The Supreme Court of Oklahoma addressed a certified question from the Tenth Circuit regarding the legality of Progressive Northern Insurance Company's uninsured motorist (UM) exclusion. The Court determined that Progressive's UM Exclusion, which denies uninsured motorist coverage to insureds who recover the minimum statutory liability coverage, contravenes Oklahoma's Uninsured Motorist Statute (36 O.S. 3636). The statute mandates that insurers provide uninsured-motorist coverage in addition to liability coverage, and since the plaintiffs had purchased this coverage, they were entitled to the full benefits promised in their policy.
The Court elaborated that Progressive's UM Exclusion effectively nullified the policyholder's choice to buy uninsured-motorist coverage by allowing the insurer to avoid delivering the promised protection, thus violating public policy. Consequently, the Court ruled that Progressive's UM Exclusion is void as it contradicts section 3636 and undermines the intended coverage for which the policyholders had paid premiums.
The underlying case involved plaintiffs Elissa Lane and Kyle Stone, who were injured in a 2017 rollover accident while passengers in a vehicle driven by a minor. The vehicle was insured by Progressive, which included both liability and uninsured-motorist coverage in the policy.
The policy in question provided uninsured-motorist coverage of $100,000 per person and a $300,000 total limit per accident. Lane and Stone, who suffered significant injuries exceeding $100,000, sought additional coverage after recovering the policy’s liability limit. Progressive denied their claims based on the UM Exclusion, which states that uninsured-motorist coverage does not apply if liability coverage equal to or greater than Oklahoma's minimum requirement of $25,000 is available. Since both Lane and Stone received $100,000 in liability coverage, Progressive invoked this exclusion to deny their claims. They subsequently sued Progressive for breach of contract and bad faith in federal court, where Progressive sought judgment on the pleadings based on the UM Exclusion. Lane and Stone contended that the exclusion was void under public policy according to Oklahoma law. The federal court, finding the UM Exclusion permissible under Oklahoma law, ruled in favor of Progressive. Lane and Stone appealed to the Tenth Circuit, which certified a question regarding whether Oklahoma’s uninsured-motorist-coverage statute, 36 O.S. 3636, invalidates the specific UM Exclusion. The analysis focuses on whether public policy under Oklahoma law negates this type of exclusion, a matter with no controlling precedent in the state. The statute mandates that policies must include uninsured-motorist coverage and outlines protections for policyholders against uninsured and hit-and-run drivers.
Uninsured motorist coverage must conform to a form approved by the Insurance Commissioner, as stipulated in the Insurance Code. An 'uninsured motor vehicle' encompasses not only vehicles without liability insurance but also those with insurance where the insurer cannot pay due to insolvency or where the liability limits are insufficient to cover the claim. Named insureds or applicants can reject this coverage in writing, with the rejection or selection of lower limits remaining valid for the policy's duration without needing to complete a new form upon renewal or changes. The Oklahoma Legislature's 1979 amendment to section 3636 expanded uninsured motorist provisions to include underinsured motorist coverage, shifting recovery measurement from per-person liability coverage to the value of the claim. Additionally, insurers are prohibited from offsetting uninsured-motorist coverage by benefits received from the tortfeasor's liability policy. The distinction between liability and uninsured-motorist coverage is emphasized, with the requirement that the minimum amounts for both must be identical, though they remain separate coverages. If the insured does not decline uninsured-motorist coverage, it must be provided alongside liability coverage.
The insurance policy issued by Progressive to Stewart's parents includes distinct sections for motor-vehicle liability (Part I) and uninsured-motorist coverage (Part III). Part I outlines that if the premium is paid, the insurer will cover damages for bodily injury and property damage for which an insured person is legally responsible due to an accident. It defines 'insured person' as the policyholder, their relatives, or others using a covered vehicle with permission.
Part III states that if the premium for uninsured-motorist coverage is paid, the insurer will pay damages the insured person is entitled to recover from the owner/operator of an uninsured vehicle for bodily injuries sustained in an accident. It outlines who qualifies as an 'insured person' and defines an 'uninsured motor vehicle' as one with inadequate liability coverage. However, it also includes a significant exclusion: coverage does not apply to bodily injury if liability coverage equal to or greater than Oklahoma's minimum limits is available under Part I.
