Court Opinion

ID: 9575654
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:15:40.649412+00
Date Added: 2024-06-11T12:49:40.463360
License: Public Domain

FADELEY, J.,
dissenting.
This is an appeal from a summary judgment in favor of defendants, who operated a tavern. Plaintiff was injured by an automobile driven by a customer of the tavern, Morgan, soon after Morgan left defendants’ establishment. Defendants allegedly had continued to serve Morgan intoxicants after he was visibly intoxicated.
The majority upholds a summary judgment granted to defendants. The summary judgment was granted after the tavern’s insurance company became insolvent. That insolvency occurred before plaintiffs injury case got to the point of trial by jury. The summary judgment was founded on factors flowing from that insolvency, not on any issue concerning tort liability of defendants for plaintiffs injuries. The majority upholds the summary judgment by granting the defendants what the majority described as “immunity.” 316 Or at 350.
The issues in this case may be stated in three questions:
*353(1) Do the statutory words “first exhaust the remedies under” an insurance policy, found in ORS 734.640, actually mean “first recover the maximum limits of coverage under” an insurance policy? The majority says “exhaust the remedies” means “exhaust the limits of coverage.” I disagree.
(2) Do the statutory words “[determination as to whether the insured, the insured’s heirs or the insured’s legal representative is legally entitled to recover such damages and if so, the amount thereof, shall be made by agreement between the insured and the insurer, or, in the event of disagreement, by arbitration,”1 create a mandatory duty that requires arbitration? The majority appears to hold that the words do not require arbitration. The majority further appears to hold that the following statutory words, “such person and the insurer each agree to consider themselves bound and to be bound by any award made by the arbitrators,”2 actually mean that the arbitrator’s award is not binding. I disagree with those tortured meanings.
(3) Does a jury trial of a complaint on a contract against one’s own insurance company satisfy the right to a jury trial constitutionally guaranteed to persons tortiously injured by third-party defendants? The majority says it does. 316 Or at 352.1 disagree.
After plaintiff filed a negligence complaint against the tavern operators, defendants’ insurer became insolvent. Plaintiff then filed a claim against his own insurance company under his own underinsured motorist policy contract with Farmers Insurance Company (Farmers). As required in plaintiffs insurance policy, and ORS 742.504(l)(a), plaintiffs claim went to arbitration.3 In the meantime, plaintiff *354shared a fractional part of Morgan’s $50,000 total liability insurance coverage with two others injured in the same accident. At the arbitration hearing, liability was not disputed. Plaintiffs insurer, Farmers, stipulated to the amount of plaintiff’s special damages only, most of which were Personal Injury Protection (PIP) and property damage payments already made to plaintiff by Farmers. The insurance arbitration panel awarded plaintiff a total of $ 100,000 in both general and special damages combined. That amount was less than the $250,000 limit of plaintiffs uninsured and underin-sured contract with Farmers. Plaintiff, upon payment of the arbitration amount, reduced by the payments previously received from Farmers and the fractional share of the intoxicated driver’s liability coverage, acknowledged satisfaction of his claim against Farmers on payment of the reduced amount but expressly reserved and continued to assert his right to continue his negligence action against defendants.
The statutory provisions relevant to this case are found in a 23-section comprehensive legislative act setting up and regulating the Oregon Insurance Guaranty Association (OIGA). Or Laws 1971, ch 616. That comprehensive act, as subsequently amended, is now found in ORS 734.510 to 734.710. Portions of that act relevant to this case are set out.
ORS 734.520 provides:
“The purpose of ORS 734.510 to 734.710 is to provide for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, to provide an association to assess the cost of such protection among insurers and to assist in the liquidation of insurers as provided in this chapter.” (Emphasis added.)
ORS 734.570 provides in part:

“The association shall:

