UM/UIM Demand Letter - New Mexico

UM/UIM (UNINSURED/UNDERINSURED MOTORIST) DEMAND LETTER

State of New Mexico

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER NMRA 11-408 AND FED. R. EVID. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED — ARTICLE NO. [TRACKING_NUMBER]
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[UM_UIM_CLAIMS_DEPARTMENT_ADDRESS]
[CITY], [STATE] [ZIP]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]
Claim Representative ID/License No.: [ADJUSTER_LICENSE_NUMBER]

Re: FORMAL UM/UIM POLICY LIMITS DEMAND — NEW MEXICO LAW

Dear [ADJUSTER_NAME]:

I. INTRODUCTION AND FORMAL DEMAND

This firm represents [CLIENT_NAME] ("our client") in connection with a claim for [uninsured/underinsured] motorist benefits under your policy No. [POLICY_NUMBER] arising from a motor vehicle collision on [__/__/____]. This letter constitutes a formal demand for immediate payment of the full UM/UIM policy limits of $[UM_UIM_LIMITS].

New Mexico law imposes mandatory UM/UIM coverage on every automobile liability policy issued in this state. NMSA 1978 § 66-5-301. Your insured purchased this coverage — or coverage was imposed by operation of law due to an invalid rejection — specifically to protect against situations like this one. Our client's compensable damages vastly exceed available coverage. [CARRIER_SHORT_NAME] must now honor the policy it sold.

II. NEW MEXICO UM/UIM LAW — CONTROLLING LEGAL FRAMEWORK

A. Mandatory Coverage Under NMSA 1978 § 66-5-301

New Mexico requires every automobile liability insurance policy issued in this state to include UM/UIM coverage in amounts at least equal to the mandatory liability minimums: $25,000 per person / $50,000 per occurrence for bodily injury, and $10,000 for property damage. NMSA 1978 §§ 66-5-301, 66-5-205.

UM/UIM coverage may be rejected only through a knowing and intelligent written rejection containing all required disclosures, including the premium cost for each available coverage tier. 13.12.3 NMAC; NMSA 1978 § 66-5-301(B). An invalid rejection means UM/UIM coverage is imposed by law equal to the policy's liability limits. Any purported rejection that fails to include per-vehicle premium information is invalid under NM OSI Bulletin 2025-013 (issued following Kileen v. Didio, 2025-NMSC).

B. Stacking of UM/UIM Coverage

New Mexico affirmatively permits stacking of UM/UIM coverage across multiple vehicles on the same policy. Where a rejection of stacking was not properly executed under NMSA 1978 § 66-5-301, stacking applies as a matter of law, and coverage equals the per-vehicle limit multiplied by the number of insured vehicles.

Example: A policy with $25,000 UM/UIM per vehicle covering four vehicles provides stacked coverage of $100,000.

An insurer seeking to defeat stacking must demonstrate a valid, written waiver of stacking rights from the insured. An insurer's failure to inform its insured of the availability of stacked coverage renders any purported waiver ineffective. Salas v. Mountain States Mut. Cas. Co., 2009-NMSC-005, ¶¶ 22–28.

C. Coverage Analysis — This Policy

D. Coverage Trigger

For Uninsured Motorist (UM) Claims — Check All That Apply:

The tortfeasor qualifies as an "uninsured motorist" under NMSA 1978 § 66-5-301 because:

☐ The tortfeasor carried no automobile liability insurance at the time of the collision
☐ The tortfeasor's insurer has denied coverage or reserved rights
☐ The tortfeasor's insurer is insolvent or in receivership
☐ The tortfeasor was a hit-and-run driver who cannot be identified
☐ The tortfeasor's policy limits are below New Mexico's mandatory minimums ($25,000/$50,000)
☐ [________________________________]

For Underinsured Motorist (UIM) Claims — Check All That Apply:

The tortfeasor qualifies as an "underinsured motorist" because:

☐ The tortfeasor's liability limits of $[TORTFEASOR_LIMITS] are insufficient to compensate our client for all damages
☐ Our client has exhausted the tortfeasor's available liability limits
☐ Our client has reached an agreement with the tortfeasor's carrier and hereby requests consent to settle (see Section VI below)
☐ [________________________________]

E. New Mexico Pure Comparative Fault — NMSA 1978 § 41-3A-1

New Mexico adopted pure comparative fault. Under NMSA 1978 § 41-3A-1, a plaintiff may recover regardless of their percentage of fault — even if 99% at fault — reduced proportionally. Several (not joint) liability applies to multiple tortfeasors. Our client's degree of fault, if any, does not bar recovery but only reduces it proportionally. Any allocation of fault to our client must be based on specific, articulable evidence — not conjecture.

