2015 Legislative Session Could Bring “Statutory Bad Faith” to Oregon2020-04-23T00:34:40+00:00
01.30.2015 // THE POLICYHOLDER REPORT
2015 Legislative Session Could Bring “Statutory Bad Faith” to Oregon

Insurers often loudly proclaim that, outside of certain very limited circumstances, there is no such thing as “bad faith” claims-handling under Oregon law. We believe that position, based on a narrow reading of outdated case law, is wrong. Nonetheless, insurers generally operate in Oregon under the assumption that they will never be exposed to extra-contractual or punitive damages.  Consequently, even for entirely covered claims, low-ball settlement strategies are entirely too common, as the insurers see no real economic disincentive to mistreating their own policyholders. That could change for the better, however, if either of two bills introduced in the Oregon Senate become law this legislative session.

Senate Bill 313 and  Senate Bill 314 both explicitly allow a court or jury to award punitive damages to a policyholder that has been damaged by an insurer’s unfair or unreasonable conduct. SB 313 would amend Oregon’s Insurance Code, giving policyholders a direct, statutory cause of action against insurers that commit an “unlawful insurance practice.” The remedy would be available for any violation of Oregon Revised Statutes Chapter 746, the “Trade Practices” section of Oregon’s Insurance Code. Chapter 746 encompasses both illegal sales and advertising conduct and the “unfair claim settlement practices” detailed in ORS 746.230.  SB 313 would allow a policyholder to recover the greater of its actual damages or $200, and explicitly allows both punitive damages and equitable relief. Another important advantage to policyholders is that the bill allows that a prevailing policyholder is entitled to its reasonable attorney fees and costs, but a prevailing insurer can recover fees and costs only if the court finds there was no objectively reasonable basis for bringing the action.

Senate Bill 314 would use different means to achieve a very similar end. Instead of creating a wholly new statutory cause of action, SB 314 would remove the existing insurer exemption from Oregon’s Unfair Trade Practices Act (“UTPA”), ORS 646.605 et. seq. The UTPA lists a number of specific unlawful practices, along with the catch-all category of “any other unfair or deceptive conduct in trade or commerce.” A person who suffers loss of money or property as a result of an unlawful trade practice may recover the greater of their actual damages or $200, and the court or jury is authorized to award punitive damages and equitable relief. In its current form, however, insurers are exempt from the UTPA. Notably, insurers have the only such statutory exemption. SB 314 would remove that unwarranted exemption, while expanding UTPA protection to insurance obtained for other than personal, family or household purposes (a limitation included in the current version of the statute). Among the long list of unlawful trade practices, SB 314 would add any violation of Oregon’s unfair claims settlement practices statute, ORS 746.230.

Policyholders dealing with environmental claims already have a statutory bad faith remedy as a result of the most recent amendments to the Oregon Environmental Cleanup Assistance Act. SB 313 and SB 314, however, would broaden the conduct that could give rise to a bad faith claim in the environmental context, while extending a statutory claim for punitive damages to the much broader universe of insurance claims. Passing either bill would be an important win for Oregon policyholders, leveling the playing field in the claims-handling process. Finally, insurers would have a real, statute-based incentive to treat their insureds with the utmost of good faith.

We will be carefully watching SB 313 and SB 314 as they work their way through the legislative session. In the meantime, we urge our Oregon readers to contact their legislative representatives and demand some real economic consequences for insurer misconduct.

 


 

ABOUT BALL JANIK LLP

Ball Janik LLP was founded in 1982 with six lawyers and a four-person support staff in Portland, Oregon. Since our firm’s inception, we have expanded our capabilities, our professionals, and geographic footprint. What started as a firm focused in real property and land use (known then as Ball Janik & Novack), has grown to include the insights of a team of 30-plus attorneys, with a combined six centuries of experience, and capabilities including Real Estate and Land Use, Construction Defect, Commercial Litigation, Insurance Recovery, Construction and Design, Employment, Finance and Corporate, Public Agencies and Schools, and Community Associations. With offices in Florida and Oregon, our regional growth has earned us a national reputation for upholding the rights of our clients.

Ball Janik LLP has been recognized by Chambers USA, U.S. News & World Report and Best Lawyers®, The Best Lawyers in America©, and Corporate International. Ball Janik LLP’s success and integrity have repeatedly made it one of “Oregon’s Most Admired Professional Firms,” according to the Portland Business Journal’s survey results of CEOs throughout the region.

Heather J. Oden
Oregon , Portland
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