Major Legislative Changes to Oregon’s UM/UIM and PIP Statutes
Oregon’s legislature has recently passed a law which will significantly expand benefits available under uninsured/underinsured (“UM/UIM”) and PIP coverages. Senate Bill 411 was passed by the legislature and signed into law by the governor in March 2015. The bill has four major effects, including the following: (1) requiring UIM limits to “float” on top of underlying liability limits, (2) modifying the statutory language addressing the effects of multiple UM/UIM policies, (3) permitting a PIP insurer to obtain reimbursement only after the PIP insured has been fully compensated for his or her damages, and (4) expanding the period for receiving PIP medical benefits from one year to two years. These changes, as well as other statutory changes, will only affect policies issued on or after January 1, 2016.
The most significant effects of the bill are the changes to the UM/UIM statutes. Oregon courts have typically held that under the current UM/UIM statutes, UIM benefits are available only to the extent that UM/UIM limits exceed the amount of liability coverage available. See e.g. Vogelin v. Am. Family Mut. Ins. Co., 346 Or 490, 506, 213 P3d 1216, 1224-1225 (2009) (calculating the potential UIM benefit by subtracting the tortfeasor's liability payment from the UIM limit). For example, under the current statutes, if the insured had UM/UIM limits of $100,000.00, and there was a liability policy with $25,000.00 in available limits, then $75,000.00 in UIM coverage would be available. If the available liability limits were $100,000.00 or more, there would no UIM coverage available, since the UIM limits did not exceed the available liability limits.
The new bill will change how UIM benefits will be calculated. It appears that the legislature basically intends for UIM coverage to provide a layer of coverage that “floats” on top of the available liability coverage. For example, if the insured has UM/UIM limits of $100,000.00 and there are liability limits of $25,000.00 available, the insured would have $100,000.00 in UIM benefits to cover his or her damages that exceed the liability limits. If the available liability limits were $1 million, the insured would still have $100,000.00 in UIM coverage available. Presumably, the legislature intends to allow UIM insurers to offset from the insured’s damages any amounts of liability limits that are available to the insured, since it does not seem likely that the legislature would have intended to allow an insured to recover the same damages from a liability insurer and from his or her UIM insurer. However, this is probably not as clear as it should be, since the legislature deleted portions of ORS 742.504 (7) which addressed reductions from UIM coverage for amounts paid on behalf of underinsured motorists.
Other important changes in Senate Bill 411 relate to the treatment of multiple UM/UIM policies. For example, current ORS 742.504 (9) states that any excess UM/UIM insurance applies only to the extent that those limits exceed the amount of any primary UIM limits. This limitation has been removed by Senate Bill 411.
Also, current ORS 742.504 (9)(b) prevents insureds from stacking multiple primary UM/UIM policies or stacking multiple excess UIM policies. These limitations have also been removed. We predict this will lead to arguments from plaintiff’s attorneys regarding the stacking or sequencing of multiple UM/UIM policies and limits in order to try to create larger recoveries.
As noted above, the changes in Senate Bill 411 will effect policies issued on or after January 1, 2016. It is possible that there will be some additional legislative changes or clarifications before then. In the meantime, insurers will be likely be re-drafting their policies to reflect the upcoming changes, and we will likely be seeing the effects from the statutory and policy changes over several years.
Please direct any questions in this area of law to the author, Flavio A. (Alex) Ortiz, at 503-880-8444, or by email to firstname.lastname@example.org.