Wallach v. Allstate Insurance

Plaintiff suffered injuries in three separate automobile accidents. During the trial on the first accident, the court instructed the jury that it could hold defendant Allstate Insurance Co., responsible for any “enhancement or aggravation of plaintiffs injuries caused by the subsequent accident [s]” if the enhancement or aggravation would not have occurred but for the first accident. On appeal, the Court of Appeals held that the trial court erred in giving that instruction, reversed the trial court’s judgment, and remanded for a new trial. Wallach v. Allstate Ins. Co., 206 Or App 137, 135 P3d 404 (2006). We allowed plaintiffs petition for review and now affirm the Court of Appeals decision.

Plaintiff purchased automobile insurance from defendant Allstate. Afterwards, plaintiff was involved in three automobile accidents. The first accident occurred on October 24, 1997. An unidentified truck (referred to as a “phantom vehicle” in Allstate’s policy) caused plaintiffs vehicle to swerve, injuring plaintiff. Because the person driving the truck was unidentified and thus unavailable, plaintiff sought to recover his damages from Allstate under both the uninsured motorist (UM) provision1 and the personal injury protection (PIP) provision2 of his policy. Allstate denied liability under both provisions, and plaintiff filed this action against Allstate on October 22, 1999, alleging that Allstate had breached those provisions.

The second accident occurred on August 6, 1999, a few months before plaintiff filed this action. Plaintiff had stopped at a red light when another car “rear-ended” his car. The third accident occurred on August 2, 2002, before the trial on this action began. Plaintiff had stopped at a red light when yet another car “rear-ended” his car.

*317At the trial on the first accident, plaintiff contended that Allstate was liable for the injuries resulting from the first accident and also for any aggravation of those injuries resulting from the second and third accidents.3 Plaintiff submitted a special jury instruction to that effect,4 and Allstate filed a written objection. Among other things, Allstate contended that the trial court should not give plaintiffs requested instruction because “the subsequent motor vehicle accidents are not accidents which would have occurred but for the original injury” and also because it was “not foreseeable that a plaintiff would meet with subsequent motor vehicle accidents.” Finally, Allstate argued that plaintiffs requested instruction would make it “liable for injuries attributable to the second motor vehicle accident for which [it] is not liable.”

Despite that objection, the trial court gave an instruction that repeats, in substantial part, the special jury instruction that plaintiff had requested. The trial court instructed the jury:

“The contract entered into by the plaintiff and the defendant sets forth that the defendant will provide coverage for all the natural!,] direct and proximate consequences of the wrongful acts of the driver of the phantom vehicle.

“If you find that the plaintiff was injured by those acts in the accident of October 24th, 1997 and then had a subsequent accident in which the plaintiff suffered further injury which would not have occurred, but for the original injury, the defendant may then be held liable for the enhancement *318or aggravation of plaintiffs injuries caused by the subsequent accident.

“The defendant’s liability would apply only to the injuries you attribute to the accident of October 24th, 1997 and to any enhancement or aggravation of those injuries, not to any new injuries suffered by plaintiff in any subsequent accident.”

After the court gave that instruction, Allstate excepted to it, reasoning that “this is not the type of case where the first accident caused the second and third accidents; and, therefore, that instruction should not have been given[.]” The jury returned a verdict awarding plaintiff $50,000 in damages for Allstate’s breach of the UM provision and $25,000 in damages for Allstate’s breach of the PIP provision.

Allstate appealed from the resulting judgment, arguing, among other things, that the trial court erred in instructing the jury that Allstate was liable to the extent that the second and third accidents aggravated any injuries that plaintiff sustained in the first accident. The Court of Appeals agreed that the instruction was erroneous. It reasoned that the instruction was either confusing or incorrect because it appeared to permit the jury to award damages for injuries arising out of the second and third accidents if the jury found “but for” causation only. Wallach, 206 Or App at 144. The court also noted that the instruction referred to proximate cause when it should have referred to foreseeability. Id. Because the court concluded that those errors were not harmless, it reversed the trial court’s judgment and remanded for further proceedings. Id. at 145.