“(1) Be obligated to pay covered claims existing at the time of determination of insolvency of an insurer or arising within 30 days after the determination of insolvency. * * * [S]uch obligation shall include only that amount of each covered claim that is less than $300,000. * * * In no event shall the association be obligated in an amount in excess of *355the obligation of the insolvent insurer under the policy from which the claim arises * * *.
“(2) Be the insurer to the extent of the association’s obligation on the covered claims and to such extent have all the rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent.
“(3) Assess member insurers the amounts necessary to pay the expenses incurred by the association in meeting its obligations * * *.” (Emphasis added.)
ORS 734.640 provides:
“(1) Any person who has a claim under an insurance policy against an insurer other than an insolvent insurer which would also be a covered claim against an insolvent insurer must first exhaust the remedies under such policy.
“(2) Any person who has a claim that may also be recovered from one or more insurance guaranty agencies that perform functions similar to that of the association shall first seek recovery from whichever organization serves the place of residence of the insured, except that:
“(a) Recovery on first party claims for damage to property with a permanent location shall first be sought from whichever organization serves the location of the property; and
“(b) Recovery on workers’ compensation claims shall first be sought from whichever organization serves the residence of the claimant.
“(3) Any recovery under ORS 734.510 to 734.710 from the association shall be reduced by the amount of any recovery pursuant to subsections (1) and (2) of this section.” (Emphasis added.)
As can be seen, OIGA undertakes the obligation of a defendant’s insolvent insurer but is entitled to offset any actual recovery from other insurers. To make that offset possible as a practical matter, other recoveries that will determine the amount of that offset first must be pursued.4
*356Relying on plaintiffs right to jury trial,5 the Court of Appeals reversed the trial court’s award of summary judgment6 for defendants. The Court of Appeals held that the conditions precedent to a collection from the guaranty fund did not provide defendants a defense in plaintiffs tort action against defendants. Carrier v. Hicks, 102 Or App 13, 793 P2d 329 (1990).
I would affirm the Court of Appeals’ decision, preserving that constitutional right to trial by jury (for both plaintiff and defendants), because that right should “remain inviolate” and “be preserved” just as the constitution says, and because the statutes do not say what the majority rules that they say, as the majority must so incorrectly rule in order *357to evade the jury trial right. However, a proper construction of the relevant statutes would preserve both the statutory and constitutional protections for both injured claimants and defendant policy holders whose insurer becomes insolvent.
The majority’s ground for denying plaintiff a jury trial is based on the majority’s erroneous interpretation of statutes intended to assure plaintiffs and defendants that a substitute insurance coverage protection is available for harms caused by defendants even though their insurance company becomes insolvent and cannot pay either to protect defendants or to compensate injured plaintiffs.
Before turning to discussion of the three issues identified in the text of this dissent, it seems fair to point out that no authority whatever is cited by the majority. No authority is cited by the majority for either of its constructions of the statutes — to read “exhaust the remedies” to mean “recover the limits of coverage” and to read “shall be made * * * by arbitration” and “agree * * * to be bound” to be permissive and non-binding. Based on those unsupported interpretations, the majority then evades and cancels out plaintiffs right to a jury trial on his tort complaint citing only one authority, Molodyh v. Truck Insurance Exchange, 304 Or 290, 744 P2d 992 (1987). That case interpreted ORS 743.6487 (now 742.232) relating to fire insurance law and holding that the plaintiff was entitled to a jury trial on a contract claim against his own fire insurance company. Molodyh did not involve either a tort claim or the statutes relevant in this case.
EXHAUST THE REMEDIES
There is nothing in the statutory text to suggest either that “remedies” means “limits of coverage” or that “exhaust” means “obtain the potential maximum.” Immediate context is also to the contrary. The section in which the phrase “first exhaust the remedies” is found includes, as subsection (3), a reference to “any” recovery and mandates a reduction “by the amount of any recovery” from one’s own or any other insurance policy. ORS 734.640(3). If the legislature intended “any recovery” to mean “the maximum limits of coverage,” it would have said so in subsections (1) or (3). It is *358not logical to refer to “any recovery” in one part of a statutory section while saying that only the recovery of the maximum policy limits satisfies the requirement of another part of the same section that must be satisfied in order for there to be a possibility of any reduction at all under the “any recovery” provision.
