Wright v. State Farm Mutual Automobile Insurance

LEESON, J.,

concurring in part and dissenting in part.

I agree with the majority that, under the family member/household exclusion in the umbrella policy, plaintiffs are not entitled to coverage. However, I disagree with the majority that plaintiffs are entitled to prevail under the automobile policy. The reason that plaintiffs prevail on their auto claim, the majority explains, is because the exclusion in their auto policy is as unintelligible as a similar family member/household exclusion in the policy at issue in North Pacific Ins. Co. v. Hamilton, 332 Or 20, 22 P3d 739 (2001). The majority concludes that plaintiffs in this case are entitled to prevail on the same theory, apparently because both cases are decided on the same day. The difficulty with the majority’s conclusion is that it permits these plaintiffs to prevail on a theory that they did not raise below. In my view, the majority errs in reversing the Court of Appeals’ decision and the trial court’s judgment for a reason that plaintiffs never have advanced at any stage of this litigation.

This court has held that,

“[generally, before an appellate court may address whether a trial court committed an error in any of the particulars of the trial of a case, the adversely affected party must have preserved the alleged error in the trial court and raised the issue on appeal by an assignment of error in its opening brief.”

Ailes v. Portland Meadows, Inc., 312 Or 376, 380, 823 P2d 956 (1991). There is, of course, an exception to the rule *17requiring preservation of error. Appellate courts may consider unpreserved errors if they are “ ‘errors of law apparent on the face of the record.’ ” Id. at 381 (citing ORAP 5.45(2)).

Preservation problems typically arise when a party that failed to preserve an error at trial claims error for the first time on appeal. See, e.g., Brokenshire v. Rivas and Rivas, Ltd., 327 Or 119, 121, 957 P2d 157 (1998) (claim of error appeared for first time in defendant’s opening brief in Court of Appeals). In this case, plaintiffs did not raise at trial the issue whether the family member/household exclusion in State Farm’s policy is ambiguous under this court’s methodology for construing insurance contracts. Neither did plaintiffs make that argument on appeal or on review.

At the trial court, the parties agreed to submit the case under ORCP 66. That rule provides, in part:

“A Submission without action. Parties to a question in controversy, which might have been the subject of an action with such parties plaintiff and defendant, may submit the question to the determination of a court having subject matter jurisdiction.
“A(l) Contents of submission. The written submission shall consist of an agreed statement of facts upon which the controversy depends, a certificate that the controversy is real and that the submission is made in good faith for the purpose of determining the rights of the parties, and a request for relief.
* * * *
“A(3) Effect of submission. From the moment the submission is filed, the court shall treat the controversy as if it is an action pending after a special verdict found. The controversy shall be determined on the agreed case alone, but the court may find facts by inference from the agreed facts.”

ORCP 66 A (boldface in original; emphasis added). In their stipulation, they agreed that “the issues set forth below are the only issues in this controversy.” Thereafter followed a list of four questions, two of which related to coverage under plaintiffs’ State Farm auto policy:

*18“Query #1: Under State Farm Auto’s car policy is State Farm Auto’s liability limited to $25,000.00[?]
“Query #2: If the liability limits of State Farm Auto’s policy are reduced from $100,000.00 to $25,000.00, is there underinsured motorist coverage of $75,000.00 available under State Farm Auto’s policy for claims of the Estate of Geoffery Eric Wright and James R. Strickland, Personal Representative thereof[?]”

In their briefs to the trial court, plaintiffs argued that the exclusion in Section 1 of the auto policy, quoted in the majority opinion, 332 Or at 5-6, did not apply to the personal representative of Geoffery Wright’s estate. They contended that, by the plain terms of the exclusion, “the Personal Representative’s claim is not a claim brought by the named insured or any members of the insured’s family residing in the insured’s household.”

Plaintiffs also argued that the failure of the auto policy to include the claim of a personal representative within its exclusion, and the failure “to advise their insured of the lower limit [of coverage] when applicable,” violated ORS 742.450(1). That statute provides:

“Every motor vehicle liability insurance policy issued for delivery in this state shall state the name and address of the named insured, the coverage afforded by the policy, the premium charged therefor, the policy period and the limits of liability.”

At the Court of Appeals, plaintiffs pressed two assignments of error regarding the trial court’s judgment in favor of State Farm on the auto policy. In their first assignment, plaintiffs argued that both the auto and umbrella policies violated the requirements of ORS 742.450. In their second assignment, plaintiffs contended that, “[b]y failing to provide a separate insurance section for underinsurance, [State Farm] Auto issued a policy which is ‘unintelligible, uncertain, ambiguous or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued’ all in violation of ORS 742.005.” (Emphasis added.)

The Court of Appeals affirmed the trial court. Wright v. State Farm Mutual Auto. Ins. Co., 152 Or App 101, 952 P2d 73 (1998). On review before this court, plaintiffs argued that, *19as a matter of statutory construction, underinsured motorist coverage is mandatory whenever a claim for injury or death arises out of the use of a motor vehicle that has effective liability insurance limits in amounts less than underinsured motorist limits. The majority does not reach that question, because it holds that the wording of the family member/ household exclusion in the auto policy is so “obtuse” that, as a matter of contract law, the exclusion is unenforceable. 332 Or at 7-8. Plaintiffs no doubt will be relieved to learn that, after losing at the trial court and at the Court of Appeals, they have prevailed on one of their claims, but they also should be surprised by this court’s rationale for reversing both courts. Each of those courts, in turn, no doubt will puzzle over why this court reverses them on a theory that plaintiffs never asked them to address. And defendant no doubt will be baffled to learn that, after prevailing at trial and on appeal, it has lost on review in this court on an issue that it never knew was in the case, and against which it had no opportunity to defend at any stage of these proceedings.

The majority, sua sponte, has raised the contract issue for plaintiffs and then has resolved it in their favor. The majority’s rationale appears to be that, if this court decides two cases on the same day and, properly understood, the cases raise the same issue, then this court will resolve the similar issue the same way no matter how the cases were argued below. I disagree both with that rationale and the result in this case as it affects plaintiffs’ claim under the auto policy.