August 16, 2010 – Jesus Molina and Maria Anita Molina v. Allstate Indemnity Company, No. 28,536

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: ___________
Filing Date: 	August 16, 2010
NO. 28,536
JESUS MOLINA and
MARIA ANITA MOLINA,
Plaintiffs-Appellants,
v.
ALLSTATE INDEMNITY COMPANY,
an Illinois corporation,
Defendant-Appellee.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Linda M. Vanzi, District Judge
Douglas A. Azar
Albuquerque, NM
for Appellants
Simone, Roberts & Weiss, P.A.
David W. Frizzell
Albuquerque, NM
for Appellee

OPINION
GARCIA, Judge.
{1} 	The issue in this case is whether there was a lapse in policy coverage.
Concluding that there was a lapse, we affirm the district court.
BACKGROUND
{2} 	Jesus and Maria Anita Molina (the Molinas) appeal from the district court’s
order and judgment dismissing their complaint against Allstate Indemnity Company
(Allstate). The Molinas had been Allstate customers for twelve years at the time the
dispute arose. In 2002 the Molinas insured two homes and four vehicles with Allstate,
including a 1999 Ford F-250 pickup, which is the vehicle at issue in this case. Around
August 13, 2002, the Molinas received a renewal statement for their automobile
insurance policy. One option for renewing their insurance was to pay the premium
in installments, provided that the initial minium payment of $853.77 was paid before
12:02 a.m. on September 2, 2002. The statement stated that the Molinas’ coverage
would not continue if Allstate did not receive the minimum payment amount by the
due date.
{3} 	On August 29, 2002, the Molinas made a payment of $500. Allstate sent the
Molinas a special notice dated September 3, 2002, informing the Molinas that their
coverage would terminate if full payment was not received before 12:01 a.m. on

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September 2, 2002. 	There was a grace period that allowed for payment until
September 9, 2002. On September 10, 2002, the Molinas’ daughter delivered a check
for the remainder of the premium, $353.77. 	When their daughter delivered the
payment, the Allstate secretary gave their daughter a conditional receipt that stated
that acceptance of the payment did not reinstate the policy. 	Allstate deposited the
second payment on September 11, 2002.
{4} 	On September 13, 2002, Allstate generated a refund check for the total amount
of $853.77. Allstate records indicate the refund check was mailed to the Molinas on
September 16, 2002. Also on September 16, the Molinas called Allstate to report that
their vehicle was stolen sometime during the previous night. The Molinas later filed
a claim for their stolen vehicle. Allstate denied the theft claim.
{5} 	In response to the coverage denial, the Molinas sued Allstate. After a bench
trial, the district court dismissed the case. 	The court determined that the Molinas’
policy lapsed because of their failure to make the minimum required payment within
the time limits required for renewal of the policy. This appeal followed.
DISCUSSION
{6} 	We begin by reminding the parties to follow the Rules of Appellate Procedure
when filing briefs. 	See Rule 12-305(C), (D) NMRA (specifying the font size and
spacing requirements).
{7} 	The ultimate question in this case is whether the Molinas’ insurance policy

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lapsed or was cancelled. The Molinas argue that the district court’s determination that
there was a lapse in the policy is a mixed question of law and fact. Without deciding
the issue, we apply the Molinas’ requested standard of review. As such, we apply a
substantial evidence standard to the facts and review de novo the district court’s
application of the law to the facts. 	See Ponder v. State Farm Mut. Auto. Ins. Co.,
2000-NMSC-033, ¶ 7, 129 N.M. 698, 12 P.3d 960.
{8} 	Generally, “the failure of an insured to pay a renewal premium by the due date
results in a lapse of coverage as of the last day of the policy period.” Guar. Nat’l Ins.
Co. v. C de Baca, 120 N.M. 806, 811, 907 P.2d 210, 215 (Ct. App. 1995). In contrast,
a policy is cancelled by “a unilateral act of the insurer terminating coverage during the
policy term.” 	Id. (internal quotation marks and citation omitted). 	This Court in
Guaranty National addressed the question of whether the plaintiff’s policy had lapsed
or had been cancelled. Id. In that case, the plaintiff failed to pay the renewal premium
payment by the due date. Id. at 808, 907 P.2d at 212. The plaintiff was involved in
a serious accident that occurred after the due date for the renewal premium and prior
to the insurer’s receipt of her renewal payment. Id. 	The insurer filed a declaratory
judgment action to determine whether the policy had lapsed. Id. at 807-08, 907 P.2d
at 211-12. 	The district court found there was a lapse in coverage, and this Court
agreed. Id. at 811-12, 907 P.2d at 215-16.
{9} 	Under the holding in Guaranty National, an insured must pay the renewal

