Wallach v. Allstate Ins. Co.

• Decision Date: 20 March 2008
• Docket Number: SC S053702.,CC 99-3671-L4(7).,CA A124340.
• Citation: 180 P.3d 19,344 Or. 314
• Parties: Michael E. WALLACH, Petitioner on Review, v. ALLSTATE INSURANCE COMPANY, an Illinois corporation, aka Allstate Indemnity Company, Respondent on Review.
• Court: Oregon Supreme Court

180 P.3d 19

344 Or. 314

Michael E. WALLACH, Petitioner on Review, v. ALLSTATE INSURANCE COMPANY, an Illinois corporation, aka Allstate Indemnity Company, Respondent on Review.

CC 99-3671-L4(7).

CA A124340.

SC S053702.

Supreme Court of Oregon, En Banc.

Argued and Submitted January 3, 2007.

Decided March 20, 2008.

On review of the decision of the Court of Appeals.^*

G. Jefferson Campbell, Medford, argued the cause and filed the brief for petitioner on review.

Edward H. Talmadge, of Frohnmayer, Deatherage, Pratt, Jamieson, Clarke & Moore, PC, Medford, argued the cause and filed the brief for respondent on review. With him on the brief was Bernard S. Moore, Medford.

KISTLER, J.

Plaintiff suffered injuries in three separate automobile accidents. During the trial on the first accident, the court instructed the jury that it could hold defendant Allstate Insurance Co., responsible for any "enhancement or aggravation of plaintiff's injuries caused by the subsequent accident[s]" if the enhancement or aggravation would not have occurred but for the first accident. On appeal, the Court of Appeals held that the trial court erred in giving that instruction, reversed the trial court's judgment, and remanded for a new trial. Wallach v. Allstate Ins. Co., 206 Or.App. 137, 135 P.3d 404 (2006). We allowed plaintiff's petition for review and now affirm the Court of Appeals decision.

Plaintiff purchased automobile insurance from defendant Allstate. Afterwards, plaintiff was involved in three automobile accidents. The first accident occurred on October 24, 1997. An unidentified truck (referred to as a "phantom vehicle" in Allstate's policy) caused plaintiff's vehicle to swerve, injuring plaintiff. Because the person driving the truck was unidentified and thus unavailable, plaintiff sought to recover his damages from Allstate under both the uninsured motorist (UM) provision¹ and the personal injury protection (PIP) provision² of his policy. Allstate denied liability under both provisions, and plaintiff filed this action against Allstate on October 22, 1999, alleging that Allstate had breached those provisions.

The second accident occurred on August 6, 1999, a few months before plaintiff filed this action. Plaintiff had stopped at a red light when another car "rear-ended" his car. The third accident occurred on August 2, 2002, before the trial on this action began. Plaintiff had stopped at a red light when yet another car "rear-ended" his car.

At the trial on the first accident, plaintiff contended that Allstate was liable for the injuries resulting from the first accident and also for any aggravation of those injuries resulting from the second and third accidents.³ Plaintiff submitted a special jury instruction to that effect,⁴ and Allstate filed a written objection. Among other things, Allstate contended that the trial court should not give plaintiff's requested instruction because "the subsequent motor vehicle accidents are not accidents which would have occurred but for the original injury" and also because it was "not foreseeable that a plaintiff would meet with subsequent motor vehicle accidents." Finally, Allstate argued that plaintiff's requested instruction would make it "liable for injuries attributable to the second motor vehicle accident for which [it] is not liable."

Despite that objection, the trial court gave an instruction that repeats, in substantial part, the special jury instruction that plaintiff had requested. The trial court instructed the jury:

"The contract entered into by the plaintiff and the defendant sets forth that the defendant will provide coverage for all the natural[,] direct and proximate consequences of the wrongful acts of the driver of the phantom vehicle.

"If you find that the plaintiff was injured by those acts in the accident of October 24th, 1997 and then had a subsequent accident in which the plaintiff suffered further injury which would not have occurred, but for the original injury, the defendant may then be held liable for the enhancement or aggravation of plaintiff's injuries caused by the subsequent accident.

"The defendant's liability would apply only to the injuries you attribute to the accident of October 24th, 1997 and to any enhancement or aggravation of those injuries, not to any new injuries suffered by plaintiff in any subsequent accident."

