SAFECO INSURANCE COMPANY OF AMERICA, a foreign corporation, Petitioner, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a Maryland corporation, Respondent.
No. 14643.
Supreme Court of New Mexico.
April 10, 1984.
679 P.2d 816
John E. Farrow, Fairfield, Farrow, Hunt, Reecer & Strotz, Albuquerque, for respondent.
OPINION
WALTERS, Justice.
This action arose when Kim Taylor‘s automobile collided with an automobile driven by Nicholas Calomino and an automobile driven by Richard Vigil and owned by Eugene Vigil. Taylor was insured by USF & G, Calamino was insured by Safeco, and the Vigils were uninsured. After USF & G paid the bulk of Taylor‘s damages, it sued Calamino, Safeco, and the Vigils on a subrogation theory, and named Taylor an involuntary plaintiff to the extent of her $100 deductible. The trial court dismissed the claim against Safeco. Citing Sellman v. Haddock, 62 N.M. 391, 310 P.2d 1045 (1957), Maurer v. Thorpe, 95 N.M. 286, 621 P.2d 503 (1980), and Campbell v. Benson, 97 N.M. 147, 637 P.2d 578 (Ct.App.1981), the court of appeals reversed and held that due process requires Safeco to be joined as a party defendant. We granted certiorari to clarify the law regarding joinder and naming insurance companies as parties, and regarding the introduction of evidence of a party‘s insured status.
We reverse the result reached by the court of appeals and remand the matter to the trial court for additional proceedings.
I.
In New Mexico, an insurer who pays the claim of its insured under an automobile insurance policy is deemed to be subrogated by operation of law to recovery of its payments against the person who caused the loss. In 1957, under Sellman, this Court held that when the insurer pays its insured any amount of the loss, it is deemed to be a necessary and an indispensable party in any later action by its insured against the person responsible for the loss. Sellman, 62 N.M. at 403, 310 P.2d at 1053. This holding had the effect of requiring plaintiff‘s insurer to join in the action while disallowing any mention of defendant‘s insurer. In 1980, this Court attempted in Maurer to alleviate a portion of the Sellman problem. Maurer, 95 N.M. at 287, 621 P.2d at 504. Later, in Campbell, the court of appeals re-emphasized the Maurer rule and held that when a plaintiff is compelled to join the insurance company as a party, the element of fairness embodied in due process requires joinder of a defendant‘s insurance company as well.
Although the Sellman joinder doctrine was to some extent improved, it remains critically flawed as evidenced by the questions posed in the instant case. Here, USF & G is bringing suit against Calamino and his insurer Safeco, and against the Vigils who, because they are uninsured, have no insurer to be joined. The existing joinder doctrine, in attempting to balance the positions of insured plaintiffs and defendants, fails to anticipate the prejudice which might occur when both insured and uninsured parties are named in the same suit. Here, the fact that Vigils are the only parties to the action not represented by an insurance company could create the impression that the parties are financially unequal. It may be perceived that Taylor and USF & G are bringing suit against an uninsured defendant who would not have the means to satisfy any judgment entered against him. In contrast, a jury might infer that insured parties, such as Taylor and Calomino, have access to “deep pockets” and it could return a verdict accordingly. Other jurors might even tend to find against a party out of fear that any judgments against an insured or insurer party could contribute to an increase in their costs of liability insurance.
The inquiries attending the questions of which parties must be named or which parties must be joined to permit the just and proper maintenance of a lawsuit have been formalized in logically discrete rules of procedure. See
Maurer sought to reconcile this perceived potential for prejudice with the unfairness apparent in Sellman‘s required joinder of a plaintiff‘s subrogated insurer. Today, we reject Maurer‘s attempted reconciliation as being unnecessary in view of the procedure we direct to be followed in cases of this nature, and our clarification of
II.
As necessitated by our ensuing resolution of this case, we hereby overrule Sellman, Maurer, and Campbell, to any extent that they are inconsistent with the approach we adopt in this Opinion. Trial courts are instructed to disregard these cases as authority for any joinder issues concerning insurers or insureds.
In future, when subrogated insurers are required by
The procedure outlined above has, as a practical matter, been the manner of proceeding that has been followed by agreement of the parties in many districts of New Mexico for decades. Our adoption of this method hereafter as a required procedure in Sellman-type cases will obviate any unfair effects visited upon either a plaintiff or defendant, as recognized in Maurer, if either or both of them are insured, and will, at the same time, safeguard the interests of all insurers to the extent of their subrogated rights.
III.
Despite our resolution of the joinder question in cases of this nature, the potential for juror awareness of insurance coverage in some instances will be made possible by the applicable rules of evidence adopted by this Court. See
Of these evidentiary rules, Rule 411 has particular impact:
Evidence that a person was or was not insured against liability is not admissible upon the issue whether he acted negligently or otherwise wrongfully. This rule does not require the exclusion of evidence of insurance against liability when offered for another purpose, such as proof of agency, ownership or control, or bias or prejudice of a witness.