Nor do our cases construing the term “exhaustion of remedies” provide the majority any foundation for its strained interpretations.
In Rose v. Etling, 255 Or 395, 398, 467 P2d 633 (1970), this court approved the definition of “remedies” as the “means to enforce a right.” That case held that a motion for change of venue was a defendant’s “remedy” to enforce a “right” to a change of venue and that a contract provision waiving that remedy was invalid because the remedy was granted by law. Id. at 399-400.
Statutory definitions for use in commercial transactions state that “ ‘remedy’ means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal” and that “ ‘rights’ includes remedies.” ORS 71.2010(34) and (36).
In Shockey v. City of Portland, 313 Or 414, 422, 837 P2d 505 (1992), cert den 123 L Ed 2d 444 (1993), this court has recently affirmed this court’s long-held view that an exhaustion of remedies requirement is fulfilled, so that the next step may be taken to gain relief, when the required procedure has been “followed without success.”8
“As previously stated, plaintiff appealed his termination to the City of Portland Civil Service Board * * * [which] found in plaintiffs favor, reinstated plaintiff with back pay and restored seniority and benefits. In Miller v. Schrunk, 232 Or 383, 388, 375 P2d 823 (1962), this court held:
“ ‘When any charter or statute sets out a procedure whereby an administrative agency must review its own prior determination, that procedure must be followed. Judicial review [by way of writ of review] is only available after the procedure for relief within the administrative *359body itself has been followed without success. (Emphasis added.)’
“Plaintiffs success before the Civil Service Board made writ of review not only unnecessary, but unavailable.” (Emphasis in original.)
In Jackson v. Dept of Rev., 298 Or 633, 635, 695 P2d 923 (1985), the Department of Revenue moved to dismiss an action in the Oregon Tax Court on the ground that plaintiffs-taxpayers had failed to “exhaust administrative remedies.” The tax court dismissed because of that failure and this court affirmed. This court relied on ORS 305.275(4), which provided in part that:
“[N]o person shall appeal to the Oregon Tax Court or other court * * * unless he first exhausts the administrative remedies provided him before the department.”
Plaintiff-taxpayers had filed their request for administrative relief after the statutory time period for doing so of 90 days had run. Thus, there was no timely attempt to obtain any administrative remedy and, accordingly, no appeal was possible. The court explained exhaustion in terms of what was not exhaustion, holding: “Administrative remedies are not exhausted unless applicable procedures, prescribed by statute or rule, have been satisfied.” Id. at 637 (emphasis added). In the present case, plaintiff timely employed the procedure, pursued the available remedy to its end, obtained an offset against OIGA and defendants’ liability of $100,000, and could do no more.
In Zollinger v. Warner, 286 Or 19, 25, 593 P2d 1107 (1979), this court stated that the phrase exhaustion of administrative remedies “properly applies where one seeks prematurely to obtain judicial review of or judicial intervention * * * without waiting to see whether the agency will take the desired action.” That is not this case. Plaintiff has done all he can to recover. The arbitration award amount is final here. ORS 36.350, ORS 36.355, and ORS 36.365.
Legislative history does not support the majority’s interpretation. The only purpose for this provision mentioned during legislative consideration of the Oregon Insurance Guaranty Association Act was to prevent a double or duplicate recovery. The requirement that recovery from one’s *360own insurance or other insurance be offset against the recovery from OIGA on behalf of a defendant assures, of course, that no duplicate recovery will occur.
Introduced and adopted in the 1977 legislative session as Senate Bill 63, amendments to the OIGA comprehensive act included amendments to ORS 734.640. Or Laws 1977, ch 793, § 10. This is the source of the language requiring a claimant to first exhaust the remedies under the claimant’s own insurance policy. On final adoption by the House, Representative Vian explained that this section prevents “double recovery.” House Floor Debate, 6-30-77, tape 37, side 1. Previous consideration in the Senate confirms that the intent was to prevent double recovery, not what the majority asserts by changing the words of the statute. The Senate Labor, Business and Consumer Affairs Committee sent Senate Bill 63 to the Senate floor accompanied by a “Measure Intent Statement” which stated that the bill “prevents double recovery by a claimant against OIGA and another insurance policy.”
