619 F.

2d 885

FARMERS ALLIANCE MUTUAL INSURANCE COMPANY,

Plaintiff-Appellee,
v.
Mary BAKKE, Johnny Bakke, Jo Lynn Wood, Karla Vigil and
Lawrence Vigil, Defendants-Appellants.
No. 79-1981.

United States Court of Appeals,

Tenth Circuit.
Submitted Feb. 14, 1980.
Decided April 30, 1980.

Stephen M. Williams of Shaffer, Butt, Thornton & Baehr, P. C.,

Albuquerque, N. M., for plaintiff-appellee.
Paul S. Cronin of Duhigg & Cronin, Albuquerque, N. M., for defendantsappellants Mary Bakke and Johnny Bakke.
Mark Klecan of Klecan & Roach, P. A., Albuquerque, N. M., for
defendants-appellants Karla Vigil and Lawrence Vigil.
Before BARRETT, DOYLE and McKAY, Circuit Judges.
BARRETT, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has
determined unanimously that oral argument would not be of material assistance
in the determination of this appeal. See: Fed.R.App.P. 34(a); Tenth Circuit R.
10(e). The cause is therefore ordered submitted without oral argument.

Mary Bakke, Johnny Bakke, Jo Lynn Wood, Karla Vigil, and Lawrence Vigil
(appellants) appeal from summary judgment granted to Farmers Alliance
Mutual Insurance Company (Farmers) in an action commenced pursuant to the
Federal Declaratory Judgments Act, 28 U.S.C. 2201-2202.

The facts are not in dispute. Farmers issued an insurance policy to Mary Bakke

The facts are not in dispute. Farmers issued an insurance policy to Mary Bakke
covering a 1973 Honda CL 350 motorcycle for the period November 18, 1975
through November 18, 1976. On February 26, 1976, during the policy period,
Jo Lynn Wood sustained personal injuries resulting from an intersection
collision between the insured motorcycle, on which she was a passenger, and an
automobile driven by Karla Vigil, and owned by Lawrence Vigil.

Wood filed an action in state court against the Vigils alleging that Karla Vigil's
negligent operation of the automobile caused the accident. The Vigils
answered, and set up a third-party complaint for indemnity and/or contribution
against Johnny A. Bakke. The third-party complaint alleged that Johnny A.
Bakke was the driver of the motorcycle involved in the collision; Johnny
Bakke's negligent operation of the motorcycle proximately caused injuries to Jo
Lynn Wood; and, as a result thereof, the Vigils were entitled to indemnity
and/or contribution for any damages awarded Wood on her complaint.

Following service of the third-party complaint, Farmers (the insuror of Mary

Bakke, Johnny's mother) filed this action for declaratory relief seeking a
judgment that it need not indemnify or defend Johnny A. Bakke as to any
claims arising out of the February 26, 1976 accident in which Wood was
injured.

On an agreed statement of facts, Farmers filed a motion for summary judgment

relying on the following provisions of the insurance contract issued to Mary
Bakke:

Coverage A Bodily Injury Liability; Coverage B Property Damage Liability. To

pay on behalf of the insured all sums which the insured shall become legally
obligated to pay as damages because of:

A. bodily injury, sickness or disease, including death resulting therefrom,

hereinafter called "bodily injury," sustained by any person;

B. injury to or destruction of property, including loss of use thereof, hereinafter

called "property damage";

10
caused
by accident and arising out of the ownership, maintenance or use of the
owned motorcycle and the company shall defend any suit alleging such bodily
injury or property damage and seeking damages which are payable under the terms
of this policy, even if any of the allegations of the suit are groundless, false or
fraudulent; . . .

11

Persons Insured.

12

(a) with respect to the insurance for bodily injury liability and for property
damage liability, the unqualified word "insured" includes the named insured
and if the named insured is an individual, his spouse if a resident of the same
household, and

13

(b) any other person using or legally responsible for the use of an insured
vehicle covered by this policy with the permission of the named insured, only if
such other person (1) has no liability insurance of his (her) own, either primary
or excess, or (2) is not included in "Persons Insured" or "Definitions of Insured"
in any other liability insurance policy, either primary or excess.

