Case Title: Bergmann v. Hutton

Citation: 

Docket Number: S50395

State: oregon

Court: Oregon Supreme Court

Date: 2004-12-02T00:00:00Z

Document:
FILED:  December 2, 2004
IN THE SUPREME COURT OF THE STATE OF OREGON
DAVID BERGMANN,
Personal Representative of the Estate of
Terrel Ann Bergmann,
Petitioner on Review,
v.
JENNIFER HUTTON,
Defendant,
and
FARMERS INSURANCE COMPANY OF OREGON,
Respondent on Review.
(CC 00-3304-L-2; CA A115380; SC S50395)
En Banc
On review from the Court of Appeals.*
Argued and submitted May 3, 2004.
Kathryn Hall Clarke, Portland, argued the cause for
petitioner on review.  Shane A. Reed, of Reed & Associates,
Jacksonville, filed the brief.
Kenneth M. Tharp, of Frohnmayer, Deatherage, Pratt,
Jamieson, Clarke & Moore, P.C., Medford, argued the cause and
filed the brief for respondent on review.
Thomas M. Christ, of Cosgrave Vergeer Kester LLP, Portland,
argued the cause and filed the brief for amici curiae Liberty
Northwest Insurance Company, Mutual of Enumclaw Insurance
Company, State Farm Mutual Automobile Insurance Company, Oregon
Mutual Insurance Company, Safeco Insurance Company, and the
American Insurance Association.  With him on the brief was Thomas
W. Brown, Portland.
Meagan A. Flynn, of Preston Bunnell & Stone, LLP, Portland,
filed the brief for amicus curiae Oregon Trial Lawyers
Association.
GILLETTE, J.
The decision of the Court of Appeals is reversed.  The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings. 
Kistler, J., dissented and filed an opinion in which Carson,
C.J., and Balmer, J., joined.
*Appeal from Jackson County Circuit Court, G. Philip Arnold, Judge. 186 Or App 566, 65 P3d 1132 (2003). 
GILLETTE, J.
In this automobile insurance case, the issue is whether
an insurer is entitled to offset the amount that an injured
insured received in workers' compensation benefits against the
amount that the insurer otherwise would have been obligated to
pay to the insured under the insured's underinsured motorist
(UIM) coverage in a policy issued by the defendant insurer.  The
issue arose when plaintiff (1) submitted a claim under the UIM
coverage.  Defendant responded that the policy entitled it to
offset the workers' compensation payments that plaintiff had
received and that, in the offset, defendant owed plaintiff
nothing.  Plaintiff then brought this contract action against
defendant.  Defendant moved for summary judgment respecting the
offset for workers' compensation benefits.  The trial court
granted defendant's motion, and, on appeal, the Court of Appeals
affirmed that ruling without opinion.  Bergmann v. Hutton, 186 Or
App 566, 65 P3d 1132 (2003).  We allowed review and, for the
reasons that follow, now reverse the decision of the Court of
Appeals and the judgment of the trial court.
Because we are reviewing a grant of summary judgment,
we view the facts from the summary judgment record, and all
reasonable inferences that may be drawn from them, in the light
most favorable to the nonmoving party, in this case plaintiff
insured.  Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP, 336
Or 329, 332, 83 P3d 322 (2004).  
In October 1998, plaintiff was seriously injured in an
automobile collision caused by the failure of another driver,
defendant Hutton, to stop at a red light.  At the time of the
accident, plaintiff was 51 years old.  She worked at a bank and
earned a salary of more than $3,000 per month.  After the
accident, plaintiff's condition was such that she was unable to
return to work and had difficulty participating in normal life
activities. 
At the time of the accident, defendant Farmers
Insurance Company (Farmers) insured plaintiff under an automobile
insurance policy.  That policy provided for uninsured
motorist/underinsured motorist (UM/UIM) coverage with a liability
limit of $100,000.  Farmers also insured Hutton, who admitted
responsibility for the accident, under a policy that had a
liability limit of $25,000.  
Plaintiff's damages resulting from the accident totaled
more than $650,000. (2)  Farmers tendered the policy limit of
$25,000 under Hutton's policy, and plaintiff received a total of
$107,652 in workers' compensation benefits.  Because those
amounts did not fully compensate plaintiff for her losses,
plaintiff made a claim for damages under the UIM provisions of
her automobile insurance policy. (3)  
Farmers denied that claim.  Farmers contended that the
policy and applicable law entitled it to deduct from the amount
that it otherwise would owe to plaintiff under the UIM provision
of its policy both the amount tendered on behalf of the negligent
driver and the amount that plaintiff received in workers'
compensation benefits.  Because those amounts collectively
exceeded the policy limit of $100,000, Farmers asserted that
plaintiff's UIM benefits were exhausted and Farmers owed her
nothing.  
