Court Upholds Automobile Insurer’s Denial of Coverage for Theft of Truck under New Mexico Law

A person whose truck was stolen sought compensation in New Mexico state court from his automobile insurer on the basis that the theft constituted property damage under the uninsured motorist provisions of the parties’ contract.  The insurance company removed the lawsuit to federal court and filed a motion to dismiss, which the court granted.  In arriving at its conclusion that the insured’s case should be dismissed, the court accepted the insurance company’s construction of the uninsured motorist provisions of the contract between the insurance company and its insured.

The federal court deciding the motion to dismiss determined that it was tasked with predicting how New Mexico’s Supreme Court would decide the dispute under New Mexico’s Uninsured Motorist Act.  As a decision had not yet been made on the issues at that level, the federal court looked to legislative intent and rulings by other courts.  It concluded that the legislative intent was to protect the public from culpable underinsured motorists and that the phrases “injury to or destruction of property” and “property damage” do not ordinarily include theft.

The court observed that the insured plaintiff was correct that the New Mexico Supreme Court had liberally construed New Mexico law in favor of insureds.  The court rejected the insured’s position he was covered based on concerns the court expressed, including that accepting the position would in effect add a requirement that the New Mexico legislature could have but purportedly had not enacted – that every automobile liability insurance policy in New Mexico provide coverage for auto theft.

In support of its ruling in favor of the insurance company defendant denying coverage, the court also observed that New Mexico limited uninsured motorist coverage by defining an uninsured motorist as an operator of a motor vehicle whose liability at the time of the accident is less than the liability limits under the insured’s uninsured motorist coverage.  The court reasoned that the theft giving rise to the insured’s claim was not an accident with the operator of a motor vehicle, and was therefore outside of the scope of coverage.

The court rejected a case presented by the insured that had been decided by the Florida District Court of Appeal in the context of losses sustained by an insured jewelry store.  The Florida court had reasoned that property is damaged to the extent its market value is diminished and when property is stolen its market value to the person who lawfully possessed it is totally diminished, therefore theft of personal property is property damage unless contrary intent is clearly expressed.

Ultimately the New Mexico federal court ruled that the defendant insurance company had no contractual duty to cover the loss incurred by the insured plaintiff and dismissed the plaintiff’s complaint.

If you or a loved one has been injured in an accident or incurred property damage due to acts or omissions of third parties, there may be grounds for a financial recovery.  An award of monetary damages can help people with out of pocket costs including medical costs, lost wages, and pain and suffering.  Insurance companies are among third parties that may be responsible for paying costs, depending on the circumstances.  To understand more about your case and how it can be pursued to maximize your recovery, call New Mexico personal injury lawyer Matthew Vance at the Law Office of Matthew Vance, P.C.  We provide a free consultation and can be reached at (505) 242-6267 or online.