Burch v. Allstate Insurance Co.

1998 OK 129, 977 P.2d 1057, 1998 WL 917312

• Court: Supreme Court of Oklahoma
• Decided: January 5, 1999
• Docket: 88,546
• Status: Published

Opinions

OPALA, J.

¶ 1 The United States Court of Appeals for the Tenth Circuit (“certifying court”) certified the following question pursuant to the Uniform Certification of Questions of Law Act, 20 O.S.1991 §§ 1601 et seq.¹:

“When an insured’s damages in an automobile accident exceed a tortfeasor’s liability limits and the insured seeks payment for damages directly from its underinsured motorist (UIM) carrier, is the UIM carrier liable for the entire amount of the insured’s claim when the liability and UIM coverage are provided by the same carrier but the statute of limitations period has expired on the liability claim?

¶ 2 We answer in the affirmative. Under the provisions of 36 O.S.1991 § 3636,² uninsured motorist (“UM”) coverage is primary,³ meaning that an uninsured motorist carrier is liable for the entire amount of its insured’s loss from the first dollar up to the UM policy limits without regard to the presence of any other insurance. At first blush this answer may appear to go beyond the parameters of the question asked, but in fact we answer no more than that which is sought. The question posed can be adequately addressed only by exploring the more fundamental issues raised with respect to the obligation imposed upon UM carriers in general under Oklahoma’s statutory scheme for uninsured motorist coverage. In order to answer the certified question, we must first determine whether, in enacting § 3636, the Oklahoma legislature intended UM coverage to be primary. Only by doing so can we then decide how to answer the precise question posed by the certifying court, which presents a somewhat unique factual pattern.

¶ 3 Having determined that UM coverage is primary, we answer the precise question posed by holding that under the unique facts of this case (in which both the liability and the uninsured motorist coverage are provided by the same carrier and the statute of limitations has run on the insured’s tort claim against the negligent party), the UM carrier’s statutorily mandated obligation as a provider of primary insurance coverage is not altered. Except tohere the insured affirmatively destroys the insurer’s subrogation rights, a UM carrier is directly and primarily liable to its insured for the entire loss to be indemnified; it must seek recovery of paid indemnity through an exercise of its right to subrogation.

I

THE ANATOMY OF FEDERAL LITIGATION⁴

¶4 On April 14, 1992, Linda Burch was riding as a passenger in her own automobile, which was being driven by her husband, Herbert. Herbert rear-ended another vehicle, and Linda was injured. At the time of the accident, Linda’s car was covered with respect to both liability and uninsured motorist claims under a single policy of automobile insurance issued by Allstate Insurance Company. The policy’s liability limits were $100, 000/$300,000, but those limits “stepped down” to $10,000/$20,000 when the injured party was a named insured under the policy, as Linda was in this case. The UM limits were also $100,000/$300,0000 with no step-down provision.⁵ Linda’s injuries exceeded the stepped-down $10,000 liability policy limit. Linda notified Allstate of her claim. Allstate contends that for more than two years, she did not provide sufficient documentation for Allstate to evaluate and settle her claim under either the liability or UM coverage.

¶ 5 Without ever filing suit against Herbert, and within one day of the expiration of the statute limiting the time to bring her tort claim against him, Linda brought suit against Allstate in the United States District Court for the Western District of Oklahoma, alleging bad faith and indemnifiable loss under the UM policy.⁶ Although Linda and Allstate eventually agreed that her loss from bodily injuries amounted to $50,000, Allstate refused to pay more than $40,000, the value of Linda’s claim less Herbert’s $10,000 liability coverage limit. Linda pressed for the entire $50,000. Unable to agree on the extent of Allstate’s obligation, the parties submitted to the federal district court the following agreed question of law:

In an auto accident case when the tort-feasor has collectible liability insurance coverage with stated limits, and the statute of limitations on plaintiffs claim against the tort-feasor has expired, is the UM carrier obligated to pay those amounts of plaintiffs damages that would have been covered by the tort-feasor’s liability coverage limits?

¶ 6 Relying upon this court’s decision in Buzzard v. Farmers Insurance Co. (“Buzzard”),7 the district court answered the question in the negative. Judgment was for Allstate, and Linda appealed. Not convinced that Buzzard was dispositive, the United States Court of Appeals for the Tenth Circuit submitted to this court the certified question of law which we answer today.