On review, plaintiff argues that the Court of Appeals erred in three respects. He contends initially that Allstate failed to preserve its objection to the instruction. Plaintiff recognizes that Allstate objected to the instruction. He contends, however, that Allstate did not object on the grounds on which the Court of Appeals relied. As noted above, however, Allstate filed a written memorandum objecting to plaintiffs special requested jury instruction on the ground, among other things, that the second and third accidents were not foreseeable. As also noted, the trial court’s instruction tracked in substantial part the special requested instruction *319to which Allstate objected, and Allstate renewed its objection when it excepted to the instruction that the trial court gave. Allstate preserved the issues that it has raised on appeal and on review. See Beall Transport Equipment Co. v. Southern Pacific, 335 Or 130, 137, 60 P3d 530 (2002) (describing preservation requirements for jury instructions).

Having concluded that Allstate preserved its objections to the instruction, we turn to the question whether that instruction correctly stated the law. The instruction consists of three sentences. The first sentence purports to recite the terms of the insurance contract under which plaintiff s claims against Allstate arise.5 The second sentence sets out the operative legal principle; it tells the jury what it must find before Allstate “may * * * be held liable.” That sentence provides:

“If you find that the plaintiff was injured by those acts in the accident of October 24th, 1997 and then had a subsequent accident in which the plaintiff suffered further injury which would not have occurred, but for the original injury, the defendant may then be held liable for the enhancement or aggravation of plaintiffs injuries caused by the subsequent accident.”

The third sentence limits the second. It clarifies that Allstate is liable for the injuries resulting from the first accident and for “any enhancement or aggravation of those injuries, [but] not [for] any new injuries suffered by plaintiff in any subsequent accident.”

The trial court’s instruction is erroneous in two separate but related respects. First, the instruction is at odds with the general rule that a defendant is liable only for the foreseeable consequences of his or her negligence. See Fazzolari v. Portland School Dist. No. 1J, 303 Or 1, 17, 734 P2d 1326 (1987) (holding that, unless a status, relationship, or standard of conduct “creates, defines, or limits the defendant’s duty, the issue of liability for harm actually resulting *320from [the] defendant’s conduct properly depends on whether that conduct unreasonably created a foreseeable risk to a protected interest of the kind of harm that befell the plaintiff’).6 Under the trial court’s instruction, the jury could hold Allstate liable for all aggravation damages that were causally connected to the first driver’s negligence no matter how unforeseeable those damages were. Such unlimited liability is contrary to Oregon negligence law.

Not only is the trial court’s instruction contrary to the general rule on negligence, but it is also inconsistent with the specific application of that rule in Ferrante v. August, 248 Or 16, 432 P2d 167 (1967). In Ferrante, the plaintiff had injured her back in an automobile accident as a result of the defendant’s negligence. Id. at 17. Several months later, as her back was improving, she “felt a very sharp pain in her back as she was getting out of her chair.” Id. at 18. The plaintiffs doctor testified that the injury had weakened the plaintiffs back and that the later injury she experienced on getting out of the chair was a foreseeable consequence of her weakened back and thus the earlier accident. Id.

On that evidence, this court held that the plaintiff could recover both for the injury that she originally suffered as a result of the accident and also for the later back sprain. Id. at 22-23. The court reasoned that, given the doctor’s testimony, the jury reasonably could find that “but for the original injury the [later] back sprain * * * would not have occurred and that the latter injury was the natural and probable consequence of the former.” Id. at 22; see also Restatement (Second) of Torts § 460 (1965) (stating similar rule).7 Although we would now use the phrase “foreseeable consequence” rather than “natural and probable consequence,” see Fazzolari, 303 Or at 14 (explaining that foreseeability rather *321than proximate cause is the measure of a defendant’s liability), the important point is that the court in Ferrante not only required a causal connection between the original negligent act and the later injury that resulted in increased pain but it also required that the later injury be a foreseeable consequence of the original negligence. The trial court’s instruction in this case erroneously omitted that limitation.