Plaintiff filed the present action against Farmers for
breach of contract. (4)  Farmers answered, denying any
liability, and moved for summary judgment.  Farmers argued, among
other things, that the Court of Appeals had held, in California
Casualty Indemnity Exchange v. Maritzen, 123 Or App 166, 860 P2d
259 (1993), and in Pitchford v. State Farm Mutual Auto. Ins. Co.,
147 Or App 9, 934 P2d 616 (1997), that UIM policy provisions
similar to the one at issue here permitted the insurer to offset
the amount that the insured received in workers' compensation
benefits against the insured's UIM policy limits.  According to
Farmers, those Court of Appeals holdings were dispositive and
mandated a ruling in its favor in the instant case.  The trial
court agreed and granted Farmers' summary judgment motion.  As
noted, the Court of Appeals affirmed without opinion.  We allowed
plaintiff's petition for review. 
In this court, plaintiff contends that, under the
governing statute, ORS 742.504(7)(c)(B), the workers'
compensation benefits that she received are properly deducted
from the total amount that she legally would be entitled to
recover in damages from the owner of the underinsured vehicle,
i.e., from $650,000, rather than from the (lower) liability limit
under her UIM policy ($100,000), and that the Court of Appeals'
earlier decisions to the contrary were erroneous.  
We begin by examining the statutes pertinent to UIM
coverage. (5)  ORS 742.502 contains a general UM and UIM
coverage mandate.  That statute requires, first, that all motor
vehicle liability policies in Oregon provide UM coverage.  ORS
742.502(1).  Moreover, those policies generally must provide the
same limits for UM coverage as for bodily injury liability
coverage. (6)  ORS 742.502(2)(a).  Second, ORS 742.502(2)(a)
requires the inclusion of UIM coverage in any policy providing
for UM coverage in excess of the financial responsibility limits. 
That statute defines UIM coverage as "coverage for damages or
death caused by accident and arising out of the ownership,
maintenance, or use of a motor vehicle that is insured for an
amount that is less than the insured's uninsured motorist
coverage."  Id. (emphasis added).  That subsection also provides
a general formula for calculating UIM benefits.  Under that
subsection, "[u]nderinsurance benefits shall be equal to
uninsured motorist coverage benefits less the amount recovered
from other automobile liability insurance policies."  Id.  
In addition, ORS 742.502(4) provides, among other
things, that UIM coverage is subject to ORS 742.504, which sets
out required provisions for UM coverage.  The dispute in this
case centers around ORS 742.504(7), which provides as follows: 
"(a) The limit of liability stated in the
declarations as applicable to 'each person' is the
limit of the insurer's liability for all damages
because of bodily injury sustained by one person as the
result of any one accident and, subject to the above
provision respecting each person, the limit of
liability stated in the declarations as applicable to
'each accident' is the total limit of the company's
liability for all damages because of bodily injury
sustained by two or more persons as the result of any
one accident.
"* * * * *
"(c) Any amount payable under the terms of this
coverage because of bodily injury sustained in an
accident by a person who is an insured under this
coverage shall be reduced by:
"(A) All sums paid on account of such bodily
injury by or on behalf of the owner or operator of the
uninsured vehicle and by or on behalf of any other
person or organization jointly or severally liable
together with such owner or operator for such bodily
injury including all sums paid under the bodily injury
liability coverage of the policy; and
"(B) The amount paid and the present value of all
amounts payable on account of such bodily injury under
any workers' compensation law, disability benefits law
or any similar law."
(Emphasis added.)
The parties assign different meanings to that statutory
subsection and, in particular, to the highlighted phrase, "any
amount payable under the terms of this coverage," in ORS
742.504(7)(c).  Farmers contends that ORS 742.504(7) generally
deals with limits of insurer liability, as evidenced by the
express reference to that concept in ORS 742.504(7)(a). 
Accordingly, Farmers contends that it is clear that the operative
phrase in paragraph (c) also refers to the limit of the insurer's
liability as set out on the declarations page of the policy.  As
noted, ORS 742.504(7)(c)(B) permits the insurer to deduct the
amount of workers' compensation benefits that the insured has
received from the "amount payable under the terms of this
coverage," which, according to Farmers, is its liability limit. 
