Title: Vogelin v. American Family Mutual Ins. Co.

State: oregon

Issuer: Oregon Supreme Court

Document:

FILED: July 16, 2009
IN THE SUPREME COURT OF THE STATE OF OREGON
JESSICA
VOGELIN,
Petitioner
on Review,
v.
AMERICAN FAMILY
MUTUAL INSURANCE
COMPANY,
Respondent
on Review.
(CC0502-01571;
CA A132051; SC S056655)
En Banc
On review from the
Court of Appeals.*
Argued and submitted
June 11, 2009.
Kathryn H. Clarke,
Portland, argued the cause for petitioner on review.  With her on the brief was
Steven A. Kahn.
Thomas M. Christ,
Cosgrave Vergeer Kester LLP, Portland, argued the cause for respondent on
review.  With him on the brief was Brian J. Scott.
Meagan A. Flynn,
Portland, filed the brief on behalf of amicus curiae Oregon Trial
Lawyers Association.
Joel S. DeVore, Luvaas
Cobb, Eugene, filed a brief on behalf of amici curiae Allstate Ins. Co.,
State Farm Mutual Auto Ins. Co., and The Property Casualty Insurers Association
of America.
WALTERS, J.
The decision of the
Court of Appeals and the judgment of the circuit court are affirmed.
*Appeal from Multnomah
County Circuit Court, Dale R. Koch, Judge. 221 Or App 558, 191
P3d 687 (2008).
WALTERS, J.
In this insurance breach-of-contract case,
we decide how a liability payment that plaintiff recovered from a tortfeasor
affects her recovery of underinsured motorist (UIM) benefits under her own insurance
policy.  We conclude that the relevant Oregon statutes permitted defendant --
plaintiff's insurer -- to calculate plaintiff's UIM benefit by subtracting the tortfeasor's
liability payment from the uninsured motorist (UM) liability limit of plaintiff's
policy, instead of by subtracting that payment from the amount of plaintiff's total
damages. 
The
facts are undisputed.  Plaintiff, who had purchased an automobile insurance policy
from defendant, was injured in an automobile collision in 2003 and sustained
damages exceeding $300,000.  The driver who collided with plaintiff and injured
her had liability insurance with a liability limit of $25,000; the driver's insurance
carrier paid that amount to plaintiff.  Because the driver's liability payment was
not sufficient to pay the full amount of plaintiff's damages, plaintiff made a
claim against defendant for UIM benefits; the UM liability limit under her own
policy was $100,000.  The parties discussed various settlement amounts but did
not come to an agreement.  
Plaintiff filed this action against
defendant in 2005 for breach of contract, arguing that ORS 742.504 establishes the minimum policy terms for UM and UIM insurance
coverage.  Plaintiff contended that, as interpreted by this court in Bergmann
v. Hutton, 337 Or 596, 101 P3d 353 (2004), ORS 742.504(7)(c) requires
insurers to pay their insureds the total amount of the damages that they incur,
less any amount paid by or on behalf of a tortfeasor, up to the insured's UM liability
limit.  Plaintiff argued that ORS 742.502(2)(a), which mandates UIM coverage,
must be read consistently with ORS 742.504(7)(c), and compels the same result. 
Thus, plaintiff asserted, although the policy that she had purchased from
defendant purportedly provided that the tortfeasor's $25,000 liability payment would
be deducted from her UM liability limit ($100,000), Oregon law required that
that payment should be deducted from the total amount of her damages (which
exceeded $300,000).  Because the resulting figure exceeded her policy's $100,000
UM liability limit, plaintiff reasoned that she was entitled to receive her full
UIM benefit from defendant.  Defendant responded that ORS 742.502(2)(a), rather
than ORS 742.504(7)(c), controlled, and that, under defendant's interpretation
of that former statute,  the tortfeasor's payment ($25,000) must be deducted
from the amount of the policy's UM limit in plaintiff's policy ($100,000),
rather than from plaintiff's damages.  It followed, in
defendant's view, that its obligation to plaintiff was limited to $75,000.
