State Farm Auto. Ins. Co. v. Orlando, – 8/15/2023

September 5, 2023

Arizona Court of Appeals, Division One, holds that an insurance policy’s “underinsured motor vehicle” definition cannot limit or bar underinsured motorist coverage based on the type of vehicle involved.

A passenger in an all-terrain vehicle was injured when the driver took the vehicle off road. After receiving policy limits from the driver’s insurer, the passenger made an underinsured motorist claim with her insurer. The insurer denied coverage because the vehicle was not an “underinsured motor vehicle” under the policy.

By statute (A.R.S. §20-259.01(E)), uninsured motorist coverage may be subject to the terms and conditions of the policy. An insurer therefore may provide in its policy that there is no uninsured motor vehicle coverage when an insured is injured on a vehicle designed for off-road use that was not on a highway when the accident occurred. In contrast, the underinsured motorist coverage statute (A.R.S. § 20-259.01(G)) broadly covers damages whenever the insured is not indemnified fully by the available limits of liability. Exceptions to underinsured motorist coverage not permitted by statute are void. Accordingly, the Court of Appeals held that the policy’s underinsured motor vehicle definition cannot limit or bar underinsured coverage based on the type of vehicle involved.

Judge Morse delivered the opinion of the court, in which Judges Cruz and Kiley joined.

Posted by: Brandon T. Delgado