Under Farmers' interpretation, then, Farmers owes plaintiff
nothing, because plaintiff has received more in workers'
compensation benefits and from Hutton than the limit of Farmers'
UIM liability under plaintiff's policy.  
Plaintiff, by contrast, asserts that the phrase "any
amount payable under the terms of this coverage" in ORS
742.504(7)(c) refers to the total amount that the insured legally
would be entitled to recover from the tortfeasor or, in other
words, in this case, the insured's damages.  Here, plaintiff's
damages so far exceed the amount that plaintiff received in
workers' compensation benefits that, even after making that
adjustment, Farmers' liability limit is not met.  Under
plaintiff's interpretation, she is entitled to the amount of her
$100,000 UIM coverage less the $25,000 tendered on Hutton's
behalf, or $75,000. (7)
To resolve the question of which of those competing
interpretations is correct, we turn to the now-familiar
methodology for construing statutes that this court summarized in
PGE v. Bureau of Labor and Industries, 317 Or 606, 859 P2d 1143
(1993).  Under that methodology, we first examine the text of the
statute, in context, in an effort to discern the intent of the
legislature.  Id. at 610.  If the meaning of the statute is clear
at that level of analysis, then further inquiry is unnecessary. 
Id. at 611.  
We begin with the text of ORS 742.504(7)(c).  We
observe that the complete description of the amount from which
the enumerated deductions shall be taken is as follows: "[a]ny
amount payable under the terms of this coverage because of bodily
injury sustained in an accident by a person who is insured under
this coverage * * *."  Although that clause, standing alone, does
not help us much, its meaning becomes clearer when we consider it
in the context of ORS 742.504 as a whole.  
For example, the phrase "this coverage" quite clearly
is a general reference to UM coverage, which is the express
subject of ORS 742.504.  That is apparent because ORS 742.504
begins with the preamble, "[e]very policy required to provide the
coverage specified in ORS 742.502 shall provide uninsured
motorist coverage * * *."  (Emphasis added.)  Relatedly, the
cross-referenced statute, ORS 742.502, provides, in part,
"[e]very motor vehicle liability policy * * * shall provide
therein or by indorsement thereon uninsured motorist coverage * * *."  ORS 742.502(1).  Moreover, by virtue of ORS 742.502(4),
which provides that "[u]nderinsurance coverage shall be subject
to ORS 742.504, the phrase "this coverage" in ORS 742.504(7)(c)
also is a reference, in the appropriate case, to UIM coverage.
The wording of those statutes also makes clear that the
term "coverage" is not synonymous with the term "policy."  As is
evident from the quoted material above, ORS 742.502 and ORS
742.504 require every "policy" to provide certain kinds of
"coverage."  "Coverage," thus, is a broad term; it is the
universe of people, vehicles, and events that trigger the
insurer's obligation to pay under the policy.  
By contrast, the "policy" is the specific contract
between the insurer and the insured, which, by statute, is
required to include certain terms.  Under ORS 742.450(1),
"[e]very motor vehicle liability insurance policy issued for
delivery in this state shall state the name and address of the
named insured, the coverage afforded by the policy, the premium
charged therefor, the policy period and the limits of liability." 
(Emphasis added.) (8)  The terms of a policy include limits on
the insurer's liability; the terms of the coverage do not. 
Indeed, the only "limits" for coverage set out in the statutes
pertaining to motor vehicle insurance are minimum limits required
to meet the financial responsibility laws.  See ORS 742.450(4)
(requiring motor vehicle liability insurance policies to provide
liability coverage to at least limits specified in ORS 806.070);
ORS 742.500(1) ("'[u]ninsured motorist coverage' means coverage 
within the terms and conditions specified in ORS 742.504 insuring
the insured * * * in amounts or limits not less than the amounts
or limits prescribed for bodily injury or death under ORS
806.070"); ORS 806.080(1)(c) (requiring motor vehicle insurance
policies to provide "minimum limits of coverage required under
ORS 806.070"); ORS 806.070 (setting out schedule for minimum
required payment of judgment).  
