Opinion ID: 1187855
Heading Depth: 1
Heading Rank: 2

Heading: an uninsured motorist carrier is obligated for all of its insured's loss from the first dollar up to the policy limits.

Text: ¶ 7 Allstate contends Buzzard v. Farmers Insurance Co. [8] provides the answer to the certified question by limiting a UM carrier's obligation to the amount of the claim which exceeds the tortfeasor's liability coverage limits. Its contention is that this limitation is a rule of general applicability, and neither the running of the statute of limitations nor the fact that Allstate is both the liability and UM carrier under the same policy of insurance may alter this rule. [9] ¶ 8 Linda argues [10] that: (1) a UM carrier has a statutory duty to pay first-dollar damages to an insured where, at the time the UM claim is resolved, no liability insurance is available to the claimant even if liability insurance was available at an earlier time, provided the claimant does nothing affirmatively to cause the liability insurance to become unavailable; [11] (2) Buzzard is not dispositive because in that case the court's discussion of the scope of a UM carrier's obligation, if understood as a blanket limitation on that obligation, was gratuitous ( obiter dictum ) and should not now be elevated as ratio decidendi for resolution of the issue in this case, [12] and (3) if Buzzard were to be found dispositive here, it should be construed as expressly limiting a UM carrier's liability to the amount of the claim which exceeds that available from the liability carrier (emphasis added), [13] and the court should now make clear that availability is the crucial factor, and is to be determined at the time the UM claim is resolved, not at the time of the accident. [14] ¶ 9 In Buzzard, the plaintiffs' son was killed when his automobile was struck by a City of Norman truck. The City of Norman carried liability insurance in the amount of $50,000 per claimant. The plaintiffs' damages exceeded the liability insurance limits, and the City was hence underinsured with respect to the plaintiffs' damages. Plaintiffs presented their UM claim to their insurer, Farmers Insurance Co. (Farmers), within a month of the accident. Farmers took the position that it did not have to pay anything on the UM claim until the liability insurance benefits had been exhausted by settlement or judgment. Plaintiffs then settled the claim with the City of Norman for $50,500 and signed a covenant not to sue. Farmers now refused to pay on the UM policy because the plaintiffs' covenant not to sue had destroyed their subrogation rights against the City. The court held that a UM carrier cannot withhold payment on the UM policy until liability benefits have been exhausted. The UM carrier must promptly investigate, place a value on the damage claim and pay UM benefits without regard to whether liability benefits have been paid. The court then went on to describe what damages a UM carrier is obligated to pay, stating that its obligation is to pay that amount of injury or damage which exceeds the liability limits of the tortfeasor. [15] ¶ 10 Two decisions by the Oklahoma Court of Civil Appeals [16] have applied Buzzard in cases involving an issue similar to that which is presented in this case. [17] In the first, Kavanaugh v. Maryland Insurance Co., Inc., [18] the injured party brought suit against the tortfeasor within the limitations period, but dismissed the suit without prejudice approximately three years later. After dismissing her suit against the tortfeasor, the insured sued her UM carrier, seeking recovery of her total damages. The insurer interposed Buzzard. The insured argued that Buzzard applied only where the tortfeasor's insurance remains available. Since the tortfeasor's liability insurance was no longer available to her, Buzzard was inapplicable. Relying on our decisions in Bohannan v. Allstate Insurance Co. [19] and Uptegraft v. Home Insurance Co., [20] the appellate court held that the insurer should be liable for the entire damages claimed by the insured if the tortfeasor's liability insurance is no longer available as long as the insured did nothing affirmatively to cause the liability insurance to become unavailable. [21] ¶ 11 The second pronouncement by the Court of Civil Appeals, decided this year, is Smith v. American Fidelity Insurance Cos. [22] In Smith, the insured made demand for payment of her entire damages (in the amount of $12,000) from her UM carrier, although the negligent party had $10,000 in collectible liability insurance. The insured argued that once the preconditions for the application of § 3636 are met, a UM carrier is liable to its insured for the entire amount of the insured's claim up to the UM policy limits, even if liability insurance remains available. [23] The insurer interposed Buzzard. The court agreed with the