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premium amount prior to the due date in order to avoid a lapse in insurance coverage.
Guaranty National presented a slightly different factual situation than the one before
us now. In this case, the insured made an on-time, short payment toward the premium
and then fulfilled the premium amount with a subsequent late payment. However, we
see no reason to depart from our holding Guaranty National. Insurance policies are
contracts and are governed by basic contract principles. See Ponder, 2000-NMSC-
033, ¶ 11 (“We resolve questions regarding insurance policies by interpreting their
terms and provisions in accordance with the same principles which govern the
interpretations of all contracts.” (internal quotations marks and citation omitted));
Atlas Assurance Co. v. Gen. Builders, Inc., 93 N.M. 398, 400, 600 P.2d 850, 852 (Ct.
App. 1979). 	One basic principle is that “when the policy language is clear and
unambiguous, we must give effect to the contract and enforce it as written.” Ponder,
2000-NMSC-033, ¶ 11.
{10} 	The renewal letter in this case was clear and unambiguous, and the Molinas do
not argue that it was ambiguous. The facts are undisputed. Mrs. Molina knew she had
to pay $853.77 by September 2, 2002. While the Molinas made a $500 on-time, short
payment, they did not pay the full premium amount prior to September 2, 2002.
When the Molinas failed to pay the premium renewal amount of $853.77 prior to the
due date, they did not comply with the terms of their contact with Allstate. 	As a
result, their insurance coverage lapsed. The Molinas have not directed us to a contract

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principle that would allow for us to interpret the contract such that partial payment
would suffice to continue their coverage. 	We assume that no authority for their
proposition exists. 	See In re Adoption of Doe, 100 N.M. 764, 765, 676 P.2d 1329,
1330 (1984).
{11} 	In an effort to convince this Court that their policy did not lapse, the Molinas
attempt to analogize their case to several out-of-state cases. Based on these cases, the
Molinas contend that by accepting the Molinas’ short payment, “retaining it and using
it, Allstate waived any conditions of payments it might have had regarding premium
payment terms.” These cases are distinguishable from the case before us and do not
persuade us that the Molinas’ policy did not lapse.
{12} 	The Molinas cite Mitchell v. Farmers Insurance Exchange, 396 S.W.2d 647,
652 (Mo. 1965), for the proposition that “conditions for payments of premium may
be waived by the insure[r.]” 	In Mitchell, the insured’s policy continued without a
lapse when the insurer accepted a late premium renewal payment, processed the
payment in a normal fashion, and did not raise any objection to the late payment. Id.
at 649-50. After learning of the insured’s accident, the insurer decided the policy was
not in effect at the time of the accident. 	Id. at 649. The court held that the insurer
waived the contract terms by accepting and processing the late payment without
objection. Id. at 650-51. Unlike Mitchell, there is no evidence that Allstate waived
the contract terms in the present case. 	The Molinas’ daughter was specifically

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provided a conditional receipt and notified that acceptance did not reinstate the policy.
Allstate did not process the payment as normal and did not waive its contract rights
by conditionally accepting the late payment. 	Within a week of receiving the
conditional late payment and prior to the incident, Allstate affirmed its rejection of the
late payment and refunded the Molinas’ their full payments. There was no waiver.
See J.R. Hale Contracting Co. v. United N.M. Bank, 110 N.M. 712, 716, 799 P.2d
581, 585 (1990) (defining waiver as “the intentional relinquishment or abandonment
of a known right”).
{13} 	The Molinas also cite to Evaluation Systems, Inc. v. Aetna Life Insurance Co.,
555 F. Supp. 116 (N.D. Ill. 1982) (mem. and order). Evaluations Systems involved
a complicated fact pattern where a life insurance company accepted a premium
payment for less than the total premium amount, immediately cashed the check, and
then retained the proceeds for three months before refunding the payment. Id. at 117-
19. In addition, there were several letters mailed and returned regarding the premium
payment as well as conversations between the potential insured and the insurer. Id.
Based on the language in the policy allowing for quarterly payments and other Illinois
precedent, the court held that the insurer was contractually bound to provide coverage.
Id. at 120-21. The facts in Evaluation Systems are markedly different from the facts
of the case before us as the Molinas failed to make the minimum payment amount
acceptable to the insurer, Allstate refunded the payments within a week of receiving

