Mosley v. Allstate Insurance Co.

• Decision Date: 26 January 2000
• Parties: Marnella MOSLEY and Emanuel Mosley, Appellants, v. ALLSTATE INSURANCE CO., an Illinois corporation, Respondent.
• Court: Oregon Court of Appeals

996 P.2d 513

165 Or. App. 304

Marnella MOSLEY and Emanuel Mosley, Appellants, v. ALLSTATE INSURANCE CO., an Illinois corporation, Respondent.

(9712-09445; CA A104802)

Court of Appeals of Oregon.

Argued and Submitted December 20, 1999.

Decided January 26, 2000.

Willard E. Merkel, Portland, argued the cause for appellants. With him on the briefs was Popick & Merkel.

R. Daniel Lindahl, Portland, argued the cause for respondent. With him on the brief were Jeffrey S. Eden, Portland, and Bullivant Houser Bailey.

Before LANDAU, Presiding Judge, and LINDER and BREWER, Judges.

BREWER, J.

Plaintiffs appeal from a supplemental judgment that sustained defendant insurer's exceptions to an award of attorney fees and costs made in plaintiff's favor in a court-annexed uninsured motorist (UM) arbitration proceeding. The trial court concluded that plaintiffs were not entitled to the award on the ground that defendant tendered an offer of settlement that exceeded their arbitration recoveries within six months of submission of an adequate proof of loss under the UM policy. ORS 742.061. Plaintiffs assert that they submitted an adequate proof of loss more than six months before defendant made a qualifying offer of settlement. We agree with plaintiffs and, therefore, reverse and remand.

Marnella Mosley was insured under a UM policy (the policy) issued by defendant; Emanuel Mosley is her son. In November 1996, plaintiffs were injured in an automobile accident in which they were passengers in a vehicle operated by an uninsured driver. On March 10, 1997, after determining that no responsible driver was insured, plaintiffs' attorney sent a letter advising defendant that he represented plaintiffs in uninsured motorist claims under the policy. On the same date, defendant's adjuster wrote to plaintiffs' attorney. That letter stated that "[w]e would appreciate a copy of the police report if you have it. If there is no police report, we would like to take a statement from our insured driver." Defendant also requested a "demand packet" including medical records, once plaintiffs' injuries were medically stationary. On May 20, plaintiffs' attorney sent a second letter to defendant, advising that plaintiffs' injuries had become stationary. That letter enclosed plaintiffs' medical records, including an itemization of related expenses, and offered to settle Marnella's UM claim for $12,500 and Emanuel's claim for $10,000. The letter did not mention a police report or defendant's alternative request for a statement from the insured.

On August 4, another adjuster wrote to plaintiffs' attorney. That letter stated that defendant had paid plaintiffs' medical expenses under PIP coverage. The letter also returned photographs plaintiffs had previously provided. In addition, the letter stated "[r]egarding the Mosleys' UM claims, I would like to meet with them and take their statements regarding the facts of the accident and their alleged injuries." On September 15, defendant's adjuster renewed his request for "recorded statements" from plaintiffs and stated that "I will not be able to consider any settlement without the statements." On September 29, plaintiffs gave the requested statements.

On October 15, defendant offered to settle plaintiffs' claims for a total of $500 each. Plaintiffs did not accept the offer and, instead, filed this action. On March 23, 1998, defendant filed and served an offer to allow judgment. Defendant offered $2,000 to Marnella, "plus PIP already paid, plus costs and disbursements to date, inclusive of attorney fees, if any," and $1,000 to Emanuel, subject to the same adjustments and limitations. Plaintiffs attempted to accept the offer and, in addition, to recover attorney fees. Defendant opposed plaintiffs' motion for judgment and the trial court denied the motion "on the ground that there was no effective acceptance of a valid offer of judgment under ORCP 54 E." The case was then referred to court-annexed arbitration.

The arbitrator awarded Marnella $1,450 plus previously paid PIP benefits totalling $1,350 and $218 to Emanuel plus PIP benefits paid in the amount of $782. The arbitrator also awarded attorney fees and costs to plaintiffs in the sum of $5,192. Defendant filed exceptions to the award of attorney fees and costs. The trial court held that plaintiffs were not entitled to recover attorney fees under ORS 742.061 and also determined that neither party should recover costs. Plaintiffs appeal from the supplemental judgment embodying that decision.