14

Exclusions. This policy does not apply under Part 1:

15

(c) to bodily injury to any person while on or getting on or alighting from the
insured vehicle;

(R., Vol. I, p. 5).

16
17

Appellants vigorously contested Farmers' motion for summary judgment

contending that: (1) the exclusionary provisions quoted do not apply under the
factual situation presented; (2) exclusion of passengers under the insuring
agreement is repugnant to the public policy of the State of New Mexico; and
(3) enforcement of the exclusionary provisions triggers uninsured motorist
coverage under the insuring agreement and the statutes of the State of New
Mexico.

18

Following extensive briefing by the parties, the District Court ruled:

19

The policy states in large red capital type on the declaration page that it does
not apply to bodily injury to riders and in the Exclusion (c) that the policy does
not apply to bodily injury to any person while on or getting on or alighting from
the insured vehicle. Inasmuch as the allegation of the complaint and the thirdparty complaint show clearly that Jo Lynn Wood was a passenger on the
motorcycle and as such specifically exempted from coverage by the policy
there is no duty to defend on the part of the plaintiff there being no assertion of
a claim within the terms of the policy.

20

There is some contention raised by defendants of applicability of the New

Mexico Financial Responsibility Act which I find are not tenable.

21

Therefore, summary judgment is granted to the plaintiffs.

(R., Vol. I, p. 49).

22
23

Thus, the sole issue on appeal is whether the District Court erred in granting
summary judgment to Farmers Alliance Mutual Insurance Company.

Exclusionary Provisions
24

It is axiomatic that the substantive law of the State of New Mexico applies with
respect to the issues involved in this federal declaratory relief action predicated
upon complete diversity of citizenship, and requisite amount in controversy.
Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188
(1938); Farmers Insurance Co., Inc. v. McClain, 603 F.2d 821 (10th Cir. 1979).
Unfortunately, the New Mexico Supreme Court has not ruled on the issues
presented. Accordingly, our decision on the substantive law issues presented
must be predicated on our interpretation of how the Supreme Court of New
Mexico would construe the law if faced with similar facts and issues. City of
Aurora, Colorado v. Bechtel Corp., 599 F.2d 382 (10th Cir. 1979). This
requires us to consider all resources available, including decisions of other
states, New Mexico and federal decisions, and the general weight and trend of
authority. Burgert v. Tietjens, 499 F.2d 1 (10th Cir. 1974). The resident District
Court's views on this question of New Mexico law, of course, carry
extraordinary force on this appeal because there are no controlling state
decisions providing clear precedent. Rasmussen Drilling, Inc. v. Kerr-McGee
Nuclear Corp., 571 F.2d 1144 (10th Cir. 1978), cert. denied, 439 U.S. 862, 99
S.Ct. 183, 58 L.Ed.2d 171 (1978).

25

In New Mexico, the "obligation of a liability insuror is contractual and is to be

determined by the terms of the policy". Safeco Insurance Co. of America, Inc.
v. McKenna, 90 N.M. 516, 565 P.2d 1033, 1037 (1977). The insuring
agreement must be construed to effect the intent of the parties. Cain v. National
Old Line Insurance Co., 85 N.M. 697, 516 P.2d 668 (1973). Whenever
possible, "the meaning of the contract must be ascertained from a consideration
of the written policy itself. Extrinsic evidence is not admissible to determine the
intent of the parties unless there is an uncertainty and ambiguity in the
contract." Atlas Assurance Co., Lt'd. v. General Builders, Inc., 93 N.M. 398,
600 P.2d 850, 852 (1979).

