2021 New Mexico Statutes
Chapter 42 - Actions and Proceedings Relating to Property
Article 10 - Exemptions
Section 42-10-3 - [Life, accident and health insurance benefits.]

The cash surrender value of any life insurance policy, the withdrawal value of any optional settlement, annuity contract or deposit with any life insurance company, all weekly, monthly, quarterly, semiannual or annual annuities, indemnities or payments of every kind from any life, accident or health insurance policy, annuity contract or deposit heretofore or hereafter issued upon the life of a citizen or resident of the state of New Mexico, or made by any such insurance company with such citizen, upon whatever form and whether the insured or the person protected thereby has the right to change the beneficiary therein or not, shall in no case be liable to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured or who is protected by said contract, or who receives or is to receive the benefit thereof, nor shall it be subject in any other manner to the debts of the person whose life is so insured, or who is protected by said contract or who receives or is to receive the benefit thereof, unless such policy, contract or deposit be taken out, made or assigned in writing for the benefit of such creditor.

History: Laws 1937, ch. 223; § 1; 1941 Comp., § 21-503; 1953 Comp., § 24-5-3.

Bracketed material. — The bracketed material was inserted by the compiler and is not part of the law.

Section 42-10-3 NMSA 1978 does not apply to attorney-fee contracts to recover insurance proceeds from an insurer. Will Ferguson & Assoc., Inc. v. Gengler, 2012-NMCA-093, 287 P.3d 350, cert. denied, 2012-NMCERT-007.

The exemption does not apply to attorney-fee contracts. — Where an insured retained an attorney pursuant to a contingent fee agreement to recover insurance proceeds under an accidental death and dismemberment policy, the insurer paid the insured's claim; and the contingent fee agreement did not contain a specific assignment by the insured of recovered insurance proceeds to the attorney, the attorney was entitled to recover the contingent fee pursuant to the contingent fee agreement because Section 42-10-3 NMSA 1978 did not apply to the contingent fee agreement. Will Ferguson & Assoc., Inc. v. Gengler, 2012-NMCA-093, 287 P.3d 350, cert. denied, 2012-NMCERT-007.

Construction of section. — The language of this section is broad and expansive. It does not limit the type of payment, form of payment, or person to receive the payment. Finch v. Schrock, 119 Bankr. 808 (Bankr. D.N.M. 1990).

Payment of a policy's premiums by a third party. — Where debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code (11 U.S.C.), and where creditors contested whether debtor owned a life insurance policy based on the parties' stipulation that a third party paid the majority of the premiums for the policy, debtor was entitled to the cash surrender value of the life insurance policy, because payment of a policy's premiums by a party other than the owner does not effectuate a change in ownership of the policy. In re Bushey, 559 B.R. 766 (Bankr. D. N.M. 2016).

Waiver of exemption. — Where parties to a divorce action entered into a marital settlement agreement in which they placed an annuity, money purchase plan, profit sharing plan, and individual retirement accounts under the control of a receiver to pay personal taxes and community debts, the parties waived the statutory exemption. Gordon v. Gordon, 2011-NMCA-044, 149 N.M. 783, 255 P.3d 361.

Unlimited exemptions allowed as to insurance. — The New Mexico statutes permit unlimited exemptions in bankruptcy proceedings with respect to insurance, and with respect to pension and retirement plans. Albuquerque Nat'l Bank v. Zouhar, 10 Bankr. 154 (Bankr. D.N.M. 1981).

Exemption by person not a beneficiary. — Debtor could exempt insurance proceeds he was to receive as an heir of his parents' probate estate even though he was not a named beneficiary on the policies. Finch v. Schrock, 119 Bankr. 808 (Bankr. D.N.M. 1990).

Factors in determining voidable transfers. — The noninclusive enumeration of factors contained in Sections 56-10-18 and 56-10-19 NMSA 1978 are to be considered when determining whether the funds that ordinarily would be exempt from attachment under Section 42-10-2 NMSA 1978 and this section should be set aside as the result of a voidable transfer. Dona Ana Sav. & Loan Ass'n v. Dofflemeyer, 1993-NMSC-031, 115 N.M. 590, 855 P.2d 1054.

Funds are not automatically protected. — The conversion of nonexempt funds into funds that are ordinarily exempt under Section 42-10-2 NMSA 1978 and this section are not automatically protected from attachment by creditors without an analysis of whether the transfer served the underlying purpose of the exemption statutes and was not in furtherance of an intent to defraud creditors. Dona Ana Sav. & Loan Ass'n v. Dofflemeyer, 1993-NMSC-031, 115 N.M. 590, 855 P.2d 1054.

Uninsured motorist policy. — The proceeds from an uninsured motorist policy are exempt from attachment as accident insurance under this section. In re Portal, 2002-NMSC-011, 132 N.M. 171, 45 P.3d 891.

Law reviews. — For article, "Attachment in New Mexico - Part II," see 2 Nat. Resources J. 75 (1962).

For article, "The Perils of Intestate Succession in New Mexico and Related Will Problems," see 7 Nat. Resources J. 555 (1967).

For comment, "A Comparison of State and Federal Exemptions: 11 U.S.C. § 101-1330 (Supp. II 1978)," see 10 N.M.L. Rev. 431 (1980).

For note, "Matching the Historic Legal Principles of New Mexico's Exemption Laws to the Modern Identity of Annuities: Dona Ana Savings & Loan Ass'n v. Dofflemeyer," see 24 N.M.L. Rev. 365 (1994).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 31 Am. Jur. 2d Exemptions §§ 179 to 181, 186 to 188, 190 to 194, 198, 200, 220 to 223, 245, 246.

Constitutionality of statute exempting proceeds of life or benefit insurance, 1 A.L.R. 757.

Period of duration of exemption under statute exempting money or benefit "to be paid" under insurance policy or certificate, 6 A.L.R. 610.

Debtor's exemption of proceeds of insurance on property itself exempt, 63 A.L.R. 1286.

Impairment of obligation of contracts by statute exempting insurance proceeds, 93 A.L.R. 182.

Exemption of property purchased with exempt proceeds of insurance, 96 A.L.R. 410.

Accident insurance as life insurance within exemption law, 111 A.L.R. 61.

War risk insurance proceeds as exempt from creditors, 158 A.L.R. 1445.

Proceeds of life insurance left with insurer after maturity of policy as subject to claims of creditors of beneficiary, 164 A.L.R. 914.

Assignee of insurance policy, exemption of proceeds as available to, 1 A.L.R.2d 1031.

Right with respect to exempt proceeds of life insurance, of one whose funds have been wrongfully used to pay premiums, 24 A.L.R.2d 672.

Retirement or pension proceeds or annuity payment under group insurance as subject to attachment or garnishment, 28 A.L.R.2d 1213.

Endowment policy as life insurance within exemption law, 30 A.L.R.2d 751.

35 C.J.S. Exemptions §§ 31, 39 to 42, 61, 132.