Advisories & Insights

Companies that issue motor vehicle liability insurance in Oregon should be aware of the changes made during the 2005 Oregon Legislative Session. Oregon's Legislative Assembly enacted several bills that amend the state's Uninsured/Underinsured ("UM/UIM") and Personal Injury Protection ("PIP") statutes. The new statutory requirements apply to all motor vehicle liability policies issued or renewed in Oregon after January 1, 2006. Although many of the changes simply clarified statutory wording, or changed the statutes to use certain terms more consistently, several significant substantive changes were made to the PIP and UM/UIM statutes. The changes are summarized for you below.

In 2005, the Oregon Legislative Assembly passed four bills making substantial changes to Oregon's UM/UIM statutes.

Senate Bill 923. In 1997, the Legislative Assembly revised ORS 742.502(3) to state that UIM coverage applies when a liable driver's liability policy "provides recovery in an amount that is less than the insured's uninsured motorist coverage." Both ORS 742.502(2)(a) and (3) also provided that "[u]nderinsurance benefits shall be equal to uninsured motorist coverage benefits less the amount recovered from other automobile liability insurance policies." The 1997 revisions, however, left unchanged wording in ORS 742.502(2)(a) stating that "[u]ninsured motorist coverage larger than [the amounts required by the Financial Responsibility Law] * * * shall include underinsurance coverage for damages or death caused by accident and arising out of the ownership, maintenance or use of a motor vehicle that is insured for an amount that is less than the insured's uninsured motorist coverage."

After the 1997 amendments and subsequent case law applying the revised statute, some doubts remained as to whether the 1997 amendments meant that a claimant could seek UIM coverage when the liable driver's policy was insured with the minimum limits required by the Financial Responsibility Law ($25,000 per person/$50,000 per accident), and the claimant had matching UM/UIM limits, but other injured persons had reduced the "amount recoverable" to less than $25,000.

Senate Bill 923 amended ORS 742.502 to resolve those doubts. As amended, ORS 742.502(2)(a) now states that UM coverage includes UIM coverage for damages "arising out of the ownership, maintenance or use of a motor vehicle with motor vehicle liability insurance that provides recovery in an amount that is less than the insured's uninsured motorist coverage." A new statutory subsection, ORS 742.502(5) restates that UM/UIM coverage shall apply when the limits for the insured's UM coverage equal the liable party's liability limits, and the amount of liability insurance recovered is less than the UM coverage limits.

The revised statute more clearly sets forth the rule that the Legislative Assembly apparently attempted to enact in 1997. The revised statute does not, however, change the requirement that a UM/UIM claimant exhaust the liable driver's liability limits in one of the ways forth in ORS 732.504(4)(d).

Senate Bill 924. Senate Bill 924 addressed a specific and, presumably, unusual fact situation – an insured's right to claim UM/UIM coverage when the insured is injured as a result of a thief's use of the insured's own vehicle. Under the previous version of the statute, an insured who is injured through the use of his or her own stolen vehicle could not claim UM/UIM benefits because, under the statute, the definition of "uninsured vehicle" excludes vehicles that are insured under the policy. Senate Bill 924 amended the UM/UIM statutes to allow an injured insured to seek UM coverage in that situation.

As revised, ORS 742.502(2) defines "stolen vehicle" as "an insured vehicle that causes bodily injury to the insured arising out of a motor vehicle accident" if the vehicle is operated without the consent of the insured, the vehicle operator does not have collectible liability insurance, the insured reports the accident to authorities within 72 hours, and the insured cooperates with law enforcement in the prosecution of the theft of the vehicle. The revised statute defines "uninsured vehicle" to include "[a] stolen vehicle."

Although the revised statute is a change from current law, the circumstances in which the new law will apply should occur infrequently.

Senate Bill 925. Senate Bill 925 did not change current UM/UIM law, but instead clarified the statutory provisions concerning overlapping UM/UIM coverage. As revised by Senate Bill 925, ORS 742.504(9) provides that when an insured is injured while occupying a vehicle that the insured owns, then the insured's UM/UIM coverage is primary. When an insured is injured while occupying a vehicle that insured does not own, then the insured's UM/UIM coverage is excess.

This is the same rule for overlapping UM/UIM coverage that was set forth in the previous version of the statute. The revised statute simply states the rule more plainly. The statute continues to allow anti-stacking provisions in UM/UIM coverage.

Senate Bill 926. Like Senate Bill 924, Senate Bill 926 amends the definitions set forth in ORS 742.504(2). Senate Bill 926 concerns the bankruptcy of a liable driver's liability insurer. Under the prior version of the statute, the term "uninsured vehicle" included a vehicle that had collectible liability insurance at the time of the accident, but for which the liability insurer become bankrupt or insolvent within two years of the accident. Because the insured had no control over the timing of an insurer's bankruptcy, however, the two year limitation was criticized as arbitrary and unfair.

The revised statute removes the two year limitation. As revised by Senate Bill 926, ORS 742.504(2) now allows a claimant to assert a UM/UIM claim when the liable driver's insurer become bankrupt or insolvent, even if the insolvency occurs more than two years after the accident. Senate Bill 926 did not change the requirements set out in ORS 742.504(12) concerning the acts that must occur within two years from the date of an accident for a UM/UIM cause of action to accrue, however.

The Oregon Legislative Assembly also made several changes to Oregon's PIP statutes during the 2005 Legislative Session.

Senate Bill 151. Senate Bill 151 enacted several changes to Oregon's PIP statutes. First, the revised statute (ORS 742.524(1)(d)) requires insurers to provide $5,000 (instead of $2,500) in reasonable and necessary funeral expenses incurred within one year of an accident. The revised statute (ORS 742.524(1)(e)) also requires insurers to provide $25 (instead of $15) per day for child care, when the injured person is a parent of a minor child and is required to be hospitalized for at least 24 hours, with a total child-care cap of $750 (instead of $450). Those amounts were last increased in 1989.

Next, the revised statute (ORS 742.524(1)(c)) limits reimbursement of "essential services" PIP benefits to essential services "that were performed by a person who is not related to the injured person or residing in the injured person's household."

Senate Bill 151 next amended ORS 742.530 to provide that an insurer may exclude coverage for PIP benefits for any injured person who "[w]illfully conceals or misrepresents any material fact in connection with a claim for personal injury protection benefits."

Finally, the bill established a separate alternative measure for payment of hospital services, set forth in ORS 742.525.

Senate Bill 585. Senate Bill 585 amended ORS 742.520 to prohibit insurers from entering into or renewing any contract that provides managed care services to PIP beneficiaries, but allows insurers to enter into or renew contracts that provide "evaluation services" for PIP beneficiaries. The bill moves the definitions set forth in 742.520(7) (2003) to a separate section and adds definitions of "evaluation services" and "managed care services." The bill also prohibits liens for medical services provided under PIP coverage to an injured person prior to perfection of a lien by a hospital or physician, but does not preclude a hospital or physician from perfecting a lien.

Under the revised statute, insurers may audit the quality of and the need for medical services once they are provided, but may not limit or restrict access to providers or their services.

Conclusion
As noted above, these statutory amendments apply to UM/UIM and PIP coverage provided in motor vehicle liability policies issued or renewed on or after January 1, 2006. Insurers should review their policies to ensure that their PIP and UM/UIM coverage parts comply with Oregon's statutory requirements. Bullivant insurance lawyers are available to assist with that review.

For more information, please contact your Bullivant attorney.