Nor do cases from other states having statutes like subsections (1) and (3) of ORS 734.640 support the majority. See, e.g., Ala. Ins. Guar. Ass’n. v. Colonial Freight, 537 So 2d 475, 476 (Ala 1988) (“The trial court correctly held that the appropriate amount by which to reduce Colonial Freight’s reimbursement from AIGA [the state insurance guaranty association] was $25,000, the amount of [an uninsured motorist policy claim] recovery, and not $50,000, the full coverage under her policy. The language of the statute clearly refers to ‘recovery’ and not to the full amounts potentially payable under the uninsured motorist policy.” (Emphasis in original.)). Oregon’s statute refers to “any recovery,” as mentioned previously.
“SHALL BE * * * BY ARBITRATION, AGREE TO BE * * * BOUND”
The majority ignores the above words found in statutes, referred to post. To replace them, the majority says that, under Molodyh, “any party can demand a jury trial,” 316 Or at 352. The majority must distort the positive law, found in *361statutes not involved in Molodyh,9 in order to make that statement. The statutes involving recovery from one’s own uninsured motorist insurance that are relevant to the present case follow.
First, ORS 742.504 provides for arbitration between insured and insurer to be required by all uninsured and underinsured policies. It provides in part:
“Every policy required to provide the coverage specified in ORS 742.502 shall provide uninsured motorist coverage which in each instance is no less favorable in any respect to the insured or the beneficiary than if the following provisions were set forth in the policy.” (Emphasis added.)
Subsections of that statute mandate that compulsory, binding arbitration decide both liability and amount of damage. The arbitration is made mandatory by ORS 742.504(l)(a), which provides in part:
“Determination as to whether the insured, the insured’s heirs or the insured’s legal representative is legally entitled to recover such damages, and if so, the amount thereof, shall be made by agreement between the insured and the insurer, or, in the event of disagreement, by arbitration.”
The arbitration award is made binding by ORS 742.504(10), which provides in part:
“If any person making claim hereunder and the insurer do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured vehicle because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this coverage, then, in the event the insured or the insurer elects to settle the matter by arbitration, * * * [s]uch person and the insurer each agree to consider themselves bound and to be bound by any award made by the arbitrators pursuant to this coverage in the event of such election.” (Emphasis added.)
In the face of these statutes, the majority holds:
“[A]n unwilling UM [uninsured motorist] or UIM [underin-sured motorist] claimant or insurer cannot be required to arbitrate the claim.” 316 Or at 352. To arrive at that holding, *362and yet deprive plaintiff here of a jury trial against the tavern that allegedly served additional drinks to an already intoxicated driver, the majority fictionalizes:
“In the present case, however, the arbitration was conducted by agreement of the parties, not under statutory compulsion.” 316 Or at 352.
Based on those fictional facts, the majority concludes:
“[T]he state has not deprived plaintiff of a jury trial; he voluntarily has agreed to forego one.” 316 Or at 352.
The majority then says, of Molodyh-.
“The * * * statute was held to be permissive as regards the demanding party and thus did not offend that party’s jury trial rights.”10 316 Or at 352.
With regard to the plaintiff in Molodyh, who brought an action on the insurance contract against his own insurer, not against a third-party tortfeasor, this court held:
“If plaintiff wanted * * * insurance, he had to take it on the terms dictated by the legislature. The legislature cannot itself ‘waive’ plaintiffs right to a jury trial by requiring the inclusion of such provisions in insurance policies.” Molodyh v. Truck Insurance Exchange, supra, 304 Or at 295.
Applying that conclusion to the language of the arbitration statute in this case, and to the actual facts in the record, plaintiff was entitled to a jury trial on his tort claim against defendants. The legislative requirement of arbitration between insured and insurer cannot and did not “waive” plaintiffs right to trial by jury against the tortfeasor. The majority distorts positive law, found in the statutes considered above, as well as extending without explanation the applicability of Molodyh, a contract action, to this tort case.
WARNING TO PRACTITIONERS, LOSS OF JURY TRIAL
To determine the effect of the majority’s reading of Molodyh to this tort case, we should consider that case in detail. In Molodyh, this court said:
*363“Defendants argue that plaintiff waived his right to a jury trial by voluntarily entering into the insurance contract containingthe ORS 743.648 appraisal provision. We find this argument unpersuasive. The appraisal provision is required in all fire insurance policies sold in Oregon. Plaintiff did not bargain for or consent to its inclusion. If plaintiff wanted fire insurance, he had to take it on the terms dictated by the legislature. The legislature cannot itself ‘waive’ plaintiffs right to a jury trial by requiring the inclusion of such provisions in insurance policies.
^ ❖ * ❖
