American Economy Insurance v. Canamore , 114 Or. App. 348 ( 1992 )

EDMONDS, J.

This is a declaratory judgment action. Plaintiff appeals and defendants cross-appeal a judgment regarding defendants’ entitlement to benefits under two insurance policies. We affirm on appeal and on cross-appeal.

Plaintiff issued two insurance policies to defendant Canamore. One was an automobile liability policy that provided a $500,000 liability limit and $50,000 in uninsured/ underinsured (UM/UIM) benefits. The other was a multirisk, extra-liability, umbrella policy with a $1 million liability limit; it did not offer any UM/UIM benefits.

In May, 1988, Canamore was driving a car in which defendant Conn and decedent Stephen Landis were passengers. The car was involved in an accident with an insured of Safeco Insurance Company (Safeco), who had a policy with a $500,000 bodily injury Lability limit. Defendants received $500,000 from Safeco in settlement of their claims against Safeco’s insured. They then made claims for UIM benefits under both of Canamore’s policies with plaintiff. Plaintiff denied the claims on the grounds that the $500,000 settlement precluded any benefits under the automobile policy and that UIM benefits were not available under the umbrella policy. Plaintiff initiated this action to determiné whether defendants are entitled to UIM benefits under either policy. The parties made cross-motions for summary judgment. The trial court granted defendants’ motion with regard to the umbrella policy and granted plaintiffs motion with regard to the automobile policy. The judgment says, in part:

“ 1. Plaintiff has no obligation for underinsured motorist benefits for this loss under [the automobile policy] issued to defendant Canamore, for the reason that said policy, when viewed in conjunction with the liability payments made by Safeco Insurance Company, would not provide coverage for underinsured motorist benefits, even if plaintiffs policy limit were to be reformed to $500,000.

“2. Defendants are entitled to make claims for underinsured motorist benefits under [the umbrella policy], for the reason that such policy is a ‘motor vehicle liability policy,’ as that term is used in ORS 742.502,[¹] and that such benefits are imposed by law, even though they are not provided for within the policy itself.”

On appeal, plaintiff asserts that the trial court erred in ruling that the umbrella policy is a “motor vehicle liability policy” for the purposes of ORS 742.502. Defendants argue that ORS 742.502 is applicable and assert that, because plaintiff did not offer Canamore any UIM benefits as part of the umbrella policy, the court properly reformed the policy to include UIM benefits.

We begin by examining the language of the statute. It is not appropriate to consider extrinsic evidence of legislative intent when the language of the statute has a plain, natural and ordinary meaning. See Mattiza v. Foster, 311 Or 1, 4, 803 P2d 723 (1990). ORS 742.502(1) provides, in part:

“Every motor vehicle liability policy insuring against loss suffered by any natural person resulting from liability imposed by law for bodily injury or death arising out of the ownership, maintenance, or the use of a motor vehicle, shall provide uninsured[²] motorist coverage therein * * *.” (Emphasis supplied.)

By its terms, the statute applies to policies that insure “against loss for liability * * * arising out of the ownership, maintenance, or the use of a motor vehicle.” The umbrella policy provides, in part:

“[Plaintiff] agrees to indemnify the insured for ultimate net loss in excess of the retained limit which the insured shall become legally obligated to pay because of personal liability.” (Boldface in original.)

“Insured,” which includes “named insured,” is defined as

“any person while using an automobile * * * owned by, loaned to or hired for use in behalf of the named insured and any person or organization legally responsible for the use thereof if the actual use is by the named insured or with permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission * * (Boldface in original.)

Because the statute, by its terms, applies to “every motor vehicle policy,” and because the umbrella policy is a liability policy insuring against loss resulting from the use of an automobile, the policy is subject to the provisions of ORS 742.502. Therefore, plaintiffs failure to offer UIM coverage means that the policy must be reformed to provide UIM benefits in the amount of the policy’s bodily injury limits. See ORS 742.502(2); White v. Safeco Ins. Co. of America, 68 Or App 11, 680 P2d 700, rev den 297 Or 492 (1984). The trial court did not err in holding that defendants are entitled to make claims for UIM benefits under the umbrella policy.

On cross-appeal, defendants assert that the trial court erred in ruling that, in the light of Safeco’s $500,000 settlement with them, plaintiff has no obligation to pay any underinsured motorist benefits to them under the automobile policy with Canamore. They argue that, when that policy is reformed to offer UIM coverage, ORS 742.502(2) requires that UIM benefits be determined by deducting the $500,000 payment by Safeco from their total damages, which they contend exceed that amount. Under the trial court’s ruling, defendants are not entitled to any benefits under the policy, because the payment from Safeco is equal to the amount of underinsured benefits that would be available under the reformed policy. ORS 742.502(2) provides, in part:

“Underinsurance benefits shall be equal to uninsured motorist coverage benefits less the amount recovered from other automobile liability insurance policies.” (Emphasis supplied.)

Because defendants’ argument is contrary to the plain language of the statute, we reject it.

Alternatively, defendants argue that the auto policy provides that the proper offset be between their total legal damages and the amount of Safeco’s settlement. The Limit of Insurance provision of the policy says:

“Any amount payable under this [UM/UIM] coverage shall be reduced by:

¿(‡ ‡ # íj;

“b. All sums paid by or for anyone who is legally responsible, including all sums paid under this Policy Form’s LIABILITY COVERAGE.”

Additionally, the policy defines an ‘ ‘underinsured motor vehicle” as

“a motor vehicle or trailer for which the sum of all liability bonds or policies at the time of the ‘accident’ provides at least the amounts required by the applicable law where a covered ‘auto’ is principally garaged but that sum is less than the Limit of Insurance of this coverage.” (Emphasis supplied.)

Reading those provisions together, it is apparent that the policy’s UIM benefits are to be reduced by any amounts “paid by or for anyone who is legally responsible.” The trial court did not err when it held that defendants are not entitled to UIM benefits under the automobile policy.

Affirmed on appeal and on cross-appeal.

1 At the time of the accident, ORS 742.502 was numbered ORS 743.789; it was renumbered in 1989. For convenience, we refer to the statute as ORS 742.502.

2 UM coverage includes UIM coverage. ORS 742.502(2), (3).