{1} This insurance case raises issues about when a liability insurer’s duty to defend is triggered. Over twenty years ago, in State Farm, Fire & Casualty Co. v. Price, our Court of Appeals stated that “before the duty to defend arises there must be a demand.”
BACKGROUND
{2} The facts are set forth in their entirety in the Court of Appeals’ opinion and we relate only those facts pertinent to the issue before us on certiorari.
{3} This case arises out of the death of Patrick Garcia, the husband of Plaintiff Victoria Garcia. Mr. Garcia was killed on April 23, 1999, when his vehicle was struck by a
{4} The Personal Representative of the Perfetti Estate “failed to respond or otherwise take any action with regard to Plaintiffs claim” and “failed to file an inventory or otherwise account for the assets of the [Perfetti Estate] or to take any significant action to administer the Estate.” Garcia,
{5} Plaintiffs counsel then wrote a letter to Insurance Exchange requesting a copy of the policy for the Red Carpet Bar. The letter summarized the April 23, 1999, accident and included a copy of Plaintiffs claim filed in the probate proceedings against the Perfetti Estate. Plaintiffs counsel requested that Insurance Exchange treat the letter as a claim under the policy and notify the insurer. Insurance Exchange forwarded the claim to Burns & Wilcox, the agent for Lloyd’s, which in turn advised the attorneys for Lloyd’s of the claim. Thus, Lloyd’s received actual notice of the claim on June 14, 2001.
{6} On June 29, 2001, New York counsel for Lloyd’s wrote a letter to the attorney for the Special Administrator advising that Lloyd’s accepted notice of the claim and was proceeding under a reservation of rights because notice appeared to be late under the terms of the policy, which required that the insured notify Lloyd’s in writing of any claim made under the policy “as soon as practicable.” Apparently, Lloyd’s took the position that, because the accident resulting in the claim had occurred more than two years prior to Lloyd’s receiving notice, it was not notified “as soon as practicable.” No other reservation of rights was asserted. New York counsel informed the Perfetti Estate that the claim was under investigation and recommended that the Special Administrator disallow the claim.
{7} In a telephone conversation on September 21, 2001, the Special Administrator’s attorney informed Lloyd’s that the Special Administrator did not have the statutory authority that a Personal Representative does to deny claims, and that only the court had the authority to determine the validity of the claim in the formal probate proceeding. 1 In a follow-up letter dated September 28, 2001, the Special Administrator’s attorney summarized the earlier phone conversation; urged Lloyd’s to intervene in the probate proceedings as an interested party, and recommended that Lloyd’s pursue a motion for the court to deny the wrongful death claim.
{8} On September 25, 2001 New York counsel wrote to Lloyd’s to report on the status of the matter. The letter stated that
{9} “The Perfetti Estate was thereafter administered under the direction of the district court for the assets to be collected and claims paid.” Id. ¶ 12. On September 16, 2002, the district court entered an order in the probate case allowing Plaintiffs claim in the amount of $3,000,000. The court also filed a “Stipulated Order Approving Assignment of Insurance Policies and Claims,” in which the Special Administrator assigned to Plaintiff the rights of the Perfetti Estate under the insurance policy so that Plaintiff could pursue the claim directed against Lloyd’s.
{10} Under the assignment of rights, Plaintiff filed a lawsuit against Lloyd’s for breach of contract, bad faith, and violation of the Insurance Code and Unfair Practices Act. The district court granted summary judgment in favor of Lloyd’s based on the arguments advanced by Lloyd’s that (1) Plaintiffs claim for damages against the Perfetti Estate was not cognizable in the probate proceeding, but rather, exclusive jurisdiction over such a claim “resided with a district court hearing a properly filed tort suit,” and (2) the Perfetti Estate waived any duty to defend because “the insured never made any demand for defense or tendered the defense of the wrongful death notice of claim to [Lloyd’s], either personally before he died or through his Estate.”