In addition, we observe that the phrase "any amount
payable under the terms of this coverage because of bodily injury
sustained in an accident by a person who is insured under this
coverage" tracks the wording of ORS 742.504(1)(a), which defines
the insurer's liability for UM coverage.  That paragraph
provides,
"The insurer will pay all sums which the insured * * *
shall be legally entitled to recover as general and
special damages from the owner or operator of an
uninsured vehicle because of bodily injury sustained by
the insured caused by accident and arising out of the
ownership, maintenance or use of such uninsured
vehicle."    
(Emphasis added.)  Thus, the amount that is "payable" by the
insurer under the "coverage" is "all sums" that the insured is
"legally entitled to recover" as a result of an accident with an
uninsured motorist.  In the usual case, that amount would be
equal to the insured's total damages, although there may be cases
in which the insured would not be "legally entitled to recover"
all of his or her damages, such as when the tortfeasor is immune
from liability or when there has been a determination of
comparative fault. (9)  Notably, in defining the insurer's
liability for coverage, ORS 742.504(1)(a) does not speak to any
limits on the insurer's liability under a policy.
Farmers asserts that ORS 742.504(7)(c) authorizes
deductions from the amount payable "under the terms of this
coverage" and argues that plaintiff "fails to note that the sums
payable under ORS 742.504(1) and the terms of her coverage are
limited by her policy limits."  (Emphasis in original.)  That is,
according to Farmers, under the terms of plaintiff's UM/UIM
policy, the amount payable is never more than Farmers' limit of
liability and, therefore, the "amount payable" is the amount of
damages up to the limit of Farmers' liability as stated in the
declarations.  As is evident from the discussion above, we reject
that argument. 
We observe at the outset that Farmers unintentionally
(but pivotally) muddies the waters by referring to the "terms of
her coverage" and equating that concept to the terms of
plaintiff's policy.  That is, by referring to "her" (plaintiff's)
coverage, Farmers conflates the contract that it and plaintiff
entered into, i.e., the policy, with the statutory reference to
the "terms of this coverage."  (Emphasis added.)  "This coverage"
in ORS 742.504(7)(c) is UM/UIM coverage as defined in the motor
vehicle liability statutes, and that coverage does not contain a
maximum limit on liability.  
The distinction that we draw here is borne out by the
text of ORS 742.504(7).  The first subsection deals with the
"limit of liability stated in the declarations."  As noted
earlier, ORS 742.504(7)(a) provides, in part:
"The limit of liability stated in the declarations as
applicable to 'each person' is the limit of the
insurer's liability for all damages because of bodily
injury sustained by one person as a result of any one
accident * * *."
The term "declarations," while not defined in the statute, is an
unambiguous reference to a page of the policy itself.  In common
parlance, it is the first page of an insurance policy and
summarizes the terms of that policy, including, among other
things, setting out the insurer's limit on liability.  ORS
742.504(7)(c), by contrast, does not refer to the policy in any
way.  It does not use the words "policy" or "declarations;"
instead, it refers simply to "the terms of this coverage." 
Farmers argues that, because paragraphs (a) and (c) are
found in the same part of the statute, ORS 742.504(7)(a) provides
relevant and decisive context for interpreting ORS 742.504(7)(c). 
According to Farmers, ORS 742.504(7)(a) "unequivocally defines
the 'amount payable under the terms of this coverage' as the
limit of liability stated in the declarations page."  However, it
does not follow from the fact that the first paragraph of ORS
742.504(7) deals with an insurer's limits of liability that the
third paragraph does so as well.  Neither does it follow that the
third paragraph somehow is subject to the first.  A careful
reading of ORS 742.504(7) demonstrates that the first paragraph
addresses subject matter entirely different from that covered in
subsequent paragraphs.  By its plain terms, ORS 742.504(7)(a)
deals with the "limit of liability stated in the declarations"
and describes the operation of that limit when more than one
person is injured in an accident.  ORS 742.504(7)(c), on the
other hand, concerns reductions from "any amount payable" because
of bodily injury under "the terms of this coverage."  As
discussed above, "this coverage" is UM/UIM coverage and "any
amount payable" refers to the amount that the insurer potentially
could be obligated to pay on account of bodily injury that the
insured sustains in an accident with an uninsured or underinsured
vehicle.   
