A liability insurance policy as specified in Subsection B of 13.11.2.9 NMAC which contains a provision limiting legal defense costs shall be issued or renewed in this state only if the requirements of Subsections A and B of 13.11.2.10 NMAC are met, or if the requirement of Subsection C of 13.11.2.10 NMAC is met.

1. A. Legal defense costs charged against the stated limit of liability shall not exceed fifty percent (50%) of such limits and, except as authorized by Subsection B of 13.11.2.10 NMAC, the insurer shall assume any legal defense cost over the amount of percentage specified in the policy.
2. B. Legal defense costs charged against the deductible shall not exceed fifty percent (50%) of such deductible and, except as authorized by Subsection A of 13.11.2.10 NMAC, the insurer shall assume any legal defense cost over the amount or percentage specified in the policy in regard to such deductible.

3. C. The limitation specified in Subsections A and B of 13.11.2.10 NMAC may be omitted if the policy provides that the insured shall have the option to:

   (1) select the defense attorney or to consent to the insurer’s choice of defense attorney, which consent shall not be unreasonably withheld;

   (2) participate in, and assist in the direction of the defense of any claim with such participation and assistance not limiting the insurer’s right to control the defense; and

   (3) consent to a settlement, which consent shall not be unreasonably withheld.

   [10/13/88; 13.11.2.10 NMAC - Rn & A, 13 NMAC 11.2.10 NMAC, 6/30/04]