Off-Highway Motor Vehicles Are Not Subject to the Mandatory Financial Responsibility Act

On October 25, 2022, the New Mexico Court of Appeals held in Castillo v. Allstate Property and Casualty Insurance Company, 2022-NMCA-____ (No. A-1-CA-39107, filed Oct. 25, 2022) that a Polaris Ranger RZR, an all-terrain vehicle, was an off-highway motor vehicle that was not subject to the New Mexico Mandatory Financial Responsibility Act (“MFRA”) and, accordingly, the insurer was not required to offer uninsured/underinsured (UM/UIM) coverage in an off-road vehicle policy for the RZR.  Castillo was in a motor-vehicle accident in which she sustained injuries.  An arbitration panel awarded Castillo $425,000.  Castillo had an auto policy that provided for $300,000 of available stacked UIM coverage.  She claimed she was actually entitled to $400,000 of stacked UIM coverage because she also had an off-road vehicle policy for her Polaris RZR, for which Castillo argued that Allstate was required to offer her UIM coverage under New Mexico law.  The Court of Appeals disagreed and affirmed the holding of the District Court, which found that the RZR off-road policy was not required to offer UIM coverage.  The Court of Appeals emphasized, “because Castillo’s RZR is primarily intended for off-road use and is not licensed or equipped for on-road use, it is a ‘motor vehicle operated upon a highway only for the purpose of crossing such highway from one property to another’ for the purposes of the MFRA . . . . and as such, Allstate was not required to offer UM/UIM coverage on the policy insuring Castillo’s RZR.”  Id. at *11-12.

Castillo further argued that Allstate was not entitled to an offset for the amount that Castillo recovered from the tortfeasor who caused her accident.  The Court of Appeals disagreed, affirming the District Court’s reduction of the arbitration award to the available UIM limits of the Allstate auto policy, less the amount that Castillo recovered from the tortfeasor.  The Court of Appeals stated, “in New Mexico, an insurer may offset its claim payment by the amount of liability proceeds actually received by the insured from the tortfeasor.”  Id. at *13 (citing Manzanares v. Allstate Ins. Co., 2006-NMCA-104 and Farmers Ins. Co. v. Sandoval, 2011-NMCA-051).  Accordingly, the Court of Appeals agreed that the arbitration panel’s award exceeded the available coverage and that the District Court did not err in modifying the award to total her available limits of coverage, reduced by the amount Castillo received from the tortfeasor.

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