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the late payment, and the Molinas were aware of the need to pay their full premium
payment amount by the due date.
{14} 	The Molinas make several other arguments that their policy did not lapse. They
contend that “Allstate’s acceptance of the late payment without objecting to its
timeliness, modified the contract allowing it to remain in force until after the date of
the theft.” There are also several flaws with this argument. Allstate did object to the
timeliness of the payment. Allstate sent a letter reminding the Molinas that their first
short payment was insufficient. 	When the Molinas’ daughter made the second
premium payment, Allstate gave her a conditional receipt indicating that the
acceptance of the payment did not reinstate the policy. The Molinas cite to Cowan v.
Chalamidas, 98 N.M. 14, 15, 644 P.2d 528, 529 (1982), apparently for the proposition
that when a late payment is accepted without an objection by a contract payee, the
payee impliedly indicates that late payments are acceptable. The general proposition
set forth in Cowan is not applicable to this case because Allstate did object at the time
the late payment was made and then timely processed the full refund of all amounts
received.
{15} 	Three other cases cited by the Molinas in their brief in chief stand for the
proposition that absent a showing of fraud, inadequate consideration is not enough to
forfeit a contract. 	Cf. Estate of Duncan v. Kinsolving, 2003-NMSC-013, ¶ 21, 133
N.M. 821, 70 P.3d 1260; Featherstone v. Walker, 43 N.M. 181, 191, 88 P.2d 271, 276

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(1939); Ramirez v. Johnny’s Roofing, Inc., 1999-NMCA-038, ¶ 11, 127 N.M. 83, 977
P.2d 348. Whether the renewal premium payment amount was adequate consideration
is not the issue before us, as it is undisputed that $853.77 was the proper consideration
that the Molinas were required to timely pay in order to renew their policy coverage.
{16} 	Next, the Molinas ask this Court to construe the insurance policy in favor of the
insured and determine that the Molinas’ noncompliance with the strict payment terms
did not forfeit the policy. 	However, the payment terms under the policy were not
ambiguous. Where no ambiguity exists, the court will not construe the terms of an
insurance policy in favor of the insured. See King v. Travelers Ins. Co., 84 N.M. 550,
555, 505 P.2d 1226, 1231 (1973); Ivy Nelson Grain Co. v. Commercial Union Ins.
Co., 80 N.M. 224, 226, 453 P.2d 587, 589 (1969); Gray v. Int’l Serv. Ins. Co., 73
N.M. 158, 161, 386 P.2d 249, 252 (1963). 	In addition, the Molinas provide no
authority or argument in support of their position that Guaranty National must yield
to a construction in favor of the insured. We therefore decline to address the issue
further. See ITT Educ. Servs., Inc. v. Taxation & Revenue Dep’t, 1998-NMCA-078,
¶ 10, 125 N.M. 244, 959 P.2d 969 (stating that this Court will not consider
propositions that are unsupported).
{17} 	Finally, the Molinas seem to allege that the contract was an adhesion contract.
They do not explain how or why a unilateral contract would change their payment
terms or otherwise affect the timeliness of the required premium payment. 	We

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therefore have no argument to address. 	See Headley v. Morgan Mgmt. Corp.,
2005-NMCA-045, ¶ 15, 137 N.M. 339, 110 P.3d 1076 (“We will not review unclear
arguments, or guess at what [a party’s] arguments might be.”).
{18} 	The Molinas’ insurance policy lapsed when they failed to pay the renewal
premium of $853.77 by the due date. See Guaranty National, 120 N.M. at 811, 907
P.2d at 215. Allstate’s obligations to the Molinas ceased as of the date of the lapse.
Therefore, Allstate did not have an insurance obligation to the Molinas when their
vehicle was stolen after the date the policy lapsed.
CONCLUSION
{19} 	We affirm the district court for the foregoing reasons.
{20} 	IT IS SO ORDERED.
______________________________
TIMOTHY L. GARCIA, Judge
WE CONCUR:
_________________________________
JONATHAN B. SUTIN, Judge
_________________________________
RODERICK T. KENNEDY, Judge