Oregon Court Construes Scope of UM/UIM Coverage Grant

On March 25, 2015, the Oregon Court of Appeals issued its decision in De Zafra v. Farmers Ins. Co., 270 Or App 77, — P3d — (2015), addressing the scope of coverage available under the uninsured/underinsured motorist (UM/UIM) statute.  The specific issue before the court was the meaning of the phrase “arise out of” use of an uninsured vehicle.  The court rejected prior case law that incorporated a requirement that there be a “direct cause” between the injury and use of the vehicle.

The case concerned an insured that was passenger in a vehicle.  Another vehicle drove alongside the insured’s vehicle and fired several gunshots, causing her serious injuries.  The liability insurer covering the individual that fired the gunshots denied the insured’s claim.  The insured filed a claim under the UM/UIM insurance policy covering the vehicle she was occupying at the time of the incident.  The UM/UIM insurance company denied the insured’s claim.  As a result, the insured filed a lawsuit alleging breach of contract.

At the trial court, the parties filed cross-motions for summary judgment on whether there was coverage under the policy.  The primary issue for consideration was whether the insured’s injuries fell within the requirement under ORS 742.504(1)(a) and the policy that injuries “arise out of the * * * use of [an] uninsured motor vehicle.”  The insurance company relied on the decision in Worldwide Underwriters Ins. Co. v. Jackson, 121 Or App 292, 855 P2d 166, rev den, 318 Or 26 (1993).  In Jackson, the Court of Appeals construed the same phrase in a UM policy and determined a gunshot, not a vehicle, to be the “direct cause” of the injury and upheld the denial of a claim.  The insured, on the other hand, relied on the more recent Oregon Supreme Court decision in Carrigan v. State Farm Mut. Auto. Ins. Co., 326 Or 97, 949 P2d 705 (1997).  In Carrigan, the court construed similar language in the context of the personal injury protection (PIP) statute and rejected the “direct cause” interpretation.  The trial court agreed with the insurance company and granted its motion, finding that Carrigan was distinguishable and Jackson to be on point.  The insured appealed.

The parties reiterated their arguments before the Court of Appeals.  The court began its opinion with a thorough analysis of the Jackson and Carrigan decisions, including outlining the basis for each decision.  Citing other Oregon authorities interpreting the phrase, the court concluded that the term “arising out of” is broader than “caused by.”  The court also concluded that it was unable to draw any meaningful distinction between the Supreme Court’s interpretation of the phrase in the context of the PIP statute, finding that although PIP and UM provide distinct insurance benefits, the causal link in the statutes between an injury and vehicle is the same.  The court rejected the insurance company’s invocation of the doctrine of stare decisis, holding that the UM/UIM statute requires coverage “when the injury arises out of the use of an uninsured motor vehicle and that coverage cannot be denied based on an interpretation that the gunshots were the ‘direct cause’ of the injury.”

Maloney Lauersdorf Reiner regularly represents clients facing UM/UIM insurance coverage issues.  Please contact us with any questions regarding this case or any other matter you see addressed in the MLR Insurance Coverage Blog.

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