“Plaintiff here has assumed that this case was an action on a contract and therefore carried with it the right to trial by jury. This assumption is not unfounded because a jury trial on factual issues concerning an insurance policy long has been established practice in this country.
“Finally, defendants ask us to adopt the reasoning of other jurisdictions which have held that an insured gives up his or her right to have a jury decide only the amount of loss while retaining the right to a jury trial on all other issues.
“This reasoning is unpersuasive. Our constitution provides that the right to jury trial ‘shall remain inviolate.’ This right includes having a jury determine all issues of fact, not just those issues that remain after the legislature has narrowed the claims process. In many instances, the amount of the loss will be the only disputed issue.
“Because one party to the contract may unilaterally, by written demand, make the appraisal process mandatory, we must next determine whether the resulting appraisers’ award is binding and conclusive on the parties. If it is binding, it runs afoul of Article I, section 17. (Emphasis added.)
i i Hi H^ # H* H<
“When a constitutional provision, such as Article I, section 17, prevents a statute from applying to persons or situations to which the statute may have been meant to apply, this court will not declare the statute unconstitutional. Instead, we will hold that the statute was not intended to apply to the persons or situations in question. Northup v. Hoyt, 31 Or 524, 49 P 754 (1897). In doing so, we act with the *364presumption that the legislature did not intend to violate the constitution. 31 Or at 529. To save the statute at issue here, ORS 743.648, from running afoul of Article I, section 17, we therefore construe the provision as non-binding in respect of the non-demanding party.
“Under this interpretation of ORS 743.648, a party that demands appraisal will be deemed to have consented voluntarily to the appraisal process and the appraisal award will be binding upon that party.
“* * * Plaintiff continued to assert his right to a jury trial throughout this litigation. Consequently, plaintiff remains entitled to a jury trial on this issue.” 304 Or at 295-300. (Heading omitted; emphasis added.)
ORS 734.520 states that the purpose of the comprehensive OIGA law is to provide a two-way protection, covering both claimants and policyholder-defendants. That Act’s purpose “is to provide for the payment of covered claims * * * to avoid financial loss to claimants or policyholders because of the insolvency of an insurer.” (Emphasis added.)
The majority holding however protects only the policy holders, not the tort claimant allegedly injured by them. The warning here is that, in keeping the loss off the tortfeasor and OIGA, the majority has taken away the injured person’s right to trial by jury. The majority says that this loss follows from participating in arbitration and that the statutes do not require arbitration between insured and insurer. This unexpected and unintended loss of jury trial is now in effect by majority vote of this court. Warning, practitioners, warning.
I dissent. Unis, J., joins in this dissent.
*365APPENDIX
Examples —
The majority’s interpretation — that the limits of coverage of a plaintiffs own insurance must be exhausted before the plaintiff may proceed against a negligent defendant represented or defended by the OIGA — produces untoward results. To demonstrate those results, I consider three separate cases. In each case, it is assumed that a plaintiff suffers what a jury would find were $200,000 in damages. It is further assumed that defendant, who is negligent and causes plaintiffs injuries, has $300,000 of liability coverage but that his insurer becomes insolvent after defendant’s negligence causes plaintiffs injuries.
Case One. A plaintiff purchased and paid the higher premium for ten times the minimum uninsured or underinsured coverage required by law, i.e., $250,000 of coverage. Plaintiff arbitrates with his own company under his contract, and is awarded $100,000. Under the majority decision, the self-purchased additional coverage limit amounts prevent recovery from the defendant who caused the harm (and whom the majority would make partially “immune”). No jury trial against defendant is available, and no recovery from either defendant or OIGA is possible.
Case Two. A plaintiff paid for $25,000 of coverage, the bare minimum required by law. Plaintiff arbitrates and the award sets the value of the loss at $100,000. The plaintiff would be entitled to recover $175,000 from the OIGA and defendant, that being the difference between his maximum limits of coverage and the $100,000 awarded by the arbitration.
Case Three. Plaintiff, who paid no premium and purchased no automobile liability insurance could recover up to the full $200,000 from OIGA (paying for defendants) even though he has not paid any premiums and thus has not, even indirectly, contributed to the OIGA fund.
According to the majority, defendant is partially “immune” in case one, because plaintiff purchased extra insurance, but not so in cases two and three. 316 Or at 349. Where is the rhyme or reason for that?

