Bergmann v. Hutton

• Citation: 101 P.3d 353,337 Ore. 596,337 Or. 596
• Parties: David BERGMANN, Personal Representative of the Estate of Terrel Ann Bergmann, Petitioner on Review, v. Jennifer HUTTON, Defendant, and Farmers Insurance Company of Oregon, Respondent on Review.
• Decision Date: 02 December 2004
• Court: Oregon Supreme Court

101 P.3d 353

337 Or. 596

337 Ore. 596

David BERGMANN, Personal Representative of the Estate of Terrel Ann Bergmann, Petitioner on Review, v. Jennifer HUTTON, Defendant, and Farmers Insurance Company of Oregon, Respondent on Review.

(CC 00-3304-L-2; CA A115380; SC S50395).

Supreme Court of Oregon, En Banc.

Argued and submitted May 3, 2004.

Decided December 2, 2004.

Kathryn Hall Clarke, Portland, argued the cause for petitioner on review. Shane A. Reed, of Reed & Associates, Jacksonville, filed the brief.

Kenneth M. Tharp, of Frohnmayer, Deatherage, Pratt, Jamieson, Clarke & Moore, P.C., Medford, argued the cause and filed the brief for respondent on review.

Thomas M. Christ, of Cosgrave Vergeer Kester LLP, Portland, argued the cause and filed the brief for amici curiae Liberty Northwest Insurance Company, Mutual of Enumclaw Insurance Company, State Farm Mutual Automobile Insurance Company, Oregon Mutual Insurance Company, Safeco Insurance Company, and the American Insurance Association. With him on the brief was Thomas W. Brown, Portland.

Meagan A. Flynn, of Preston Bunnell & Stone, LLP, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association.

GILLETTE, J.

In this automobile insurance case, the issue is whether an insurer is entitled to offset the amount that an injured insured received in workers' compensation benefits against the amount that the insurer otherwise would have been obligated to pay to the insured under the insured's underinsured motorist (UIM) coverage in a policy issued by the defendant insurer. The issue arose when plaintiff¹ submitted a claim under the UIM coverage. Defendant responded that the policy entitled it to offset the workers' compensation payments that plaintiff had received and that, in the offset, defendant owed plaintiff nothing. Plaintiff then brought this contract action against defendant. Defendant moved for summary judgment respecting the offset for workers' compensation benefits. The trial court granted defendant's motion, and, on appeal, the Court of Appeals affirmed that ruling without opinion. Bergmann v. Hutton, 186 Or.App. 566, 65 P.3d 1132 (2003). We allowed review and, for the reasons that follow, now reverse the decision of the Court of Appeals and the judgment of the trial court.

Because we are reviewing a grant of summary judgment, we view the facts from the summary judgment record, and all reasonable inferences that may be drawn from them, in the light most favorable to the nonmoving party, in this case plaintiff insured. Oregon Steel Mills, Inc. v. Coopers Lybrand, LLP, 336 Or. 329, 332, 83 P.3d 322 (2004).

In October 1998, plaintiff was seriously injured in an automobile collision caused by the failure of another driver, defendant Hutton, to stop at a red light. At the time of the accident, plaintiff was 51 years old. She worked at a bank and earned a salary of more than $3,000 per month. After the accident, plaintiff's condition was such that she was unable to return to work and had difficulty participating in normal life activities.

At the time of the accident, defendant Farmers Insurance Company (Farmers) insured plaintiff under an automobile insurance policy. That policy provided for uninsured motorist/underinsured motorist (UM/UIM) coverage with a liability limit of $100,000. Farmers also insured Hutton, who admitted responsibility for the accident, under a policy that had a liability limit of $25,000.

Plaintiff's damages resulting from the accident totaled more than $650,000.² Farmers tendered the policy limit of $25,000 under Hutton's policy, and plaintiff received a total of $107,652 in workers' compensation benefits. Because those amounts did not fully compensate plaintiff for her losses, plaintiff made a claim for damages under the UIM provisions of her automobile insurance policy.³

Farmers denied that claim. Farmers contended that the policy and applicable law entitled it to deduct from the amount that it otherwise would owe to plaintiff under the UIM provision of its policy both the amount tendered on behalf of the negligent driver and the amount that plaintiff received in workers' compensation benefits. Because those amounts collectively exceeded the policy limit of $100,000, Farmers asserted that plaintiff's UIM benefits were exhausted and Farmers owed her nothing.

