The Supreme Court of Oregon has answered a certified question from a federal district court and found that a provision in an insurer's auto policies that limited payouts for uninsured motorists claims to the maximum amount allowed by a single policy cannot be enforced because they do not comply with state law. The case is Batten v. State Farm, 368 Ore. 538 (September 17, 2021).

The lawsuits stemmed from four separate crashes involving Travis Batten, Cesar Rivera, Lori Chrisholm, and lastly, John Wesley Counts who was killed when he was struck by a vehicle while walking.

Batton had coverage through three State Farm policies, each with a $250,000 limit. Counts had two policies with the same limit, and Chrisholm and Rivera were covered under three State Farm policies, each with a $1,000 limit. State Farm refused to pay more than a single policy limit, $250,000 for Batten and Counts, $100,000 for Chrisholm and Rivera. Batten's complaint alleged damages of almost $5 million, Counts' estate sought more than $500,000, Chrisholm more than $3 million and Rivera more than $600,000. The U.S. District Court consolidated the lawsuits and asked the Supreme Court to answer the certified question which represented a very murky area of Oregon insurance law.

State Farm argued that an "antistacking" provision within the policies requires carriers to provide coverage up to the amount allowed "under the terms of the policy." The carrier argued that since each of the policies included the same language limiting payouts from "other coverage," the provision complied with the statute.

The antistacking provisions stated:

  1. If Uninsured Motor Vehicle Bodily Injury and Property Damage Coverage provided by this policy and Uninsured Motor Vehicle Coverage of any kind provided by one or more other vehicle policies issued to you or any resident relative by the State Farm Companies apply to the same bodily injury or property damage, then:
    1. such Uninsured Motor Vehicle Coverage limits of such policies will not be added together to determine the most that may be paid
    2. the maximum amount that may be paid from all such policies combined is the single highest applicable limit provided by any one of the policies. We may choose one or more policies from which to make payment.

The Supreme Court said that amendments to the uninsured motorists statute, Or. Rev. Stat. § 742.504, adopted by the state legislature in 2015 specifically disallow this type of "other coverage" limits. The statute requires every auto insurance policy to include uninsured motorist benefits according to a specific formula and prohibits carriers policy language that provides terms that are less favorable to the insured. The opinion stated, "[a]ccordingly, State Farm's 'other coverage' limitation is unenforceable."

The high court said that the argument would require it to ignore the fact that the legislature required every policy to provide coverage up to the minimum limits without including language to allow limits to that coverage. There would also be no reason to state in the statute that coverage must be "no less favorable in any respect to the insured or beneficiary than if (those) provisions were set forth in the policy."

The Supreme Court also rejected an argument that a separate statute Or. Rev. Stat. § 742.506 allowed the other coverage limit because it states that "the terms of the policy shall control" in cases where multiple carriers who are jointly liable for an accident allocate responsibility. The court stated that would require it to accept that the "comprehensive model coverage in Or. Rev. Stat. § 742.504 is not actually comprehensive."

Editor's Note: Zach Needles, author of ALM's daily Trendspotter column noted that "[p]laintiffs lawyers have been taking aim at what they allege are deceptive and decades-long practices by insurers to collect premiums for uninsured and underinsured motorist benefits that policyholders don't realize are virtually inaccessible. As several recent class actions demonstrate, the boilerplate nature of motor vehicle insurance policies can leave insurers vulnerable to potentially broad exposure when courts find fault with standard contractual language that has been in use for dozens of years."