Finally, we think that it is noteworthy that ORS
742.504(7)(c) does not use the words "limit of liability" and, in
particular, does not refer to the "amount payable up to the
insurer's liability limit."  The legislature has directed this
court, when interpreting a statute, "to ascertain and declare
what is, in terms or in substance, contained therein, not to
insert what has been omitted."  ORS 174.010.  Moreover, as this
court stated in PGE, "use of a term in one section [of a statute]
and not in another section of the same statute indicates a
purposeful omission."  317 Or at 611.  Given that the UM/UIM
statute repeatedly employs the phrases "limits of liability" and
"liability limits," we think that, if the legislature had
intended the phrase "any amount payable under the terms of this
coverage" in ORS 742.504(7)(c) to mean the insurer's liability
limit, it would have done so expressly.  
Farmers maintains that interpreting ORS 742.504(7)(c)
as permitting offsets from the insured's damages rather from the
insurer's liability limit would produce an unreasonable result. 
That is, according to Farmers, if that interpretation were to
prevail, "insurers could place no policy limits on UM/UIM
insurance benefits under Oregon law."  It would "abrogate[] the
concept of a UM/UIM policy limit when damages exceed that limit." 
Farmers does not elaborate, but its argument seems to be based on
the fact that, in addition to an offset for workers' compensation
payments in ORS 742.504(7)(c)(B), ORS 742.504(7)(c)(A) provides
that the "amount payable under the terms of this coverage" also
is to be reduced by "[a]ll sums paid on account of such bodily
injury by or on behalf of the owner of the uninsured vehicle." 
Apparently, Farmers thinks that an interpretation that permits
the amount that an insured receives from an uninsured tortfeasor
to be offset against the total amount of damages that the insured
would be entitled to recover on account of his or her injuries
would vitiate other provisions of the statute, including,
importantly, those pertaining to the insurer's UIM liability
limit.  
That concern is misplaced.  First, no matter what types
of offsets ORS 742.504 permits, the maximum amount for which the
insurer is liable under its UM coverage is the limit of liability
set out on the declarations page of the policy.  ORS
742.504(7)(a).  Second, ORS 742.502(2)(a) essentially defines the
limit of the insurer's liability in the UIM context.  That
section provides that UIM benefits are "equal to uninsured
motorist coverage benefits less the amount recovered from other
automobile liability insurance policies."  Nothing in ORS
742.504(7)(c), and certainly nothing in the interpretation of
that provision that we announce here, renders those provisions of
the statute inoperable.  Thus, even if the insured's damages
continue to exceed the policy limits after appropriate deductions
from the total damages are taken, the maximum amount for which
the insurer will be liable is the limit of liability set out in
the declarations.  And if, after reducing the amount that the
insured legally would be entitled to recover in the various ways
permitted in ORS 742.504(7), the resulting amount is less than
the insurer's liability limit, then that resulting amount is the
maximum that the insurer will have to pay.  The insurer may have
to pay, but the payment will never exceed the liability limits
that are stated on the declarations page.  No unreasonable result
obtains.  
Finally, Farmers contends that this court, in its
earlier opinion in Grijalva v. Safeco Ins. Co., 329 Or 36, 985
P2d 784 (1999), held that the meaning of ORS 74.504(7)(c) is
clear and that that section unambiguously provides, in Farmers'
words, that "in determining UIM proceeds, the amount the claimant
received from other sources should be deducted from the UM/UIM
policy limits."  Farmers reads too much into this court's opinion
in Grijalva.  
In Grijalva, the plaintiff and her coworker were
driving together in the coworker's car when it was struck by a
car driven by an underinsured motorist, Dawson.  The facts recite
that the plaintiff "suffered damages in excess of $100,000."  329
Or at 39.  The plaintiff received some compensation from Dawson's
insurer, as did the coworker.  In addition, both the plaintiff
and the coworker received workers' compensation benefits. 
Neither the plaintiff nor the coworker was made whole by those
recoveries, and, therefore, the plaintiff and the coworker filed
claims under the coworker's UIM policy.  The insurer paid the
coworker part of the amount that she sought but denied the
plaintiff's claim entirely, on the ground that it was entitled to
offset the amounts that both the plaintiff and the coworker
received from Dawson's insurer and in workers' compensation
benefits from the amount of the coworker's liability limit. 
After those reductions were taken, there was nothing left for the
plaintiff.  
The precise issue before this court in Grijalva was
whether ORS 742.504(c) permitted the insurer to deduct amounts
paid to other claimants from other sources because of injuries
that they sustained in a single accident with an underinsured
motorist.  This court held that the UIM statute did not authorize
those reductions.  In Grijalva, the court assumed that the amount
that the plaintiff herself had received in workers' compensation
benefits was a proper offset, but that issue expressly was not
before the court.  329 Or at 41. (10)  This court's opinion in
Grijalva does not assist Farmers.  