After the court gave that instruction, Allstate excepted to it, reasoning that "this is not the type of case where the first accident caused the second and third accidents; and, therefore, that instruction should not have been given[.]" The jury returned a verdict awarding plaintiff $50,000 in damages for Allstate's breach of the UM provision and $25,000 in damages for Allstate's breach of the PIP provision.

Allstate appealed from the resulting judgment, arguing, among other things, that the trial court erred in instructing the jury that Allstate was liable to the extent that the second and third accidents aggravated any injuries that plaintiff sustained in the first accident. The Court of Appeals agreed that the instruction was erroneous. It reasoned that the instruction was either confusing or incorrect because it appeared to permit the jury to award damages for injuries arising out of the second and third accidents if the jury found "but for" causation only. Wallach, 206 Or.App. at 144, 135 P.3d 404. The court also noted that the instruction referred to proximate cause when it should have referred to foreseeability. Id. Because the court concluded that those errors were not harmless, it reversed the trial court's judgment and remanded for further proceedings. Id. at 145, 135 P.3d 404.

On review, plaintiff argues that the Court of Appeals erred in three respects. He contends initially that Allstate failed to preserve its objection to the instruction. Plaintiff recognizes that Allstate objected to the instruction. He contends, however, that Allstate did not object on the grounds on which the Court of Appeals relied. As noted above, however, Allstate filed a written memorandum objecting to plaintiff's special requested jury instruction on the ground, among other things, that the second and third accidents were not foreseeable. As also noted, the trial court's instruction tracked in substantial part the special requested instruction to which Allstate objected, and Allstate renewed its objection when it excepted to the instruction that the trial court gave. Allstate preserved the issues that it has raised on appeal and on review. See Beall Transport Equipment Co. v. Southern Pacific, 335 Or. 130, 137, 60 P.3d 530 (2002) (describing preservation requirements for jury instructions).

Having concluded that Allstate preserved its objections to the instruction, we turn to the question whether that instruction correctly stated the law. The instruction consists of three sentences. The first sentence purports to recite the terms of the insurance contract under which plaintiff's claims against Allstate arise.⁵ The second sentence sets out the operative legal principle; it tells the jury what it must find before Allstate "may * * * be held liable." That sentence provides:

"If you find that the plaintiff was injured by those acts in the accident of October 24th, 1997 and then had a subsequent accident in which the plaintiff suffered further injury which would not have occurred, but for the original injury, the defendant may then be held liable for the enhancement or aggravation of plaintiff's injuries caused by the subsequent accident."

The third sentence limits the second. It clarifies that Allstate is liable for the injuries resulting from the first accident and for "any enhancement or aggravation of those injuries, [but] not [for] any new injuries suffered by plaintiff in any subsequent accident."

The trial court's instruction is erroneous in two separate but related respects. First, the instruction is at odds with the general rule that a defendant is liable only for the foreseeable consequences of his or her negligence. See Fazzolari v. Portland School Dist. No. 1J, 303 Or. 1, 17, 734 P.2d 1326 (1987) (holding that, unless a status, relationship, or standard of conduct "creates, defines, or limits the defendant's duty, the issue of liability for harm actually resulting from [the] defendant's conduct properly depends on whether that conduct unreasonably created a foreseeable risk to a protected interest of the kind of harm that befell the plaintiff").⁶ Under the trial court's instruction, the jury could hold Allstate liable for all aggravation damages that were causally connected to the first driver's negligence no matter how unforeseeable those damages were. Such unlimited liability is contrary to Oregon negligence law.

Not only is the trial court's instruction contrary to the general rule on negligence, but it is also inconsistent with the specific application of that rule in Ferrante v. August, 248 Or. 16, 432 P.2d 167 (1967). In Ferrante, the plaintiff had injured her back in an automobile accident as a result of the defendant's negligence. Id. at 17, 432 P.2d 167. Several months later, as her back was improving, she "felt a very sharp pain in her back as she was getting out of her chair." Id. at 18, 432 P.2d 167. The plaintiff's doctor testified that the injury had weakened the plaintiff's back and that the later injury she experienced on getting out of the chair was a foreseeable consequence of her weakened back and thus the earlier accident. Id.

On that evidence, this court held that the plaintiff could recover both for the injury that she originally suffered as a result of the accident and also for the later back sprain. Id. at 22-23, 432 P.2d 167. The court reasoned that, given the doctor's testimony, the jury reasonably could find that "but for the original injury the [later] back sprain * * * would not have occurred and that the latter injury was the natural and probable consequence of the former." Id. at 22, 432...