Plaintiff filed the present action against Farmers for breach of contract.⁴ Farmers answered, denying any liability, and moved for summary judgment. Farmers argued, among other things, that the Court of Appeals had held, in California Casualty Indemnity Exchange v. Maritzen, 123 Or.App. 166, 860 P.2d 259 (1993), and in Pitchford v. State Farm Mutual Auto. Ins. Co., 147 Or.App. 9, 934 P.2d 616 (1997), that UIM policy provisions similar to the one at issue here permitted the insurer to offset the amount that the insured received in workers' compensation benefits against the insured's UIM policy limits. According to Farmers, those Court of Appeals holdings were dispositive and mandated a ruling in its favor in the instant case. The trial court agreed and granted Farmers' summary judgment motion. As noted, the Court of Appeals affirmed without opinion. We allowed plaintiff's petition for review.

In this court, plaintiff contends that, under the governing statute, ORS 742.504(7)(c)(B), the workers' compensation benefits that she received are properly deducted from the total amount that she legally would be entitled to recover in damages from the owner of the underinsured vehicle, i.e., from $650,000, rather than from the (lower) liability limit under her UIM policy ($100,000), and that the Court of Appeals' earlier decisions to the contrary were erroneous.

We begin by examining the statutes pertinent to UIM coverage.⁵ ORS 742.502 contains a general UM and UIM coverage mandate. That statute requires, first, that all motor vehicle liability policies in Oregon provide UM coverage. ORS 742.502(1). Moreover, those policies generally must provide the same limits for UM coverage as for bodily injury liability coverage.⁶ ORS 742.502(2)(a). Second, ORS 742.502(2)(a) requires the inclusion of UIM coverage in any policy providing for UM coverage in excess of the financial responsibility limits. That statute defines UIM coverage as "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." Id. (emphasis added). That subsection also provides a general formula for calculating UIM benefits. Under that subsection, "[u]nderinsurance benefits shall be equal to uninsured motorist coverage benefits less the amount recovered from other automobile liability insurance policies." Id.

In addition, ORS 742.502(4) provides, among other things, that UIM coverage is subject to ORS 742.504, which sets out required provisions for UM coverage. The dispute in this case centers around ORS 742.504(7), which provides as follows:

"(a) The limit of liability stated in the declarations as applicable to `each person' is the limit of the insurer's liability for all damages because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting each person, the limit of liability stated in the declarations as applicable to `each accident' is the total limit of the company's liability for all damages because of bodily injury sustained by two or more persons as the result of any one accident.

"* * * * *

"(c) Any amount payable under the terms of this coverage because of bodily injury sustained in an accident by a person who is an insured under this coverage shall be reduced by:

"(A) All sums paid on account of such bodily injury by or on behalf of the owner or operator of the uninsured vehicle and by or on behalf of any other person or organization jointly or severally liable together with such owner or operator for such bodily injury including all sums paid under the bodily injury liability coverage of the policy; and

"(B) The amount paid and the present value of all amounts payable on account of such bodily injury under any workers' compensation law, disability benefits law or any similar law."

(Emphasis added.)

The parties assign different meanings to that statutory subsection and, in particular, to the highlighted phrase, "any amount payable under the terms of this coverage," in ORS 742.504(7)(c). Farmers contends that ORS 742.504(7) generally deals with limits of insurer liability, as evidenced by the express reference to that concept in ORS 742.504(7)(a). Accordingly, Farmers contends that it is clear that the operative phrase in paragraph (c) also refers to the limit of the insurer's liability as set out on the declarations page of the policy. As noted, ORS 742.504(7)(c)(B) permits the insurer to deduct the amount of workers' compensation benefits that the insured has received from the "amount payable under the terms of this coverage," which, according to Farmers, is its liability limit. Under Farmers' interpretation, then, Farmers owes plaintiff nothing, because plaintiff has received more in workers' compensation benefits and from Hutton than the limit of Farmers' UIM liability under plaintiff's policy.

Plaintiff, by contrast, asserts that the phrase "any amount payable under the terms of this coverage" in ORS 742.504(7)(c) refers to the total amount that the insured legally would be entitled to recover from the tortfeasor or, in other words, in this case, the insured's damages. Here, plaintiff's damages so far exceed the amount that plaintiff received in workers' compensation benefits that, even after making that adjustment, Farmers' liability limit is not met. Under plaintiff's interpretation, she is entitled to the amount of her $100,000 UIM coverage less the $25,000 tendered on Hutton's behalf, or $75,000.⁷

To resolve the question of which of those competing...