The instruction was incorrect in a second, related respect. Under Oregon law, a tortfeasor is responsible to the extent that his or her negligence aggravates a preexisting condition. See Stubbs v. Mason, 252 Or 547, 551, 450 P2d 773 (1969) (so holding); Dodson v. Lemon, 197 Or 444, 449, 253 P2d 900 (1953) (same). It follows that, in this case, if the second tortfeasor aggravated a preexisting condition and if the second accident was not a foreseeable consequence of the first, then the law allocates responsibility for any aggravation of plaintiffs preexisting condition to the second tortfeasor, not the first. The trial court’s instruction, however, told the jury that it could hold the first tortfeasor liable for any aggravation damages that the second accident caused without regard to whether the second accident was a foreseeable consequence of the phantom driver’s negligence.

Plaintiff has not argued that either the second or third accident was a foreseeable consequence of the phantom driver’s negligence, nor is there any evidence in the record that would permit a reasonable juror to draw that inference. Accordingly, we agree with Allstate that, on this record, the trial court should not have instructed the jury that it could hold Allstate liable for any aggravation damages resulting from the second and third accidents. We note that the other courts that have considered this issue agree that, when the second accident is not a foreseeable consequence of the first, the defendant involved in the first accident is not liable for any aggravation of the plaintiffs injuries that the second accident causes. See, e.g., Hashimoto v. Marathon Pipe Line Co., 767 P2d 158, 160-61 (Wyo 1989); Bruckman v. Pena, 29 Colo App 357, 487 P2d 566 (1971); Armstrong v. Bergeron, 104 NH 85, 178 A2d 293 (1962) (all so holding).8

*322The final issue is whether the erroneous instruction substantially affected Allstate’s rights. See ORS 19.415(2) (providing that “[n]o judgment shall be reversed or modified except for error substantially affecting the rights of a party”). On that issue, we note that the trial court’s instruction gave the jury the wrong legal rule to apply. The instruction told the jury that it could hold Allstate liable for damages for which the jury could not, on this record, hold it legally responsible. Allstate observes that, when an instruction tells the jury to apply the wrong legal rule and the erroneous instruction permits the jury to reach an incorrect result, this court consistently has held that the error substantially affects the party’s rights. See, e.g., Honeywell v. Sterling Furniture Co., 310 Or 206, 211-12, 797 P2d 1019 (1990) (instructing jury that part of a punitive damages award could go to a crime victim’s fund encouraged jury to award damages for the wrong reason); Fairbrother v. Rinker, 274 Or 525, 529-30, 547 P2d 605 (1976) (instruction that erroneously permitted jury to consider defendant’s financial condition in assessing damages was reversible error because it could have prejudiced plaintiffs chance of recovery); Waterway Terminals v. P. S. Lord, 256 Or 361, 370, 474 P2d 309 (1970) (stating general principle).

Plaintiff responds that this court’s decision in Shoup v.Wal-Mart Stores, Inc., 335 Or 164, 61 P3d 928 (2003), altered that longstanding rule. Plaintiff contends that, after Shoup, an appellate court must affirm a jury’s verdict unless the party who objected to the instruction can demonstrate that the erroneous instruction affected the verdict. In that connection, plaintiff notes that the jury could have based its damages award in this case solely on the injuries resulting from the first accident without including any aggravation *323damages from the second and third accidents. Plaintiff contends that, because Allstate cannot show otherwise, this court must affirm the jury’s verdict even though the court told the jury to apply an incorrect legal rule in determining the amount of plaintiffs damages.

The holding in Shoup is not as far reaching as plaintiff perceives. The plaintiff in Shoup alleged three specifications of negligence. 335 Or at 166-67. The trial court submitted all three specifications to the jury, even though it should have granted the defendant’s motion to withdraw one of those specifications. Id. at 167-68. The trial court then correctly instructed the jury on negligence, after which the jury returned a general verdict finding the defendant negligent. Id. at 167.