{11} Plaintiff appealed and the Court of Appeals reversed, holding that: (1) a wrongful death claim may properly be filed against the estate of a decedent in formal probate proceedings before the district court sitting in probate; (2) the liquor liability insurance policy issued by Lloyd’s provided coverage for such a claim; (3) there are material issues of fact regarding whether the Perfetti Estate made a sufficient demand for a defense under the policy; and (4) policy defenses are not available to the insurer if the finder of fact determines that the Perfetti Estate made a demand for a defense under the policy. Garcia,
STANDARD OF REVIEW
{12} Our review on a grant of summary judgment is de novo. See Juneau v. Intel Corp.,
DISCUSSION
Actual Notice Presumptively Triggers the Insurer’s Duty to Defend
{13} The Court of Appeals correctly noted a split among jurisdictions over the issue of when the duty to defend is triggered. Garcia,
{14} In Price, the Court of Appeals held that the trial court had improperly directed a verdict for the insurer, because reasonable minds could differ on whether two letters written by the insured could support a finding that a defense had been demanded.
support a conclusion that [the insurer] knew of the lawsuit and knew of the possibility of settlement, yet consciously disregarded what was happening. It is true that no suit papers were forwarded to [the insurer] and that notice of the impending settlement could have been more clearly given. However, under the circumstances reasonable minds could differ about whether there was a sufficient demand to defend on [the insurer], about [the insurer’s] good faith, and about the insured’s conduct. These are properly [sic] issues for the jury.
Id. (emphasis added). Thus, although Price states that “before the duty to defend arises there must be a demand,” id. at 443,
{15} The only other New Mexico case stating that a demand is required before the duty to defend arises is American General Fire & Casualty Co. v. Progressive Casualty Co.,
{16} We agree with Judge Wechsler that the Court of Appeals could have simply applied Price to this case and concluded that there were issues of fact as to whether a sufficient demand was made. See Garcia,
{17} Further, it is not unfair to apply the new rule to Lloyd’s in this case because the record does not show that Lloyd’s relied on the absence of an affirmative demand in deciding not to provide a defense or otherwise intervene in the proceedings. Rather, Lloyd’s declined to step in based on incorrect advice from its New York counsel that the probate court did not have jurisdiction to hear a tort claim, and thus, any determination made by the probate court would have “no bearing on the merits.”
{18} Of course, as pointed out by Judge Weehsler, the difference between the rule in Price, and that announced by the majority of the Court of Appeals in this case, is that the new rule changes the inquiry at the summary judgment stage. Thus, under the new rule, “if the insured can prove actual notice, summary judgment may be granted [for the insured] unless the insurance company submits evidence showing that the insured intended to decline a defense.” Id. ¶ 43. Under the Price rule, on the other hand, summary judgment would be granted in favor of the insurer unless the insured could produce evidence that an adequate demand had been made. We agree with the Court of Appeals’ majority that “sound policy considerations support a rule tying the duty to defend to actual notice of a claim.” Id. ¶ 31. Such considerations include the following:
(1) “the insurer is usually in a better position than even a sophisticated insured to know the scope of the insurance contract and its duties under it,” and (2) “allowing actual notice to trigger the duty to defend ... assure[s] or protects] the benefits of the insurance contract” because “[t]he insurer, having received consideration for inclusion of the insured on its policy, should not be allowed to evade its responsibilities under the policy as a result of the insured’s ignorance.”
Id. ¶ 26 (quoting Cincinnati Cos.,
{19} We also agree that the rule does not “impose some kind of automatic duty [on insurers] to become involved in litigation.” Id. ¶ 31. As noted by the majority below, “[w]hen actual notice is given to an insurer, the insurer may protect its interests ‘simply by contacting the insured to ascertain whether the insurer’s assistance is desired. If the insured indicates that it does not want the insurer’s assistance, or is unresponsive or uncooperative, the insurer is relieved of its duty to defend.’” Id. (quoting Cincinnati Cos.,
If it has actual notice a lawsuit has been filed against one of its insureds, the insurer understands its insured will require a defense. Furthermore, based on its experience, the insurer should assume its insured will desire the insurer provide such defense. Both parties are assumed to understand the ramifications of a lawsuit. Why then should the insurer receive the benefit of a rule requiring written tender ... ? Such a rule requires an insured to jump through meaningless hoops towards an absurd end: telling the insurer something it already knows. Such a rule injects a degree of gamesmanship into the insurer-insured relationship without providing any valid corresponding benefit. In fact, the only benefit of such rule is to create a possibility-where none would otherwise exist-for an insurer to escape an obligation it otherwise owes its insured.
