The provision is valid and enforceable under California law. In Shope v. State Farm Insurance Co., 1996–NMSC–052, 122 N.M. 398, 925 P.2d 515, our Supreme Court held that an anti-stacking provision valid in another state was a question of contract interpretation governed by the law of the other state and not a matter of fundamental interests so as to require application of New Mexico public policy. This case is governed by Shope, and we affirm the ruling of the district court dismissing the claim for additional coverage.
The district court granted State Farm's motion for summary judgment and denied Saveraid's cross-motion. First, it denied her request to apply New Mexico law to the anti-stacking provisions, explaining that the Iowa provision was fully enforceable in New Mexico under Shope v. State Farm Ins. Co., 925 P.2d 515 (N.M. 1996). Second, the court declined to reform her Towed Vehicle policy's UIM coverage limits because, based on the payments Saveraid had received under her policies, it concluded that applying Iowa law did not conflict with fundamental principles of justice in New Mexico.
While New Mexico has not specifically addressed the scope of interpretation as opposed to construction, New Mexico courts appear to use the words interchangeably. See, e.g., Shope v. State Farm Ins. Co., 122 N.M. 398, 400, 925 P.2d 515, 517 (N.M. 1996) (courts interpretation of insurance contract included an analysis of states public policy with respect to stacking of uninsured motorist benefits); Crow v. Capitol Bankers Life Ins. Co., 119 N.M. 452, 456, 891 P.2d 1206, 1210 (N.M. 1995); Rodriguez v. Windsor Ins. Co., 118 N.M. 127, 133, 879 P.2d 759, 765 (N.M. 1994). The Tenth Circuit has also employed the terms synonymously.
In New Mexico, courts will apply the law of the state where the contract was made or executed. See O'Toole v. Northrop Grumman Corp., 305 F.3d 1222, 1225 (10th Cir. 2002) (citing Shope v. State Farm Ins. Co., 925 P.2d 515, 516, 517 (N.M. 1996)); Sheppard v. Allstate Ins. Co., 21 F.3d 1010 (10th Cir. 1994) (citing State Farm Mut. Ins. Co. v. Conyers, 784 P.2d 986 (N.M. 1989)). Also referred to as lex loci contractus, this rule holds that a contract is governed in the place where the last act necessary for its consummation is formed, see Conyers, 784 P.2d at 991 (citing Pound v. Ins. Co. of N. Am., 439 F.2d 1059, 1062 (10th Cir. 1971)), which is often the place where the last signature is affixed to the contract, id. (citing Brashar v. Mobil Oil Corp., 626 F. Supp. 434, 436 (D.N.M. 1984)).
See State Farm Mut. Auto. Ins. Co. v. Ballard, 2002-NMSC-030, 54 P.3d 537, 539. "To overcome the rule favoring the place where a contract is executed, there must be a countervailing interest that is fundamental and separate from general policies of contract interpretation." Shope v. State Farm Ins. Co., 1996-NMSC-052, ¶ 9, 925 P.2d 515, 517. Application of the rule must result in a violation of "fundamental principles of justice" before applying New Mexico law rather than the law of the jurisdiction where the contract was signed.
In Shope v. State Farm Ins. Co., the New Mexico Supreme Court addressed stacking of insurance coverage, which was specifically precluded under the insurance contract in accordance with Virginia law, where the policy was purchased. 1996-NMSC-052, ¶¶ 3, 6, 122 N.M. 398. The Supreme Court explained that, "[w]hile New Mexico public policy does favor the stacking of coverage in underinsured motorist cases, our rationale in establishing this policy did not concern fundamental principles of justice, but focused on the expectations of the insured."
In general, the New Mexico choice of law rules interpret contracts according to the laws of the place where the final act necessary to the formation of the contract occurred, also known as lex loci contractus. Shope v. State Farm Ins. Co., 122 N.M. 398, 401, 925 P.2d 515, 518 (1996); State Farm Mutual Insurance Co. v. Conyers, 109 N.M. 243, 247, 784 P.2d 986, 990 (1989); Eichel v. Goode, 101 N.M. 246, 250, 680 P.2d 627, 631 (Ct.App. 1984). However, when the conflict of laws rules lead to the law of a state whose law differs from that of the forum or when the parties have chosen a law different from the forum, the rule is that the forum may decline to apply the out-of-state law if it offends New Mexico public policy.
{17} Defendants argue and we agree that, as an agreement was formed in Texas, “allowing Flemma to escape his obligations under the agreement simply because he was working in New Mexico when his claim arose would be inconsistent with contractual expectations of the parties[.]” See Shope v. State Farm Ins. Co., 1996–NMSC–052, ¶ 7, 122 N.M. 398, 925 P.2d 515 (stating that “as Virginia residents ..., [the plaintiffs] should have expected that the laws of Virginia would be applied to their various transactions”). Moreover, as the plain language of the Program states, once the parties agreed to be bound by the Program, they intended to be bound by their agreement at all times during and after the employment relationship.
According to the doctrine of lex loci contractus, New Mexico's choice-of-law rule, the law of the place where an insurance contract is executed controls the terms of the contract. Shope v. State Farm Ins. Co., 122 N.M. 398, 400 (1996). However, there is an exception: a New Mexico court will refrain from applying the law of a different state if doing so would violate a "fundamental principle of justice" under New Mexico law.
Wilkeson v. State Farm Mut. Auto. Ins. Co. , 2014-NMCA-077, ¶ 5, 329 P.3d 749, 750. "[T]he policy of New Mexico is to interpret insurance contracts according to the law of the place where the contract was executed." Shope v. State Farm Ins. Co. , 1996-NMSC-052, ¶ 9, 122 N.M. 398, 925 P.2d 515, 517. The policy was executed in Texas.