II

AN UNINSURED MOTORIST CARRIER IS OBLIGATED FOR ALL OF ITS INSURED’S LOSS FROM THE FIRST DOLLAR UP TO THE POLICY LIMITS.

¶ 7 Allstate contends Buzzard v. Farmers Insurance Co.8 provides the answer to the certified question by limiting a UM carrier’s obligation to the amount of the claim which exceeds the tortfeasor’s liability coverage limits. Its contention is that this limitation is a rule of general applicability, and neither the running of the statute of limitations nor the fact that Allstate is both the liability and UM carrier under the same policy of insurance may alter this rule.⁹

¶ 8 Linda argues¹⁰ that: (1) a UM carrier has a statutory duty to pay first-dollar damages to an insured where, at the time the UM claim is resolved, no liability insurance is available to the claimant even if liability insurance was available at an earlier time, provided the claimant does nothing affirmatively to cause the liability insurance to become unavailable;¹¹ (2) Buzzard is not dispositive because in that case the court’s discussion of the scope of a UM carrier’s obligation, if understood as a blanket limitation on that obligation, was gratuitous (obiter dictum) and should not now be elevated as ratio decidendi for resolution of the issue in this case,¹² and (3) if Buzzard were to be found dispositive here, it should be construed as expressly limiting a UM carrier’s liability to “the amount of the claim which exceeds that available from the liability carrier” (emphasis added),¹³ and the court should now make clear that availability is the crucial factor, and is to be determined at the time the UM claim is resolved, not at the time of the accident.¹⁴

¶ 9 In Buzzard, the plaintiffs’ son was killed when his automobile was struck by a City of Norman truck. The City of Norman carried liability insurance in the amount of $50,000 per claimant. The plaintiffs’ damages exceeded the liability insurance limits, and the City was hence underinsured with respect to the plaintiffs’ damages. Plaintiffs presented their UM claim to their insurer, Farmers Insurance Co. (“Farmers”), within a month of the accident. Farmers took the position that it did not have to pay anything on the UM claim until the liability insurance benefits had been “exhausted” by settlement or judgment. Plaintiffs then settled the claim with the City of Norman for $50,500 and signed a covenant not to sue. Farmers now refused to pay on the UM policy because the plaintiffs’ covenant not to sue had destroyed their subrogation rights against the City. The court. held that a UM carrier cannot withhold -payment on the UM policy until liability benefits have been exhausted. The UM carrier must promptly investigate, place a value on the damage claim and pay UM benefits without regard to whether liability benefits have been paid. The court then went on to describe what damages a UM carrier is obligated to pay, stating that its obligation is to pay “that amount of injury or damage which exceeds the liability limits of the tortfeasor.”¹⁵

¶ 10 Two decisions by the Oklahoma Court of Civil Appeals¹⁶ have applied Buzzard in cases involving an, issue similar to that which is presented in this case.¹⁷ In the first, Kavanaugh v. Maryland Insurance Co., Inc.,18 the injured party brought suit against the tortfeasor within the limitations period, but dismissed the suit without prejudice approximately three years later. After dismissing her suit against the tortfeasor, the insured sued her UM carrier, seeking recovery of her total damages. The insurer interposed Buzzard. The insured argued that Buzzard applied only where the tortfeasor’s insurance remains available. Since the tort-feasor’s liability insurance was no longer available to her, Buzzard was inapplicable. Relying on our decisions in Bohannan u-Allstate Insurance Co.¹⁹ and Uptegraft v. Home Insurance Co.,²⁰, the appellate court held that the insurer should be liable for the entire damages claimed by the insured if the tortfeasor’s liability insurance is no longer available as long as the insured did nothing affirmatively to cause the liability insurance to become unavailable.²¹

¶ 11 The second pronouncement by the Court of Civil Appeals, decided this year, is Smith v. American Fidelity Insurance Cos.22 In Smith, the insured made demand for payment of her entire damages (in the amount of $12,000) from her UM carrier, although the negligent party had $10,000 in collectible liability insurance. The insured argued that once the preconditions for the application of § 3636 are met, a UM carrier is liable to its insured for the entire amount of the insured’s claim up to the UM policy limits, even if liability insurance remains available.²³ The insurer interposed Buzzard. The court agreed with the insurer,²⁴ holding that under Buzzard the insurer cannot be compelled to pay the insured’s entire damage claim where the tortfeasor’s liability insurance remains available.²⁵

