Coates v. Progressive Direct Ins. Co.

• Decision Date: 03 May 2022
• Docket Number: 119,571
• Citation: 512 P.3d 345
• Parties: John Randall COATES, Plaintiff/Appellant, Counter-Appellee, v. PROGRESSIVE DIRECT INSURANCE COMPANY, Defendant/Appellee, Counter-Appellant.
• Court: Oklahoma Supreme Court

512 P.3d 345

John Randall COATES, Plaintiff/Appellant, Counter-Appellee,

v.PROGRESSIVE DIRECT INSURANCE COMPANY, Defendant/Appellee, Counter-Appellant.

No. 119,571

Supreme Court of Oklahoma.

FILED MAY 3, 2022

Simone Fulmer Gaus, Harrison C. Lujan, Jacob L. Rowe, Andrea R. Rust, FULMER SILL, PLLC, Oklahoma City, Oklahoma, for Plaintiff/Appellant, Counter-Appellee.

Brad L. Roberson, Dawn M. Goeres, ROBERSON, KOLKER, COOPER & GOERES, P.C., Edmond, Oklahoma, for Defendant/Appellee, Counter-Appellant.

KUEHN, J.:

¶1 This case presents two questions: (1) is Appellee Progressive Direct Insurance Company required to pay Appellant Coates uninsured/underinsured motorist (UM) benefits, and (2) did Appellee breach a duty of good faith and fair dealing in refusing Coates' claim. We answer the first question "yes". We reverse the trial court's order denying time for discovery on the second question, and leave the initial resolution of that question to the trial court.

FACTS AND PROCEDURAL HISTORY

¶2 On August 14, 2019, Coates, riding a 1964 Triumph Bonneville motorcycle, suffered serious injuries in a collision with a vehicle driven by Mary Toney. At the time of the crash, Coates was the named insured of two separate policies with Appellee Progressive. Coates insured the Triumph motorcycle with Progressive through Motorcycle Policy No. 9261634. He had, and rejected, the opportunity to purchase additional UM coverage under the Motorcycle Policy.

¶3 Coates also had Automobile Policy No. 927561880 with liability coverage for a Dodge Ram truck. At the time he bought the Auto Policy Coates also bought uninsured/underinsured motorist (UM) coverage for $25,000 for each person and $50,000 each accident.

¶4 After the collision, Coates submitted claims for UM coverage benefits to Progressive under both policies, but quickly agreed that there were no UM benefits connected with his Motorcycle Policy. Progressive rejected Coates' UM claim for coverage bought with the Auto Policy. Progressive claimed that the Auto Policy UM coverage did not apply to the motorcycle collision, because the motorcycle was not specifically included in the Auto Policy.

¶5 Coates filed suit against Progressive for breach of contract and breach of the duty of good faith and fair dealing.¹ Coates soon after filed a motion for partial summary judgment regarding his entitlement to UM benefits from Progressive. Progressive filed a motion for summary judgment on both Coates' breach of contract and good faith claims. Coates asked the trial court for more time to respond to Progressive's motion to conduct further discovery.

¶6 A hearing on all motions was held, and during an unrecorded telephone conference, the trial court granted Coates' partial motion for summary judgment. The trial court on a later date, denied Coates' motion for more time to respond, granted Progressive's motion for summary judgment on the issue of good faith and fair dealing and denied any pending motions as moot.²

STANDARD OF REVIEW

¶7 Summary judgment claims turn on the law because there is no material factual dispute. While the trial court necessarily considers the facts in deciding such a claim, the actual question before the court is a pure matter of law. H2K Technologies, Inc. v. WSP USA, Inc. , 2021 OK 59, ¶ 6, 503 P.3d 1177. Our review of this legal determination is de novo . Id .

COATES IS ENTITLED TO UM BENEFITS UNDER THE AUTO POLICY

I. UM Coverage is governed by public policy considerations.

¶8 "When interpreting automobile insurance contracts, the court strives to strike a balance between freedom of contract principles and the state's interest in protecting the public." Ball v. Wilshire Ins. Co ., 2009 OK 38, ¶ 27, 221 P.3d 717, 726. We look to see whether a provision "clearly tends to injure public health, morals or confidence in the administration of law, or if it undermines the security of individual rights with respect to either personal liability or private property." Id .

¶9 UM coverage is recommended but not required. However, the Legislature has made it clear that, as a matter of public policy, insurers must offer UM coverage. 36 O.S. § 3636(B) Ch. 1, art. 36, https://govt.westlaw.com/okjc (2021). Insurers must provide UM coverage unless the insured, after being given the opportunity to buy it, affirmatively declines the coverage in writing. 36 O.S. § 3636(G). However, UM coverage is separate and distinct from liability coverage. Lane v. Progressive Northern Ins. Co. , 2021 OK 40, ¶ 10, 494 P.3d 345, 349. Insurers must provide UM coverage in order to "protect the insured from the effects of personal injury resulting from an accident with an uninsured/underinsured motorist." Id ., ¶ 13, 494 P.3d at 350 (quoting State Farm Auto Ins. Co. v. Greer , 1989 OK 110, ¶ 6, 777 P.2d 941, 942 ). While one may buy UM coverage at the same time one buys a liability insurance policy, UM coverage does not cover motor vehicles. It covers people. Morris v. America First Ins. Co. , 2010 OK 35, ¶ 10, 240 P.3d 661, 663.