The excerpt references a legal principle that insurance contracts must be liberally construed to achieve their intended purpose of protecting the insured from personal injury due to uninsured/underinsured motorists. It concludes that Progressive's exclusion violates section 3636 because it negates uninsured-motorist coverage rather than merely modifying it, emphasizing the insurer's obligation to provide such coverage separately from liability coverage.
Progressive's blanket exclusion restricts coverage solely to motor-vehicle liability, denying access to underinsured motorist (UM) coverage despite policyholder payments. Oklahoma law mandates rigorous scrutiny of policy provisions that undermine legislatively required uninsured motorist coverage. Exclusions that dilute or limit this coverage are void due to public policy violations. Underinsured-motorist coverage is essential when damages exceed a driver’s liability limits, necessitating access to amounts beyond the statutory minimum of $25,000. Progressive's UM exclusion fails to provide the bargained-for coverage and thus does not meet the scrutiny standards set by Oklahoma law.
Oklahoma's UM legislation allows policyholders the choice to accept or reject coverage, with exclusions deemed impermissible if they do not protect this choice. Even if not explicitly violating a law, an exclusion may still be invalid if it conflicts with public policy. The overarching goal of Oklahoma's statutory framework is to guarantee full contracted coverage for which premiums have been paid. The policyholders, parents of a teenage driver, purchased coverage that inherently included the plaintiffs, regardless of their classification as Class 2 insureds. Coverage arises from the definition of an "insured" in the contract, not merely from vehicle ownership. Families reasonably expect their insurance to protect against potential accidents, and legislative intent strongly supports obtaining insurance that exceeds basic liability limits.
Insurance contracts are classified as contracts of adhesion, meaning they are interpreted against the party that drafted them. Statutory automobile insurance policies in Oklahoma exhibit characteristics of public-law obligations, limiting the applicability of traditional contract principles. Because insurance is offered on a "take it or leave it" basis, policyholders must accept the terms as written. Insurers cannot exploit their superior bargaining power to mislead policyholders regarding their coverage. The court emphasizes the protection of uninsured-motorist (UM) rights under Oklahoma law, stating that Progressive's UM Exclusion does not validly exclude policyholders from UM coverage. A ruling from the Western District of Oklahoma highlighted that such exclusions violate public policy by contradicting statutory coverage mandates. The exclusion creates a "Catch 22" scenario, where policyholders who file liability claims would be ineligible for UM coverage, despite having paid for it. In the case at hand, plaintiffs Lane and Stone, as passengers, are covered under the UM provision, and their damages exceed the liability limits. Given these facts, a reasonable policyholder would expect UM coverage to apply in serious injury scenarios; however, the language of the exclusion prevents access to that coverage.
A provision in the insurance policy is deemed an attempt to undermine the effect of section 3636, which is viewed as contrary to public policy and therefore invalid. Liability coverage cannot replace uninsured-motorist (UM) coverage; instead, UM coverage must be based on the claim's value exceeding available liability coverage, not merely on the presence of minimum liability coverage. Progressive's UM Exclusion is criticized for failing to deliver the coverage for which policyholders paid, violating Oklahoma's public policy favoring accessible uninsured-motorist coverage. The court has responded to a certified question regarding this issue, with various justices concurring or dissenting. Further, the document outlines the legal rights of consumers regarding UM coverage, emphasizing the importance of having adequate protection against uninsured motorists. The current iteration of section 3636, applicable to the Progressive policy in question, was enacted on November 1, 2014. Progressive does not contest that the plaintiffs qualify as insured individuals regarding the involved uninsured vehicle, although there are multiple exclusions listed, only one is relevant to the case.
Liability coverage for bodily injury exceeding Oklahoma's statutory minimum of $25,000 is acknowledged by both parties as available in the insurance policy's Part I. Oklahoma law mandates that any insurance provision limiting or undermining the uninsured motorist statute is void. Class 1 insureds include named insureds and resident relatives, while Class 2 insureds, like the plaintiffs, are those granted coverage through permissive use of a vehicle. Insurers are required to inform prospective insureds about the option to purchase uninsured motorist coverage equivalent to their bodily injury liability limit, emphasizing its importance for protecting themselves and others.