¶ 12 Both Kavanaugh and Smith assumed Buzzard was dispositive on the outer limit of a UM carrier’s liability to its insured. We disagree.26 It is a time-honored principle of judicial decisionmaking that courts are not allowed to forecast what they might do about an issue that is not before them.²⁷ This principle was inadvertently departed from in Buzzard. Our discussion there of the scope of a UM carrier’s obligation was pure obiter dictum. The issue in Buzzard was whether § 3636 permits a UM carrier to withhold payment of UM benefits until the limits of liability under any applicable liability policy are exhausted by the payment of a judgment or by settlement.²⁸ The question that had to be decided in that case was when benefits under UM coverage must be paid, not what benefits ivere payable. The Buzzard family had settled with the City of Norman, for $50,500, $500 more than the City’s liability policy limits. They were not attempting to collect from the UM carrier the same amount they had already collected from the liability carrier. In the Buzzard scenario, the court was quite correct that the insurance company’s obligation to pay was limited to the amount of damages incurred which there exceeded the liability limit since the liability limits had already been paid. There was hence no need in Buzzard to fashion a general rule regarding the scope of a UM carrier’s obligation. Any language in Buzzard formulating a global rule of universal applicability was gratuitous. It was pure dictum — a statement not dispositive of the issue the opinion purports to decide.

¶ 13 We turn next to the text of § 3636, the statute creating uninsured motorist coverage.²⁹ The purpose of an uninsured motorist provision in an insurance contract is to protect the insured from the effects of personal injury from an accident with another motorist who either carries no insurance or has inadequate coverage.³⁰ In enacting § 3636, the Legislature created only one category of vehicle to which its provisions apply. In contrast to the statutory scheme of other states, § 3636 creates only uninsured motorist coverage, and includes toithin that term both motor vehicles on which their owners carry no insurance as well as those on which their owners’ coverage is in an amount insufficient to satisfy a loss. With one exception, the statute makes no distinction between completely and partially insured vehicles.³¹ Moreover, no separate premium is charged for indemnity against insured losses occasioned by a completely uninsured motorist and those by a partially uninsured motorist. The premium is one and indivisible. The insured who has paid a premium for uninsured motorist coverage and presses a claim for the actual amount of damages sustained within the policy limits seeks no more than recovery of that for which the premium was paid. If the liability limits of a motor vehicle are less than the amount of the injured insured’s claim, that vehicle is classified as uninsured. Based on this definition, one can conclude that under our statutory scheme, the UM carrier’s obligation to its insured is identical regardless of the underlying reason for the classification of the vehicle as uninsured. We hold § 3636 mandates that when the preconditions for the loss under uninsured motorist coverage exist, an uninsured motorist coverage carrier is obligated to pay the entire loss of its injured insured from the first dollar up to the policy limits.

¶ 14 The dissent argues that in enacting § 3636(D), the Legislature explicitly limited the use of UM coverage as a substitute for liability coverage to the situation in which the liability carrier becomes insolvent within one year after the date of the accident. The dissent is mistaken. Subsection (D) merely deals with an insolvent insurer as a special subclass of available UM insurance from in-demnitors who become insolvent. It does not support the dichotomous treatment of claims generated by uninsured and underin-sured tortfeasors.

¶ 15 The pre-Buzzard Court of Civil Appeals case of Roberts v. Mid-Continent Casualty Co.,³² correctly applied § 3636.³³ First, the appellate court held that liability attaches to an uninsured motorist carrier without the insured first having to seek recovery against the tortfeasor.³⁴ Next, it held that an insured can collect solely from his (or her) UM carrier even after the statute of limitations runs on the insured’s claim against the tortfeasor.³⁵ The court then turned to the question of the amount of damages for which the UM carrier is liable when the insured pursues the UM carrier without joining the tortfeasor. The insured sought recovery of his entire damages. The insurer argued that it was entitled to a credit for the amount of liability coverage held by the tortfeasor and that a failure to grant credit for the tortfeasor’s liability insurance would be tantamount to making UM coverage primary. The court held that the intent of the legislature was to prohibit diminution of an injured party’s recovery based upon payments made by a tortfeasor. Hence, there can be no credit given to a UM carrier for the amount of liability coverage held by a tortfeasor.

