Advisories & Insights

In Bergmann v. Hutton, 101 P3d 353 (December 2, 2004), a divided Oregon Supreme Court ruled that the amount of workers' compensation benefits obtained by an uninsured/underinsured (UM/UIM) claimant must be offset from the amount that a claimant is entitled to recover from the at-fault driver (which, usually, will be the claimant's damages), rather than the UM/UIM limit in the claimant's policy.

A majority of the court rejected prior Oregon Court of Appeals rulings holding that workers' compensation benefits were offset – or subtracted from – the UM/UIM limit in the applicable policy. As a result of the Bergmann ruling, insurers providing UM/UIM coverage in Oregon will face increased potential liability in matters in which the claimant received workers' compensation benefits and the damages exceed the UM/UIM policy limits.

In Bergmann, the injured claimant alleged damages of more than $650,000. She received $25,000 from the at-fault driver, $107,652 in workers' compensation benefits, and sought additional UIM benefits under a Farmers policy with a $100,000 UM/UIM coverage limit. Farmers denied the claim, relying on prior Court of Appeals decisions holding that ORS 742.504(7)(c)(B) allowed insurers to offset the amount that a claimant received in workers' compensation benefits against the UIM limit. Because Bergmann had received more than the $100,000 UIM limit in liability and workers' compensation benefits, Farmers argued that the UIM limits were exhausted. The Circuit Court and the Court of Appeals agreed with Farmers. The Supreme Court, however, came to a different conclusion.

The applicable UM/UIM statute, ORS 742.504(7)(c)(B), provides that "any amount payable under the terms of this coverage * * * shall be reduced" by the amount paid and present value of amounts payable to the claimant under "any workers' compensation law, disability benefits law or any similar law." Justice Gillette, writing for the majority, held that the phrase "any amount payable under the terms of this coverage" referred to the total amount that a claimant would be entitled to recover from the at-fault driver, rather than the UIM policy limit. The court decided that the term "coverage," as set forth in the statute, refers to a broader concept than just the "policy" entered into between the claimant and her insurer. Although the "policy" includes limits on an insurer's liability, "coverage" does not. The court therefore concluded that the amount payable under the "coverage" is the amount that a claimant is legally entitled to recover in damages as a result of the accident, rather than the policy limit. Accordingly, the claimant could potentially recover $75,000 from her insurer, despite receiving over $100,000 in workers' compensation benefits.

Justice Kistler, joined by Chief Justice Carson and Justice Balmer, dissented. They argued that the statutory context made clear that the "terms of * * * coverage" included the applicable policy limit. Because the "amount payable under the terms of this coverage" is the amount a claimant is entitled to recover from the liable driver, up the insurer's limit of liability, the dissent concluded, the amount of workers' compensation benefits received by a claimant should be deducted from that amount.

The Bergmann decision departs from previous case law holding that workers' compensation benefits would be offset from UM/UIM policy limits. Notably, however, the Supreme Court reinforced the continued offset of liability payments from UIM policy limits, consistent with ORS 742.502 and 742.504(7)(c)(A). Thus, liability payments received should continue to reduce the amount of UIM limits available as a result of an accident.