The trial court agreed with defendant
and, after a jury returned a damages finding of $304,035.70, entered judgment
for plaintiff in the amount of $75,000, plus attorney fees and costs. The Court of Appeals affirmed. 
Vogelin v. American Family Mutual Ins. Co., 221 Or App 558, 191 P3d 687
(2008).  We allowed plaintiff's petition for review to answer this question of
statutory interpretation -- a question left open in Mid-Century Ins. Co. v.
Perkins, 344 Or 196, 179 P3d 633 (2008), modified on recons, 345 Or
373, 195 P3d 59 (2008).
We begin our analysis with ORS
742.504(7)(c), because it is central to an understanding of the parties'
arguments.  The parties agree that ORS 742.504 sets out the minimum required UM
and UIM benefit provisions for all automobile insurance policies issued in Oregon. 
ORS 742.504; ORS 742.502(4).(1) 
ORS 742.504(7)(c) sets out the mandatory provisions regarding calculation of UM
and UIM benefits and provides:
"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 the bodily
injury by or on behalf of the owner or operator of the uninsured vehicle * * *,
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 the bodily injury under any workers'
compensation law, disability benefits law or any similar law."
(Emphasis added.)
In Bergmann, 337 Or 596, this
court considered the question whether, under ORS 742.504(7)(c)(B), the amount of
UIM benefits that an insured was entitled to receive from an insurer was (1) the
amount of the insured's damages reduced by workers' compensation benefits; or (2)
the amount of the insured's UM liability limit reduced by workers' compensation
benefits.(2) 
To make that determination, the court construed the meaning of the words in the
introductory phrase italicized above, "[a]ny amount payable under the
terms of this coverage."  Id.
at 602-07.  The court distinguished the term "coverage"
from the term "policy" -- a term that the legislature did not use in
the statutory text at issue -- and explained that the former was a broad term
encompassing "the universe of people, vehicles, and events that trigger
the insurer's obligation to pay under the policy," whereas the latter referred
to "the specific contract between the insurer and the insured[.]" Id.
at 604.  The court noted that an insurance policy includes limits on the
insurer's liability, but insurance "coverage" does not.  Id.  The
court therefore concluded that the phrase "[a]ny amount payable under the
terms of this coverage" in ORS 742.504(7)(c) meant
"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."
Id. at 610.  Because, in the usual case, "that
amount would be equal to the insured's total damages," id. at 605, the
court held that the plaintiff in Bergmann was entitled to recover the
amount of his total damages less the workers' compensation benefits that he had
received.  Id. at 610.   
Responding to the insurer's concern in
Bergmann that the foregoing interpretation of ORS 742.504(7)(c) could
result in an insurer being liable for an amount greater than the UM liability limit
of the insured's policy, the court explained that the UM policy limits set the
maximum amount of UIM benefit payments that the insured could recover: 
"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."
Id. at 608.
This case involves a payment on
behalf of a tortfeasor, which is addressed under ORS 742.504(7)(c)(A), not
workers' compensation benefits, which are addressed under ORS 742.504(7)(c)(B),
but the analysis proceeds from the same introductory phrase, "[a]ny amount
payable under the terms of this coverage."  For purposes of ORS
742.504(7)(c), that phrase defines the initial figure from which payments,
including those made by or on behalf of a tortfeasor, are to be deducted.  As
noted in Bergmann, that figure is, in the usual case, the insured's
total damages.  Thus, under Bergmann, ORS 742.504(7)(c)(A) means that
payments made by or on behalf of a tortfeasor must be deducted from the insured's
total damages, as plaintiff contends, not from the insured's UM policy limit, as
defendant contends.  