¶ 16 We agree. When § 3636 was amended in 1979, the Legislature prohibited the reduction of a § 3636 claim by a set-off of benefits from the tortfeasor’s liability policy.³⁶ The purpose of Oklahoma’s statutory scheme is to “assure each [UM insured] person the full contracted coverage” for which a premium has been paid.³⁷ This court has in several instances refused to permit a set-off for payments received by an insured person from collateral sources.³⁸ Upon payment of the loss to an insured, a UM carrier is free under § 3636(E) to proceed in its own right against the tortfeasor. The insured is penalized only when he (or she) takes some active step that would have the effect of destroying the insurer’s § 3636 subrogation rights.³⁹ Even passive destruction of the insurer’s subrogation rights, such as by permitting the statute of limitations to expire without filing suit against the tortfeasor, does not forfeit the uninsured motorist coverage.⁴⁰

¶ 17 Allstate argues that the broader purpose of UM coverage is simply “to place plaintiff in the position she would be in if the tort-feasor had proper liability insurance,” not to create a duplicate pool of insurance. In a situation where a vehicle is classified as uninsured solely because its liability coverage is inadequate to satisfy a damage claim, Allstate argues, UM coverage merely “adds to” existing liability coverage, but does not replace it. Allstate contends that the statutory language of § 3636 reveals no legislative intent to make UM coverage the sole source of recovery for all of a plaintiffs damages.

¶ 18 We agree that UM coverage was not intended to be the sole source of recovery for all of a plaintiffs damages and our holding today does not make it so. Allstate fails to take into account that if liability coverage is indeed “duplicated” by a “first-dollar damages” construction of § 3636, such duplication is only a temporary expedient to facilitate prompt payment to the insured. This clearly is contemplated by § 3636. Our holding — that the UM carrier is directly and primarily liable to its insured for the entire loss to be indemnified, except where the insured affirmatively destroys the insurer’s subrogation right, does not make the UM carrier the final indemnitor for the injured party’s loss. The UM earner is statutorily subrogated to the rights of its insured against the tortfeasor and the tortfeasor’s liability carrier, if any there be, and must seek recovery of paid indemnity through an exercise of its right to subrogation. The particular facts of this case (in which both the liability and the uninsured motorist coverage are provided by the same carrier and the statute of limitations has run on the insured’s tort claim against the negligent party) provide no reason to exclude Allstate from the application of the general rale we pronounce today.

¶ 19 CERTIFIED QUESTION ANSWERED

¶ 20 KAUGER, C.J., OPALA, ALMA WILSON, WATT, JJ., and CHAPEL, S.J. (sitting by designation in lieu of SIMMS, J., who'certified his disqualification), concur. ¶ 21 SUMMERS, V.C.J., and HODGES, LAVENDER, and HARGRAVE, JJ., dissent. -

1 . This Act was amended by Laws 1997, c. 61, § 1, eff. Nov. 1, 1997, and is now known as the Revised Uniform Certification of Questions of Law Act.

2 . This section was amended by Laws 1994, c. 294, § 5, eff. September 1, 1994 to add certain provisions to subsection G.

3 . Primary coverage is defined as that for which, "under the terms of the policy, the insurer is liable without regard to any other insurance coverage available.” Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 1987 OK 121, ¶ 19, 747 P.2d 947, 954. In the law of general liability insurance, primary insurance is defined as that which pays a policyholder’s first-dollar damages and is the first policy in line to pay such damages. Eugene R. Anderson et al„ 2 Insurance coverage Litigation, § 13.3, pp. 104-105 (1997). Excess coverage attaches only after the primary coverage has paid out or been exhausted. Id., § 13.4, p. 106.

4 . The material accompanying the certified question consists of the parties' briefs to the United States Court of Appeals for the Tenth Circuit. Additional briefs, from which the factual recitals in the anatomy of federal litigation were extracted, were received in this case. An amicus curiae brief was submitted by the Oklahoma Trial Lawyers Association. The automobile insurance policy providing the liability and UM coverage for the party involved here was neither included in the record submitted by the Tenth Circuit Court of Appeals nor was it provided by the parties.

5 . The terms of 36 O.S.1991 § 3636 prescribe that the policy limits for UM coverage are "not to exceed the limits provided in the policy of bodily injury liability of the insured.” We have not been asked to decide here, under the rationale employed in Gray v. Midland Risk Ins. Co., 1996 OK 111, 925 P.2d 560, whether the UM coverage in this case should be deemed to have "stepped down” by operation of law when the stepped-down liability limits of the policy were triggered.