¶10 The distinction in the subject of coverage — vehicle versus person — is essential. Every driver must carry liability insurance pursuant to 47 O.S. § 7-601, and therefore must buy it. To fully give effect to the Legislature's intention to encourage universal UM coverage, the ability to purchase UM coverage is simple. Under Section 3636, UM coverage must be offered simultaneously with the purchase of a liability policy. 36 O.S.Supp.2014, § 3636(A). But although the liability policy and the UM coverage are bought together, they do not run together.

¶11 As UM coverage is for persons and not specific vehicles, the coverage follows the person. "Follows the person" means that, if an insured person buys UM coverage when the coverage is offered, that UM coverage will apply to accidents and injuries to that person, regardless of whether a specific vehicle involved in an accident was insured under the liability policy bought at the same time. The only circumstance under which UM coverage does not apply is where an insured is injured while occupying a motor vehicle "owned by, or available for the regular use of, an insured, resident spouse, or resident relative", and that motor vehicle "is not insured by a motor vehicle insurance policy." 36 O.S.Supp.2014, § 3636(E). We have interpreted the term "motor vehicle policy" in that exclusion to include a policy for UM coverage. Morris , 2010 OK 35, ¶ 16, 240 P.3d at 664.

¶12 However, that interpretation is not exclusive. The plain language of the statute — "a motor vehicle insurance policy" — means what it says. It may include either, or both, liability and UM coverage. Both parties agree that the Triumph was covered by a liability policy. Therefore, since the UM coverage follows the person, and a liability policy was purchased, Progressive must offer some other justification for denying UM coverage.

II. Progressive's policy exclusion.

¶13 Progressive argues that Section 3636(E) allows it to deny UM coverage to an insured who purchased UM coverage through another liability policy for another vehicle, regardless of whether the insured has UM coverage through another policy. Progressive argues that since Coates rejected UM coverage under the motorcycle policy, and he was injured while riding the motorcycle, this statutory exclusion applies. This reflects a significant misunderstanding of Section 3636(E).

¶14 Progressive based its denial of Coates' UM claim on exclusionary language it drafted in its Auto Policy under Part III, 1(b), exclusions to UM coverage. That provision states that UM coverage under the policy will not apply:

"(1) to bodily injury sustained by any person while using or occupying: (b) a motor vehicle that is owned by or available for the regular use of you, a relative, or a rated resident. This exclusion does not apply: (i) to a covered auto that is insured under this Part III, or (ii) to a relative or rated resident who is insured for uninsured motorist coverage under any other motor vehicle insurance policy he or she has obtained."³

Exclusion 1(b) thus appears to exclude from UM coverage injuries which occur in the insured's own motor vehicle, even though the insured has paid for coverage, unless coverage for that particular vehicle listed in the liability policy was bought at the same time as the UM coverage. Put another way, Progressive has written an exclusion which follows the vehicle, not the person.

¶15 The United States District Court for the Northern District of Oklahoma considered this exclusion in Vickers v. Progressive Northern Insurance Company , 353 F.Supp.3d 1153 (N.D. Okla. 2018). While not binding on this Court, the Vickers general analysis of Exclusion 1(b) is persuasive.⁴ Vickers correctly emphasizes that, when considering whether a policy exclusion violates Section 3636(E), one controlling factor is whether an insured has had the opportunity to purchase his own UM coverage. Vickers , 353 F.Supp.3d at 1161. In Vickers , the insured was a resident relative driving a vehicle owned and insured for UM coverage by his father; the resident relative himself had no opportunity to purchase UM coverage and was therefore entitled to rely on the doctrine that UM coverage follows the person, not the vehicle. Id . Here, of course, the insured himself both purchased liability and UM coverage from Progressive and made the claim for UM coverage on his UM policy after he was injured in the collision. As per Vickers , UM coverage under Section 3636 is "for the protection of persons insured thereunder." Id . at 1161-62 ; 36 O.S. § 3636(B).

¶16 People who pay for UM coverage should get what they paid for. Lane , 2021 OK 40, ¶ 20, 494 P.3d at 353 ; Morris , 2010 OK 35, ¶ 19, 240 P.3d at 664.⁵ As the trial court remarked, Coates would be entitled to benefits from his UM coverage had he been hit by an underinsured motorist while walking, parked in a parking lot, or sitting on his porch. To find that Coates' UM coverage would apply in those...