26

Exclusionary provisions in insuring agreements are enforceable so long as their

meaning is clear and they do not conflict "with the express language of a statute
(or) . . . with the legislative intent, absent explicit statutory expression." Chavez
v. State Farm Mutual Automobile Insurance Co., 87 N.M. 327, 533 P.2d 100,
102 (1975). If an ambiguity appears, however, its construction should be
resolved in favor of the insured. Mountain States Mutual Casualty Co. v.
Northeastern New Mexico Fair Assoc., 84 N.M. 779, 508 P.2d 588 (1973).
Thus, ambiguities in coverage are construed to afford coverage, Read v.
Western Farm Bureau Mutual Insurance Co., 90 N.M. 369, 563 P.2d 1162
(1977), while unclear exclusionary provisions are construed narrowly so as to
avoid non-coverage. King v. Travelers Insurance Co., 84 N.M. 550, 505 P.2d
1226 (1973).
27

The "Declarations" page of the insuring agreement provides in large, visible

red-type "THIS POLICY DOES NOT APPLY TO BODILY INJURY TO
RIDERS." (R., Vol. I, p. 4). The insuring agreement itself excludes "bodily
injury to any person while on or getting on or alighting from the insured
vehicle." (R., Vol. I, p. 5). The exclusionary provisions are clear and
unambiguous. Moreover, they are highly visible and calculated to afford
adequate notice to any purchaser. Inasmuch as it is uncontested that Jo Lynn
Wood was a passenger on the Bakke vehicle, the exclusionary provisions
apply. Based upon our consideration of the provisions contained in the four
corners of the contract, we hold that Farmers has no duty to defend or
indemnify Mary Bakke or Johnny A. Bakke in any action seeking damages as a
result of the subject collision. This court "will not make a contract of insurance,
but will only enforce the intent of the parties as manifested by the writing."
Horn v. Lawyers Title Insurance Corp., 89 N.M. 709, 557 P.2d 206, 208
(1976).

Public Policy Considerations

28

In determining whether the exclusionary clause is repugnant to the public

policy of the State of New Mexico, we must determine whether its application
would conflict with either the express language of a statute, or the legislative
intent of a particular statutory scheme. Chavez v. State Farm Mutual
Automobile Insurance Co., supra, 533 P.2d at 102. Appellants urge us to
declare the exclusion void and unenforceable based on its conflict with the
public policy underlying the enactment of the New Mexico Financial
Responsibility Act, N.M.Stat.Ann. 66-5-201, et seq. (1978 Comp.), and the
public policy rationales employed by the Supreme Court of New Mexico in its
decision holding the New Mexico guest statute (N.M.Stat.Ann. 64-24-1 (1953
Comp.)) unconstitutional. McGeehan v. Bunch, 88 N.M. 308, 540 P.2d 238
(1975).

29

We first discuss the contentions surrounding the applicability and public policy
announced in the enactment of the New Mexico Financial Responsibility Act.
The Act, by its own terms, applies only to individuals "who have been
convicted of or forfeited bail for certain offenses under motor vehicle laws or
who have failed to pay judgments or written settlement agreements upon causes
of aciton (action) arising out of ownership, maintenance or use of vehicles of a
type subject to registration under the laws of this state." 1 N.M.Stat.Ann. 66-5205 (1978 Comp.).

30

Here, it is admitted that the policy in question was not "certified or filed as
proof of financial responsibility under the New Mexico Financial
Responsibility Act by or on behalf of either Mary Bakke or Johnny Bakke." (R.,
Supp. Vol. I, p. 3). The singular fact that the insuring agreement contains a
"conformity clause" to the effect that when it is certified as proof of financial
responsibility, the requirements of the Financial Responsibility Act are
incorporated into the terms of the policy is of no moment here. In Larson v.
Occidental Fire and Casualty Co., 79 N.M. 562, 446 P.2d 210 (1968) the
Supreme Court stated:

31 Mexico has no general statutory provision making insurance compulsory in all

New
cases. The statute in force at the time of this accident pertaining to proof of financial
responsibility for the future, ch. 182, Laws 1955, applied only to drivers who had
had prior accidents and who would otherwise have been prohibited from continuing
to operate a motor vehicle. Farmers Ins. Exchange v. Ledesma, 214 F.2d 495 (10th
Cir. 1954) (construing predecessor provisions). A policy covering insurance for the
future pursuant to this act constituted proof of a driver's future financial
responsibility necessary to his continued operation of a vehicle. The owner or person
covered by the policy must have been brought within the scope of the statute by
prior accident before its provisions applied. (Citations omitted) Section 8 of the
policy in question, providing: "When this policy is certified as proof of financial
responsibility for the future under the provisions of the motor vehicle responsibility
law * * *," extends the coverage under the financial responsibility provisions of the
statute only after the driver has been involved in an accident for which he was
unable to respond in damages. Since no prior accident was alleged, the financial
responsibility provisions did not become effective and the territorial limitation
contained in the policy controls.
(79 N.M. 562, 446 P.2d 210 at p. 211) (Emphasis supplied).
32
33

By limiting the application of the Financial Responsibility Act to a certain class

of persons, in our view the legislature made a conscious choice to subject the
specific insuring provisions contained therein only to that class of persons. In

other words, insurance companies and their clients are free to contract at arm's
length without regard to provisions contained in the New Mexico Financial
Responsibility Act, so long as it does not apply to them and no other express
public policy considerations are involved.
34

The vast majority of cases support this view. Mooradian v. Canal Ins. Co., 272
Ala. 373, 130 So.2d 915 (1961); Aetna Casualty & Surety Co. v. Simpson, 228
Ark. 157, 306 S.W.2d 117 (1957); American Service Mutual Ins. Co. v. Parviz,
153 Colo. 490, 386 P.2d 982 (1963); Bankers & Shippers Ins. Co. v. Phoenix
Assur. Co., 210 So.2d 715 (Fla.1968); McCann v. Continental Casualty Co., 6
Ill.App.2d 527, 128 N.E.2d 624 (1955), aff'd 8 Ill.2d 476, 134 N.E.2d 302
(1956); Green v. State Farm Mutual Auto Ins. Co., 343 N.E.2d 828
(Ind.App.1976); Western Casualty & Surety Co. v. General Casualty Co., 200
N.W.2d 892 (Iowa 1972); Miller v. State Farm Mutual Auto Ins. Co., 204 Kan.
694, 466 P.2d 336 (1970); Travelers Ins. Co. v. Boyd, 312 Ky. 527, 228
S.W.2d 421 (1949); Johnson v. Universal Auto Ins. Assn., 124 So.2d 580
(La.App.1960); State Auto Ins. Assn. v. Kooiman, 143 F.Supp. 614
(D.S.D.1956) (Minnesota and South Dakota statutes); State Farm Mutual Auto
Ins. Co. v. Ward, 340 S.W.2d 635 (Mo.1960), but see Winterton v. Van Zandt,
351 S.W.2d 696 (Mo.1961); Lewis v. Mid-Century Ins. Co., 152 Mont. 328,
449 P.2d 679 (1968); Reserve Ins. Co. v. Aguilera, 181 Neb. 605, 150 N.W.2d
114, 24 A.L.R.3d 431 (1967); American Mutual Liability Ins. Co. v. Ocean
Accidental Guarantee Corp., 87 N.H. 374, 180 A. 249 (1935); Rasinski v.
Metropolitan Casualty Ins. Co., 117 N.J.L. 490, 189 A. 373 (1937); Letson v.
Sun Indemnity Co., 147 Misc. 690, 264 N.Y.S. 519 (1933), aff'd 241 App.Div.
629, 269 N.Y.S. 965 (1934), Moyer v. Aron, 175 Ohio St. 490, 196 N.E.2d 454
(1964); United States Fidelity & Guaranty Co. v. Walker, 329 P.2d 852
(Okl.1958); State Farm Mutual Auto Ins. Co. v. Cooper, 233 F.2d 500 (4th Cir.
1956) (South Carolina statute); United States Casualty Co. v. Brock, 345
S.W.2d 461 (Tex.Civ.App.1961) writ ref.; Holt v. State Farm Mutual Auto Ins.
Co., 486 S.W.2d 734 (Tenn.1972); State Farm Mutual Auto Ins. Co. v.
Arghyris, 189 Va. 913, 55 S.E.2d 16 (1949); Royse v. Boldt, 80 Wash.2d 44,
491 P.2d 644 (1971); Havlik v. Bittner, 272 Wis. 71, 74 N.W.2d 798 (1956).
Also noteworthy is an extensive annotation which is reported in 8 A.L.R.3d 388
(1966).