6 .Federal jurisdiction of this case is based upon diversity of citizenship. See the provisions of 28 U.S.C.A. §§ 1332.

7 . 1991 OK 127, 824 P.2d 1105.

⁸

9 . The universality of Allstate's position is demonstrated by the issues which, in its brief to this court, Allstate explicitly removes from consideration as factors in this case: (1) Allstate concedes that a UM carrier has no subrogation rights against its own policyholder for UM benefits paid under that policyholder's contract of insurance. Thus, Allstate’s contention that its contractual obligation in this case is limited to the amount of damages that exceeds the tortfeasor's liability limits is not based on any purported loss of subrogation rights against Herbert; (2) Allstate concedes that Linda's failure to sue Herbert does not destroy, reduce, or alter what she is entitled to collect under the UM policy. Allstate contends that Linda is entitled to precisely the same amount after the lapse of the limitations period which she could claim before its expiration. Allstate’s disagreement with Linda concerns only the amount for which Allstate is ever liable under the UM coverage; and (3) Allstate agrees that the UM total policy limits under Linda's policy may not be reduced by the liability limits of the tort-feasor. Allstate’s contention is that it owes Linda only $40,000 of her $50,000 damage claim, but the full $100,000/$300,000 UM limits of the policy remain available to pay that claim. Thus if her claim had been valued at $110,000, Allstate would have paid her $100,000, the full policy limit.

10 . In addition to the arguments set forth in the text, Linda argues that even if the court were to establish a general rule that under Oklahoma's uninsured motorist statute, the UM carrier's obligation is limited to the amount in excess of the tortfeasor’s liability insurance limits, that general rule should not apply under the particular circumstances of this case where Allstate is both the liability and UM carrier under the same policy of insurance. Linda reasons that if Allstate had had to pay the policy’s liability limits, it would have paid her in total the same amount that she is now seeking from the UM coverage. In denying payment, Linda argues, Allstate is relying on a mere accounting technicality. Linda further reasons that where the UM carrier could never have recovered in subrogation from its own insured (Herbert), the running of the statute of limitations did nothing to prejudice Allstate. She also argues that Allstate failed to perform the prompt investigation of her claim required by our decision in Buzzard. She contends that had Allstate performed the required investigation of her UM claim, it would have gathered, as Herbert’s liability carrier as well as her UM carrier under the very same policy of insurance, all the information it needed to process the liability claim at the same time. Therefore, all the damages should be paid by Allstate without regard to whether Linda can now sue Herbert, and Allstate is simply hiding behind its own failure properly to investigate and settle the liability claim. In light of our decision today, it is unnecessary to consider these arguments.

11 .Linda contends that the UM carrier's obligation is not fixed as of the date of the accident, but can change depending on subsequent events. Linda argues that an underinsured tortfeasor becomes an uninsured tortfeasor upon the expiration of the statute of limitations on the injured party's tort claim against the negligent party, causing the tortfeasor's liability insurance to become unavailable, and the UM carrier then becomes responsible for all of its insured's damages from the first dollar up to the UM policy limits.

12 . In its amicus curiae brief to this court, the OTLA enlarges upon the same analysis, making explicit that in its view, the court’s discussion in Buzzard on the scope of a UM carrier's obligation was mere dictum.

13 . Buzzard, 1991 OK 127 at ¶ 24, 824 P.2d at 1111.

14 . Although Linda cites numerous cases demonstrating this court’s tendency to protect the insured's right to collect from the UM carrier, none of the cited cases involves the issue presented here — whether an insured is entitled to first-dollar damages. See, e.g., Torres v. Kansas City Fire & Marine Ins. Co., 1993 OK 32, 849 P.2d 407; Barfield v. Barfield, 1987 OK 72, 742 P.2d 1107; Karlson v. Oklahoma City, 1985 OK 45, 711 P.2d 72; Uptegraft v. Home Ins. Co., 1983 OK 41, 662 P.2d 681. Linda also cites general language in Karlson which describes the UM carrier’s obligation as that of having to pay for injuries caused by a tortfeasor who is unable to make full compensation, regardless of the cause of that inability. Linda reads more into this than is there. Karlson merely says that the UM carrier is required to pay, to the extent of its legal obligation, when a tortfeasor cannot. Karlson does not determine the scope of that obligation.