The verdict form did not identify which specification or specifications the jury relied on in finding the defendant negligent, and the question before this court was whether it could say that the trial court’s error in submitting one of three specifications of negligence to an otherwise correctly instructed jury substantially affected the defendant’s rights. Faced with that question, this court held that, without some basis for saying that a correctly instructed jury had relied solely on the invalid specification of negligence, it could not say that the error had substantially affected the defendant’s rights; that is, the court could not say that the jury had not based its verdict on the other two specifications of negligence that were properly before it. Id. at 176, 179.9

This court was careful in Shoup to distinguish instructional error from the particular species of error that was at issue in that case. In reviewing prior cases, this court observed that, although its earlier decision in Hernandez v. Barbo Machinery Co., 327 Or 99, 957 P2d 147 (1998), may have stated the standard for reversible error too broadly, the decision had correctly held that the instructional error in *324that case had substantially affected the plaintiffs rights. Shoup, 335 Or at 172 n 2. After questioning the way in which the court had articulated the legal standard in Hernandez, the court stated in Shoup: “We do not, however, question the conclusion reached by this court in Hernandez. The error in jury instructions at issue in Hernandez was ‘reversible’ under ORS 19.415(2).” Id.

Because the instructional error in Hernandez marks the limit of Shoup's holding, we describe that case briefly. Hernandez was a products liability case. The defendant in that case raised the affirmative defense of comparative fault, alleging that the plaintiff had been negligent in ten respects. 327 Or at 102-03. The plaintiff requested an instruction that would have told the jury that certain types of negligence are not sufficient to establish comparative fault in a products liability case. Id. at 103-04. Specifically, the instruction would have told the jury that negligence that consists of an “unobservant, inattentive, ignorant, or awkward failure to discover or to guard against the defect that goes toward making the product dangerously defective” is not sufficient to establish comparative fault. Id. at 104.

The trial court refused to give the requested instruction, and the jury returned a verdict finding that the plaintiff was 50.5 percent and the defendant 49.5 percent at fault. Id. at 104-05. On review, this court held that the trial court erred in refusing to give the requested instruction and that the error substantially affected the plaintiffs rights. Id. at 112-13. On the latter point, the court observed that nine of the ten allegations of negligence alleged that the plaintiff had “knowingly encountered” a risk of injury and that those allegations, if proved, would be sufficient to establish comparative fault. Id. at 110-11. One specification, however, alleged only that the plaintiff had acted negligently in standing on a slippery surface (sawdust) when he used the defendant’s product, and the court observed that a properly instructed jury could have found that the plaintiffs negligence in standing on the sawdust consisted only of an “unobservant, inattentive, ignorant or awkward failure” to discover or guard against the defective product. Id. at 112.

*325Because the trial court refused to give the plaintiffs requested instruction, the jury applied an incomplete and thus inaccurate legal rule to the facts, which permitted the jury to reach an erroneous result. That was sufficient, this court held in Hernandez and reaffirmed in Shoup, to say that the instructional error substantially affected the plaintiffs rights and required reversal. Hernandez, 327 Or at 112-13; Shoup, 335 Or at 172 n 2. That was true even though the jury in Hernandez properly could have based its verdict on the other allegations of negligence and the plaintiff in Hernandez could have memorialized the effect of the trial court’s refusal to give his requested instruction by asking the jury to specify which, if any, of the defendant’s allegations of negligence it relied on in determining the parties’ respective fault.

In State v. Pine, 336 Or 194, 82 P3d 130 (2003), the court confirmed the distinction that it noted in Shoup. In Pine, this court held that a defendant could be held liable for third-degree assault only if he or she “caused” physical injury to the victim; that is, the “defendant either must have inflicted physical injury directly himself or herself, or must have engaged in conduct so extensively intertwined with infliction of the injury that such conduct can be found to have produced the injury.” Id. at 207. The trial court, however, had instructed the jury that a defendant could be guilty of third-degree assault if the defendant merely had aided another person who caused physical injury to the victim. Id. at 209. Under the trial court’s instruction, the jury could have found the defendant in Pine guilty of third-degree assault without finding the direct causal connection that the third-degree assault statute required.

