The Oregon Supreme Court today modified its opinion in Mid-Century Insurance Company v. Perkins
October, 2008
Previously, the court had ruled "ORS 742.502(2)(a) establishes that, regardless of an insured's actual damages, the insurer's liability will never exceed an amount totaling the benefits available under uninsured motorist coverage, i.e., the policy limit, minus the amount that the insured recovers from other policies. In other words, UIM benefits are intended to fill the gap between the limit of an insured's UM coverage and the amount that he or she actually receives from another motorist."
Perkins and the Oregon Trial Lawyers Association complained that the quoted language was unnecessary to the court's opinion since it had compared the liability policy limits with the UIM policy limits and concluded that the tortfeasor was not underinsured. Since the decision could have been based on the tortfeasor not being underinsured, there was no reason to address the broader issue of whether liability payments should reduce damages or the UIM limits.
On reconsideration, the Oregon Supreme Court agreed with the argument and modified Perkins to remove the language from the opinion. It instead relied solely on the narrower ground that there is no underinsured vehicle when the liability and UIM limits match.
This is an unfortunate turn of events because it casts doubt on the previous determination that liability insurance payments would reduce UIM policy limits. Many insurers may see increased litigation as claimant attorneys resurrect various arguments over the liability insurance offset being from damages rather than limits. We can expect these issues to once again be challenged until we get a final decision from the Supreme Court.
While the Supreme Court opinion cites to two Court of Appeals decisions that address the issue of the liability reduction from limits, Vogelin v. American Family Mutual Ins. Co., 221 Or App 558, 191 P3d 687 (2008), and Albarran v. Allstate Ins. Co., 221 Or App 701, 191 P3d 735 (2008) (per curiam), we are informed that the Vogelin case received an extension to file a Petition for Review before the Oregon Supreme Court. The short term effect is that the Court of Appeals decisions still support liability insurance payments reducing UIM policy limits. But stay tuned for a potential change by the Oregon Supreme Court, who may have final say on the matter.
A copy of the opinion can be viewed online at: http://www.publications.ojd.state.or.us/S054652.htm