S054652, Opinion — Mid-Century Ins. Co. v. Perkins

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<!-- PageHeader="On petitioner for review Perkins' petition for reconsideration filed March 20, considered and under advisement May 21,* petition for reconsideration allowed; former opinion modified and adhered to as modified October 16, 2008" -->

MID-CENTURY INSURANCE COMPANY,
Respondent on Review,
v.

Elijah PERKINS,
Petitioner on Review.
(CC 04-1834-E7; CA A127522; SC S054652)

Dennis W. PHILLIPS,
Petitioner on Review,
v.
SAFECO INSURANCE COMPANY
OF OREGON,
Respondent on Review.
(CC 0504-03584; CA A130265; SC S054660)
(Consolidated for Opinion)

195 P3d 59

En Banc

Meagan A. Flynn, Preston Bunnell & Flynn, LLP,
Portland, filed the petition for petitioner on review Perkins.

Thomas M. Christ, of Cosgrave Vergeer Kester LLP,
Portland, filed the brief for respondent on review Mid-Century
Insurance Company.

No appearance on behalf of petitioner on review Phillips
or respondent on review Safeco Insurance Company of
Oregon.

Kathryn H. Clarke, Portland, filed the brief for amicus
curiae Oregon Trial Lawyers Association.

No appearance on behalf of amicus curiae Allstate Ins.
Co., State Farm Mutual Auto Ins. Co., Country Mutual Ins.
Co., American Family Ins. Co., and The Property Casualty
Insurers Association of America.

\* 344 Or 196, 179 P3d 633 (2008).

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DURHAM, J.

The petition for reconsideration is allowed. The former
opinion is modified and adhered to as modified.

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# DURHAM, J.

Petitioner on review Perkins in this underinsured
motorist insurance case seeks reconsideration of this court's
decision.1 Mid-Century Ins. Co. v. Perkins, 344 Or 196, 179
P3d 633 (2008). Petitioner, however, does not challenge the
court's ultimate conclusion or resolution of the issue pre-
sented by this case. Instead, petitioner requests only that
this court remove two sentences from the penultimate para-
graph of its opinion. For the reasons that follow, we agree
with petitioner and modify our original opinion by removing
those two sentences from the opinion of the court.

Petitioner-the insured in the dispute that gave rise
to one of the underlying proceedings-and amicus curiae
Oregon Trial Lawyers Association (OTLA) take issue with
the following paragraph from this court's opinion:

"[In Bergmann v. Hutton, 337 Or 596, 608, 101 P3d 353
(2004),] [w]e noted that ORS 742.502(2)(a) 'essentially
defines the limit of the insurer's liability in the UIM con-
text' by providing 'that UIM benefits are "equal to unin-
sured motorist coverage benefits less the amount recovered
from other automobile liability insurance policies.'

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."

Id. at 217 (emphasis added). Petitioner and OTLA focus on
the two highlighted sentences because, they contend, in those
two sentences, the court purported to interpret the conclud-
ing sentence of ORS 742.502(2)(a), although that part of ORS
742.502(2)(a) was not at issue in this case. The last sentence

1 In its opinion, the court consolidated its review of two actions: Mid-Century
Ins. Co. v. Perkins, 209 Or App 613, 149 P3d 165 (2006), and Phillips v. Safeco Ins.
Co., 209 Or App 815, 149 P3d 316 (2006). The petitioner on review in Mid-Century
is the party seeking reconsideration. For the sake of simplicity, we refer in this
opinion to petitioner on reconsideration Perkins as "petitioner."

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of ORS 742.502(2)(a) focuses on how to determine the amount
of underinsurance benefits: "Underinsurance benefits shall
be equal to uninsured motorist coverage benefits less the
amount recovered from other automobile liability insurance
policies."

As petitioner and OTLA note, however, this case
"deal[t] with the threshold question of whether a motorist is
underinsured at all." Mid-Century, 344 Or at 217. There-
fore, we needed to interpret only the sentence in ORS
742.502(2)(a) that governed that "threshold question":

"Uninsured motorist coverage larger than the amounts
required by ORS 806.070 shall include underinsurance cov-
erage 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."

(Emphasis added.) Specifically, this case required us to deter-
mine the meaning of the phrase "the insured's uninsured
motorist coverage," highlighted above. If that phrase referred
"to the damages that the insured is legally entitled to recover
from a motorist, then a motorist is underinsured when those
damages exceed the limits of his liability policy, as [peti-
tioner] claim[s]." Mid-Century, 344 Or at 207-08 (emphasis in
original). On the other hand, if that phrase referred to "the
policy limits on the insured's [uninsured motorist] coverage,
then a motorist is underinsured when those policy limits
exceed the limits of his own liability policy, as [the insurer]
claim[s]." Id. at 208 (emphasis in original). After reviewing
the statutory text and context, we ultimately agreed with the
insurer that "the insured's uninsured motorist coverage"
referred to the policy limits of that coverage and held that
whether a motorist is underinsured under ORS 742.502(2)(a)
is determined by comparing the motorist's liability limits
with the limits on the insured's uninsured motorist coverage.
Id. at 216. In this case, petitioner's liability limits were equal
to the liability limits of the motorists who injured each plain-
tiff in the underlying proceedings; therefore, petitioner was
not injured by an underinsured motorist and was not entitled
to underinsured motorist benefits under ORS 742.502(2)(a).
Id. at 218.