However, although our analysis begins
with ORS 742.504(7)(c), that is not where it ends.  As noted, another statute central
to the parties' arguments, ORS 742.502, creates and addresses UM and UIM
coverage.  Specifically, ORS 742.502(1) requires that all motor vehicle
liability policies in Oregon provide UM coverage, and ORS 742.502(2)(a) defines
that coverage, as well as UIM coverage.  Plaintiff argues that we must
interpret ORS 742.502(2)(a) in a manner that is consistent with the
interpretation of ORS 742.504(7)(c) that Bergmann compels.  Defendant responds
that the wording of ORS 742.502(2)(a) necessitates a different result and
controls over any contrary construction of ORS 742.504(7)(c).  Stated
differently, defendant asserts that the provisions of ORS 742.504(7)(c) apply
to UIM coverage only to the extent that they are not inconsistent with ORS
742.502(2)(a).
Before examining the parties'
arguments further, we set out the applicable 2001 version of ORS 742.502(2)(a),
separately numbering its four distinct sentences for ease of reference:
(1)  "A motor vehicle bodily injury liability policy shall
have the same limits for uninsured motorist coverage as for bodily injury
liability coverage unless a named insured in writing elects lower limits."
(2)  "The insured may not elect limits lower than the
amounts prescribed to meet the requirements of ORS 806.070 for bodily injury or
death."
(3)  "Uninsured motorist coverage larger than the
amounts required by ORS 806.070 shall include underinsurance 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."
(4)  "Underinsurance benefits shall be equal to
uninsured motorist coverage benefits less the amount recovered from other
automobile liability insurance policies."(3)
The first two sentences of ORS
742.502(2)(a) (2001) address the required
minimum limits of UM coverage and do so by referring to the insured's liability
insurance limits.  The first sentence requires that an insured's UM limits be
equivalent to the insured's bodily injury liability limits, unless the insured agrees
to lower limits in writing.  The second sentence, by incorporating a reference
to ORS 806.070, prohibits motorists from electing limits lower than $25,000 (colloquially
known as the "financial responsibility limits").  
The third sentence of ORS
742.502(2)(a) (2001) addresses the circumstances in which an insurer must provide
its insureds with UIM coverage and defines that coverage.  UIM coverage is
triggered when an insured obtains UM coverage that exceeds the financial
responsibility minimum of $25,000.  UIM coverage is 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."  ORS 742.502(2)(a) (2001).
This court recently discussed the
meaning of the third sentence of ORS 742.502(2)(a) (2001), including the above-quoted
phrase, in Mid-Century Ins. Co., 344 Or 196.  In those consolidated cases, the insureds contended
that a "motorist is underinsured if the limit of his or her liability
policy is less than the sum of the damages sustained by the insured."
Id. at 206 (emphasis added).  The insurers, on the other hand, contended
that the determination whether a vehicle is underinsured is made by comparing
the limits of the tortfeasor's liability policy to the limits of the insured's
UM policy; by the insurer's reasoning, if the limits were equal, as they were
in Mid-Century Ins. Co., then the tortfeasor would not be an
underinsured motorist, and, thus, the insured would not be entitled to recover
UIM benefits.  Id. at 207.
Resolution of that dispute turned on
the meaning of the word "coverage," as used in the third sentence of ORS
742.502(2)(a) (2001).  This court concluded that, although in Bergmann the
word "coverage" in ORS 742.504(7)(c) had been construed to refer to
an insured's total damages, the
legislature had not necessarily used that word in the same sense in the third
sentence of ORS 742.502(2)(a) (2001).  Id. at 209-11.  The court
reasoned in part that, because the legislature had included a companion reference
to "limits" of coverage in the latter provision, see ___ Or at
___ (slip op at 6) (setting out statute), it had intended the word "coverage"
in that provision to mean the amount of the UM liability limits in the insured's
policy.  Mid-Century Ins. Co., 344 Or at 213-14.  The court in Mid-Century
Ins. Co. therefore determined that the threshold question whether a
tortfeasor's vehicle is underinsured is determined by comparing the liability
limits of the vehicle's insurance against the limits of the insured's UM policy
coverage, rather than against the insured's damages.  Id. at 216.  