{20} Lloyd’s does not offer any reason why it is better to require the insured to formally and unequivocally demand a defense as opposed to requiring the liability insurer, which has received actual notice of a lawsuit against its insured, to actively ascertain whether the insured desires a defense. Balancing the two possibilities against one another, we conclude that the interests of fairness weigh in favor of placing the burden on the insurer, “who is in the better position, because of its experience, competence, and resources to conduct the task.” Id.,
Notice Does Not Necessarily Have to Come Directly From the Insured
{21} Lloyd’s argues that even if actual notice suffices to trigger the duty to defend, such notice has to come directly from the insured or a person acting with the insured’s authority. Thus, according to Lloyd’s, because Plaintiffs attorney notified Insurance Exchange of the claim against the Perfetti Estate, which Insurance Exchange then forwarded to counsel for Lloyd’s, the notice was ineffective because it was given by the insured’s adversary. In support of this argument, Lloyd’s cites to L Atrium on the Creek I, L.P. v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania,
{22} However, the insurer in LAtrium acted in line with the approach we adopt here. Upon receiving notice from the injured party’s attorney, the insurer advised both the attorney and its own insured that the insured had not made a demand. Id. at 791, 793. In sending notice to the insured, the insurer allowed the insured an opportunity to request a defense — which it did. Id. at 791-92. Had Lloyd’s acted similarly in response to the notice it received from Plaintiffs attorney by way of Insurance Exchange, there would likely have been a clear answer as to whether the Perfetti Estate desired a defense. Moreover, if the Perfetti Estate had not responded to such notice, Lloyd’s would have had at least some justification for assuming that its insured did not desire its assistance.
{23} As the record stands, however, all we have is a series of ambiguous communications between New York counsel for Lloyd’s and the attorney for the Special Administrator that does not shed much light, at least at the summary judgment phase, as to whether the Perfetti Estate was affirmatively rejecting a defense. These communications could be read as a rejection of a defense, or they could simply state a belief, though erroneous, on the part of counsel for the Special Administrator that the Special Administrator had no authority to demand or reject a defense.
2
In any case, Lloyd’s chose not to step in and seek clarification from the court about these matters, deciding instead to do nothing.
{24} Other cases support the proposition that actual notice need not come from the insured to trigger the duty to defend. For instance, Illinois Founders Insurance Co. v. Barnett,
{25} We prefer to follow the approach taken in Barnett. We note that the technical approach to the question of actual notice advocated by Lloyd’s is really just another way of saying that there must be some sort of specific demand made before the duty to defend is triggered, and as such it does nothing to advance the policy considerations we have articulated above. Nor does Lloyd’s point to a persuasive countervailing concern that would weigh in favor of requiring notice to come directly from the insured. As we have said, upon receiving notice of a claim from whatever source, if such notice is unclear regarding a defense, all the insurer has to do is contact the insured and inquire whether a defense is desired. We therefore hold that, for the purposes of determining when an insurer’s duty to defend arises, “[a]ctual notice means notice from ‘any source sufficient to permit the insurer to locate and defend its insured.’ ” Barnett,
{26} Because Lloyd’s had actual notice of Plaintiffs claim, there is a presumption that the duty to defend was triggered. The majority below correctly noted that “[t]he key inquiry in this case ... is whether under all the circumstances, including the correspondence exchanged between the Perfetti Estate and [Lloyd’s], the Perfetti Estate was foregoing a defense from [Lloyd’s].” Garcia,
CONCLUSION
{27} We affirm the Court of Appeals’ decision reversing the district court’s grant of summary judgment in favor of Lloyd’s and remand for further proceedings consistent with this Opinion.
{28} IT IS SO ORDERED.
Notes
. Though not material to this appeal, this conclusion appears to be erroneous, as the order appointing the Special Administrator specifically authorized the Special Administrator to "defend against any claim that may be asserted against the [Perfetti Estate] or its assets.” Furthermore, under the Uniform Probate Code, a special administrator has the power of a personal representative, NMSA 1978, § 45-3-617 (1975), and a personal representative has the power to deny claims, NMSA 1978, § 45-3-806(A) (1993).
. In its briefs, Lloyd's asserts that by these communications the Perfetti Estate “made it clear that it did not want to be ... represented by [Lloyd's]” and “did not need or want any assistance from [Lloyd's].” We disagree. All that is clearly expressed in the communications is the Special Administrator’s belief that she lacked the authority to deny the claim. It is true that the Special Administrator stated in an affidavit that she "never requested or demanded that any insurance company do anything about or 'defend' against the Garcia Notice of Claim,” but this was not because she did not desire such a defense; rather, it was because she thought that “[t]here was no wrongful death suit to defend.” Given the bizarre set of circumstances in this case involving the death of the insured prior to the filing of any claim and the complicated probate proceedings that followed, it is very difficult to view this evidence as clearly demonstrating an affirmative rejection of a defense. That is a question for the fact-finder.