To summarize, we hold that the phrase "any amount
payable under the terms of this coverage" in ORS 742.504(7)(c)
refers to the amount that the insured legally would be entitled
to recover from the owner or operator of an uninsured or
underinsured vehicle on account of bodily injury sustained by the
insured in an accident caused by the ownership or operation of
the uninsured or underinsured vehicle.  
In the present case, plaintiff had an underinsured
motorist coverage policy with a liability limit $100,000.  She
received workers' compensation benefits totaling approximately
$107,000.  Applying a policy provision that it contended was
consistent with ORS 742.504(7)(c)(B), Farmers reduced the
liability limit by the amount that plaintiff received in workers'
compensation benefits and concluded that it owed her nothing
under her UIM policy.  Notwithstanding the fact that plaintiff
alleged in her complaint that she had sustained over $650,000 in
damages as a result of the accident caused by the underinsured
motorist, Hutton, the trial court agreed with Farmers that, as a
matter of law, plaintiff was not entitled to recover under her
UIM policy.  Accordingly, it awarded Farmers summary judgment.  
As is evident from the discussion above, Farmers should
not have applied the amount that plaintiff received in workers'
compensation benefits to reduce the amount of Farmers' liability
to plaintiff under the policy.  Instead, Farmers should have
applied those benefits in reduction of the total amount of
damages that plaintiff legally would have been entitled to
receive from Hutton because of bodily injury sustained in the
accident that Hutton caused.  Accepting for purposes of review on
summary judgment that plaintiff's damages well exceeded both the
amount that plaintiff received in workers' compensation benefits
and the amount of Farmers' liability limit under the UIM policy,
Farmers was liable to plaintiff for some amount under that
policy.  It follows that the trial court's ruling granting
summary judgment to Farmers was in error.  Likewise, the Court of
Appeals erred in affirming that ruling.  The case must be
remanded to the circuit court to determine what amount is owing
to plaintiff. 
The decision of the Court of Appeals is reversed.  The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings. 
KISTLER, J., dissenting.
The majority holds that, in computing uninsured
motorist benefits, a statutory offset for workers' compensation
payments should be deducted from the amount of the damages that
the insured sustained.  In my view, the text and the context of
the governing statute require a different result.  They require
that any workers' compensation payments be deducted from the
amount of the insured's damages up to the limits of liability.  
I respectfully dissent.
ORS 742.504(7)(c) provides that a statutory offset for
workers’ compensation payments shall be deducted from "[a]ny
amount payable under the terms of this coverage."  The question
that this case presents is what that quoted phrase means.  See
PGE v. Bureau of Labor and Industries, 317 Or 606, 859 P2d 1143
(1993) (explaining statutory construction methodology).  The text
of ORS 742.504(7)(c) does not answer that question.  The text
does not identify the type of coverage to which "this coverage"
refers, nor does it identify what "the terms" of that coverage
are.  The context, however, resolves both those issues.
ORS 742.502(1) requires that every motor vehicle
liability policy provide uninsured motorist coverage -- coverage
for bodily injuries that the insured sustains in a motor vehicle
accident with an uninsured driver.  In addition to requiring
uninsured motorist coverage, ORS 742.504 sets out the minimum
terms and conditions of that coverage that every motor vehicle
liability policy must contain.  See Vega v. Farmers Ins. Co., 323
Or 291, 301-02, 918 P2d 95 (1996) (explaining that motor vehicle
liability policies may not contain less favorable terms than
those set out in ORS 742.504). (11)
Two propositions follow from this statutory context. 
First, the phrase "this coverage" in ORS 742.504(7)(c) refers to
uninsured motorist coverage.  Second, the phrase "the terms of
this coverage" refers to the terms and conditions of coverage set
out in ORS 742.504.  ORS 742.500(1) makes that point clear.  ORS
742.500(1) provides that "'[u]ninsured motorist coverage' means
coverage within the terms and conditions specified in ORS
742.504."  (Emphasis added.)  As the emphasized portion of ORS
742.500(1) demonstrates, when the legislature referred to the
"amount payable under the terms of this coverage" in ORS
742.504(7)(c), it meant the amount payable under all the terms
and conditions specified in ORS 742.504.
