By John Bachofner
On September 14, 2012, the Oregon Supreme Court issued a decision in Morgan v. Amex Insurance Co., that may substantially expand out-of-state insurers' exposure to attorney fees for insurance claims under ORS 742.061. Even claims arising under policies issued in Washington and other states that get filed in Oregon may be subject to an award of attorney fees under ORS 742.061.
In Morgan, a Vancouver resident was injured in an accident with an uninsured motorist. They sought Uninsured Motorist benefits under their Washington insurance policy and when negotiations stalled, eventually filed suit against the insurer in Oregon. The claim was eventually settled exclusive of fees or costs, and the plaintiff sought attorney fees under ORS 742.061. The trial court denied fees based on ORS 742.001, holding that it limited application of the insurance code to policies issued in Oregon, and ORS 742.061 was part of that code. Although the Court of Appeals affirmed the trial court's decision, the Oregon Supreme Court reversed, holding that ORS 742.001 does not limit application of the ORS 742.061 fee entitlement to policies issued in Oregon.
ORS 742.061 allows attorney fees to an insured plaintiff that prevails in litigation against an insurer in an Oregon court. There are safe harbor provisions that exclude fees if the plaintiff recovers less than an amount tendered within six months after a Proof of Loss is received by the insurer, or where coverage is confirmed and binding arbitration is offered in writing within six months after Proof of Loss for Uninsured, Underinsured, and Personal Injury Protection ("UM/UIM/PIP") claims. However, Proof of Loss has been very broadly interpreted as any event or submission that places the insurer on notice of its potential obligations, taking into consideration its duty to investigate claims. Applications for PIP benefits, letters to an insurer, and even a telephone conversation with an insurance agent have all been found to qualify as a Proof of Loss in certain circumstances. As a result, the timeline for taking advantage of the safe harbor provision can begin to run almost immediately after a loss. More importantly, most insurers adjusting claims on a policy issued in another state may have no idea about the potential exposure or opportunities to avoid it.
This decision may well result in an increase of UM/UIM/PIP and other insurance-based claims being litigated in Oregon where the policy was issued in Washington or one of its neighboring states. If the claimants have any chance of bringing a lawsuit in Oregon, they could substantially increase the insurer's exposure by allowing attorney fees where none would have been allowed in the state in which the policy was issued. Out-of-state insurers should acquaint themselves with the safe harbor provisions of ORS 742.061 and consider limiting their exposure to attorney fees by tendering an offer within six months after a Proof of Loss, or considering written confirmation of coverage and an offer to resolve the claim through binding arbitration.
A full copy of the opinion can be found online at: http://www.courts.oregon.gov/Publications/docs/S059655.pdf