Is UIM Coverage for Claimants in Insured Vehicles on the Horizon in Oregon?

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From the desk of Cliff Wilson:

Insurance carriers have historically been allowed to exclude UIM coverage for injury damages of occupants in an “insured vehicle.”  Oregon Courts have repeatedly applied the insured vehicle exclusion as being fully consonant with the statutory scheme set forth in Oregon’s UM/UIM statute, ORS 742.502.  However, a recent Court of Appeals case has hinted at a potential sea change if this issue is properly brought in the higher courts.

Claims Pointer:

In this case, Plaintiff argued that Oregon statutes governing UM/UIM coverage require automotive insurers to provide UIM coverage for injuries incurred by occupants of an insured vehicle where the liability limits of the policy are insufficient to cover all damages incurred.  The Court rejected this argument as contrary to its holding in Wright I, which was reversed, in part, on unrelated grounds by the Oregon Supreme Court in Wright II.  However, the Court of Appeals decided not to consider plaintiff’s additional argument, that it should reconsider Wright I under the auspices of Vogelin v. American Family Mutual Ins. Co., 346 Or 490, 213 P3d 1216 (2009) (a case involving the calculation of UIM benefits), because that argument was first raised in Plaintiff’s reply brief, which will normally then not be considered. The Court of Appeals did, however, take the time to note in its opinion that Plaintiff’s challenge to Wright I may be more suitably directed to the Oregon Supreme Court, if properly brought.

Roberts v. State Farm Mutual Auto. Ins. Co., 311 Or App 235 (May 5, 2021)

Facts:

Plaintiff David Roberts was injured in a single-car accident as a passenger in a vehicle insured by State Farm.  State Farm originally paid Plaintiff $25,000 -the liability limits of the policy- for his injuries, but this did not cover the full amount for his costs of treatment.  Plaintiff then demanded that State Farm pay him an additional $25,000 from the policy’s underinsured motorist (UIM) coverage. State Farm refused this demand due to its policy language that an uninsured or underinsured vehicle does not include a vehicle insured by the policy. Specifically, a vehicle “whose ownership, maintenance, or use is provided Liability Coverage by this policy.”  The trial court granted State Farm’s motion for summary judgment.  Plaintiff appealed.

Law:

In Oregon, every motor vehicle liability policy that insures against loss that a person suffers -including injury or death- resulting from a use of a motor vehicle, shall provide in the policy or by indorsement on the policy uninsured motorist coverage if the policy is either: (a) issued for delivery in this state; or (b) issued or delivered by an insurer that does business in this state with respect to any motor vehicle principally used in this state. ORS 742.502(1). Moreover, the insurer will pay all sums that the insured is legally entitled to recover from the owner or operator of an uninsured vehicle because of bodily injury sustained by the insured caused by an accident -arising out of the ownership, maintenance, or use- of the uninsured vehicle. ORS 742.504(1). However, an uninsured vehicle does not include an insured vehicle, unless it is a stolen vehicle. ORS 742.504(2)(L)(A).

Analysis:

During his appeal, Plaintiff argued that it was proper to construe the Oregon statutes governing UIM coverage to require insurers (in this case State Farm) to provide UIM coverage for injuries stemming from the insured vehicle accident when the liability limits of the policy are insufficient to cover all incurred damages. The Appellate Court concluded that its decision in Wright I rejects the argument made by the Plaintiff in this case, determining that the application of the insured vehicle exclusion to UIM coverage is consistent with the statutory scheme. Wright I, 152 Or App at 114; see also William J. Schermer, 3 Auto Liability Ins 4th § 39.3 (2020).[1]  The Court further held that Plaintiff failed to demonstrate why it would be appropriate for the Court to abandon its own prior precedent and raised, for the first time in his reply brief, the argument that the Supreme Court’s decision in Vogelin called the Appellate Court’s adjudication in Wright I into question. See generally Vogelin 346 Or 490. Yet, Vogelin did not address the specific question of law at hand in this matter.  Even if the Appellate Court should reconsider Wright I in light of Vogelin, Plaintiff’s argument had come too late. Murga 291 Or App at 468; ORAP 5.45(1).

The Big Picture:

Oregon Insurance policies that exclude insured vehicles from UIM coverage -when injuries incurred are as a result from an accident with the liable insured vehicle- continues to be consistent with the applicable statutory language in Oregon.  However, if the argument that the Oregon Court of Appeals in Wright I should be reconsidered in light of the Oregon Supreme Court’s case of Vogelin is properly brought within the Appellate or Supreme Courts of Oregon, insurance companies may potentially face a new UIM exposure not previously seen in Oregon. This argument is one to look out for in future UIM cases and appeals.   

[1] Noting approaches by different states and that, under the Appellate decision in Wright I, Oregon enforces the exclusion of a “vehicle insured under the policy’s liability coverage from the definition of an uninsured/underinsured motor vehicle.”