Smith v. Interinsurance Exchange of the Automobile Club
MEMORANDUM OPINION AND ORDER by Chief District Judge William P. Johnson Sua Sponte Certifying Question to the New Mexico Supreme Court (bap)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
JOSHUA SMITH, individually and on behalf
of other similarly situated individuals,
INTERINSURANCE EXCHANGE OF
THE AUTOMOBILE CLUB, aka AAA,
MEMORANDUM OPINION AND ORDER SUA SPONTE CERTIFYING QUESTION
TO THE NEW MEXICO SUPREME COURT
THIS MATTER is before the Court sua sponte. In Defendant Interinsurance Exchange of
the Automobile Club’s Motion to Dismiss, Defendant raised the determinative question of whether
the New Mexico Supreme Court’s decision, Crutcher v. Liberty Mut. Ins. Co., 2022-NMSC-001,
501 P.3d 433, applies prospectively or retroactively. For the following reasons, the Court sua
sponte certifies this question to the New Mexico Supreme Court.
In 2020—well before the New Mexico Supreme Court’s decision in Crutcher v. Liberty
Mut. Ins. Co., 2022-NMSC-001, 501 P.3d 433—Defendant Interinsurance Exchange of the
Automobile Club (“Defendant Exchange”) issued Mr. Joshua Smith an automobile insurance
Applying a Rule 12(b)(6) standard, the background facts are taken from Mr. Smith’s
Complaint and Insurance Policy, which the Court may consider. Jacobsen v. Deseret Book Co.,
287 F.3d 936, 941 (10th Cir. 2002) (“In addition to the complaint, the district court may consider
documents referred to in the complaint if the documents are central to the plaintiff’s claim and the
parties do not dispute the documents’ authenticity.”).
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policy. The policy provided liability coverage for one vehicle in the amount of $25,000 per
person/$50,000 per occurrence.2 The policy also provided uninsured/underinsured motorist
(UM/UIM) coverage in the amount of $25,000 per person/$50,000 per occurrence. Mr. Smith paid
a premium for the UM/UIM coverage to Defendant Exchange during the relevant period.
On October 13, 2020, Mr. Smith alleges he sustained bodily injuries, in excess of $50,000,
when he was rear-ended by an at-fault motorist. After the auto collision, Mr. Smith made a claim
with the tortfeasor’s insurer. The tortfeasor’s insurer paid Mr. Smith $25,000—the full extent of
the tortfeasor’s liability coverage. Mr. Smith also reported the collision to his own insurer,
Defendant Exchange, and filed an underinsured motorist claim. Defendant Exchange allegedly
denied Mr. Smith’s claim after applying the Schmick offset. In other words, Defendant Exchange
is alleged to have refused to pay out Mr. Smith’s UIM coverage because his UIM coverage was
the same as the tortfeasor’s liability coverage; therefore, his UIM coverage was “offset”—i.e.,
reduced—by the amount of the tortfeasor’s liability coverage. See Schmick v. State Farm Mut.
Auto. Ins. Co., 1985-NMSC-073, 103 N.M. 216 (permitting an insured’s UIM coverage to be offset
by tortfeasor’s liability coverage); see id. ¶ 28 (“The state of being underinsured exists when the
aggregate of the insured’s uninsured motorist coverage reduced by the tortfeasor’s liability
coverage is greater than zero.”).
In the Class Action Complaint, Plaintiff alleged that his UIM coverage was illusory and/or
misleading because of the Schmick offset, that Defendant charged a premium for this illusory
coverage, and that Defendant failed to properly inform him that his UIM coverage would be subject
The Court deems facts contained within Plaintiff’s insurance policy to be undisputed. A
copy of the insurance policy was attached to the Complaint and submitted to the Court as part of
Defendant Exchange’s Notice of Removal. Doc. 1, Ex. 1. Moreover, in Defendant’s Motion to
Dismiss, Defendant referenced parts of Plaintiff’s policy and did not dispute the policy’s
authenticity. Doc. 7 at 5 n.1.
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to the Schmick offset. Based on these allegations, Plaintiff brought claims against Defendant for
violating New Mexico’s Unfair Trade Practices and Unfair Insurance Practices Acts; for
Reformation of Insurance Policy; Breach of the Covenant of Good Faith and Fair Dealing;
Negligence; Negligent Misrepresentation; Unjust Enrichment; and Declaratory and Injunctive
Relief. Plaintiff’s Complaint was filed after and expressly references the New Mexico Supreme
Court’s Crutcher decision.
