Okla. Supreme Court Voids Progressive’s ‘Furtive’ UIM Policy Exclusion

By Jim Sams | July 1, 2021

An exclusion added to an uninsured motorist policy issued by Progressive Northern Insurance Co. is void because it contravenes state law, a divided Oklahoma Supreme Court ruled on Thursday.

In a 5-3 decision, the high court said that an Oklahoma insurer “cannot deprive its policyholder of uninsured-motorist coverage for which a premium has been paid through an exclusion that effectively erases its policyholder’s choice to purchase that coverage in the first place.”

The legal challenge to Progressive’s policy exclusion came to the Supreme Court after the driver of a vehicle full of teenagers lost control of her car while driving in Canadian County outside of Oklahoma City. The car spun 180 degrees, struck a tree, rolled over and landed upside down.

The September 2017 crash seriously injured Elissa Lane and Kyle Stone, who were among four passengers in the car. The driver and all of the occupants were described in court papers as teenagers.

The driver’s car was insured by her parents through Progressive. The carrier paid out its liability limit of $100,000 to both victims, but refused to release an additional $100,000 in uninsured-motorist coverage.

The parents had purchased insurance to cover damages by uninsured or underinsured motorists, but the policy excluded coverage to any insured person who is paid an amount equal or greater than the minimum statutory limit for liability coverage. Because Lane and Stone were each paid more than the state’s $25,000 minimum liability limit already, no underinsured coverage was available, Progressive contended.

The plaintiffs’ attorneys argued that Progressive collected premiums for uninsured motorist coverage but then added an exclusion that effectively took coverage away from any “class 2 insured” passengers who are injured in an accident. Such an exclusion contravened the purpose of the state state statute that allows insurers to offer optional uninsured motorist coverage, they said.

U.S. District Judge Stephen P. Friot ruled that the insurer was within its rights to deny the claim. He said in his order that while the Supreme Court had decided that some exclusions in uninsured motorists policies are not allowed by state law, the court never ruled that no exclusions are allowed.

Lane and Stone appealed. Rather than guessing at Oklahoma state law, the federal 10th Circuit Court of Appeals sent the state’s Supreme Court a certified question: Does Progressive’s exclusion contravene the state’s uninsured motorist statute?

Yes it does, five justices decided.

The majority opinion says Oklahoma public policy is to assure that policyholders receive all of the coverage for which they paid premiums.

“It is entirely reasonable for an Oklahoma family to anticipate the unpleasant possibility that their novice driver might take out the family car, get into an automobile accident, and injure her passengers,” the opinion says. “It is commendable to seek out and obtain insurance that gives protection beyond a policy’s basic liability limits in the event of that major injury.”

Even the three dissenting justices said Progressive’s exclusion “may border on furtiveness.” Justice Dustin Rowe wrote a dissenting opinion, joined by Justices M. John Kane IV and James R. Winchester, that saidOklahoma’s uninsured motorist statute does not list any exclusions that are permitted or not permitted.

“If the Legislature had intended to disallow this type of exclusion, it could have easily done so–or can do so in the future,” Rowe wrote.

That argument brought a strong rebuke from Justice Yvonne Kauger. She wrote an opinion concurring with the majority and drew attention to the dissenters’ use of the word “furtive.” Kauger said that means “characterized by stealth; hence sly; secret; stealing; as a furtive look…”

“An insurance contract should be open and transparent,” Kauger wrote. “Neither the Legislature intent nor our extant jurisprudence authorizes or approves the implementation of a border-line theft.”

Attorneys for Progressive did not respond to a request for comment.

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