III. THE COLLISION AND LIABILITY

A. Facts of the Collision

On [__/__/____], at approximately [____] [a.m./p.m.], our client was [DESCRIBE_CLIENT_ACTIVITY — e.g., operating a motor vehicle traveling northbound on] [STREET/HIGHWAY NAME] [near/at the intersection of] [CROSS_STREET] in [CITY], New Mexico.

[DETAILED_FACTUAL_NARRATIVE — describe direction of travel, road conditions, weather, lighting, speed limits, what each party was doing, point of impact, etc.]

B. Evidence of Tortfeasor's Negligence

The tortfeasor, [TORTFEASOR_NAME], was negligent under New Mexico law in the following specific respects:

☐ Failure to maintain proper lookout — NMSA 1978 § 66-7-[____]
☐ Failure to yield right-of-way — NMSA 1978 § 66-7-[____]
☐ Following too closely — NMSA 1978 § 66-7-318
☐ Excessive speed / speed unreasonable for conditions — NMSA 1978 § 66-7-301
☐ Distracted driving (cell phone/texting) — NMSA 1978 § 66-7-374
☐ Running red light or stop sign — NMSA 1978 § 66-7-[____]
☐ Improper lane change — NMSA 1978 § 66-7-317
☐ Driving under the influence — NMSA 1978 § 66-8-102
☐ [________________________________]

C. Evidentiary Support

1. Traffic Crash Report
[POLICE_DEPARTMENT / NM State Police] Crash Report No. [REPORT_NUMBER], dated [__/__/____]. Officer [OFFICER_NAME] found [SUMMARY_OF_FINDINGS / CITE CITATION ISSUED IF ANY].

2. Witness Statements
[NUMBER] independent witnesses observed the collision and have provided statements consistent with our client's account. Witnesses include:

• [WITNESS_1_NAME], [BRIEF_DESCRIPTION]
• [WITNESS_2_NAME], [BRIEF_DESCRIPTION]

3. Physical and Forensic Evidence
[DESCRIBE: Point of impact, skid/yaw marks, debris field, vehicle damage patterns, photographs, dashcam footage, surveillance video, etc.]

4. Accident Reconstruction (if applicable)
[EXPERT_NAME], a certified accident reconstructionist, has concluded [SUMMARY_OF_OPINION] based on [METHODOLOGY].

D. Comparative Fault Analysis

Under New Mexico's pure comparative fault doctrine (NMSA 1978 § 41-3A-1), our client bears [no / minimal — [____]%] comparative fault for this collision because [EXPLAIN_BASIS]. The tortfeasor was [entirely / primarily] responsible.

IV. OUR CLIENT'S INJURIES AND MEDICAL TREATMENT

A. Summary of Injuries

As a direct and proximate result of this collision, our client sustained the following injuries:

Primary Diagnoses:

• [PRIMARY_INJURY_1 — e.g., C5-C6 disc herniation with radiculopathy]
• [PRIMARY_INJURY_2 — e.g., traumatic brain injury, Glasgow Coma Scale score [____]]
• [PRIMARY_INJURY_3]

Secondary/Consequential Diagnoses:

• [SECONDARY_INJURY_1]
• [SECONDARY_INJURY_2]

B. Medical Treatment Timeline

C. Current Condition and Prognosis

[DESCRIBE_CURRENT_CONDITION, FUNCTIONAL_LIMITATIONS, AND PROGNOSIS AS OF DATE OF THIS LETTER]

Treating physician [DR_NAME], [SPECIALTY], at [FACILITY/PRACTICE], opines that our client [HAS REACHED/HAS NOT YET REACHED] maximum medical improvement and that [DESCRIBE_PROGNOSIS_AND_FUTURE_CARE_NEEDS].