15 . Buzzard, 1991, OK 127 at ¶ 29, 824 P.2d at 1112. Other language in Buzzard, as plaintiff points out, expressly states that the UM carrier’s obligation is limited by the available liability insurance. See, supra text accompanying note 13.

16 . Decisions of the Court of Civil Appeals released for publication by order of the Court of Civil Appeals have persuasive effect only. sup. Ct.R. 1.200(c)(2), 12 O.S.Supp 1997, Ch. 15, App. 1.

17 . Both of these cases were decided after the time had expired to file briefs in this case.

18 . 1997 OK CIV APP 41, 943 P.2d 629.

19 . 1991 OK 64, 820 P.2d 787 (The purpose of Oklahoma’s statutory UM scheme is. to “assure each [UM insured] person the full contracted coverage” for which a premium has been paid.) (Emphasis added.) Id., at ¶ 13, 820 P.2d'at 792.

20 . 1983 OK 41, 662 P.2d 681 ("... failure of the insured to commence an action against the uninsured tortfeasor within the two-year time limit ... does not ipso facto discharge the insurer from liability upon its uninsured motorist coverage.”) Id. at ¶ 16, 662 P.2d at 687.

21 . Kavanaugh v. Maryland Ins. Co., Inc., 1997 OK CIV APP 41, ¶ 11, 943 P.2d 629, 632.

22 . 1998 OK CIV APP 70, 963 P.2d 16.

23 . Smith v. American Fidelity Ins. Cos., 1998 OK CIV APP 70, ¶ 4, 963 P.2d 16, 17, citing Roberts v. Mid-Continent Cos. Co., 1989 OK CIV APP 92, 790 P.2d 1121 (holding that an uninsured motorist carrier is not entitled to a credit for the amount of liability coverage held by the tortfea-sor.)

24 . The insurer argued and the court agreed that under Buzzard, the limitation on the UM carrier's obligation was connected to the available liability insurance, not the existing liability limits regardless of their availability.

25 . Smith, 1998 OK CIV APP 70, ¶ 6, 963 P.2d at 17.

26 . In Mustain v. United States Fidelity and Guaranty Co., 1996 OK 98, ¶ 2, 925 P.2d 533, 536, we held "as between the insurer and its insured UM insurance is primary coverage.” In its amicus brief in this case, the OTLA argues that by its decision in Mustain, this court has already impliedly repudiated Buzzard. In Mustain, we held invalid an insurance contract provision which purported to control priority among multiple UM insurers. Our use of the term "primary coverage” to describe the relationship between multiple UM carriers did not clearly establish that UM coverage was primary in circumstances such as those presented in the instant case. Today we make explicit that the Mustain usage of the term "primary coverage” does indeed apply beyond the facts of Mustain to include, as in this case, the relationship between the carrier's liability and UM coverage.

27 . Hughey v. Grand River Dam Authority, 1995 OK 56, ¶ 10, n. 20, 897 P.2d 1138, 1143-1144, n. 20. "Every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law but govern and are qualified by the particular facts of the case in which such expressions are to be found.” Lord Halsbury's famous passage in Quin v. Leathern (1901) A.C. 495 at p. 506, quoted in Rupert cross, PRECEDENT IN ENGLISH LAW 37(l961).

28 . When a tortfeasor is insured, the possibility of recovery from the tortfeasor’s liability insurance exists, and the terms of underinsured motorist coverage, where such coverage exists, often include a requirement that the tortfeasor's insurance be exhausted before any payment of under-insured motorist benefits will be made. Alan I. WlDISS, UNINSURED AND UNDER INSURED MOTORIST INSURANCE, § 44.1, at 355-356 (2d ed.). When exhaustion is required either by contract or by statute, a settlement that does not exhaust a tortfeasor's liability limits can cause the insured to lose the right to seek indemnification from the underin-sured motorist carrier. Id., § 44.2, at 357. The issue of exhaustion is raised by insurers in order to delay any payment under a UM policy until the injured party actually collects from another insurer such as the tortfeasor’s liability carrier or a second UM carrier and to limit the recovery to the amount in excess of the primary insurance.

29 .The pertinent subsections of § 3636 are:

"§ 3636. Uninsured motorist coverage

A. No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be issued, delivered, renewed, or extended in this state with respect to a motor vehicle registered or principally garaged in this state unless the policy included the coverage described in subsection B of this section.