In Crutcher, the New Mexico Supreme Court answered two questions certified to it by
United States District Court Judge Judith Herrera. The Supreme Court articulated the certified
questions as follows:
whether the underinsured motorist (UIM) coverage on a policy that provides
minimum uninsured/underinsured motorist (UM/UIM) limits of $25,000 per
person/$50,000 per accident is illusory for an insured who sustains more than
$25,000 in damages caused by a minimally insured tortfeasor. If so, then we must
decide whether insurance companies may charge premiums for such a policy.
Crutcher, 2022-NMSC-001, ¶ 1, 501 P.3d at 434. And the Supreme Court provided the following
[W]e conclude that UM/UIM coverage at the minimum level is permitted because
the law not only allows, but requires, it to be sold as was done so here. However,
such coverage is illusory because it is misleading to the average policyholder. As
such, we will now require every insurer to adequately disclose the limitations of
minimum limits UM/UIM policies in the form of an exclusion in its insurance
policy. If the insurer provides adequate disclosure, it may lawfully charge a
premium for such coverage.
Id. ¶ 33.
After Crutcher, the United States District Court for the District of New Mexico began
experiencing a flurry of Crutcher-related litigation. And defendant insurers began routinely raising
the legal question of whether Crutcher applies prospectively or retroactively. In this case,
Defendant Exchange has also raised this issue.
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Defendant Exchange contends Crutcher is expressly prospective and that insurers had no
duty to disclose and explain the Schmick offset prior to Crutcher. To argue this, Defendant points
to the New Mexico Supreme Court’s use of the words “hereafter” and “now” in Crutcher when
explaining the requirement that every insurer adequately disclose the limitations of minimum limit
UM/UIM policies: “Therefore, hereafter, the insurer shall bear the burden of disclosure to the
policyholder that a purchase of the statutory minimum of UM/UIM insurance may come with the
counterintuitive exclusion of UIM insurance if the insured is in an accident with a tortfeasor who
carries minimum liability insurance,” Crutcher, 2022-NMSC-001, ¶ 32, “As such, we will now
require every insurer to adequately disclose the limitations of minimum limits UM/UIM policies
in the form of an exclusion in its insurance policy,” id. ¶ 33 (emphases added). Moreover,
Defendant Exchange contends that even if Crutcher is not expressly prospective, it should be
applied prospectively because Defendant Exchange provided sufficient proof under the Chevron
Oil factors to overcome New Mexico’s presumption of retroactivity. See Beavers v. Johnson
Controls World Servs., Inc., 1994-NMSC-094, ¶ 22, 118 N.M. 391, 398 (reaffirming the weighing
of the three factors articulated in Chevron Oil Co. v. Huson, 404 U.S. 97 (1971), when determining
whether New Mexico’s presumption of retroactivity is overcome).
Plaintiff Smith disagrees. According to Mr. Smith, “The Court in Crutcher in no manner
forgave or immunized insurers from past misconduct of collecting premiums from insureds while
providing no coverage for such premiums, and where they misrepresented the coverages
available.” Doc. 16 at 20.
The Court finds certification to the New Mexico Supreme Court appropriate to resolve the
parties’ dispute over this question of New Mexico law.
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Question for Certification:
The Court certifies the following question to the New Mexico Supreme Court:
Whether Crutcher v. Liberty Mut. Ins. Co, 2022-NMSC-001, 501 P.3d 433, applies
prospectively or retroactively?
The New Mexico Supreme Court has discretion to accept or reject this certification and to
reformulate the question. See Rule 12-607(C)(4) NMRA.
Certification Is Warranted.
Under New Mexico Rules of Appellate Procedure, the New Mexico Supreme Court may
answer questions of law certified to it by a federal court if “ the answer may be determinative
of an issue in pending litigation in the certifying court and  the question is one for which answer
is not provided by a controlling (a) appellate opinion of the New Mexico Supreme Court or the
New Mexico Court of Appeals; or (b) constitutional provision or statute of this state.” Rule 12607(A)(1); see also NMSA 1978, § 39-7-4 (1997) (“The supreme court of this state may answer a
question of law certified to it by a court of the United States . . . if the answer may be determinative
of an issue in pending litigation in the certifying court and there is no controlling appellate
decision, constitutional provision or statute of this state.”).