This case concerns the meaning of the
fourth sentence of ORS 742.502(2)(a) (2001), which, again, provided:
"Underinsurance benefits shall be equal to uninsured
motorist coverage benefits less the amount recovered from other automobile
liability insurance policies."
The fourth sentence addresses, as does ORS 742.504(7)(c), the
issue of how liability insurance payments recovered from, or on behalf of, a
tortfeasor affect an insured's UIM policy benefits.  According to that fourth
sentence, the initial figure for purposes of subtracting "the amount
recovered from other automobile liability insurance policies" -- here, the
tortfeasor's liability payment -- is the insured's "uninsured motorist
coverage benefits." 
In defendant's view, that phrase from
the fourth sentence of ORS 742.502(2)(a) (2001), "uninsured motorist
coverage benefits," means the amount that the insured would be entitled to
recover from the insurer if the tortfeasor had been uninsured.  Because,
defendant argues, that amount cannot exceed the UM liability limits in the
insured's policy, the phrase "uninsured
motorist coverage benefits" must refer to those limits.  Furthermore,
defendant contends, this court in Mid-Century interpreted the third
sentence in ORS 742.502(2)(a) (2001) to refer to an insured's UM liability limits,
and there is no reason to conclude that the legislature intended a different
meaning when it used similar wording in the fourth sentence.
Plaintiff counters that we must interpret
the phrase "uninsured motorist coverage benefits" in the fourth
sentence of ORS 742.502(2)(a) (2001) consistently with the Bergmann interpretation
of the introductory phrase "[a]ny amount payable under the terms of this
coverage" in ORS 742.504(7)(c).  In other words, both phrases must mean "the
amount that the insured legally would be entitled to recover from the [tortfeasor],"
Bergmann, 337 Or at 610, not from the insurer.  Plaintiff urges
that the initial figure for purposes of calculating UIM benefits under ORS
742.502(2)(a) (2001) should be the same as the initial figure mandated by ORS
742.504(7)(c) as determined in Bergmann -- the insured's total damages. 
Under plaintiff's interpretation, ORS 742.502(2)(a) (2001) requires the insurer
to subtract the tortfeasor's liability payment from the plaintiff's total damages
and obliges the insurer to pay its insured the remainder, up to the UM
liability limit of the insured's policy.  Thus, plaintiff contends that she is
entitled to recover from defendant her damages of $304,035.70, minus the
payment from the tortfeasor's liability insurance carrier of $25,000, up to her
UM liability limit of $100,000 -- that is, the amount of $100,000.   
To support her position, plaintiff emphasizes
that, if we were to construe ORS 742.502(2)(a) (2001) to use her UM liability limit
as the initial figure in calculating her ultimate recovery, she would receive
less than the policy limits for which she bargained.  Plaintiff further argues
that such an outcome would cause ORS 742.502(2)(a) (2001) to conflict directly with
ORS 742.504(7)(c), which, under Bergmann, uses damages -- not the UM liability
limit -- as the initial figure from which to calculate payment.  Further,
plaintiff insists, if a conflict exists between the two statutes, the calculation
required by ORS 742.504(7)(c) controls, because ORS 742.502(4) provides that "[u]nderinsurance
coverage is subject to ORS 742.504."  
