions of the New Mexico Motor Vehicle Safety Responsibility Act, Sections 64-24-42 to 64-42-104, 1953 Comp. (similar to this part), were effectively incorporated into the policy and the liability of the insurer was the same as though the policy had been written under and in compliance with such act. Farmers Ins. Exch. v. Ledesma, 214 F.2d 495 (10th Cir. 1954).

Legislative intent. — By enacting the financial responsibility laws, Sections 64-24-42 through 64-24-107, 1953 Comp. (similar to 66-5-201 to 66-5-239 NMSA 1978), the legislature intended to eliminate the financially irresponsible driver from the highways and to provide for the giving of security and proof of financial responsibility by owners and operators of motor vehicles. 1969 Op. Att'y Gen. No. 69-119.

II. ISSUANCE OF POLICIES.

The obligation to deal fairly and honestly rests equally upon the insurer and the insured. Modisette v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-094, 77 N.M. 661, 427 P.2d 21.

An application for insurance is a mere offer or proposal for a contract of insurance. Before a contract of insurance is effected and any contractual relationship exists between the parties, it is necessary that the application be accepted by the insurer, since insurance companies are not compelled to accept every application presented and may stipulate upon what terms and for what period of time the risk will be accepted. Modisette v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-094, 77 N.M. 661, 427 P.2d 21.

Insurer has right to set up its own standards, to avail itself of its own experience and the experience of others, to secure information from the applicant, and to rely upon the information furnished as true and to govern its actions accordingly. Modisette v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-094, 77 N.M. 661, 427 P.2d 21.

Parties' intent irrelevant if misrepresentations made. — The general rule is that if misrepresentations be made, or information withheld, and such be material to the contract, then it makes no difference whether the party acted fraudulently, negligently or innocently. Modisette v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-094, 77 N.M. 661, 427 P.2d 21.

A representation or concealment of a fact is material if it operates as an inducement to the insurer to enter into the contract, where, except for such inducement, it would not have done so, or would have charged a higher premium. Modisette v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-094, 77 N.M. 661, 427 P.2d 21.

Agent's disregard of information considered in determining issue of materiality. — Aside from any question which may be present as to the effect of the failure of defendant's agent to make further inquiry to avoid being misled, the agent's disregard of the information that was given may properly be considered by the court in determining the issue of materiality and reliance. Tsosie v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-095, 77 N.M. 671, 427 P.2d 29.

In absence of waiver, policy voided if withheld information material. — If the information withheld or the misrepresentations made were material, then insurer was entitled to void the policy, in the absence of waiver or estoppel. Modisette v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-094, 77 N.M. 661, 427 P.2d 21.

Policy not cancelled for fraud if shown conduct would be unaltered. — When it is determined that the insurer's conduct would not have been altered in either accepting the risk or in the premium that would have been charged, the conclusion follows that the policy should not be cancelled for fraud. Tsosie v. Foundation Reserve Ins. Co., Inc., 1967-NMSC-095, 77 N.M. 671, 427 P.2d 29.

III. COVERAGE AND EXCLUSIONS.

Applicability of initial permission rule. — An individual working in a business of servicing vehicles, having been given initial permission to use a covered vehicle, was not subject to an exclusion for persons using covered vehicles while in the business of servicing vehicles when an accident occurred while the individual was using the vehicle solely for personal reasons. Kitchens v. Houston Gen. Ins. Co., 1995-NMSC-031, 119 N.M. 799, 896 P.2d 479.

Coverage for subsequent permittees. — Coverage extends to any subsequent permittee operating an insured vehicle as long as the named insured has given his or her initial permission to use the vehicle. This coverage is mandated by the statutory omnibus clause notwithstanding violation of the named insured's restriction on second permittees. United Servs. Auto. Ass'n v. National Farmers Union Prop. & Cas., 1995-NMSC-014, 119 N.M. 397, 891 P.2d 538.

Scope of coverage provided by omnibus clause. — The omnibus clause of an insurer's liability policy must provide coverage to any person using the insured vehicle with the owner's consent, without regard to any restrictions or understanding between the parties on the particular use for which the permission was given. Allstate Ins. Co. v. Jensen, 1990-NMSC-009, 109 N.M. 584, 788 P.2d 340; Kitchens v. Houston Gen. Ins. Co., 1995-NMSC-031, 119 N.M. 799, 896 P.2d 479.

Scope of coverage provided by omnibus clause. — A policy's omnibus clause may not be more restrictive of coverage than the statutory omnibus clause. United Servs. Auto. Ass'n v. National Farmers Union Prop. & Cas., 1995-NMSC-014, 119 N.M. 397, 891 P.2d 538.

Coverage for punitive damages not required. — New Mexico's mandatory liability insurance law does not require coverage for punitive damages because its intent was only to require drivers to demonstrate a minimal amount of financial responsibility as a condition for driving in the state. State Farm Mut. Auto. Ins. Co. v. Progressive Specialty Ins. Co., 2001-NMCA-101, 131 N.M. 304, 35 P.3d 309.