“The decision to certify a question to the state supreme court ‘rests in the sound discretion
of the federal court.’” Kansas Jud. Rev. v. Stout, 519 F.3d 1107, 1120 (10th Cir.) (quoting Lehman
Bros. v. Schein, 416 U.S. 386, 391 (1974)). This Court may certify a question to the New Mexico
Supreme Court sua sponte. Id. When determining whether to certify a question, the Court must
exercise “judgment and restraint”—the Court “will not trouble [its] sister state courts every time
an arguably unsettled question of state law comes across [its] desk.” Pino v. United States, 507
F.3d 1233, 1236 (10th Cir. 2007). That said, the act of certifying seeks “to give meaning and
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respect to the federal character of our judicial system, recognizing that the judicial policy of a state
should be decided when possible by state, not federal, courts.” Id. And “when important and close
questions of state legal policy arise . . . certification may ‘in the long run save time, energy, and
resources and help[ ] build a cooperative judicial federalism.’” United States v. Reese, 505 F.
App’x 733, 734 (10th Cir. 2012) (quoting Lehman Bros., 416 U.S. at 391) (alterations in original).
Plaintiff Smith’s insurance policy was issued by Defendant Exchange pre-Crutcher;
therefore, whether the New Mexico Supreme Court intended Crutcher to apply prospectively may
be determinative of an issue—if not dispositive of Plaintiff’s entire case—and no controlling New
Mexico appellate decision, constitutional provision, or statute provides the answer.
Without clear guidance from the New Mexico Supreme Court as to whether Crutcher
applies prospectively or retroactively, the District of New Mexico has already been flooded with
Crutcher-related litigation. By this Court’s calculations there are at least twelve Crutcher-related
cases pending in the District of New Mexico that involve policies issued pre-Crutcher—and the
undersigned judge has been assigned three of them. Thus, the resolution of the certified question
may be determinative of not only issues in this case, but also in numerous other cases. Moreover,
the question of whether a New Mexico Supreme Court decision applies prospectively or
retroactively is ultimately a question of New Mexico judicial policy, which “should be decided
when possible by state, not federal, courts.” Pino, 507 F.3d at 1236.
While this Court understands the New Mexico Supreme Court may be reluctant to accept
a question so soon after Crutcher, this Court respectfully seeks certification because certification
may “in the long run save time, energy, and resources and help[ ] build a cooperative judicial
federalism.” Reese, 505 F. App’x at 734 (citation omitted) (alterations in original).
Case 1:22-cv-00447-WJ-KK Document 24 Filed 11/21/22 Page 7 of 8
Names and Addresses of Counsel of Record:
On behalf of Plaintiff Joshua Smith:
Andrea D. Harris
Valle, O’Cleireachain, Zamora & Harris, P.C.
1805 Rio Grande Blvd NW,
Albuquerque, NM 87104
Corbin Hildebrandt, P.C.
Sycamore Square, Suite 2000
1400 Central Ave. S.E.
Albuquerque, NM 87106
Geoffrey R. Romero
Law Offices of Geoffrey R. Romero
4801 All Saints Road, NW
Albuquerque, NM 87120
2741 Indian School Rd. NE
Albuquerque, NM 87106
On behalf of Defendant Interinsurance Exchange of the Automobile Club:
Kevin P. Zimmerman
Baker & Hostetler LLP
200 Civic Center Drive
Columbus, OH 43215
Case 1:22-cv-00447-WJ-KK Document 24 Filed 11/21/22 Page 8 of 8
Baker & Hostetler LLP
127 Public Square
Cleveland, OH 44114-1214
Rodger L. Eckelberry
Baker & Hostetler LLP
200 Civic Center Drive
Columbus, OH 43215
Meena H. Allen
Allen Law Firm, LLC
6121 Indian School Rd. NE, Suite 230
Albuquerque, NM 87110
For the reasons discussed in this memorandum order and opinion, the Court sua sponte
certifies the above question to the New Mexico Supreme Court.
IT IS SO ORDERED.
WILLIAM P. JOHNSON
CHIEF UNITED STATES DISTRICT JUDGE
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