Lachenmeier, Enloe & Rall - February, 2004 Publication

Permissive Drivers Entitled to Coverage Under PIP Covering Insured Vehicle

Recently, in Sheptow v. GEICO General Insurance Co., 246 Or App 18 (2011), the Oregon Court of Appeals held that under the personal injury protection (“PIP”) statutory scheme, an “insured” includes a permissive driver of the vehicle.

In Sheptow, the plaintiff was injured in a motor vehicle accident while driving his mother’s vehicle with her permission. The vehicle was covered by a liability insurance policy that GEICO had issued to the plaintiff’s mother, who was the sole named insured. The plaintiff was not living with his mother at the time of the accident. The plaintiff sought PIP benefits under the GEICO policy. GEICO denied PIP coverage to the plaintiff.

GEICO’s denial of coverage was based on its presumption that ORS 742.520(1), which describes who is entitled to PIP benefits, does not describe permissive drivers. ORS 742.520(1) states the following:

“Every motor vehicle liability policy issued for delivery in this state that covers any private passenger motor vehicle shall provide personal injury protection benefits to the person insured thereunder, members of that person’s family residing in the same household, children not related to the insured by blood, marriage or adoption who are residing in the same household as the insured and being reared as the insured’s own, passengers occupying the insured motor vehicle and pedestrians struck by the insured motor vehicle”

GEICO argued that its reading of the statute was supported by an earlier case, Mid-Century Ins. Co. v. Utah Home Fire Ins. Co., 58 Or App 210 (1982), in which the Oregon Court of Appeals held that a permissive driver was not entitled to PIP benefits under a policy issued by Utah Home Fire Insurance. (In Mid-Century, the court specifically rejected the argument that a permissive driver is considered a “passenger occupying the insured motor vehicle.”)

In Sheptow, however, the Oregon Court of Appeals rejected GEICO’s interpretation of ORS 742.520(1). The court reasoned that ORS 742.520(1) specifically states that all liability policies issued in Oregon must provide PIP coverage “to the person insured thereunder.” That, in turn, requires an examination of who is a person “insured” under the liability portion of the policy. ORS 806.080(1)(b) states that liability policies must cover permissive users of a vehicle insured under the policy (except for any person properly excluded from coverage). Because a permissive user is a “person insured under” the liability portion of the policy, the court concluded that ORS 806.080 necessitates that a permissive user (which includes a permissive driver) should be entitled to benefits under the PIP portion of the policy. The court distinguished the Mid-Century Ins. decision by noting that it pre-dated certain amendments to ORS 806.080 in 1991 that extended liability coverage to permissive users.

The holding in Sheptow is fairly straightforward: PIP insurers are generally obliged to cover people injured while permissively using or driving an insured vehicle. Notably, following the Sheptow decision, liability, PIP, and UIM coverage should generally be available to a person who is permissively operating an insured vehicle (subject to any applicable exclusions). As noted above, liability coverage should be available pursuant to ORS 806.080(1)(b) and PIP coverage should be available pursuant to ORS 742.520(1). Also, UIM coverage should be available to a permissive operator pursuant to ORS 742.504(2) (defining an “insured” to include a person “occupying an insured vehicle” with permission and defining “occupy” to mean “in or upon or entering into or alighting from.”)

If you have any questions, please feel free to contact the author: Flavio A. Ortiz (alex@lerlaw.com) at
503-768-9600.