Progressive Insurance v. National American Insurance
Docket: 02C-14226; A123317
Court: Court of Appeals of Oregon; August 31, 2005; Oregon; State Appellate Court
A contribution action arose between two motor vehicle liability insurers regarding a personal injury claim related to a motor vehicle accident involving insured Eugene Fastener. The plaintiff, which defended and settled the claim, sought contribution from the defendant, who also insured Fastener during the same coverage period. The trial court granted summary judgment to the plaintiff, denying the defendant's motion, leading to the defendant's appeal. Key issues included whether the defendant’s policy excluded the insured's driver from coverage as required by the Oregon Financial Responsibility Law and whether the vehicle involved was covered under the defendant’s policy.
The court affirmed the summary judgment, noting that no genuine issues of material fact existed. Eugene Fastener's vice president, Mitchell, had signed an application in June 1995 that excluded him from coverage, but this application was not attached to the policy. An endorsement issued during the 1996 policy renewal excluded Mitchell from liability for accidents while driving covered vehicles; however, it was not signed by him or anyone from Eugene Fastener. In April 1997, a 1997 Ford Expedition was added as a covered vehicle, which Mitchell drove when it collided with another vehicle, resulting in injuries. After the plaintiff defended against the related lawsuit and settled for $250,000, it sought contribution from the defendant, who ultimately was ordered to pay $200,000, its pro rata share based on policy limits. The defendant contended on appeal that the trial court erred in finding Mitchell a covered driver under its policy at the time of the incident.
The issue at hand is governed by ORS 742.450(6), which allows motor vehicle liability insurance policies issued in Oregon to exclude specific individuals from coverage, provided that the insurer obtains a signed endorsement from the named insured. The defendant claims compliance with this requirement through a 1995 application signed by Mitchell, which allegedly includes a statement of exclusion. The plaintiff counters that the term "statement" in ORS 742.450(6) cannot be satisfied by an application, asserting that had the legislature intended for applications to serve this purpose, it would have explicitly used that terminology. Moreover, the plaintiff argues that the application was not attached to the policy, rendering it inadmissible as evidence in this case, and contends that even if the application were considered a valid "statement," it fails to demonstrate valid exclusion based on the reasons outlined in ORS 742.450(7).
The dispute revolves around statutory interpretation, following the framework established in PGE v. Bureau of Labor and Industries. The analysis starts with the text of the statute and, if necessary, considers legislative history and interpretive aids. The term "statement" is not defined within the statute or elsewhere in the Insurance Code, and its ordinary meaning, as defined by Webster’s dictionary, does not exclude information found in an application. Therefore, the initial argument against using the application as a valid statement is rejected.
Additionally, ORS 742.016(1) clarifies that an insurance contract is governed by the policy's terms and conditions. If an application is delivered alongside the policy, it becomes part of that policy; if not, it is not included and cannot be used as evidence in any related legal actions. This framework emphasizes the importance of properly delivering applications to ensure their inclusion in the insurance policy.
Plaintiff argues that according to ORS 742.016, an application is not considered part of an insurance policy unless delivered with it, which did not occur in this case. Since this action involves the defendant's policy, the defendant cannot use the application as evidence. The statute acts as a parol evidence rule, affirming that insurance contracts must adhere to their written terms unless exceptional circumstances are present, which the defendant does not claim. Thus, the application is inadmissible, rendering any statements within it, including those regarding driver exclusions, also inadmissible. Consequently, the trial court correctly determined that Mitchell was a covered driver.
In addressing the second assignment of error, the defendant contends that it could retroactively cancel coverage of the Expedition after discovering duplication with the plaintiff’s policy. However, this cancellation occurred post-loss, which is not permissible under ORS 742.456. This statute establishes that an insurer's liability becomes absolute upon the occurrence of a covered loss and cannot be canceled afterward. The defendant's assertion that its policy is not an Oregon FRL policy is incorrect, as it provides motor vehicle liability insurance, which must comply with Oregon's minimum coverage requirements.
ORS 742.450(2) mandates that motor vehicle liability policies must include minimum coverage as specified by the statute, which is $25,000 per person. The existence of duplicate coverage does not exempt insurers from their obligations under this statute, as established in Safeco Ins. Co. v. American Hardware Mutual Ins. Co. Defendant's motor vehicle liability policy, required by the Financial Responsibility Law (FRL), could not retroactively cancel coverage after a covered injury occurred. Additionally, while ORS 806.070(2)(a) allows exclusions based on a person's driving record, the Director of the Department of Consumer and Business Services can impose further restrictions on such exclusions. Defendant contended that insurers may be estopped from denying coverage despite policy terms, as supported by DeJonge and Bennett cases, particularly if a party relied on a perceived waiver. The statute does not apply to claims based on oral agreements lacking written applications, per Collver v. Salem Insurance Agency, Inc. The defendant argued it should only be liable up to the $25,000 minimum limit, but this argument was not properly raised in its opening brief, leading to its dismissal. Furthermore, the defendant's late assertion that ORS 742.456 applies only to minimum limits, rather than its full policy limit, was also rejected due to the absence of this argument in the initial brief. Overall, the defendant's claims regarding limiting liability and cancellation of coverage were deemed untimely and thus not considered.