 ORS 742.504(l)(a) (emphasis added).

 ORS 742.504(10).

 The record does not disclose whether the insurer or the insured demanded arbitration of the other. It does not support the conclusion that plaintiff demanded it. It most assuredly does not support the proposition that a waiver of plaintiffs constitutional right to a jury trial on a tort action against defendants occurred. No “intentional relinquishment of a known right” is even hinted at factually, let alone demonstrated.

 Plaintiff does not contest the applicability of ORS 734.640(1) to his claim against defendants. Thus, defendants and OIGA are assured that the full amount of moneys received by plaintiff from other insurances, i.e., the $100,000, will reduce the amount of damages that a jury may determine that defendants owe to plaintiff.

 Oregon Constitution, Article I, section 17, provides: ‘ ‘In all civil cases the right of Trial by Jury shall remain inviolate.”
Oregon Constitution, Article VII (Amended), section 3, provides in part: “In actions at law * * * the right of trial by jury shall be preserved * *

 Defendants asserted three grounds for summary judgment against plaintiff. The three grounds were that arbitration and setting the amount of damages by arbitration preclude any further proceeding, that payment by Farmers under its contract with plaintiff was payment by defendants’ joint tortfeasor, and that “exhaust the remedies” means obtain the full “limits of coverage” of other insurance. The three grounds and a short response to each follow:
“[Pjlaintiff has already received judgment and full payment for all of his injuries caused by Morgan through arbitration with his own uninsured motorist insurance carrier, precluding as a matter of law any further claim against defendants who could only be joint tortfeasors.”
Plaintiffs insurance contract provided payment of amounts to be set by arbitration.
Plaintiffs insurer can hardly be classed as a “joint tortfeasor.”
“Additionally, plaintiffs claim is barred for failure to comply with ORS 734.640. * * "■ Under ORS 734.640, plaintiff was required to exhaust his remedies against all other insurers covering this claim before seeking recovery from the OIGA. However, plaintiff failed to meet this requirement as he did not and cannot exhaust the possible recovery under his own uninsured motorist policy, and his claim against defendants and the OIGA is thereby barred.”
The “remedies” were exhausted. Plaintiff can do nothing further to recover more from his or any other insurance.
“The arbitration of his claim resulted in a decision that the full value of his claim was $100,000, substantially less than the $250,000 coverage available under the policy. Since plaintiff has been fully compensated for his injuries, and failed to exhaust the recovery available under the policy, he cannot now pursue OIGA and its insureds.”
Given the right to trial by jury to determine liability and the amount of damages, one cannot say that arbitration settles the amount award as “full value” except as between insurer and insured on their contract. A jury trial of the claim against the tortfeasor, notwithstanding the insurance payment, is clearly contemplated by motor vehicle insurance statutes. ORS 742.504(11); ORS 742.538.

 A provision whose ancestry may be in admiralty, not common law.

 This view is just the opposite of that taken by the majority in this case. It holds that a failure to obtain the maximum relief potentially possible is a failure to exhaust the remedy.

 Only former ORS 743.648 (now 742.232), relating to fire insurance policies, was involved.

 The majority notes that the reverse was true as to a nondemanding party, stating: “This court held that the statute could not deprive a nondemanding party of the right to jury trial.” 316 Or at 352. That, of course, shows the crucial nature of the fictionalized facts of “agreement” to the majority holding.