Liberty Mutual total-loss offers in New Mexico: how the appraisal clause works

New Mexico regulates first-party automobile total losses primarily through the unfair claims practices section of the Insurance Code, NMSA 1978 § 59A-16-20, which lists the prohibited practices, paired with NMSA 1978 § 59A-16-30, which gives any person covered by Article 16 who has suffered damages as a result of a violation of that article by an insurer or agent a right of action in district court to recover actual damages. NMSA 1978 § 59A-16-20 prohibits practices with respect to claims, by an insurer or other person, that are knowingly committed or performed with such frequency as to indicate a general business practice, including: A. misrepresenting to insureds pertinent facts or policy provisions relating to coverages at issue; B. failing to acknowledge and act reasonably promptly upon communications with respect to claims from insureds arising under policies; C. failing to adopt and implement reasonable standards for the prompt investigation and processing of insureds' claims arising under policies; D. failing to affirm or deny coverage of claims of insureds within a reasonable time after proof of loss requirements under the policy have been completed and submitted by the insured; E. not attempting in good faith to effectuate prompt, fair and equitable settlements of an insured's claims in which liability has become reasonably clear; F. failing to settle all catastrophic claims within a ninety-day period after the assignment of a catastrophic claim number when a catastrophic loss has been declared; G. compelling insureds to institute litigation to recover amounts due under policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds when such insureds have made claims for amounts reasonably similar to amounts ultimately recovered; H. attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed the insured was entitled by reference to written or printed advertising material accompanying or made part of an application; N. failing to promptly provide an insured a reasonable explanation of the basis relied on in the policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement. In Hovet v. Allstate Insurance Co., 2004-NMSC-010, 135 N.M. 397, 89 P.3d 69, the New Mexico Supreme Court held that Article 16 gives the victim of an automobile accident a direct right of action against the at-fault driver's automobile liability insurer when the insurer fails to make good-faith efforts, as Subsection E defines them, to settle a liability claim. The court set preconditions: the holding covers the liability insurance the Mandatory Financial Responsibility Act requires; the action may be filed only after the underlying negligence case ends with a judicial determination of the insured's fault and the damages; the claimant may not sue the insured and the insurer in the same lawsuit; and a claimant who settles without that determination waives the claim. In Thayer v. State Farm Mutual Automobile Insurance Co., 2023-NMCA-090, an underinsured-motorist case whose facts the Court of Appeals called a matter of first impression, the court held that an insurer that receives notice of its insured's proposed settlement with the tortfeasor but fails to say within a reasonable time whether it grants or withholds consent may have waived its right to rely on the consent-to-settle clause. NMSA 1978 § 66-1-4.16(C) defines a "salvage vehicle" as a vehicle, other than a nonrepairable vehicle, damaged (excluding hail damage, under the Taxation and Revenue Department's rules) to the extent that the owner, leasing company, financial institution or insurer considers it uneconomical to repair and that is not then repaired by or for its owner, or a vehicle determined to be uneconomical to repair for which an insurer makes a total loss payment, whether or not it is later repaired, if the insurer obtained the claimant's agreement to the settlement amount and told the claimant the title must be branded. The definition sets no repair-cost percentage.