For its part, defendant acknowledges that
its proposed interpretation of the fourth sentence of ORS 742.502(2)(a) (2001) appears
to conflict, on its face, with the interpretation of ORS 742.504(7)(c) that Bergmann
suggests.  However, defendant contends, the two statutes can be read
harmoniously by understanding that the reference that ORS 742.502(4) makes to ORS
742.504 -- that is, that UIM coverage is "subject to ORS 742.504" -- is
a shorthand method of requiring that Oregon insurance policies include equivalent
minimum UM and UIM benefits provisions.  As defendant explains it, the
legislature understood that circumstances exist in which the provisions of ORS
742.504 cannot, for various reasons, apply to UIM coverage.(4)  Defendant concludes that
the legislature did not intend the provisions of ORS 742.504 to be controlling
when they are inconsistent with the very definition of UIM coverage set out in
ORS 742.502(2)(a) (2001).  
The wording of the two statutes is difficult
to decipher and reconcile, and both parties have strong arguments.  Had the
legislature used the terms "damages," "policy limits," or "liability
limits" in the fourth sentence of ORS 742.502(2)(a) (2001), or had it
eliminated that sentence in deference to ORS 742.504(7)(c), we could have
discerned its intent more easily.  Without that guidance, we are left to parse
the meaning of less precise terms and to harmonize provisions that are not
easily harmonized.   Recognizing the difficulty that we face in reconciling the
statutes, defendant directs our attention to the legislative history of the UM
and UIM provisions, which, as explained below, we find to be illuminating and
determinative.  See State v. Gaines, 346 Or 160, 171-72, 206 P3d 1042
(2009) (in interpreting statutes, court
will consider proffered legislative history);(5)
see also generally State ex rel Turner v. Frankel, 322 Or 363, 374, 908
P2d 293 (1995) (examining legislative history to determine intended
relationship between two related statutes).
In 1967, the legislature first
required that every automobile insurance policy in Oregon provide UM coverage,
defined as insurance against the risk of injury or death in an accident arising
out of the ownership, maintenance, or use of an "uninsured motor vehicle." 
Or Laws 1967, ch 482, §§ 1, 2 (originally former ORS 743.786(1) (1967)
and former ORS 743.789 (1967); now ORS 742.500(1) and ORS 742.502).  In
that same enactment, the legislature set out the terms of UM coverage in the
form of a "model" policy and required that insurers provide UM
coverage no less favorable to the insured than those set forth in its statutory
"model."  Vega v. Farmers Ins. Co., 323 Or 291, 301-02, 918
P2d 95 (1996); see also Or Laws 1967, ch 482, § 3 (originally former
ORS 743.792 (1967); now ORS 742.504).(6) 
The UM statutes originally required that UM coverage have limits equal to or
greater than the amounts required by the Financial Responsibility Law, ORS chapter
806.  Or Laws 1967, ch 482, §§ 1, 3 (originally former ORS 743.786(1)
(1967) and former ORS 743.792(2)(d)(A) (1967); now ORS 742.500(1) and
ORS 742.504(2)(k)(A)).  In 1975, the legislature required insurers to offer
higher UM limits whenever a policy provided liability coverage with higher
limits.  Or Laws 1975, ch 390 (originally former ORS 743.789(2) (1975);
now ORS 742.502(2)(a) (sentences one and two)).(7)
 In general, the purpose of UM coverage was to place the injured policyholder
in the same position as if the tortfeasor had had liability insurance.  Peterson
v. State Farm Ins. Co., 238 Or 106, 111-12, 393 P2d 651 (1964).    
Because UM insurance paid benefits to
an insured only when the vehicle that had caused the injury had no insurance
whatsoever, circumstances existed in which an insured could recover more
insurance benefits when injured by an uninsured driver than when injured by a
driver who was insured, but at a level insufficient to pay the injured driver's
damages in full.  So, for example, if an insured with a $100,000 UM liability limit
were injured by an uninsured driver, suffering damages of $75,000, the insured would
not be able to recover any insurance benefits from the tortfeasor, but could
recover the amount of $75,000 under his or her own UM policy.  However, if the
insured were injured by an insured tortfeasor with a liability limit of $25,000,
the insured could recover only that amount from the tortfeasor and could not recover
any additional benefit from its own insurer.  In that example, the insured
would recover $50,000 less in insurance benefits when injured by an insured
driver than the insured would recover when injured by an uninsured driver.