D. Permanent Impairment Ratings

Our client has sustained permanent impairment as follows:

V. DAMAGES

A. Past Medical Expenses

Note: New Mexico follows the reasonable value standard for medical damages. The full billed amount, not merely amounts paid by a collateral source, is presented.

B. Future Medical Expenses (Present Value)

Based on the life care plan prepared by [LIFE_CARE_PLANNER_NAME], our client will require the following future medical care:

C. Past Lost Income / Earning Capacity

Our client was employed as [OCCUPATION] earning $[WAGE_RATE] [per hour/per year] at [EMPLOYER_NAME].

D. Future Lost Earning Capacity (Present Value)

Vocational expert [EXPERT_NAME] opines that our client has sustained a permanent reduction in earning capacity of $[ANNUAL_LOSS] per year, with a total present value of $[FUTURE_EARNING_CAPACITY_PV].

E. Pain, Suffering, and Non-Economic Damages

[DETAILED_DESCRIPTION_OF_PAIN_SUFFERING, EMOTIONAL_DISTRESS, LOSS_OF_ENJOYMENT_OF_LIFE, DISFIGUREMENT, LOSS_OF_CONSORTIUM]

New Mexico places no cap on non-economic damages in personal injury actions. Our client's non-economic damages are valued at $[NON_ECONOMIC_AMOUNT].

F. Damages Summary

VI. TORTFEASOR'S LIABILITY COVERAGE — CONSENT TO SETTLE

A. Status of Liability Settlement

We [HAVE REACHED / ARE PURSUING] a settlement with the tortfeasor's liability carrier, [TORTFEASOR_CARRIER], for the tortfeasor's policy limits of $[TORTFEASOR_LIMITS].

B. Request for Consent to Settle and Subrogation Protection

Under Salas v. Mountain States Mut. Cas. Co., 2009-NMSC-005, and the policy's consent-to-settle provisions, [CARRIER_SHORT_NAME] has an affirmative duty to timely disclose the terms of any consent-to-settle requirement and to cooperate in protecting your insured's interests. Failure to disclose the consent-to-settle provision or its requirements, or unreasonable withholding of consent, may estop [CARRIER_SHORT_NAME] from enforcing that provision.

We hereby formally request [CARRIER_SHORT_NAME]'s written consent to settle with [TORTFEASOR_CARRIER] for $[TORTFEASOR_LIMITS] within [____] days of this letter.

Upon receiving consent or upon exhaustion of the tortfeasor's limits, UIM coverage is triggered. [CARRIER_SHORT_NAME] may protect its subrogation rights by advancing the UIM limits and pursuing its own claim against the tortfeasor.

VII. CALCULATION OF UIM BENEFITS DUE

A. UIM Offset Calculation

New Mexico uses a policy limits offset (not a "receipt" offset) to calculate UIM benefits: UIM benefits are available when the tortfeasor's policy limits are less than the insured's UIM limits, not merely when the tortfeasor's limits are less than the total damages.

B. Full Policy Limits Demand

We hereby formally demand immediate payment of the full UM/UIM policy limits of $[UM_UIM_LIMITS].

Our client's total compensable damages of $[TOTAL_DAMAGES] vastly exceed the combined coverage available from all sources. This is a clear policy limits case. Refusal to tender policy limits exposes [CARRIER_SHORT_NAME] to bad faith liability under New Mexico law.

VIII. BAD FAITH WARNING — NEW MEXICO STATUTORY AND COMMON LAW DUTIES

[CARRIER_SHORT_NAME] owes its own insured — [CLIENT_NAME] — the same good faith and fair dealing that it owes any party. UM/UIM claims are first-party claims subject to New Mexico's full arsenal of bad faith remedies.

A. Common Law Bad Faith — Sloan v. State Farm

The New Mexico Supreme Court has established that bad faith in a first-party context occurs when an insurer makes a frivolous or unfounded refusal to pay a claim. Sloan v. State Farm Mut. Auto. Ins. Co., 2004-NMSC-004, ¶ 19, 135 N.M. 106, 85 P.3d 230. A claim is "fairly debatable" only when reasonable minds could differ as to the insurer's obligation; a claim is not "fairly debatable" merely because the insurer chooses to dispute it. The burden is on the insurer to identify a legitimate basis for non-payment.

