A case was recently decided by the Washington Court of Appeal (Division I in Seattle), called Ochoa v. Progressive, whereby the court clarified certain points of law pertaining to Washington state’s underinsured motorist (UIM) statute.

In Ochoa, a plaintiff was injured while driving her motor vehicle by another driver who was delivering pizzas for a pizza restaurant. It was determined in the trial court that the plaintiff was not at fault in the collision. With regard to insurance coverage that applied to this accident, the pizza delivery driver had a personal automobile liability policy that covered the accident up to $50,000. In addition, the pizza restaurant had a liability policy that covered damages related to the driving of motor vehicles not owned by the restaurant that was used in the course of business of the restaurant. This policy also applied, and the limit on this policy was $1.5 million.

On top of all of this, Ochoa had her own automobile policy that included “UIM” coverage, which is coverage for underinsured motorists. In Washington state, UIM claims against one’s own insurance company are governed in part by a state statute, RCW 48.22.030, which is known as the “UIM statute.”  Generally, one’s own UIM coverage covers that person for any excess damage sustained above and beyond the insurance coverage of the at-fault driver, whether the at-fault driver was completely uninsured or if he or she was insured for an amount less than the total damages.

What happened here is that Ochoa initially hired counsel to represent her, but she only filed claims with the driver’s insurance company and with her own UIM insurer.  She did not file a claim against the pizza restaurant’s insurer. She settled with the driver for $50,000, which was the policy limit. She then pursued her own insurance company under the UIM coverage for the remainder of her damages.

In response, her UIM insurer (Progressive) denied coverage, citing as grounds that she was not injured by an underinsured driver. Why? Because – Progressive argued – the pizza restaurant’s policy also applied, and because it had a policy limit of $1.5 million (which was much higher than her total damages), the UIM coverage did not apply to this accident.

Of course, Ochoa disagreed with Progressive’s interpretation and this lawsuit arose.  Some background on how underinsured motorists are determined under the law is appropriate at this point. In the most basic sense, a driver is underinsured if he or she causes injury and either does not have an insurance policy at all, or any and all policies that do apply are exceeded by the amount of damage he or she caused. In this case, the dispute concerned the question of determining which policies apply.  Ochoa was arguing that for a policy to apply, it must be specifically owned by the at-fault driver, and Progressive argued the position that any policy that applied would suffice, even if the policy did not name the driver as an insured. In other words, the test was whether the coverage applied, and not whether it was in the name of the at-fault driver.

To resolve this question, the Court of Appeals had to clarify the UIM statute, which holds the answer to this question.

The language of the UIM statute reads as follows: “ ‘Underinsured motor vehicle’ means a motor vehicle with respect to the ownership, maintenance, or use of which . . . the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.”  That is dense. Let’s unpack that a little.

Here, the court ultimately held for Progressive, interpreting the above language to mean that any policy is applicable, provided that the claimant (the injured person), if he or she diligently pursued the claim to final adjudication, could legally procure from the insurer to pay. In plain language, that means that if the hurt driver could successfully pursue any insurance policy related to the conduct of the third party driver (the at-fault driver), then that coverage would apply in determining if the UIM insurer had any excess liability. It was immaterial that the policy might name some other beneficiary, like a business, a corporation, or another individual.

The court dismissed Ochoa’s interpretation, which would have impliedly inserted the word “or” between the “ownership, maintenance, or use” language in the statute.  In other words, Ochoa urged the court to interpret the statute to mean that if any applicable policy relating to the ownership, or the maintenance, or the use, was insufficient, then the motorist would be considered underinsured, regardless of whether any other policies might exist relating to the other two things. The Court of Appeals rejected this counter-intuitive interpretation, and instead followed the plain language of the statute, implying that its interpretation better advanced the legislature’s seeming intent.

This seems to boil down to a mistake early in the litigation of failing to pursue all third party insurance policies before resorting to UIM compensation for the difference. We encounter many cases that involve insufficient third party coverage that consequently involve UIM defendants. We take pride in conducting a full investigation of cases and claims early and often in litigation, for the sake of preventing the issues that arose in this case.

(This post is intended to be educational and should not be construed as legal advice.  If you have questions or believe these issues affect you or your case, please contact an attorney).