35

To date apparently only two jurisdictions, Arizona and California, have ruled
that voluntary insurance policies must conform to the state's financial
responsibility laws as a matter of public policy, even where the financial
responsibility law does not apply. Jenkins v. Mayflower Ins. Exchange, 93
Ariz. 287, 380 P.2d 145 (1963); Globe Indemnity Co. v. Universal
Underwriters Ins. Co., 201 Cal.App.2d 9, 20 Cal.Rptr. 73 (1962).

36

We hold that the exclusion in question is not repugnant to the provisions of the
New Mexico Financial Responsibility Act, specifically N.M.Stat.Ann. 66-5230(B)(2) (1978 Comp.), in that the policy here involved was not certified as
evidence of financial responsibility under the Act.2 Accord: Ennis v. Charter,
290 So.2d 96 (Fla.App.1974); See generally : Appleman, Insurance Law and
Practice (Buckley ed.), 4412 (1979).

37

Having held that the exclusion in question is not repugnant to the provisions of
the New Mexico Financial Responsibility Act, we now consider its viability in
light of the New Mexico Supreme Court's decision in McGeehan v. Bunch,
supra. In McGeehan, the Court held that the classifications created by the guest
statute, as between those passengers who are denied and those who are
permitted recovery against an operator of a vehicle in which they are riding for
negligently inflicted injuries, do not bear a rational relationship to the
legislative purposes underlying the enactment of the guest statute. In so
holding, the opinion placed strong emphasis on the development of widespread
availability of insurance to owners and operators of motor vehicles. In
particular, the Court stated:

38

The other line of reasoning supporting the hospitality rationale is that to sue
one's host for negligence is the epitome of ingratitude. If the doctrine of
preventing the ungrateful act of a negligence lawsuit against a hospitable host
ever had any rational basis, it has been worn away by changing circumstances.
When our guest statute was passed in 1935, it was evidently considered
inequitable to place the burden of negligently caused injury of nonpaying
guests upon the individual host. Today, this burden would in most cases no
longer fall upon the hospitable host, but on his insurance company and in turn
on the general motoring public. Liability insurance is widespread throughout
the State. The trend today is to require mandatory public liability insurance
coverage for all owners of motor vehicles. The Financial Responsibility Act,
64-24-42 et seq., N.M.S.A.1953 (2d Repl. Vol. 9, Pt. 2, 1972), also establishes a
policy for protection of the public involved in motor vehicle accidents. A
classification that may once have had a fair and substantial relation to the
objectives of the statute because of an existing factual setting, may lose its
relationship due to altered circumstances.

39 Brown (v. Merlo, 8 Cal.3d 855, 106 Cal.Rptr. 388, 506 P.2d 212) Court
"The
recognized that 'a classification which once was rational because of a given set of
circumstances may lose its rationality if the relevant factual premise is totally
altered.' The 'protection of hospitality' rationale was held to provide an insufficient
basis for the guest statute's classification. Citing the fact that nearly 85 percent of
automobile drivers carry liability insurance, the court found that there is no such

being as an ungrateful guest. '(T)here is simply no notion of "ingratitude" in suing

your host's insuror.' "
40 N.M. 308, 540 P.2d 238 at p. 241-242, quoting in part, Comment, Review of the
(88
Past, Preview of the Future: The Viability of Automobile Guest Statutes, 42
U.Cin.L.Rev. 709 (1973)).
41