B. The policy referred to in subsection A of this section shall provide coverage therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness or disease, including death resulting therefrom. Coverage shall be not less than the amounts or limits prescribed for bodily injury or death for a policy meeting the requirements of Section 7-204 of Title 47 of the Oklahoma Statutes, as the same may be hereafter amended; provided, however, that increased limits of liability shall be offered and purchased if desired, not to exceed the limits provided in the policy of bodily injury liability of the insured ....

C. ... For the purposes of this coverage the term "uninsured motor vehicle" shall also include an insured motor vehicle, the liability limits of which are less than the amount of the claim of the person or persons making such claim, regardless of the amount of coverage of either of the parties in relation to each other....

E. In the event of payment to any person under the coverage required by this section and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury for which such payment is made, ... Provided further, that any payment made by the insured tort-feasor shall not reduce or be a credit against the total liability limits as provided in the insured’s own uninsured motorist coverage. Provided further, that if a tentative agreement to settle for liability limits has been reached with an insured tort-feasor, written notice shall be given by certified mail to the uninsured motorist coverage insurer by its insured. Such written notice shall include:

1. Written documentation of pecuniary losses incurred, including copies of all medical bills; and

2. Written authorization or a court order to obtain reports from all employers and medical providers. Within sixty (60) days of receipt of this written notice, the uninsured motorist coverage insurer may substitute its payment to the insured for the tentative settlement amount. The uninsured motorist coverage insurer shall then be entitled to the insured's right of recovery to the extent of such payment and any settlement under the uninsured motorist coverage. If the uninsured motorist coverage insurer fails to pay the insured the amount of the tentative tort settlement within sixty (60) days, the uninsured motorist coverage insurer has no right to the proceeds of any settlement or judgment, as provided herein, for any amount paid under the uninsured motorist coverage."

30 . Uptegraft v. Home Ins. Co., 1983 OK 41, ¶ 6, 662 P.2d 681, 683-684.

31 . 36 O.S.1991 § 3636(E).

32 . 1989 OK CIV APP 92, 790 P.2d 1121.

33 . We disagree with Roberts' (supra, note 32) interpretation of the proviso in Section 3636(E) which states "that any payment made by the insured tort-feasor shall not reduce or be a credit against the total liability limit as provided in the insured’s own uninsured motorist coverage.” Roberts holds this to mean "that payments made by a tort-feasor should not diminish the injured party's recovery under his own policy....” (emphasis added) Id. at 11 9, at 1124. This is incorrect. Section 3636 merely forbids the diminution of the UM policy’s total policy limits. All UM coverage must remain available regardless of the existence of liability insurance. Section 3636 does not say that the amount of damages for which the UM carrier is responsible cannot be reduced by the amount of liability insurance. Thus, contrary to the Roberts holding, the proviso in § 3636 does not address whether first-dollar damages are payable by the UM carrier or only the excess over the tortfeasor’s liability limits. In the present case, the § 3636 proviso only addresses whether the $100,000 UM policy limit can be reduced by the $10,000 liability limit to $90,000. It cannot. It says nothing about whether the damages for which Allstate is responsible can be reduced by the available liability insurance from $50,000 to $40,000.

34 . Keel v. MFA Ins. Co., 1976 OK 86, 553 P.2d 153.

35 . Uptegraft v. Home Ins. Co., 1983 OK 41, ¶ 16, 662 P.2d at 687.

36 . Tidmore v. Fullman, 1982 OK 73, ¶¶ 7 and 8, 646 P.2d 1278, 1284 (Opala, J„ dissenting).

37 . Bohannan v. Allstate Ins. Co., 1991 OK 64, ¶ 13, 820 P.2d 787, 792.

38 . Aetna v. State Bd. for Property and Cas. Rates, 1981 OK 153, 637 P.2d 1251 (medical payments insurance cannot be set-off against UM coverage); Chambers v. Walker, 1982 OK 128, 653 P.2d 931 (workers’ compensation benefits cannot be used to reduce the mandatory UM coverage limits); Bill Hodges Truck Co. v. Humphrey, 1984 OK CIV APP 55, 704 P.2d 94 (workers' compensation benefits may not be reduced by uninsured motorist insurance proceeds).

39 . Porter v. MFA Mut. Ins. Co., 1982 OK 23, 643 P.2d 302.

40 . Uptegraft v. Home Ins. Co., 1983 OK 41, 662 P.2d 681.