By John R. Bachofner, Shareholder, Bullivant Houser Bailey PC
The Oregon Court of Appeals has issued a decision in Hall v. Speer, 2011 Ore. App. LEXIS 998 (Or. Ct. App. July 20, 2011) that substantially broadens what will be considered a satisfactory Proof of Loss for Underinsured Motorist (UIM) claims in Oregon. It held that notice of an accident, a Personal Injury Protection (PIP) Application for Benefits, PIP Insurance Medical Examination (IME), and representation letters from legal counsel, combined to create a sufficient Proof of Loss for plaintiff's UIM claim. With Proof of Loss occurring earlier than anticipated, the six month timeline for insurers to avoid attorney fee exposure through the "safe harbor" procedure of ORS 742.061(3) may have already expired. As a result, insurers can expect to see a significant increase in the number of claims for attorney fees in Oregon Uninsured/Underinsured Motorist (UM/UIM) matters.
In Hall, the plaintiff informed the insurer that she was injured two days following an automobile accident. Nine days later, she submitted an Application for PIP Benefits. The PIP claim was opened and, five months later, resulted in an IME by an orthopedic surgeon who concluded that the accident had caused significant injuries. Letters of legal representation followed, but did not identify the underlying liability insurance limits or that a UIM claim was being asserted until two months before the insurer sent an ORS 742.061(3) "safe harbor" letter consenting to binding arbitration of the UIM claim. Plaintiff declined arbitration and ultimately obtained a jury verdict for UIM benefits.
The trial court denied plaintiff's ORS 742.061 claim for attorney fees, ruling that the insurer could not reasonably estimate its obligations in the absence of information regarding the underlying liability insurance limits. The Court of Appeals disagreed. It held that the information the insurer had by the time it received notice of representation by plaintiff's legal counsel triggered its duty to reasonably investigate and "clarify its possible UIM obligations." In the absence of efforts to determine the underlying liability policy limits, there was insufficient basis to delay application of the six month timeline for an insurer to issue an ORS 742.061(3) "safe harbor" letter to avoid attorney fee exposure. Although the insurer submitted two affidavits to show that the liability policy limit information would not have been available, the absence of evidence that the insurer conducted any investigation to determine those limits left the Court unwilling to apply the ORS 742.061(3) "safe harbor." It reversed and remanded for the trial court to determine an award of attorney fees.
This is merely the latest in a string of decisions interpreting Proof of Loss for purposes of ORS 742.061 as "any event or submission that would permit an insurer to estimate its obligations (taking into account the insurer's obligation to investigate and clarify uncertain claims) * * *." That definition, from Dockins v. State Farm Ins. Co., 329 Or 20, 29 (1999), was applied to UM/UIM claims in Scott v. State Farm Mutual Auto. Ins., 345 Or 146, 155 (2008) and, although in the context of a property insurance claim, used to hold that telephone calls to an agent could suffice as a Proof of Loss in Parks v. Farmers Ins. Co., 347 Or 374, 376-79 (2009).
Given the recent string of cases, insurers seeking to avoid attorney fee exposure for Oregon UM/UIM claims should calculate the six month deadline for sending a "safe harbor" letter from either the date of loss, or at least the date when they first receive notice that an injury accident has occurred. Procedures should also be established for immediate notification to a UM/UIM claims handler upon receipt of a PIP claim, as the Oregon courts have not given deference to an insurer's internal separation of PIP and UM/UIM claims. Finally, insurers should establish a clear record documenting their efforts to investigate potential UM/UIM claims and obtain disclosure of underlying liability limits.
Oregon's statutes and attorney fee exposure are not directly comparable to the statutes in Washington, California or Nevada, limiting application of the Hall decision in those jurisdictions. Insurers should be aware, however, that the relaxed standard for what constitutes a Proof of Loss is comparable to the Proof of Claim provisions in California's Claims Handling regulations, 10 Cal. Code of Regulations § 2695.1 et seq.
If you need assistance in reviewing or revising your policy forms, claim procedures, or have any additional questions about attorney fees, UM/UIM claims or other insurance coverage matters, please contact John Bachofner in Vancouver at 360.906.6340 or in Portland at 503.499.4637.
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