The legislature confronted that incongruity
in 1981 by enacting legislation that required insurers to provide their
insureds with coverage for injuries inflicted by underinsured, as well as by
uninsured, vehicles.  Or Laws 1981, ch 586.(8) 
That legislation was drafted and considered by the 1980 Interim Joint Committee
on the Judiciary before the commencement of the 1981 legislative session; the
legislation later moved through the 1981 session as Senate Bill (SB) 31
(1981).  As we shall explain, we have reviewed the records from the proceedings
of the various committees that considered the legislation, and it is evident from
that review that the legislature's purpose in enacting the legislation was to
ensure that, whether a tortfeasor had some insurance or no insurance, the
insured would be able to recover the same amount in insurance payments.  When the
tortfeasor had no insurance, the UM policy provisions would be the only source
of payment.  When the tortfeasor had some insurance, the tortfeasor's liability
payment would be a secondary source of payment.
Much of the discussion before the Interim
Joint Committee on the Judiciary that preceded the 1981 legislative session
bears on our analysis here.  For example, Frank Howatt, an assistant insurance
commissioner, explained to the committee how a tortfeasor's liability payments
would be applied under the new UIM legislation:
"[T]he amount of insurance you would recover [from the
tortfeasor] would be an offset, of course, against the [UM] limit that you
carry."
Tape Recording, Joint Committee on the Judiciary, Subcommittee
on Insurance, Sept 12, 1980, Tape 9, Side A.  Howatt stated that he wanted the wording
to make it "obvious that the intent was to cover this gap that
arises when the other party is not uninsured but [he] is insured and your own
policy [limit] is a higher limit and the offset should be applied against
that higher limit rather than simply eliminating the coverage."  Id.
(emphasis added).  Howatt later explained, "You don't collect the full
benefit under the uninsured [motorist policy]; you collect the difference
between that and * * * the other party's insurance."  Tape Recording,
Joint Committee on the Judiciary, Oct 5, 1980, Tape 1, Side A.
Others who spoke before the Interim Joint
Committee on the Judiciary about the draft legislation echoed that
understanding.  Noam Stampfer, counsel to the committee and the drafter of the
proposed legislation, stated, 
"What this
legislation would do is to track underinsurance and uninsurance  [benefits].  Rather
than stack [UIM and UM benefits] one on top of the other, it would just track
them[,] so that the underinsurance would fill the gap between the amounts
received from the other party's policies and the amount that the person is
insured to under that person's uninsured motorist coverage."  
Id.  Senator Vern Cook provided an example of how the
UIM coverage would work:
"[I]f he [i.e., the tortfeasor] has
the minimum policy [limit] and you [i.e., the insured] have a 50/100
liability policy which gives you 50/100 [in] uninsured [motorist] coverage if
he is uninsured, this would mean that, if he has only $15[,000], you'll also
get an extra $35[,000] on your own policy for uninsured [motorist] coverage.  So
you would collect up to $15[,000] from the third party and then up to $35[,000]
from your own [policy]."
Id.
Plaintiff does not dispute
that, in general, the statutory UIM requirements were designed to fill a "gap"
in coverage.  In plaintiff's view, however, statements by other proponents of
the legislation demonstrate that the legislature intended that UIM benefits fill
the gap between the tortfeasor's liability limits and the insured's damages,
rather than a gap between the tortfeasor's liability limits and the insured's
UM liability limits.  Plaintiff points to statements by Senator Ed
Fadeley and Tom Bessonette of Oregon Mutual Insurance.  Speaking during a
hearing before the Joint Committee on the Judiciary, Senator Fadeley remarked:
"Suppose that I sued the other guy, and I only
got $10,000 as a judgment, but I've got a $50,000 uninsured motorist policy
under this statute, with underinsured mandated as part of it.  So I'm supposed
to get $50,000.  I wonder, if that last sentence and the word 'recovered' would
allow me to get $40,000 in that instance, when what I recovered was $10[,000]
and what I had in my policy was $50[,000]."  
