Oregon

but in Texas there is personal injury protection (PIP) that the insured should be choosing as an option to pay for expenses incurred in a situation similar to this. If that coverage is offered in Oregon and the vehicle owners refused to pay for that coverage, then I understand why the insurance company would deny paying the claim. Considering that the vehicle was a 2000 Cherokee, I suspect that they only had liability coverage on the vehicle.

BTW, there are reasons why someone may decide to sue their own insurance company such as acting in bad faith or if multiple drivers are on the policy they might sue in order to protect the other named insureds on the policy from losing their insurance coverage. Fortunately those incidents are somewhat rare.