Underinsured Motorist Insurance: Prerequisites before Coverage Applied
January 2009
One issue which recurs with some frequency
under uninsured motorist coverage is whether a person was "occupying" a vehicle.
"Occupying" is defined in many policies, and many other jurisdictions have dealt
with this question and drawn up various tests to use in making the determination.
by R. Brent
Cooper & Becky Fuller
Cooper & Scully
In Texas, the U.S. Supreme Court recently spoke on this issue, defining the
term "occupying" for the first time, and bringing clarity to the determination
of whether or not a particular person is covered under the underinsured motorist
policy in this jurisdiction (in U.S. Fid.& Guar. Co.
v. Goudeau, No. 06-0987 (Tex. 2008)).
The Facts
Mr. Goudeau stopped his car and got out to help a stranded motorist on a
Houston freeway. Leaving his own car, Mr. Goudeau approached the disabled one
and was severely injured when a third car smashed into both cars, pinning Mr.
Goudeau between both of the cars and a retaining wall. At the time of the accident,
Mr. Goudeau was driving one of his employer's cars in the course of his employment.
Advantage BMW, his employer, had two policies with U.S. Fidelity & Guaranty
Company: a workers compensation policy and an auto policy with uninsured/underinsured
coverage of $1 million. The benefits were paid under the workers compensation
policy, but benefits were denied with respect to the underinsured motorist policy.
Mr. Goudeau also received the policy limits of the third-party driver responsible
for the accident.
The underinsured policy at issue in this case covered certain designated
employees as well as other employees "occupying" an Advantage vehicle during
a collision. Mr. Goudeau was not one of those persons designated in the policy,
so the determination of whether the policy provided coverage in this case turned
on whether Mr. Goudeau was "occupying" a covered car when the collision occurred.
The policy defined "occupying" as "in, upon, getting in, on, out or off." Mr.
Goudeau asserted there was coverage based on the ground that he was "occupying"
the car by being "upon" it when he was injured.
The court of appeals adopted a test from caselaw which required that Mr.
Goudeau need only show a causal connection between the injury and the covered
vehicle. The Texas Supreme Court disagreed, holding that the cases cited by
the court of appeals involved policy provisions which required the claim "arise
out of" the use of a motor vehicle. In summary, though a covered car has a causal
connection to an accident, this does not necessarily mean that everyone injured
must have been "occupying" the covered car.
The Caselaw
The Texas Supreme Court pointed out that the law of other states on this
question is vast and varied. The various surrogate tests for determining whether
one is "occupying" a vehicle include:
- A four-pronged test requiring (1) a causal connection between the injury
and insured vehicle, (2) reasonably close geographic proximity to the vehicle,
(3) vehicle-orientation rather than highway-orientation or sidewalk-orientation,
and (4) engagement in transaction essential to use of the vehicle.
- A three-pronged test rejected the fourth prong of the four-prong test
above.
- A position-of-safety test—a passenger is in the process of getting out
of a vehicle and thus occupying the vehicle until he or she reaches a position
of safety away from the car.
- A severed-relationship test—a plaintiff occupies a vehicle until they
sever their relationship with the vehicle.
- A chain-of-events test—a plaintiff occupies a vehicle if the insured
vehicle "started the chain of events" that resulted in the injury.
- A substantial-nexus test—a plaintiff occupies a vehicle if he or she
establishes a substantial nexus between the insured vehicle and the injury
sustained.
- A reasonable-relationship test—a plaintiff occupies a vehicle if actions
were directly and reasonably related to the operation and use of the insured
vehicle.
- A close-proximity test—plaintiff must be in close proximity to the vehicle
to constitute "occupying" it.
- A vehicle-orientation test—a plaintiff occupies a vehicle if he or she
is engaged in a transaction oriented to the use of the covered auto at the
time of the accident.
- A close-proximity or vehicle-use
test—a person is considered an occupant of the covered vehicle if he or
she is either (a) within a reasonable geographic perimeter of the vehicle,
or (b) engaged in a task related to the operation of the vehicle.
- A close-proximity and vehicle-use
test—the court determines whether a plaintiff was occupying a vehicle based
on geographical proximity and the orientation of the claimant's activities.
- A plain-and-ordinary-meaning test.
The Decision
The court determined that though the goal is to strive for uniform construction
when the same policy language is used in many other states, the variety of tests
already in use rendered uniformity impossible. Based on Texas caselaw, the court
determined it was required to construe insurance policies according to their
plain language, using the ordinary, everyday meaning. The court determined that
Mr. Goudeau was not "occupying" the car based on the plain meaning of the language
used in the policy. Mr. Goudeau had exited the car, closed the door, walked
around the front, and only after these steps away from "occupying" did the vehicle
smashed into him. The court did not find him to have been "occupying" the vehicle
even if after the collision he ended partly "upon" it.
Conclusion
This decision signals that Texas is becoming further entrenched in the plain-and-ordinary
meaning test, regardless if it favors the insured or insurer. See
Don's Building Supply, Inc. v. OneBeacon Ins. Co.,
No. 07-0639 (Tex. Aug. 29, 2008); Lamar Homes, Inc.
v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007). Insurers that desire
specific meaning of a term are advised to attach a specific definition. Insureds
typically do not have this luxury and should be mindful that Texas courts—as
well as courts in most states—will follow a rule of construction in the first
instance that does not necessarily benefit the insured.
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