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In reaching our conclusion, we addressed peti-
tioner's argument that this court's decision in Bergmann v.
Hutton, 337 Or 596, 101 P3d 353 (2004), mandated his
proffered interpretation of ORS 742.502(2)(a). Bergmann
involved the interpretation of the phrase "[a]ny amount pay-
able under the terms of this coverage" in ORS 742.504(7)(c),
which governs the reduction of any amounts payable under
uninsured motorist coverage under certain circumstances.2
Id. at 603. Specifically, in Bergmann, the court concluded
that the phrase "amount payable under the terms of this
coverage" in ORS 742.504(7)(c) referred to an insured's total
damages, not to the policy's liability limit. Id.

Based on that conclusion in Bergmann, petitioner
contended in this case that "coverage," as used in ORS
742.502(2)(a), must refer to an insured's damages and, there-
fore, required a comparison of an insured's damages to the
policy limits of the other motorist to determine whether the
motorist is underinsured. According to petitioner, if we failed
to construe "coverage" in ORS 742.502(2)(a) to have the same
meaning as "coverage" in ORS 742.504(7)(c), we would have
created an untenable inconsistency among the statutes gov-
erning underinsured motorist insurance. We rejected peti-
tioner's argument based on Bergmann for two reasons. First,
we emphasized that Bergmann did not address the threshold
question whether a motorist is underinsured under ORS
742.502(2)(a). Mid-Century, 344 Or at 217. Instead,
Bergmann interpreted a different section of the uninsured
motorist statute, one not at issue in this case.

2 At the time we decided Bergmann, ORS 742.504(7)(c) (2003) provided:

"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 cov-
erage 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 paya-
ble on account of such bodily injury under any workers' compensation
law, disability benefits law or any similar law."

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The second reason that we offered for rejecting peti-
tioner's Bergmann argument is the subject of this petition for
reconsideration.3 We first stated that this court "already con-
sidered this supposed problem in Bergman" and quoted
Bergmann's statement that ORS 742.502(2)(a) provides that
"[underinsured motorist] benefits are 'equal to uninsured
motorist coverage benefits less the amount recovered from
other automobile liability insurance policies.'" Id. (quoting
Bergmann, 337 Or at 608). Our opinion went on to include
the two sentences, highlighted above, that petitioner and
OTLA would like to have excised. Those sentences provided
additional interpretation, beyond that in Bergmann, of the
concluding sentence of ORS 742.502(2)(a). That interpreta-
tion appears to establish the limits of the amount of an
insurer's liability for underinsured motorist benefits.

In this case, however, we had no need to address or
even discuss the limit of an insurer's liability for under-
insured motorist benefits. Petitioner was not entitled to any
underinsurance benefits, because his policy limits were equal
to those of the other motorist. Therefore, this case presented
no reason to interpret the sentence of ORS 742.502(2)(a) that
governs how to determine the amount of underinsurance
benefits. We agree with petitioner and OTLA that the inter-
pretation of the concluding sentence in ORS 742.502(2)(a) is
best left to a case where the issue is presented and has been
fully briefed and argued.4

We therefore allow petitioner's petition for reconsid-
eration and modify the opinion of the court in the following
two ways: (1) by changing the sentence, "Bergmann dealt

3 OTLA also asks this court to correct an asserted minor misstatement in our
earlier discussion of Bergmann. Our opinion stated that "Bergmann dealt with the
question of how much an insured may recover from an uninsured motorist in light
of benefits that the insured received from other sources." Mid-Century, 344 Or at
217 (emphasis added). OTLA asserts that the sentence instead should read:
"Bergmann dealt with the question of how much an insured may recover from the
underinsured motorist insurer [that is, petitioner's insurer] in light of benefits that
the insured receives from other sources." We agree with OTLA and make that mod-
ification to our opinion.

4 The Court of Appeals has addressed the meaning of the last sentence in ORS
742.502(2)(a) in two recent decisions: 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).

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with the question of how much an insured may recover from
an underinsured motorist in light of benefits that the insured
receives from other sources," Mid-Century, 344 Or at 217, to
read: "Bergmann dealt with the question of how much an
insured may recover from an underinsured motorist insurer
in light of benefits received from other sources," see 345 Or at
379 n 3; and (2) by removing the following two sentences:

"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."

Mid-Century, 344 Or at 217.

The petition for reconsideration is allowed. The for-
mer opinion is modified and adhered to as modified.