Moody v. Or. Cmty. Cred. Union

• Court: Oregon Supreme Court
• Writing for the Court: WALTERS, S.J.
• Citation: Moody v. Or. Cmty. Cred. Union, 542 P.3d 24, 371 Or. 772 (Or. 2023)
• Docket Number: CC 19CV26557,SC S069409
• Decision Date: 29 December 2023
• Parties: Christine MOODY, individually, and in her capacity as the Personal Representative of the Estate of Steven "Troy" Moody, Deceased, Respondent on Review, v. OREGON COMMUNITY CREDIT UNION, aka OCCU, an Oregon entity, association, union, or corporation et al., Defendants, and Federal Insurance Company, an Indiana corporation, Petitioner on Review.

542 P.3d 24

371 Or. 772

Christine MOODY, individually, and in her capacity as the Personal Representative of the Estate of Steven "Troy" Moody, Deceased, Respondent on Review,

v.OREGON COMMUNITY CREDIT UNION, aka OCCU, an Oregon entity, association, union, or corporation et al., Defendants,andFederal Insurance Company, an Indiana corporation, Petitioner on Review.

(CC 19CV26557) (SC S069409)

Supreme Court of Oregon.

Argued and submitted November 17, 2022.

December 29, 2023

On review from the Court of Appeals.^*

Daniel R. Bentson, Bullivant Houser Bailey PC, Seattle, Washington, argued the cause for petitioner on review. R. Daniel Lindahl, Bullivant Houser Bailey PC, Portland, filed the brief on the merits for petitioner on review, and Daniel R. Bentson filed the reply brief. Also on the briefs was Stuart D. Jones.

Travis Eiva, Eiva Law, Eugene, argued the cause and filed the brief for respondent on review.

Ralph C. Spooner, Spooner & Much, PC, Salem, filed the brief for amici curiae American Property Casualty Insurance Association and National Association of Mutual Insurance Companies. Also on the brief was David E. Smith.

Sage R. Vanden Heuvel, Quinn Emanuel Urquhart & Sullivan, LLP, Los Angeles, California, filed the brief for amici curiae Chamber of Commerce of the United States of America and Oregon Business & Industry. Also on the brief was Paloma Sparks, Oregon Business & Industry, Salem.

James S. Coon, Thomas, Coon, Newton & Frost, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association. Also on the brief were John A McHugh, MCH LAW LLC, Wilsonville, and Kristen William, Williams Weyand Law LLC, Salem.

Iván Resendiz Gutierrez, Miller Nash LLP, Portland, filed the brief for amicus curiae United Policyholders. Also on the brief were Seth Row and Jodi S. Green, Long Beach, California.

Before Flynn, Chief Justice, and Duncan, Garrett, DeHoog, and Bushong, Justices, and Balmer and Walters, Senior Judges, Justices pro tempore.^**

WALTERS, S.J.

₇₇₅Plaintiff, whose husband was accidentally shot and killed during a camping trip, brought this action against defendant, a first-party life insurer, claiming, among other things, that defendant had negligently failed to investigate and pay her claim for policy benefits, causing her to have fewer financial resources to navigate the loss of a breadwinning spouse and, consequently, to suffer economic harm and emotional distress. The trial court granted defendant’s motions to dismiss plaintiffs negligence claim and to strike her claim for emotional distress damages. The Court of Appeals reversed. Moody v. Oregon Community Credit Union, 317 Or App 233, 248, 505 P.3d 1047 (2022). Although our reasoning differs, we concur in the decision of the Court of Appeals, and we hold that plaintiff has pleaded facts sufficient to give rise to a legally cognizable common-law negligence claim for emotional distress damages.

I. FACTS AND PROCEDURAL HISTORY

[1] Because the trial court granted defendant’s motion to dismiss, we take the following facts from plaintiffs complaint. Paul v. Providence Health System-Oregon, 351 Or. 587, 589, 273 P.3d 106 (2012) ("When reviewing a trial court order granting a motion to dismiss, we accept as true all well-pleaded facts in the complaint."). Plaintiffs husband, decedent, was accidentally shot and killed by a friend during a camping trip. Plaintiff filed a claim for life insurance policy benefits, and defendant initially denied plaintiffs claim on the ground that decedent’s death fell within a policy exclusion for deaths "caused by or resulting from [decedent] being under the influence of any narcotic or other controlled substance"—apparently based on the fact that decedent had had marijuana in his system at the time of his death.