insurer, [24] holding that under Buzzard the insurer cannot be compelled to pay the insured's entire damage claim where the tortfeasor's liability insurance remains available. [25] ¶ 12 Both Kavanaugh and Smith assumed Buzzard was dispositive on the outer limit of a UM carrier's liability to its insured. We disagree. [26] It is a time-honored principle of judicial decisionmaking that courts are not allowed to forecast what they might do about an issue that is not before them. [27] This principle was inadvertently departed from in Buzzard. Our discussion there of the scope of a UM carrier's obligation was pure obiter dictum. The issue in Buzzard was whether § 3636 permits a UM carrier to withhold payment of UM benefits until the limits of liability under any applicable liability policy are exhausted by the payment of a judgment or by settlement. [28] The question that had to be decided in that case was when benefits under UM coverage must be paid, not what benefits were payable. The Buzzard family had settled with the City of Norman, for $50,500, $500 more than the City's liability policy limits. They were not attempting to collect from the UM carrier the same amount they had already collected from the liability carrier. In the Buzzard scenario, the court was quite correct that the insurance company's obligation to pay was limited to the amount of damages incurred which there exceeded the liability limit since the liability limits had already been paid. There was hence no need in Buzzard to fashion a general rule regarding the scope of a UM carrier's obligation. Any language in Buzzard formulating a global rule of universal applicability was gratuitous. It was pure dictum  a statement not dispositive of the issue the opinion purports to decide. ¶ 13 We turn next to the text of § 3636, the statute creating uninsured motorist coverage. [29] The purpose of an uninsured motorist provision in an insurance contract is to protect the insured from the effects of personal injury from an accident with another motorist who either carries no insurance or has inadequate coverage. [30] In enacting § 3636, the Legislature created only one category of vehicle to which its provisions apply. In contrast to the statutory scheme of other states, § 3636 creates only uninsured motorist coverage, and includes within that term both motor vehicles on which their owners carry no insurance as well as those on which their owners' coverage is in an amount insufficient to satisfy a loss. With one exception, the statute makes no distinction between completely and partially insured vehicles. [31] Moreover, no separate premium is charged for indemnity against insured losses occasioned by a completely uninsured motorist and those by a partially uninsured motorist. The premium is one and indivisible. The insured who has paid a premium for uninsured motorist coverage and presses a claim for the actual amount of damages sustained within the policy limits seeks no more than recovery of that for which the premium was paid. If the liability limits of a motor vehicle are less than the amount of the injured insured's claim, that vehicle is classified as uninsured. Based on this definition, one can conclude that under our statutory scheme, the UM carrier's obligation to its insured is identical regardless of the underlying reason for the classification of the vehicle as uninsured. We hold § 3636 mandates that when the preconditions for the loss under uninsured motorist coverage exist, an uninsured motorist coverage carrier is obligated to pay the entire loss of its injured insured from the first dollar up to the policy limits. ¶ 14 The dissent argues that in enacting § 3636(D), the Legislature explicitly limited the use of UM coverage as a substitute for liability coverage to the situation in which the liability carrier becomes insolvent within one year after the date of the accident. The dissent is mistaken. Subsection (D) merely deals with an insolvent insurer as a special subclass of available UM insurance from indemnitors who become insolvent. It does not support the dichotomous treatment of claims generated by uninsured and underinsured tortfeasors. ¶ 15 The pre-Buzzard Court of Civil Appeals case of Roberts v. Mid-Continent Casualty Co., [32] correctly applied § 3636. [33] First, the appellate court held that liability attaches to an uninsured motorist carrier without the insured first having to seek recovery against the tortfeasor. [34] Next, it held that an insured can collect solely from his (or her) UM carrier even after the statute of limitations runs on the insured's claim against the tortfeasor. [35] The court then turned to the question of the amount of damages for which the UM carrier is liable when the insured pursues the UM carrier without joining the tortfeasor. The insured sought recovery of his entire