Two of those terms are relevant here.  First, ORS
742.504(1)(a) defines the scope of uninsured motorist coverage as
"all sums [that] the insured * * * shall be legally entitled to
recover as general and special damages" because of bodily injury
caused by an accident with an uninsured driver.  Second, ORS
742.504(7)(a) recognizes that the limit of liability stated in
the declarations is the upper limit that an insurer must pay each
insured for the damages that he or she sustains.  Reading those
two provisions together, the terms of the coverage stated in ORS
742.504 require an insurer to pay the amount of the insured's
damages up to the insurer's limit of liability. 
The text and context of ORS 742.504(7)(c) thus yield a
straightforward rule:  The "amount payable under the terms of
this coverage" is the amount of the insured’s damages up to the
insurer's limit of liability.  It follows that, if the insured's
damages are less than the limit of liability, then the "amount
payable" is the amount of the damages that the insured sustained
and any workers’ compensation payments should be deducted from
that amount.  If, however, the insured's damages exceed the limit
of liability, then the "amount payable" is the limit of liability
and any workers’ compensation payments should be deducted from
that amount.
In this case, the insured's damages exceed $650,000,
and the insurer's limit of liability is $100,000.  Under the
terms of the coverage stated in ORS 742.504, the amount that the
insurer has to pay is $100,000 (the amount of the insured's
damages up to the limit of liability).  That is the "amount
payable" from which ORS 742.504(7)(c) requires that the statutory
offset for workers' compensation payments be deducted.  Although
the legislature could have adopted a different rule, the text and
context of ORS 742.504(7)(c) demonstrate that this is the rule
that it adopted.  Accord Williams v. American States Ins. Co.,
163 Or App 179, 986 P2d 1260 (1999), adh'd to on recons, 166 Or
App 145, 997 P2d 892 (2000) (adopting same interpretation of ORS
742.504(7)(c)); Pitchford v. State Farm Mutual Auto. Ins. Co.,
147 Or App 9, 16, 934 P2d 616 rev den 325 Or 621 (1997) (same);
California Casualty Indemnity Exchange v. Maritzen, 123 Or App
166, 171, 860 P2d 259, rev den, 318 Or 97 (1993) (same).
The majority reaches a different conclusion.  Relying
on ORS 742.450(1), it starts from the premise that coverage and
limits on liability are separate concepts.  It follows, the
majority concludes, that the phrase "the terms of this coverage"
does not refer to the limit of liability stated in ORS
742.504(7)(a).  Rather, it refers to the scope of coverage stated
in ORS 742.504(1)(a).  The majority also reasons that
interpreting the phrase the "amount payable under the terms of
this coverage" to mean the amount of the insured's damages up to
the limits of liability impermissibly inserts words into the text
of ORS 742.504(7)(c) that the legislature omitted.
The majority's second point is at odds with its own
interpretation.  As the majority notes, and I agree, the phrase
"the terms of this coverage" gains meaning only from its context. 
The majority looks to one contextual source -- ORS 742.504(1)(a)
-- and holds that the phrase refers to the total amount of
damages that an insured legally may recover from an uninsured
driver.  I would look to a different source -- all the terms in
ORS 742.504 -- and hold that the phrase refers to the amount of
damages that the insured may recover up to the limits of
liability.  Both interpretations go beyond the words of ORS
742.504(7)(c).  Neither, I submit, impermissibly inserts words
into the text of ORS 742.504(7)(c).  Rather, both look to context
to identify the "terms" to which ORS 742.504(7)(c) refers.
The majority's more substantial point is that, under
ORS 742.450(1), coverage and limits of liability are separate
concepts.  As noted, the majority concludes that, because the two
concepts are separate, the statutory reference to "the terms of
this coverage" does not include any limit on liability.  The
majority's reasoning is difficult to square with ORS 742.500(1). 
As the majority observes, the phrase "this coverage" in ORS
742.504(7)(c) refers to uninsured motorist coverage, and ORS
742.500(1) defines "uninsured motorist coverage" as "coverage
within the terms and conditions specified in ORS 742.504."  By
definition, the "terms" to which ORS 742.504(7)(c) refers are all
the terms in ORS 742.504, which includes both the scope of
coverage in ORS 742.504(1)(a) and the limit on liability in ORS
742.504(7)(a).