B. Statutory Bad Faith — NMSA 1978 §§ 59A-16-20 and 59A-16-30

NMSA 1978 § 59A-16-20 prohibits specific unfair claims practices, including:

• (A) Misrepresenting pertinent facts or policy provisions relating to coverages at issue
• (B) Failing to acknowledge and act reasonably promptly upon communications with respect to claims
• (C) Failing to adopt and implement reasonable standards for the prompt investigation of claims
• (D) Refusing to pay claims without conducting a reasonable investigation
• (E) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear
• (F) Failing to settle all catastrophic claims within ninety (90) days after assignment of a catastrophic claim number
• (G) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than amounts ultimately recovered
• (H) Attempting to settle a claim for less than the amount to which a reasonable person would have believed the insured was entitled

NMSA 1978 § 59A-16-30 provides a private right of action — directly enforceable by our client — to recover actual damages (including consequential damages and emotional distress), plus attorney's fees where the insurer willfully engaged in the violation. Unlike most states, New Mexico gives individual insureds the private right to sue for unfair claims practices without going through a regulatory proceeding.

C. Punitive Damages — No Statutory Cap in New Mexico

New Mexico imposes no statutory cap on punitive damages in bad faith insurance cases. Punitive damages are available upon a showing that the insurer's conduct was reckless, wanton, malicious, or reflected willful indifference to the insured's rights. Sloan, 2004-NMSC-004, ¶¶ 30–35. A $36 million verdict in a Santa Fe insurance bad faith case in 2023 illustrates what New Mexico juries will award when an insurer treats its policyholders inequitably.

D. Prejudgment Interest — NMSA 1978 § 56-8-4

In bad faith cases and cases involving tortious conduct, prejudgment interest accrues at 15% per year under NMSA 1978 § 56-8-4(B). This rate — among the highest in the nation — begins to accrue from the date the claim should have been paid. On a $[TOTAL_DAMAGES] case, each year of unnecessary delay costs [CARRIER_SHORT_NAME] approximately $[15_PCT_OF_TOTAL] in prejudgment interest alone.

IX. ARBITRATION NOTICE

The policy [☐ CONTAINS / ☐ DOES NOT CONTAIN] an arbitration clause for UM/UIM disputes.

[IF POLICY CONTAINS ARBITRATION CLAUSE:]
Under the policy's arbitration provisions, disputes concerning the amount of UM/UIM benefits are subject to binding arbitration. If [CARRIER_SHORT_NAME] fails to accept this demand within the deadline below, consider this letter as formal notice of our intent to demand arbitration under [POLICY_SECTION / NMRA Rule / AAA Rules] as applicable.

Proposed Arbitrator for our client: [ARBITRATOR_NAME / TO BE DESIGNATED]

X. DEMAND DEADLINE AND CONSEQUENCES OF NON-RESPONSE

Deadline

THIS DEMAND EXPIRES AT 5:00 P.M. MOUNTAIN TIME ON [__/__/____].

This deadline is meaningful. After expiration, this demand will be withdrawn and our client will pursue all available remedies in New Mexico courts without limitation.

Consequences of Failure to Tender Policy Limits

If [CARRIER_SHORT_NAME] fails to tender the full policy limits of $[UM_UIM_LIMITS] by the deadline:

1. Suit will be filed in [BERNALILLO COUNTY / ______ COUNTY] District Court, seeking:
   - All UM/UIM policy benefits
   - Statutory damages under NMSA 1978 § 59A-16-30
   - Consequential damages for bad faith
   - Emotional distress damages
   - Punitive damages (no cap under New Mexico law)
   - Attorney's fees (upon proof of willful violation — § 59A-16-30)
   - Prejudgment interest at 15% per year — NMSA 1978 § 56-8-4

2. A complaint will be filed with:
   - New Mexico Office of the Superintendent of Insurance (OSI)
   1120 Paseo de Peralta, Santa Fe, NM 87501
   Mailing Address: P.O. Box 1689, Santa Fe, NM 87504-1689
   Phone: (505) 827-4601 | Online: osi.state.nm.us

