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Insurance: UIM Coverage for Off-Road Vehicles

Posted by Ted A. Schmidt | Aug 17, 2023 | 0 Comments

State Farm Auto. Ins. Co. v. Orlando, No. 1 CA-CV 22-0447 (App. Div. I, August 15, 2023) (J. Morse)


Jacey Lee Orlando  was injured in an all-terrain vehicle [ATV] rollover accident while riding the ATV as a passenger off-road in the California Imperial Sand Dunes. After recovering policy limits from the driver's insurer, she brought this Underinsured Motorist [UIM] claim against her insurer State Farm.  State Farm responded quoting its off-highway exclusion which proports to exclude coverage for vehicles used “primarily off public roads except while on public roads,” and asking Orlando for information to support a claim the exclusion didn't apply.

Orlando did not respond.  State Farm brought a declaratory relief action against Orlando seeking a declaration that the off-highway exclusion was enforceable and that there was no UIM coverage for this accident. Orlando counterclaimed for breach of contract and bad faith later submitting an expert affidavit authored by Fredrick Berry to support her bad faith claim. The trial court granted State Farm's motion for summary judgment based upon Chase v. State Farm Mutual Automobile Insurance Co., 131 Ariz. 461 (App. 1982), and West American Insurance Co. v. Pirro, 167 Ariz. 437 (App. 1990) where the Arizona Court of Appeals had enforced the off-highway exclusion written in uninsured motorist [UM] policies and holding that Orlando had failed to present any evidence of bad faith. The trial court award State Farm fees and costs pursuant to A.R.S. § 12-341.01(A). The Arizona Court of Appeals affirmed in part and vacated and remanded in part.

While the UM statutes A.R.S. § 20-259.01(E) and UIM statute A.R.S. § 20-259.01(G) are similar they are not identical.

“The UM statutory subsection provides that coverage may be ‘subject to the terms and 

conditions of that coverage.' A.R.S. § 20-259.01(E). The UIM statutory subsection does not.

A.R.S. § 20-259.01(G). When the legislature includes language allowing conditions for one

type of coverage and does not include such language for another type of coverage, ‘it does

so with the intent of ascribing different meanings and consequences to that language.' .  . .

we hold that the Policy's ‘underinsured motor vehicle' definition cannot limit or bar UIM coverage

based on the type of vehicle involved. See Sharp, 229 Ariz. at 492, ¶ 16 (‘Subsection (G)

requires an insurer to provide UIM coverage, '[t]o the extent that the total damages

exceed the total applicable liability limits.' Any policy provision to the contrary is void and unenforceable.").

As to Orlando's bad faith claim the court of appeals found her expert's affidavit to be general, lacking fact specific findings and speculative. The court further noted State Farm never denied the claim, but instead sought information from Orlando and when none was forthcoming brought a declaratory relief action. Allegations that State Farm was in bad faith for failing to properly process and timely determine whether or not to honor the claim were not raised until Orlando filed her motion for new trial, and were therefore untimely and waived.

Finally, the court of appeals reversed the trial court's award of attorneys' fees and costs to State Farm and denied the same request on appeal because it is uncertain without further proceedings who the prevailing party will be.

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".


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