Clearly, New Mexico has rejected any blanket rule barring the introduction of any evidence of a party‘s insured status. Teague, 96 N.M. at 448-49, 631 P.2d at 1316-17. In addition to the particular instances listed in Rule 411 as examples of permissible use of evidence of insurance, the rule expressly permits the introduction of such evidence for any purpose other than those specifically proscribed. See Teague, 96 N.M. at 449, 631 P.2d at 1317; Grammer, 93 N.M. at 691, 604 P.2d at 829. We are in accord with at least two federal circuits applying the verbatim equivalent of our Rule 411 which have indicated that evidence of liability insurance can be introduced to bear upon some other relevant and material issue in addition to agency, ownership, control, or bias or prejudice of a witness. Savoie v. Otto Candies, Inc., 692 F.2d 363 (5th Cir.1982) (letters from defendant‘s insurer to plaintiff held to be admissible evidence of the plaintiff‘s employment status); Varlack v. SWC Caribbean, Inc., 550 F.2d 171 (3rd Cir.1977) (some references to defendant‘s insurance were not evidentiary and were made in the course of legal argument; other references were admissible for impeachment); and Posttape Associates v. Eastman Kodak Co., 537 F.2d 751 (3rd Cir.1976) (error to exclude insurance evidence when offered to show opposing party‘s knowledge of custom in the film trade).
In a similar vein, respected commentators on the law of evidence have noted:
Most courts recognize the general principle that evidence of defendant‘s insurance against liability is relevant and therefore admissible if its existence tends to prove some material issue and it does not require use of the forbidden hypothesis, ‘an insured person tends to be more careless (or more careful) than one who is uninsured.’ Rule 411 sets forth the three most common situations in which such evidence has generally been deemed admissible. These explicit exceptions are not all inclusive but are only illustrative.
2 J. Weinstein & M. Berger, Weinstein‘s Evidence 411[03] (1982).
The foregoing authorities illustrate the application of Rule 411. Accordingly, we expressly hold that while Rule 411 does not wholly preclude the admission of insurance-disclosing evidence, it expressly prohibits such evidence when the proponent is plainly offering it to show that the insured person was any more or less negligent or wrongful by virtue of his insured status.
We do not intend by this holding to sanction the admission of any evidence which should otherwise be excluded under the other rules of evidence, especially those governing relevancy.
Upon contemplating the prejudicial effects of evidence that reveals insurance coverage, trial courts should recognize that
New Mexico juries, upon becoming privy to the fact that a party is insured and upon the timely request of the party whose insurance coverage was disclosed, are currently instructed to “refrain from any inference, speculation or discussion about insurance.”
The court of appeals is reversed and the cause is remanded to the district court for further proceedings consistent with this Opinion.
FEDERICI, C.J., SOSA, Senior Justice, and RIORDAN, J., concur.
STOWERS, J., dissents.
STOWERS, Justice, dissenting.
I dissent.
This case came before this Court on a writ of certiorari to determine whether the Court of Appeals erred in reversing the trial court‘s dismissal of the petitioner, Safeco, as a party below. The majority opinion has adopted a position that says, in essence, the fact of an insurer‘s joinder is not to be disclosed to the jury. With this I disagree.
This Court has in the past taken progressive steps in recognizing the need to change and modify legal concepts. See Ramirez v. Armstrong, 100 N.M. 538, 673 P.2d 822 (1983); Scott v. Rizzo, 96 N.M. 682, 634 P.2d 1234 (1981). Here, in not recognizing the fact that disclosure of insurance companies as parties is proper and appropriate, the majority has missed an opportunity to do so again.
While the majority properly concludes that an insurance company may be the real party in interest and thus subject to joinder pursuant to
I have great faith in the jury‘s ability to consider difficult and complicated cases, and to do so free of bias or prejudice. I am not convinced that juries will be misled in deciding the issues that are appropriately before them simply because of the disclosure of insurance. The joinder provisions as found in the Rules of Civil Procedure have been developed to provide for joinder of necessary parties to the litigation. See
Every action shall be prosecuted in the name of the real party in interest; but an executor, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another or a party authorized by statute may sue in his own name without joining with him the party for whose benefit the action is brought * * * Where it appears that an action, by reason of honest mistake, is not prosecuted in the name of the real party in interest, the court may allow a reasonable time for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.
In other types of cases, disclosure of the joinder of the real party in interest has never been an issue. For reasons that may never have been valid, insurance has been an exception. Once properly joined, a party should not be given a special non-disclosed status. Nevertheless, the majority allows the fact of the insurer‘s joinder to remain unknown to the jury. It is time we recognize that an insurance company is no different, and should be treated no differently.
Moreover, while establishing a non-disclosure procedure, the majority has at the same time placed an intolerable burden on the trial court in terms of trying to sift out what is admissible insofar as evidence that relates to insurance and insurance companies. In addition, the non-disclosure of an insurer as a real party in interest will only serve to provide an unneeded temptation to somehow get this information before the jury. A review of the cases indicates that it is difficult to control the admission of insurance disclosing evidence, and once it has been disclosed, the judicial remedies for this disclosure gives cause for thought as to their adequacy and efficiency. See Cardoza v. Town of Silver City, 96 N.M. 130, 628 P.2d 1126 (Ct.App.), cert. denied, 96 N.M. 116, 628 P.2d 686 (1981). Continuing to resort to this type of legal reasoning only compounds the problem.
In my opinion, the alleged benefits of the new non-disclosure rule are outweighed by the disadvantages. The majority could create a far more efficient procedure without damaging the concept of equitable jury verdicts by simply allowing for the disclosure that an insurance company is a party to the action.
For these reasons I dissent.