damages. The insurer argued that it was entitled to a credit for the amount of liability coverage held by the tortfeasor and that a failure to grant credit for the tortfeasor's liability insurance would be tantamount to making UM coverage primary. The court held that the intent of the legislature was to prohibit diminution of an injured party's recovery based upon payments made by a tortfeasor. Hence, there can be no credit given to a UM carrier for the amount of liability coverage held by a tortfeasor. ¶ 16 We agree. When § 3636 was amended in 1979, the Legislature prohibited the reduction of a § 3636 claim by a set-off of benefits from the tortfeasor's liability policy. [36] The purpose of Oklahoma's statutory scheme is to assure each [UM insured] person the full contracted coverage for which a premium has been paid. [37] This court has in several instances refused to permit a set-off for payments received by an insured person from collateral sources. [38] Upon payment of the loss to an insured, a UM carrier is free under § 3636(E) to proceed in its own right against the tortfeasor. The insured is penalized only when he (or she) takes some active step that would have the effect of destroying the insurer's § 3636 subrogation rights. [39] Even passive destruction of the insurer's subrogation rights, such as by permitting the statute of limitations to expire without filing suit against the tortfeasor, does not forfeit the uninsured motorist coverage. [40] ¶ 17 Allstate argues that the broader purpose of UM coverage is simply to place plaintiff in the position she would be in if the tort-feasor had proper liability insurance, not to create a duplicate pool of insurance. In a situation where a vehicle is classified as uninsured solely because its liability coverage is inadequate to satisfy a damage claim, Allstate argues, UM coverage merely adds to existing liability coverage, but does not replace it. Allstate contends that the statutory language of § 3636 reveals no legislative intent to make UM coverage the sole source of recovery for all of a plaintiff's damages. ¶ 18 We agree that UM coverage was not intended to be the sole source of recovery for all of a plaintiff's damages and our holding today does not make it so. Allstate fails to take into account that if liability coverage is indeed duplicated by a first-dollar damages construction of § 3636, such duplication is only a temporary expedient to facilitate prompt payment to the insured. This clearly is contemplated by § 3636. Our holding  that the UM carrier is directly and primarily liable to its insured for the entire loss to be indemnified, except where the insured affirmatively destroys the insurer's subrogation right, does not make the UM carrier the final indemnitor for the injured party's loss. The UM carrier is statutorily subrogated to the rights of its insured against the tortfeasor and the tortfeasor's liability carrier, if any there be, and must seek recovery of paid indemnity through an exercise of its right to subrogation. The particular facts of this case (in which both the liability and the uninsured motorist coverage are provided by the same carrier and the statute of limitations has run on the insured's tort claim against the negligent party) provide no reason to exclude Allstate from the application of the general rule we pronounce today. ¶ 19 CERTIFIED QUESTION ANSWERED. ¶ 20 KAUGER, C.J., OPALA, ALMA WILSON, WATT, JJ., and CHAPEL, S.J. (sitting by designation in lieu of SIMMS, J., who certified his disqualification), concur. ¶ 21 SUMMERS, V.C.J., and HODGES, LAVENDER, and HARGRAVE, JJ., dissent. LAVENDER, J., with whom SUMMERS, V.C.J., and HODGES and HARGRAVE, JJ. join, dissenting. ¶ 1 The United States Court of Appeals for the Tenth Circuit certified a question of law to this Court pursuant to the Uniform Certification of Questions of Law Act, 20 O.S.1991, §§ 1601-1611, as amended, asking in effect the following: When an insured's damages in an automobile accident exceed a tortfeasor's automobile insurance liability limits and the insured seeks payment for damages directly from its underinsured motorist (UIM) carrier, does 36 O.S.1991, § 3636 (now Supp. 1994) mandate the UIM carrier be liable for the entire amount of the insured's claim when the tortfeasor's liability coverage and the injured person's UIM coverage are provided by the same carrier but the statute of limitation period has expired on the liability claim? The majority answers the question in the affirmative. Because I would answer it in the negative, I respectfully dissent. Contrary to the majority opinion, under the circumstances presented by the certified question, § 3636 only mandates the UIM carrier be liable  up to the policy limits of the UIM coverage  for those damages sustained by its insured which exceed the tortfeasor's liability limits.