Several years ago, I represented a young man who was paralyzed when his friend's car went off the road and struck a telephone pole. He faced hundreds of thousands of dollars in past and future medical care, and a significant change to his future life.
His case was literally worth millions.
To make matters worse, the policy that covered his friend provided for only $100,000 in liability insurance and he had no real assets to collect beyond the automobile insurance. We offered to accept the $100,000 policy limits for our client, knowing that it would cover only a small fraction of his actual damages, but knowing also that there wasn't much more we could do.
When the insurance company responded we were astonished.
Insurance Company & The "Step-Down" Clause
The insurance company offered only $25,000 to settle our client's claim. $25,000! The insurance company explained that the policy had a clause in it, called a “step-down” or “drop back” clause that provided that if anyone other than the named insured or the named insured's family members was driving the vehicle at the time of the collision, then the policy limit paid for by the insured—in this case, $100,000—would be reduced to the minimum limits required by the state—in this case, a Washington case, $25,000.
Thankfully, we were ultimately able to overcome the insurance company's reliance on this clause and secured a favorable result for our client. That story is one for another day. Nevertheless, though that was the first, and last time I ever saw such a clause, Oregon recently will allow insurance companies to include clauses like that one in policies issued in Oregon. We expect to see many more in the future.
Insurance Companies will Always try to Pay Less
In Oregon, if an insurance company gives the right notices and uses the right language, it can reduce coverage from the purchased policy limit for bodily injury (BI) down to the statutory minimum coverage ($25,000 per person). This means, that if you are getting quotes for a car policy in Oregon you want to make sure you know what you're buying because you may believe you have purchased more coverage than the policy actually provides.
Though the standards an insurance company must follow are relatively stringent—you still want to pay close attention to make sure you know whether your new policy includes a step-down provision.
As always, if you have any questions or concerns about this issue or about knowing whether your policy includes a step-down provision, do not hesitate to contact any one of us here at Schauermann Thayer, we'd be happy to review your policy and discuss these issues with you.