To be sure, as the majority notes, ORS 742.450(1)
provides that every motor vehicle liability policy "shall state
[the insured's name and address], the coverage afforded by the
policy, the premium charged therefor, the policy period and the
limits of liability."  That subsection thus distinguishes
coverage from limits of liability.  However, to the extent that
ORS 742.450(1) points in a different direction from ORS
742.500(1), (12) the latter statute controls.  Not only did the
legislature enact ORS 742.500(1) after ORS 742.450(1), (13) but
ORS 742.500(1) is the more specific statute.  See Kambury v.
DaimlerChrysler Corp., 334 Or 367, 374, 50 P3d 1163 (2002)
(explaining methodology for resolving conflicting statutes).  By
its terms, ORS 742.500(1) defines what uninsured motorist
coverage means for the purposes of ORS 742.504(7)(c).
Because the text and context of ORS 742.504(7)(c)
demonstrate that the legislature intended that workers'
compensation payments should be deducted from the amount of the
insured's damages up to the limit of liability, I respectfully
dissent.
Carson, C.J., and Balmer, J., join in this dissent.
1. At oral argument before this court in this case, counsel informed the court that
plaintiff now is deceased.  Her estate has continued as the party in interest. 
2. Plaintiff submitted an affidavit in which she stated that her total current and future
damages for lost wages and medical expenses would exceed $650,000.  For purposes of
plaintiff's summary judgment motion, Farmers did not dispute that amount.
3. Plaintiff rejected Farmers' offer of settlement on behalf of Hutton.  
4. Plaintiff also sued Hutton for negligence, but she settled that claim and the court
has dismissed it.  
5. Plaintiff and Farmers agree that, because the policy wording essentially tracks the
statute and because, in any event, under ORS 742.504 the policy cannot provide less favorable
coverage to an insured than the coverage required under that section, this case turns on the
proper interpretation of the applicable statutes.  Accordingly, they have confined their arguments
to issues of statutory construction rather than construction of the policy itself.  We agree and
proceed in the same way.  
6. The insured may elect lower UM limits than the limits set out in the policy for
bodily injury liability by doing so in writing, but the insured may not elect limits lower than the
minimum amounts prescribed to meet the requirements of ORS 806.070 for bodily injury or
death.  ORS 742.502(2)(a).  
7. Plaintiff initially seemed to be arguing to the trial court that the $25,000 tendered
on Hutton's behalf should not be offset against Farmers' liability limit because plaintiff had
refused that tender and therefore had not actually received that amount.  She appears to have
abandoned that argument before this court.  As we understand plaintiff's argument before this
court, plaintiff does not now dispute that ORS 742.502(2)(a) entitles her to UIM benefits reduced
by the amount that she recovered under Hutton's insurance policy.  
8. Similarly, ORS 742.502(2)(a) provides that "[a] motor vehicle bodily injury
liability policy shall have the same limits for uninsured motorist coverage as for bodily injury
liability coverage * * *."
9. Neither of those considerations applies here.
10. Moreover, and in any event, it was not clear from this court's opinion in Grijalva
that the amount of the plaintiff's damages exceeded the insurer's limit of liability.  As noted, the
opinion recited that the plaintiff's damages were "in excess of $100,000," which was the liability
limit under the coworker's UIM policy.  If the amount of the plaintiff's damages was
approximately equal to the liability limit, then the result would have been identical whether the
court deducted the amount that the plaintiff recovered in workers' compensation benefits from
her damages or from the insurer's liability limit. 
11. ORS 742.502(2)(a) requires that motor vehicle liability policies also provide
underinsured motorist coverage.  As the majority notes, underinsured motorist coverage generally
is subject to the same statutory requirements as uninsured motorist coverage.
12. In my view, the two statutes are not in conflict.  As ORS 742.450(1) recognizes,
coverage and limits of liability are separate concepts.  But ORS 742.504(7)(c) does not refer
simply to uninsured motorist coverage.  Rather, it refers to "the terms of [uninsured motorist]
coverage."  (Emphasis added.)  The terms on which an insurer offers coverage typically include
limitations, such as limits of liability.  The phrase "the terms of [uninsured motorist] coverage" is
broad enough to include limits of liability, as ORS 742.500(1) requires, even though coverage
and limits of liability are different concepts, as ORS 742.450(1) recognizes.
13. The legislature enacted ORS 742.504 in 1967 and ORS 742.450(1) in 1955. 
Compare Or Laws 1967, ch 482, § 1-3 (enacting ORS 742.500 to 742.506), with Or Laws 1955,
ch 429, § 23 (enacting ORS 742.450(1)).