Tape Recording, Joint Committee on the Judiciary, Oct 5,
1980, Tape 1, Side A.  Howatt then asked Senator Fadeley if his question was
whether,
"'if the man only got a judgment for $10,000, that he would
recover some larger amount by virtue of this underinsurance?'  No, it says
here, as I understand it, * * * [the legislation] say[s] underinsurance
benefits shall be equal to uninsured motorist coverage benefit.  Not [that] the
uninsured motorist coverage benefit would be $10,000 wouldn't it -- you don't recover
more under your uninsurance motorist coverage than the amount of the judgment
against the other driver.  If you start with a $10,000 judgment, that would be payable
under uninsurance, but then the existence of the other party's insurance would
normally cancel that benefit under your policy."
Id.
Contrary to plaintiff's position, that
exchange indicates that Senator Fadeley was concerned that the injured party
not recover more than the amount of the damages that he or she was entitled to
recover, not that the injured party be able to recover more than his or her UM liability
limits.  In fact, later in the proceedings, Senator Fadeley stated:
"If I was looking at it from an insurance
salesman's point of view, the intention is to allow me to buy an increase in my
uninsured motor[ist] vehicle coverage and to have the increase in my motor
vehicle insurance coverage cover the gap between low insurance and the benefits
I bought."
Id., Tape 2, Side A. 
The testimony of Bessonette also is contrary
to plaintiff's position.  Testifying before the Senate Committee on Insurance,
Banking, and Retirement, which considered SB 31 during the 1981 legislative
session, Bessonette stated:
"Many people have been involved in automobile crashes
and they were unable to collect a sufficient amount of damages for their
injuries because there just wasn't enough insurance on the other party.  * * *
This bill provides what we now call underinsurance.  If you hit and collide
with someone who has a $15,000 policy [limit] and you have a $100,000 injury, [then]
you would collect $15,000 from the wrongdoer and $85,000 from your own
insurance company and you would be made well."  
Tape Recording, Senate Committee on Insurance, Banking, and
Retirement, SB 31, Jan 23, 1981, Tape 5, Side A.
Plaintiff correctly points out that no
one who spoke about the 1981 UIM legislation specifically addressed the gap
between a tortfeasor's liability limits and an injured party's damages, but
plaintiff does not gain by that argument.  It is evident to us that the legislature
did not do so because it focused on the gap between a tortfeasor's liability limits
and the injured party's UM liability limits.  
Our review of the legislative history
surrounding the enactment of the UIM legislation convinces us that defendant's
interpretation of the fourth sentence of ORS 742.502(2)(a) (2001) is correct
and that that provision controls the outcome here.  The legislature intended
that insurers be permitted to offset tortfeasor liability payments against the
UM liability limits set out in their insureds' policies.  Thus, the phrase "uninsured
motorist coverage benefits" in the fourth sentence of ORS 742.502(2)(a) (2001)
means the UM liability limits in the insured's policy, as defendant argues, and
not damages, as plaintiff argues.  And, the provision in ORS 742.502(4) that "[u]nderinsurance
coverage is subject to ORS 742.504" does not mean that the latter statute
controls in the event of a conflict, as plaintiff contends.  Rather, it means
that the model policy terms set out in the many subsections of ORS 742.504,
which before 1981 applied to only UM coverage (see ___ Or at ___, ___ n
8 (slip op at 12-14, 14 n 8) (so explaining)), apply equally to the mandated UIM
coverage, to the extent that such an application is consistent with the UIM mandate
set out in ORS 742.502(2)(a) (2001).  Stated differently, the legislature
intended the third and fourth sentences of ORS 742.502(2)(a) (2001) to
establish the parameters of the mandated minimum UIM coverage.