The document also discusses the interpretation of Oklahoma Insurance Code provisions in plain language, as understood by ordinary consumers. It critiques the potential "furtiveness" of certain exclusions in insurance policies, suggesting such language lacks transparency and good faith. The use of terms associated with secrecy and stealth is highlighted, emphasizing that insurance contracts should be clear and not deceptive. The author contends that the contract in question, described as a contract of adhesion, violates Oklahoma's public policy due to its ambiguous and potentially deceptive language, which does not align with legislative intent or judicial standards.
Lane and L.S. were injured as passengers in a vehicle driven by minor M.S., whose vehicle was insured by Progressive Northern Insurance Company under a policy providing $100,000 per person and $300,000 per accident in liability coverage, along with uninsured/underinsured motorist (UM) coverage with the same limits. After the accident, Lane and L.S. each received the full $100,000 liability benefit from Progressive. Lane filed a UM claim with USAA, her insurer, while L.S. did the same with her father's insurer, Farmers Insurance Company, both receiving the full UM benefits available. As passengers in M.S.'s vehicle, they qualified as Class 2 insureds under the Progressive policy and sought UM benefits from Progressive, which denied their claims based on a UM Exclusion that prevents recovery by insureds who have already received at least the minimum liability benefits.
The key legal question is whether this UM Exclusion violates Oklahoma law, specifically the UM statute (36 O.S. 3636). The majority opinion argues that the exclusion contradicts the intent of the statute, asserting that insurance contracts are contracts of adhesion and should be interpreted in favor of the insured. However, the dissent argues that the majority's interpretation misapplies public policy principles. It emphasizes that a contract violates public policy only if it clearly undermines public health, morals, or individual rights, and asserts that UM exclusions have consistently been upheld in line with Oklahoma's legislative intent. The dissenting opinion further clarifies that the UM statute does not specify required coverages or exclusions and allows policyholders the option to entirely reject UM coverage. Thus, it suggests that the legislative intent can be met even with agreed-upon exclusions in UM policies.
The statutorily-required form for uninsured motorist (UM) coverage outlines the nature of UM coverage, specifying various classes of insureds and applicable scenarios. The inclusion of qualifying language indicates the Legislature's intention to allow valid exclusions from UM policies. The absence of explicit prohibitions against the UM Exclusion in the statute supports its validity. The UM Exclusion aligns with the broader public policy objectives of the UM statute, which aim to place insured individuals in a position equivalent to that had the negligent uninsured motorist complied with Oklahoma's financial responsibility laws.
The Progressive policy’s UM Exclusion provides coverage when insureds have received liability payments that meet Oklahoma’s minimum requirements, ensuring that insureds receive at least the statutory minimum coverage from either the negligent driver's liability policy or the UM policy. This arrangement adheres to the public policy established by the Legislature, as reflected in previous cases such as Moser and May.
The dissent argues that the majority’s decision creates an illogical disparity between Class 1 insureds, who include named insureds and resident relatives, and Class 2 insureds, who are covered only due to their occupancy of an insured vehicle. Allowing Class 2 insureds to access greater benefits than Class 1 insureds contradicts Oklahoma’s public policy. While the UM Exclusion may not provide optimal coverage, it complies with Oklahoma law and allows for legislative adjustments in the future if necessary. The dissent emphasizes that the statute permits exclusions, and existing case law supports this interpretation.
A commercial auto policy providing liability coverage for employees' vehicles used for company business, while limiting uninsured motorist (UM) coverage to company-owned vehicles, does not violate public policy, as established in OK 95, 61 P.3d 225. Additionally, the case Shepard v. Farmers Ins. (1983 OK 103, 678 P.2d 250) affirmed that a UM policy can exclude coverage for a relative living with the named insured who owns a vehicle, aligning with statute 36 O.S. 3636(G), which allows a named insured to reject UM coverage in writing. The excerpt also references numerous other Oklahoma Supreme Court cases and statutes related to insurance and motor vehicle liability, indicating a broader legal context regarding UM coverage.