3. Arbitration will be formally demanded (if policy contains arbitration clause)

XI. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal notice to [CARRIER_SHORT_NAME] to immediately preserve all documents and electronically stored information (ESI) related to this claim, including:

☐ Complete claim file (all versions, drafts, and internal versions)
☐ All adjuster notes, activity logs, diaries, and contact records
☐ All internal communications regarding this claim (email, chat, memoranda)
☐ Reserve logs and all reserve change documentation with reasons
☐ Claim handling guidelines, manuals, and training materials
☐ Supervisor and management review notes and approvals
☐ All expert reports, evaluations, and recorded statements
☐ Quality assurance, file review, and audit documentation
☐ All correspondence to/from the insured and counsel
☐ ISO ClaimSearch and NICB inquiry records

Destruction of any of the above after receipt of this letter may constitute spoliation and subject [CARRIER_SHORT_NAME] to adverse inferences and sanctions.

XII. CONCLUSION

[CLIENT_NAME] has paid premiums for UM/UIM coverage under New Mexico law. [CLIENT_NAME] was injured through the fault of a motorist who [lacked / carried insufficient] insurance. This is precisely the risk for which UM/UIM coverage exists. The liability is clear, the injuries are severe, and the damages vastly exceed the available limits. [CARRIER_SHORT_NAME] should do right by its own insured.

We remain available to discuss this matter. Please direct all communications to:

Respectfully submitted,

[LAW_FIRM_NAME]

By: ___________________________________
[ATTORNEY_NAME]
New Mexico Bar No. [BAR_NUMBER]
[STREET_ADDRESS]
[CITY], NM [ZIP]
Tel: ([____]) [____]-[________]
Fax: ([____]) [____]-[________]
Email: [________________________________]

Counsel for [CLIENT_NAME]

ENCLOSURES:

1. Policy declarations page
2. UM/UIM coverage endorsement and rejection form (if any)
3. Stacking waiver (if any) — [CARRIER_SHORT_NAME] bears the burden of proving a valid waiver
4. Traffic crash report — [AGENCY] Report No. [NUMBER]
5. Medical records and bills (itemized)
6. Photographs of vehicles, scene, and injuries
7. Permanent impairment rating report — Dr. [NAME]
8. Life care plan — [PLANNER_NAME]
9. Lost earnings documentation and vocational opinion
10. Expert accident reconstruction report (if applicable)

CC:

• [CLIENT_NAME] (file copy)
• [TORTFEASOR_CARRIER] (re: consent to settle with tortfeasor)

NEW MEXICO UM/UIM LAW QUICK REFERENCE

SOURCES AND REFERENCES

• NMSA 1978 § 66-5-301 (UM/UIM): https://law.justia.com/codes/new-mexico/chapter-66/article-5/part-4/section-66-5-301/
• NMSA 1978 § 59A-16-20 (Unfair Claims Practices): https://law.justia.com/codes/new-mexico/chapter-59a/article-16/section-59a-16-20/
• NMSA 1978 § 59A-16-30 (Private Right of Action): https://law.justia.com/codes/new-mexico/chapter-59a/article-16/section-59a-16-30/
• NMSA 1978 § 41-3A-1 (Several Liability): https://law.justia.com/codes/new-mexico/chapter-41/article-3a/section-41-3a-1/
• NMSA 1978 § 56-8-4 (Prejudgment Interest): https://law.justia.com/codes/new-mexico/chapter-56/article-8/section-56-8-4/
• Sloan v. State Farm Mut. Auto. Ins. Co., 2004-NMSC-004: https://law.justia.com/cases/new-mexico/supreme-court/2004/953c.html
• Salas v. Mountain States Mut. Cas. Co., NMSC (2009): https://caselaw.findlaw.com/nm-supreme-court/1218890.html
• NM OSI Bulletin 2025-013 (Per-Vehicle UM/UIM Offer): https://www.osi.state.nm.us/en/news/bulletin-2025-013/
• NM UM/UIM Law Overview: https://lawforpersonalinjury.com/the-new-mexico-uninsured-motorist-act
• FORC Article — NM Illusory Minimum UM/UIM Coverage: https://forc.org/Public/Public/Journals/2025/Articles/Summer/Vol36Ed2Article1.aspx
• NM Office of Superintendent of Insurance: https://www.osi.state.nm.us