Expert Commentary

Underinsured Motorist Insurance: Prerequisites before Coverage Applied

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.


Courts and Coverage
January 2009

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 case law 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 Case Law

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 case law, 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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