On review, the state argued that, under Shoup, this court should affirm even though the statute required that the defendant cause the physical injury. Id. at 199. The state reasoned that there was evidence from which the jury could have found that the defendant had directly inflicted the injury rather than merely aiding another person who inflicted the injury. Id. It followed from Shoup, the state reasoned, that the defendant could not establish that the erroneous instruction had substantially affected his rights. Id.

*326In rejecting the state’s argument, this court declined to rely on “procedural differences between civil and criminal proceedings.” Id. at 200. Rather, it relied on “a more fundamental reason” to distinguish the effect of the error in Shoup from the effect of the instructional error before it. Id. The court reasoned that, if the jury had believed the defendant’s version of the facts rather than the state’s, the instruction permitted the jury to convict the defendant in violation of the statute defining the crime of third-degree assault. Id. Accordingly, the court held that the instructional error required reversal. Id. at 210.

The instruction in Pine, like the instruction in this case, was too broad. It permitted the jury to find the defendant in Pine guilty for conduct that did not constitute the charged crime, as well as for conduct that did.10 In holding that the instructional error in Pine substantially affected the defendant’s rights, this court did not specify how the instructional error in Pine differed from the error in Shoup. The answer seems apparent, however: We presume that a jury follows a trial court’s instructions, DeMaris v. Whittier, 280 Or 25, 31, 569 P2d 605 (1977), and giving the jury an erroneous legal rule11 to decide an element of the state’s case in Pine substantially affected the defendant’s rights. To be sime, it was possible that the jury in Pine might have landed on a legally permissible answer despite having been given an incorrect instruction. But that possibility was too slight for this court to say in Pine that the error did not substantially affect the defendant’s rights. No other conclusion explains this court’s holdings in Pine, Hernandez, and an unbroken line of cases holding that an erroneous instruction substantially affects a party’s rights, all of which were decided in light of the standard currently codified in ORS 19.415(2).12

*327The dissent reasons that this court’s decision in Lyons v. Walsh & Sons Trucking Co., Ltd., 337 Or 319, 96 P3d 1215 (2004), requires a different conclusion. We do not read Lyons as broadly as the dissent does. Lyons arose out of an automobile accident in which a police officer died. 337 Or at 321. There was evidence that the police car in which the officer had been a passenger had turned in front of the defendant’s oncoming truck. Id. at 322. The plaintiffs submitted three proposed jury instructions, each of which would have told the jury essentially that it “should not ‘weigh or consider’ [the] conduct [of the other officer who drove the police car] unless the jury found that the accident had been the ‘sole and exclusive’ result of that [officer’s] conduct.” Id. at 323. The trial court declined to give that instruction, instructed the jury that it could not compare the officer’s and the defendant’s negligence, if any, and submitted a special verdict form to the jury that asked:

“Was defendant * * * negligent in one or more of the ways claimed by the plaintiff and, if so, was such negligence a cause of damage to the plaintiffs?”

Id. The jury answered that question “no,” resulting in a judgment in the defendant’s favor. Id.

On appeal, the Court of Appeals affirmed the trial court’s judgment, holding that the plaintiffs’ requested instructions had not correctly stated the law. Id. at 324. On review, this court affirmed but on a different ground. This court noted that the special verdict form asked a compound question and that the jury’s answer could have reflected its conclusion either that the defendant had not been negligent or that the defendant’s negligence had not caused the plaintiffs harm. Id. at 325. The plaintiffs did not argue that the trial court had instructed the jury incorrectly on negligence; they only challenged its instructions on causation. Id.

*328The instructions thus provided two alternate paths by which the jury could have answered “no” to the question on the special verdict form. One was a correct statement of the law; the other was an incorrect statement of the law, in the plaintiffs’ view. Because the jury could have based its answer on the special verdict form on the correct instructions regarding negligence, this court held that it could not say that any error in instructing the jury on causation had substantially prejudiced the plaintiffs’ rights. As the court explained in Lyons, “ [w]hat this court stated in Shoup applies equally to the narrow problem that the form of jury verdict used in the present case poses.” Id. at 326.