Based on this language, the appellants urge that allowing an exclusion, such as
that involved in this case, would in effect undercut the Supreme Court's
rationale in declaring the guest statute unconstitutional in view of changed
circumstances. See: McGeehan v. Bunch, supra, 540 P.2d at pp. 245-246
(Oman, J., dissenting). Appellants' argument does have merit. It is our view,
however, that where the State of New Mexico, through its legislature, has
specifically adopted a motorist protection statute the New Mexico Financial
Responsibility Act, and has failed to make the provisions of that Act applicable
to all classes of operators, it has made a conscious choice, as a matter of public
policy, to allow insureds and their insurors to contract in any manner they wish
so long as it is not repugnant to express legislative enactment or its underlying
intent. Here the intent of the legislature, as we view it, was to mandate insuring
provisions only for those persons who come within the purview of the
Financial Responsibility Act.

*42* * the public policy of a state is for the legislature whose judgment as to the
wisdom, expediency or necessity of any given law is conclusive on the courts unless
the declared public policy runs counter to some specific constitutional objection.
Village of Deming v. Hosdreg Co., Inc., 62 N.M. 18, 303 P.2d 920, 930 (N.M.1956).
43
44

The strong arguments and reasons advanced by appellants should, we suggest,

be directed to the New Mexico legislature rather than the courts. In any event,
we adhere to our long standing rule that where the resident federal district court
determines what New Mexico law is, in the absence of controlling state court
authority, we shall accept such a conclusion, unless it is clearly erroneous.
Chafin v. Aetna Insurance Co., 550 F.2d 575 (10th Cir. 1976).

45

We hold that the exclusion employed in the insuring agreement before us is

valid only because the policy was not certified as evidence of financial
responsibility, and, as such, did not come under the provisions of the New
Mexico Financial Responsibility Act.

Uninsured Motorist Claims

46

Certain of the appellants also argue that the "uninsured motorist provisions of

46

Certain of the appellants also argue that the "uninsured motorist provisions of
this policy come into play if the exclusionary clause in a liability policy is held
valid." (Brief of appellants Vigil at p. 9). In our view, the uninsured motorist
provisions here were designed as first-party insurance, rather than third-party
insurance. Accordingly, Jo Lynn Wood, as a third-party, cannot claim against
the Bakkes' uninsured motorist coverage.

47

The avowed purpose of the (uninsured motorist) statute is to encourage selfprotection against the financially irresponsible motorist through voluntary
insurance. To make this realistically possible, it requires liability insurance
companies to offer their clients this protection in at least the minimum amounts
established by the financial responsibility law. The policy required under the
financial responsibility law is for the protection of the public generally, while
uninsured motorist insurance is for individuals who have the foresight to
protect themselves against a financially irresponsible motorist. The statute was
clearly designed to enable the purchaser of the latter type of insurance to assure
himself and members of his household of not less than the minimum protection
provided for the general public in the financial responsibility law. The
uninsured motorist policy is personal to the insured. This is what he bargained
for, and one which he was encouraged to purchase by the legislature.

48
Palisbo
v. Hawaii Insurance and Guaranty Co., Ltd., 57 Haw. 10, 547 P.2d 1350,
1354 (1976).
49

WE AFFIRM.

There is no suggestion that the Bakkes fall within the terms of the New Mexico
Financial Responsibility Act

We may well have been forced to reach a different conclusion had this policy
been certified as evidence of financial responsibility under the New Mexico
Motor Vehicle Financial Responsibility law. See: Makris v. State Farm Mut.
Auto. Ins. Co., 267 So.2d 105 (Fla.App.1972); Hibdon v. Cas. Corp. of
America, Inc., 504 P.2d 878 (Okl.App.1972). Similarly, we do not decide
whether the exclusion would be valid in view of the New Mexico uninsured
motorist provisions, N.M.Stat.Ann. 66-5-301 (1978 Comp.), if applied to the
named insured involved in an accident with an uninsured motorist. Chavez v.
State Farm Mut. Auto. Ins. Co., supra