The Supreme Court of the State of Oklahoma has answered a certified question in favor of a policyholder and found that an insurer's uninsured-motorist (UM) exclusion violated public policy because an insurer in Oklahoma can not deprive its policyholder of UM coverage for which a premium has been paid through an exclusion that effectively erased its policyholders' choice to purchase that coverage in the first place. The case is Lane v. Progressive N. Ins. Co., 2021 OK 40.
In September 2017, Elissa Lane and Kyle Stone were two of four passengers in a car that was involved in a car crash. Lane and Stone were seriously injured after the teen driver lost control of her car. The car spun 180 degrees, struck a tree, rolled over and landed upside down.
The driver's car was insured by her parents through Progressive. The insurer paid out its liability limit of $100,000 to both victims, but refused to pay out an additional $100,000 in uninsured-motorist coverage. The parents had purchased insurance to cover damages by uninsured or underinsured motorists, but coverage was excluded to any insured person who is paid an amount equal to or greater than the minimum statutory limit for liability coverage. Progressive argued that since Lane and Stone had already each been paid more than Oklahoma's $25,000 minimum liability limit, no underinsured coverage was available.
Attorneys for the plaintiffs argued that Progressive collected premiums for the UM coverage, but added an exclusion that effectively took away coverage from any "class 2 insured" passengers injured in an accident. They argued that such an exclusion conflicted with the purpose of the state statute that allows insurers to offer optional UM coverage.
The U.S. District Court Judge ruled that denial of the claim was within the rights of the insurer. He noted in his opinion that while the Supreme Court decided that some exclusions in UM policies are not allowed by state law, the court never ruled that no exclusions are allowed.
Lane and Stone appealed. The federal 10th Circuit Court of Appeals sent it to the Oklahoma Supreme Court as a certified question: Does Progressive's UM Exclusion—which operates to deny uninsured motorist coverage to insureds who recover at least the statutorily mandated minimum in the form of liability coverage—contravene Oklahoma's Uninsured Motorist Statute, codified at 36 O.S. § 3636?
A split court decided that yes, it does. The majority noted that Oklahoma public policy is to ensure that policyholders receive all of the coverage for which they paid premiums. The opinion stated that it is reasonable for an Oklahoma family to anticipate the possibility that their teen driver might take the car out, get into an accident, and injure her passengers. The court commended the actions of the parents, seeking out and securing insurance to protect beyond basic policy limits in the event of a major tragedy.
The dissenting judges noted that the exclusion "may border on furtiveness." The opinion reminded readers that if the Legislature had intended to disallow this type of exclusion, it could have easily done so – or can do so in the future.