In sum, we conclude that the
applicable statutes that governed the terms of the insurance policy that
plaintiff purchased from defendant permitted defendant to calculate plaintiff's
UIM benefit by subtracting the tortfeasor's liability payment from plaintiff's UM
liability limit.  Defendant could have offered, and plaintiff could have
purchased, additional UIM benefits that would have provided plaintiff greater
protection against injury by an underinsured motorist, but that greater
protection was not required by Oregon law.  The trial court therefore properly
entered judgment for plaintiff in the amount of $75,000.  
The decision of the Court of Appeals and
the judgment of the circuit court are affirmed.
1. As
discussed in Bergmann v. Hutton, 337 Or 596, 602, 101 P3d 353 (2004),
ORS 742.502(4) provides that UIM coverage is subject to the UM provisions set
out in ORS 742.504.
2. In
Bergmann, the plaintiff apparently did not contend that the insurer was
prohibited by law from deducting the amount paid on behalf of the tortfeasor
from the limits of her UIM policy, Bergmann, 337 Or at 603 n 7, and that
was not an issue in the case.  
3. ORS
742.502(2)(a) has been amended since 2001; for the most part, those amendments
are immaterial to our analysis here.  We do note, however, that the fourth
sentence of ORS 742.502(2)(a) now provides (new text in italics; deleted text
in brackets):
"Underinsurance coverage [benefits] shall be
equal to uninsured motorist coverage [benefits] less the amount recovered from
other motor vehicle [automobile] liability insurance policies."
See Or Laws 2007, ch 287, § 2 (adding
"coverage" and twice removing "benefits"); Or Laws 2005, ch
235, § 1 (adding "motor vehicle" and removing
"automobile").  As noted in Mid-Century Ins. Co. v. Perkins,
344 Or 196, 200 n 2, 179 P3d 633 (2008), modified on recons, 345 Or 373,
195 P3d 59 (2008), the third sentence of ORS 742.502(2)(a) also has been
amended since 2001.
4. Provisions
of ORS 742.504 that cannot apply to UIM coverage include provisions for
"hit-and-run" and "phantom" vehicles, see ORS
742.504(2)(b), (g), because UIM coverage, by its very nature, requires an
identifiable and insured tortfeasor.  Similarly, other provisions of ORS
742.504 cannot apply to UM coverage, which requires a tortfeasor without
insurance.  See, e.g., ORS 742.504(4)(d) (concerning only
"underinsured motorist benefits").
5. Citing
PGE v. Bureau of Labor and Industries, 317 Or 606, 611-12, 859 P2d 1143
(1993), plaintiff argued in her brief that a resort to legislative history is
not justified, because no statutory ambiguity exists.  This court issued its
decision in State v. Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009),
which refined the statutory construction analysis set out in PGE, after
plaintiff filed her brief.  In any event, here, the competing statutes that
give rise to the parties' dispute certainly are capable of more than one
meaning, and we find the history to be helpful in ascertaining the
legislature's intent in that regard. 
6. Former
ORS 743.792(7)(c) (1967) is virtually identical to current ORS 742.504(7)(c).
7. The legislature later required that an insurer provide as much UM coverage as
liability coverage, unless the insured elected otherwise, as now set out in the
first two sentences of ORS 742.502(2)(a).
8. As
originally enacted, the underinsurance provisions currently set out in the
third and fourth sentences of ORS 742.502(2)(a), and also currently set out in
ORS 742.502(4), provided:
"* * * Offers of uninsured motorist
coverage larger than the amounts required by ORS chapter 486 shall include
underinsurance 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. 
Underinsurance benefits shall be equal to uninsured motorist coverage benefits
less the amount recovered from other automobile liability insurance policies.          
"* * * Underinsurance coverage shall be
subject to [former] ORS 743.792 [(1981) (now ORS 742.504)]."
Or Laws 1981, ch 586, § 1.