Arizona Law Does Not Require an Insurer to Provide Underinsured Motorist Coverage for an ATV Accident on Private Property

State Farm v. Orlando

Arizona Supreme Court
May 29, 2025
JSH Attorney:  Eileen GilBride

Arizona’s Uninsured/Underinsured Motorist Act (the “UIM Act”) requires insurers selling motor vehicle liability policies to offer—and if selected by the insured to provide—underinsured (UIM) coverage.  The Supreme Court nevertheless held today that State Farm did not violate the UIM Act and could lawfully exclude UIM coverage where its insured was injured as a passenger on an ATV driven off road.  The Court read the UIM Act together with the language and purpose of the Financial Responsibility Act (FRA)—which requires drivers on public roads to have minimum liability insurance—and thus interpreted the UIM Act to apply to motor vehicles driven on public roadways.

The ATV on which Orlando was a passenger overturned in California’s Imperial Sand Dunes, seriously injuring her leg.  The driver’s insurer paid Orlando its liability policy limit, which was insufficient to cover the extent of her injuries. To make up the difference, Orlando sought UIM coverage from State Farm, her insurer.  While State Farm’s policy covered injury the insured sustained in an underinsured motor vehicle, the policy excluded from the definition of “underinsured motor vehicle” a land motor vehicle designed for use primarily off public roads (except while it was on public roads).  On this basis, State Farm denied coverage to Orlando.

State Farm filed a declaratory judgment action and Orlando counterclaimed in pertinent part for breach of contract.  The trial court granted State Farm summary judgment, ruling that the policy excluded the ATV from the definition of underinsured motor vehicle.  Orlando appealed, and the court of appeals reversed.  It reasoned that the UIM Act did not allow State Farm to exclude coverage for the ATV accident.  The court distinguished the underinsured motorist provisions of the UIM Act from the uninsured (UM) provisions of the Act, which courts had previously held allowed an insurer to exclude coverage for an ATV accident.

The Supreme Court granted review.  The sole issue was whether State Farm’s exclusion of the ATV as an underinsured motor vehicle violated the UIM Act.  The Court read the UIM Act together with the Financial Responsibility Act (FRA) because they operate together in a congruent regulatory scheme.  The primary purpose of the FRA is to require minimum liability coverage for vehicles operating on public roads; and the UIM Act is designed to fill the gap for insureds when tortfeasor drivers fail to comply with the FRA or inadequately insure themselves under the FRA.  While the UIM Act does not define “motor vehicle,” the FRA does; and the FRA applies to motor vehicles on public highways and excludes ATVs operating off-road in unincorporated areas.

The Court followed the cases involving UM coverage (which again allow the ATV exclusion) and noted that any textual differences between UM and UIM in the UIM Act assumed the existence of coverage; as such, those textual distinctions were irrelevant to determining whether coverage exists in the first place.

The Court concluded, “Applying the FRA definition of motor vehicle, we hold that UIM coverage of an off-road ATV accident is neither required nor prohibited under the [UIM Act.].  UIM coverage in such a circumstance is a matter of contract.  Therefore, the Policy’s definition of ‘underinsured motor vehicle,’ resulting in preclusion of UIM coverage, is permissible under Arizona law.”  The Court vacated the court of appeals’ opinion and reinstated State Farm’s summary judgment.

Eileen GilBride focuses her practice on representing clients in federal and state appellate matters and dispositive motions. She also counsels and assists trial lawyers in the substantive areas of their practices, from the answer stage through the post-trial motion stage. Eileen has handled over 500 appeals at every level of the state and federal courts, in Arizona and other states, which have resulted in more than 80 published decisions. Substantive areas of her appeals include constitutional, contracts, torts, insurance coverage and defense, employment, municipal and school defense, civil rights, prisoner cases, professional malpractice, Indian law, legislative, administrative, personal injury, wrongful death, divorce, child custody and support, property rights and trusts.

egilbride@jshfirm.com | 602.263.1787 | jshfirm.com/egilbride