Plaintiff filed this action against defendant,¹ alleging claims for breach of contract, breach of an implied contractual covenant of good faith and fair dealing, and negligence. Plaintiff sought both economic damages—the benefits payable under the policy—and emotional distress damages. ₇₇₆In her negligence claim, plaintiff alleged that defendant had contracted with her husband and her to provide life insurance coverage and benefits, that an Oregon statute requires "[d]efendant to follow a standard of care in the perform- ance of its insurance contracts independent of, in addition to, and outside of the terms of the insurance contract," and that:

"Defendant Insurance Company negligently performed its obligations under [ORS] 746.230 in its review, investigation, and eventual decision to deny insurance benefits following the death of [plaintiff’s husband] in one or more of the following ways:

"(a) By refusing to pay the insurance benefits without conducting a reasonable investigation based on all available information, in violation of [ORS] 746.230(1)(d); and

"(b) Not attempting, in good faith, to promptly and equitably settle a claim in which the insurer’s liability has become reasonably clear, in violation of [ORS] 746.230(1)(f)."

Plaintiff further alleged that defendant "knew, or in the exercise of reasonable care as a corporation engaged in the business of marketing and selling insurance, should have known, that one or more of its foregoing acts or omissions would create an unreasonable risk of harm to the beneficiaries of its insured, including [plaintiff]." Finally, plaintiff alleged that, as a result of defendant’s negligence, she had suffered "the noneconomic loss of increased emotional distress and anxiety caused by having fewer financial resources to navigate the loss of a bread-winning spouse."

Defendant filed motions to dismiss plaintiff’s claims for negligence and breach of the implied covenant of good faith and fair dealing and to strike the allegations seeking damages for emotional distress, arguing that plaintiff’s only remedy under Oregon law was contractual. The trial court granted those motions and entered a limited judgment dismissing all but the breach of contract claim. Plaintiff appealed the limited judgment but, while the appeal was pending, she filed an amended complaint that alleged only breach of contract and sought only the amount of benefits payable under the insurance policy—$3,000. Thereafter, defendant paid the $3,000 to plaintiff, the parties stipulated to the entry of a judgment in favor of plaintiff and against ₇₇₇defendant, and the trial court entered a conforming general judgment.

II. THE COURT OF APPEALS DECISION

Meanwhile, plaintiff’s appeal from the limited judgment, which challenged the dismissal of her negligence claim and the striking of her allegations of emotional distress damages, proceeded in the Court of Appeals. That court ultimately reversed the trial court’s ruling, holding that plaintiff could bring a claim for "negligence per se" and seek emotional distress damages based on defendant’s violations of ORS 746.230(1). In its opinion, the Court of Appeals broadly described the issue before it as requiring it to determine "when a party to a contract may sue another party to the same contract for negligence." Moody, 317 Or App at 237, 506 P.3d 1047. After noting that, ordinarily, the sole remedy for a party’s failure to meet a contractual obligation is an action for breach of the contract, the court observed that, in specific circumstances, an injured party also may have a negligence claim, quoting the following passage from Georgetown Realty v. The Home Ins. Co., 313 Or. 97, 106, 831 P.2d 7 (1992):

‘"When the relationship involved is between contracting parties, and the gravamen of the complaint is that one party caused damage to the other by negligently performing its obligations under the contract, then, and even though the relationship between the parties arises out of the contract, the injured party may bring a claim for negligence if the other party is subject to a standard of care independent of the terms of the contract.’ "

Moody, 317 Or App at 237, 505 P.3d 1047 (emphasis added). The Court of Appeals then observed that an independent standard of care may arise out of a special relationship between the contracting parties,² but it also may be expressed in a statute or administrative rule. Id. at 237-38, 505 P.3d 1047. The court relied—for that latter suggestion—on its own opinion in Abraham, v. T. Henry Construction, Inc., 230 Or App 564, 567, 573-74, 217 ₇₇₈P.3d 212 (2009) (Abraham I), aff’d. on other grounds, 350 Or. 29, 249 P.3d 534 (2011) (Abraham II), which held that a couple who had discovered water leakage and resulting damage in a home that had been built for them under a construction contract could sue the construction company, not only for breach of contract, but also in tort, reasoning that the Oregon Building Code provided "an independent standard of care sufficient to support a claim for negligence par se."³ Moody, 317 Or App at 237, 505 P.3d 1047 (discussing Abraham, I).

However, the court acknowledged, the violation of an independent standard of care is not all that is required to state a negligence claim against another party to a contract. According to the Court of Appeals, a negligence claim based on a statutory violation requires a plaintiff also to plead and ultimately prove that

" ‘(1) defendants violated a statute; (2) that plaintiff was injured as a result of that violation; (3) that plaintiff was a member of the class of persons meant to be protected by the statute; and (4) that the injury plaintiff suffered is of a type that the statute was enacted to prevent.’ "

Moody, 317 Or App at 238, 505 P.3d 1047 (quoting McAlpine v. Multnomah County, 131 Or App 136, 144, 883 P.2d 869 (1994), rev. den., 320 Or. 507, 888 P.2d 568 (1995)).

After briefly outlining how that test appeared to be satisfied by plaintiffs allegations that she had been injured as a result of defendant’s violation of an Oregon statute, particularly ORS 749.230(1)(d) and (f), the Court of Appeals addressed several objections that defendant had levelled against that...