Application of proration among several policies is not contrary to the statutory provisions for minimum coverage and is different from a policy provision for a dollar for dollar reduction of coverage. Am. Mut. Ins. Co. v. Romero, 428 F.2d 870 (10th Cir. 1970).

Financial Responsibility Law was not applicable to insurance provisions under a car rental agreement which had the effect of excluding drivers under the age of 21 years from coverage. Peterson v. Romero, 1975-NMCA-127, 88 N.M. 483, 542 P.2d 434.

Third party not insured if loan violates long-standing family prohibition. — Where father, owner of car, loaned car to son who loaned car to friend in violation of long-standing family prohibition, there was no implied or express permission as required by Section 64-24-87, 1953 Comp. (similar to this section), and third person was not insured when involved in car accident. Western Cas. & Sur. Co. v. Grice, 422 F.2d 921 (10th Cir. 1970).

Coverage limits when insured operates non-owned vehicle. — No New Mexico statute, including the Mandatory Financial Responsibility Act, requires aggregation of liability coverage limits when the insured is operating a non-owned vehicle. Slack v. Robinson, 2003-NMCA-083, 134 N.M. 6, 71 P.3d 514, cert. quashed, 135 N.M. 321, 88 P.3d 263 (2004).

No physical contract exclusion unenforceable. — The exclusion of uninsured motorist coverage in a Texas insurance policy for accidents not involving physical contact between the covered and the uninsured vehicle violates New Mexico's public policy of protecting accident victims and will not be enforced in New Mexico. Demir v. Farmers Texas County Mut. Ins. Co., 2006-NMCA-091, 140 N.M. 162, 140 P.3d 1111.

Exclusion endorsement signed by all named insureds. — A driver's exclusion endorsement that does not bear the signatures of all named insureds is ineffective under this part. Tafoya v. Western Farm Bureau Ins. Co., 1994-NMSC-035, 117 N.M. 385, 872 P.2d 358.

Insured and household exclusions invalid. — Insured and household exclusions contained in motor vehicle liability policies are contrary to public policy and are, therefore, invalid exclusions. Estep v. State Farm Mut. Auto. Ins. Co., 1985-NMSC-069, 103 N.M. 105, 703 P.2d 882 (1985); State Farm Mut. Auto. Ins. Co. v. Ballard, 2002-NMSC-030, 132 N.M. 696, 54 P.3d 537.

Coverage for domestic partners. — Because there is no express statutory language or indication of legislative intent in New Mexico that domestic partners must be included in the definition of "family member" for purposes of automobile insurance coverage, excluding domestic partners from the definition of "family member" is not invalid as contrary to the public policy of the state of New Mexico. Hartford Ins. Co. v. Cline, 2006-NMSC-033, 140 N.M. 16, 139 P.3d 176.

Law reviews. — For comment, "A Third-Party Claimant Becomes an Insured: Hovet v. Allstate and the Expanding Right to Sue Under New Mexico's Insurance Code," see 35 N.M. L. Rev. 651 (2005).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 7 Am. Jur. 2d Automobile Insurance §§ 20 to 40; 7A Am. Jur. 2d Automobiles and Highway Traffic §§ 156 to 160.

Liability of insurer under compulsory statutory vehicle liability policy, to injured third persons, notwithstanding insured's failure to comply with policy conditions, as measured by policy limits or by limits of Motor Vehicle Financial Responsibility Act, 29 A.L.R.2d 817.

Trailers as affecting automobile insurance, 31 A.L.R.2d 298, 65 A.L.R.3d 804.

Failure to give notice, or other lack of cooperation by insured, as defense to action against compulsory liability insurer by injured member of public, 31 A.L.R.2d 645.

Validity of Motor Vehicle Financial Responsibility Act, 35 A.L.R.2d 1011, 2 A.L.R.5th 725.

Operator's liability policy issued in compliance with financial responsibility statute, 88 A.L.R.2d 995.

Policy provision extending coverage to comply with Financial Responsibility Act as applicable to insured's first accident, 8 A.L.R.3d 388.

Temporary automobile insurance pending issuance of policy, 12 A.L.R.3d 1304.

Cancellation of compulsory or "financial responsibility" automobile insurance, 44 A.L.R.4th 13.

60 C.J.S. Motor Vehicles §§ 110, 111.

Conflicts of laws in determination of coverage under automobile liability insurance policy. 110 A.L.R.5th 465.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured's claim particular conduct of insurer. 115 A.L.R.5th 589.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured's claim particular grounds for denial of claim: matters relating to policy. 116 A.L.R.5th 247.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured's claim particular grounds for denial of claim: risks, causes and extent of laoss, injury, disability or death. 123 A.L.R.5th 259.

Conduct or inaction by insurer constituting waiver of, or creating estoppel to assert, right of subrogation. 125 A.L.R.5th 1.

Conduct or inaction by insurer constituting waiver or, or creating estoppel to assert, defense of consent to settle provision under insurance policy. 16 A.L.R.6th 491.