The court was careful in Lyons to distinguish the “narrow problem” that the jury verdict form posed in that case from “other kinds of asserted trial error, such as a faulty jury instruction.” Id. The court explained:

“This was not a case in which the plaintiff advanced a single factual theory of liability that the form of jury verdict reflected. Nor did this case involve other kinds of asserted trial error, such as a faulty jury instruction, that may call for a different analysis of whether the error ‘substantially affect[s] the rights of a party’ under ORS 19.415(2). The jury verdict could have been based on one of two different rationales that the jury verdict form identified; it is impossible to tell which the jury used. Plaintiffs’ claims of error may or may not be well taken, but they depend on an assumption that the jury’s verdict was based on one rationale only.”

Id. (brackets in original). The foregoing explanation makes clear that the court in Lyons understood that the jury verdict form in that case and a faulty jury instruction present distinct issues for the purposes of ORS 19.415(2). Nothing in Lyons suggests that the court intended to overrule sub silentio its holding in Pine less than a year earlier, its reaffirmation of Hernandez in Shoup, or an unbroken line of cases before Shoup holding that an incorrect instruction substantially prejudices a party’s rights.

The dissent reasons that, despite what this court said in Lyons, the underlying problem in Lyons was the jury instruction and that, if the court applied Shoup to the instructional error in Lyons, we should apply it to the instructional error here as well. In essence, the dissent reasons that *329the distinction that the court drew in Lyons does not withstand scrutiny and that Lyons’ holding cannot be limited to the “narrow problem that the form of jury verdict used in [that] case pose[d].” We need not decide whether Lyons was correct in positing that the jury verdict form in that case and instructional error present distinct issues for the purposes of ORS 19.0415(2). This case does not involve a jury verdict form similar to the one in Lyons-, it thus provides no occasion for us to decide whether the distinction that the court articulated in Lyons was correct. Rather, it is sufficient for the purposes of this case to reaffirm the general rule stated in Pine, Hernandez, and an unbroken line of cases that, when a trial court incorrectly instructs the jury on an element of a claim or defense and when that incorrect instruction permits the jury to reach a legally erroneous result, a party has established that the instructional error substantially affected its rights within the meaning of ORS 19.415(2).

In this case, the trial court incorrectly instructed the jury on the damages for which Allstate was liable. That error substantially affected Allstate’s rights. Although the trial court’s judgment must be reversed, the question that remains is whether the erroneous instruction affected only the jury’s award for the breach of the UM provision or whether it also affected the jury’s award for the breach of the PIP provision. We turn to that issue.

As noted, plaintiff sued Allstate for breach of contract. He alleged that Allstate had failed to pay sums that it owed him under both the PIP and the UM provisions of his insurance policy. Ordinarily, one might expect that any aggravation damages that plaintiff experienced as a result of the second and third accidents, which occurred two and five years respectively after the first accident, would not be included within any award of PIP damages. (The insurance policy, for instance, limits PIP coverage for medical expenses to certain reasonable and necessary medical expenses incurred within one year of the accident.) However, in defining plaintiff’s rights under the PIP and UM provisions of his policy, the trial court instructed the jury generally that plaintiff had a right to recover up to $25,000 in economic damages under the PIP provision and up to $100,000 in noneconomic damages under the UM provision; that is, the trial court instructed the jurors that they should allocate any damages *330between the two breaches based on the nature of the damages.13

Given those instructions and the instruction on aggravation damages, the jury could have included medical costs that plaintiff incurred after the second accident in the award of PIP damages; that is, the trial court’s instructions erroneously permitted the jury to find that the second accident aggravated injuries that plaintiff sustained in the first accident and to assess PIP damages against Allstate for the medical costs that plaintiff incurred to treat those aggravated injuries. Because the trial court’s erroneous instruction on aggravation affected both the jury’s award of damages for breaching the PIP provision and its award for breaching the UM provision, neither damages award can stand.

The decision of the Court of Appeals is affirmed. The judgment of the circuit court is reversed, and the case is remanded to the circuit court for further proceedings.