Oklahoma Court: Progressive’s Uninsured Motorist Exclusion Not Lawful

July 30, 2021

Oklahoma’s highest court recently found that an insurer’s uninsured motorist exclusion violates state law.

The Oklahoma Supreme Court came to that conclusion in answering a certified question from the U.S. Court of Appeals for the Tenth Circuit about the UM exclusion in a private automobile policy from Progressive Insurance Co.

According to the Oklahoma Supreme Court’s written opinion delivered June 29, the 10th Circuit Court asked: “Does Progressive’s UM Exclusion — which operates to deny uninsured motorist coverage to insureds who recover at least the statutorily mandated minimum in the form of liability coverage — contravene Oklahoma’s Uninsured Motorist Statute, codified at 36 O.S. § 3636?”

The Oklahoma Supreme Court answered “yes.”

The question arose in Lane v. Progressive Northern Insurance Co., a case involving two passengers who were severely injured in a single-car rollover accident in 2017. The insurance policy on the vehicle had been issued by Progressive Northern to the parents of the driver, who was a minor at the time of the accident and is not a party to the lawsuit.

The court’s opinion described the underlying case: “Premiums were paid for both liability and uninsured-motorist coverage. The driver’s policy provided liability coverage of $100,000 per person, with a $300,000 limit per accident (labeled under the policy as Part I — Liability to Others). Additionally, the policy provided uninsured-motorist coverage of $100,000 per person, with a $300,000 limit per accident (designated in the policy as Part III — Uninsured Motorist Coverage). Both Lane and Stone recovered the $100,000-per-person liability limit — but their injuries were substantial, and their damages exceeded $100,000. In light of their extensive injuries, Lane and Stone sought additional uninsured-motorist coverage from Progressive. Relying on an exclusion in the policy — referred to herein as the UM Exclusion — Progressive denied their claims.”

In Oklahoma, auto insurers are required to offer uninsured motorist coverage along with standard liability coverage, though policyholders may decline the UM coverage.

“Where a policyholder has chosen to purchase uninsured-motorist coverage and the insurer has included it in the insurance contract in accord with section 3636 — as here — our public policy requires protection up to the contracted-for limits,” the Oklahoma Supreme Court’s opinion states.

The “sweeping” UM exclusion in Progressive’s policy allows the company to avoid providing the coverage required by the statute, the court said. “Progressive’s UM Exclusion states that uninsured-motorist coverage will not apply to ‘bodily injury sustained by an insured person where liability coverage for bodily injury in an amount equal to or greater than the minimum limits of liability required by the motor vehicle financial responsibility law of Oklahoma is available for said bodily injury under Part I—Liability to Others.'”

This provision violates public policy by depriving the policyholder of the UM coverage they paid for, effectively erasing “its policyholder’s choice to purchase that coverage in the first place,” the opinion states.

Relying on its UM exclusion, Progressive denied Lane and Stone uninsured motorist coverage because both had recovered “$100,000 under the policy’s liability coverage — which is greater than the Oklahoma statutory minimum of $25,000,” the court said.

Lane and Stone sued Progressive in federal district court for breach of contract and bad faith. They asserted that the UM exclusion upon which the insurer relied in denying coverage “is void as a matter of public policy under state law.”

The federal district court saw things differently, however, and ruled in Progressive’s favor, finding that the UM exclusion is permitted under state law.

Lane and Stone appealed to the 10th Circuit Court, which, in turn certified the question of legitimacy of the exclusion to the Oklahoma Supreme Court.

Justice Gurich, writing for the majority, pointed out that the applicable statute “plainly differentiates between liability and uninsured-motorist coverage.” It also does not intend for the coverages to be combined. Unless the insured specifically declines UM coverage, “the insurer must provide both the uninsured-motorist coverage and the liability coverage,” Gurich wrote.

The circumstances of the case are undisputed — that Lane and Stone are covered under the insured’s policy, their “damages exceed the policy’s $100,000-per-person liability limit. The vehicle involved in the accident meets the definition of an uninsured motor vehicle under the terms of both the insurance policy and section 3636,” and the UM coverage was selected and paid for, the opinion states.

Therefore, the court reasoned, the policyholder would be correct in assuming the coverage would be available “in the event of an automobile accident resulting in serious injuries to their insureds in excess of the policy’s liability limits.”

Liability coverage is not the same as UM coverage and is not a substitute for it, the court wrote. As such, “we hold that Progressive’s UM Exclusion contravenes Oklahoma’s strong public policy in favor of broadly available uninsured-motorist coverage,” the majority opinion states.

The ruling was not unanimous. Three justices — Kane, Rowe and Winchester — dissented.

Topics Oklahoma

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