In two separate assignments of error, plaintiffs contend that the trial court erred in failing to award them costs and disbursements and attorney fees. Because the attorney fees issue is for practical purposes dispositive of both assignments of error, we discuss it first. Whether a particular statute entitles a party to recover attorney fees is a question of law. ORS 20.220(1); Selective Services, Inc., v. AAA Liquidating, 126 Or. App. 74, 77, 867 P.2d 545 (1994).

The trial court denied attorney fees under ORS 742.061, which provides, in part:

"If settlement is not made within six months from the date proof of loss is filed with an insurer and an action is brought in any court of this state upon any policy of insurance of any kind or nature, and the plaintiff's recovery exceeds the amount of any tender made by the defendant in such to be fixed by the court as attorney fees shall be taxed as part of the costs of the action and any appeal thereon."

The trial court determined that two of the statutory requirements for an attorney fee award had not been met in this case. First, the court concluded that "proof of loss occurred after defendant received adequate information and tender was made within six months thereof." Second, the court determined that plaintiffs' arbitration recoveries did not exceed the March 1998 offer of judgment, which, the court concluded, was a complying tender, although not made until after this action was filed. Because the March 1998 offer of judgment exceeded plaintiffs' arbitration recoveries, the trial court held that plaintiffs were not entitled to attorney fees. In reaching its conclusions, the trial court relied on this court's decision in Grijalva v. Safeco Insurance Co., 153 Or.App. 144, 156-58, 956 P.2d 995 (1998), rev'd 329 Or. 36, 985 P.2d 784 (1999).

In Grijalva, we held that a plaintiff could not recover attorney fees under the statute unless the plaintiff's recovery exceeded the amount of "any tender" made by the defendant, irrespective of whether the tender was made within six months of the proof of loss. In view of that holding, the trial court's first conclusion that defendant made a qualifying tender within six months of an adequate proof of loss was unnecessary to its analysis. However, that conclusion reveals that the trial court must have determined that plaintiffs' May 1997 proof of loss was inadequate, because that submission was made more than ten months before defendant's March 1998 offer was filed and served. Only the March 1998 offer exceeded plaintiffs' ultimate arbitration recovery. In light of later case authority discussed below, the trial court's first conclusion is central to the disposition of this case.¹

During the pendency of this appeal, the Supreme Court addressed the meaning of the term "proof of loss" as used in ORS 742.061. In Dockins, the plaintiffs sought attorney fees in an action under a homeowner's policy. The policy provided both general liability and property coverage. During the policy term, the Oregon Department of Environmental Quality (DEQ) made a claim against the plaintiffs that damage had occurred as a result of petroleum residue on the plaintiffs' property. In their complaint against the insurer, the plaintiffs sought coverage for DEQ's claim under the third-party liability provisions of the policy. The parties settled the damages portion of the plaintiffs' claim more than six months after the date on which the complaint was filed. The trial court denied the plaintiffs' request for attorney fees under ORS 742.061. We affirmed that decision. The Supreme Court reversed, concluding that the plaintiffs' complaint constituted proof of loss under the policy. The court noted that "proof of loss" is not defined by statute and, after reviewing the relevant statutory text and context, concluded:

"From the foregoing discussion of the text of ORS 742.061 and the case law that surrounds it and its predecessor statutes, we conclude the meaning of the statutory term `proof of loss' is clear: 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) qualifies as a `proof of loss' for purposes of the statute." Id. at 29, 985 P.2d 796.

The defendant insurer argued that the complaint was insufficient to qualify as a proof of loss under ORS 742.061 because (1) DEQ's demand was not attached and, (2) the insurer's duty to indemnify was not triggered because the plaintiffs were not yet able to calculate their remediation costs. The court rejected both arguments:

"Although it is true that the DEQ demand was not attached to the complaint and that State Farm was not required to accept plaintiffs' characterization of the DEQ demand at face value, it also is true that State Farm easily could have ascertained whether plaintiffs' characterization was accurate.

"As to its duty to indemnify under the liability provision of the policy, State Farm argues that the six-month settlement period does not begin to run until plaintiffs could calculate their remediation costs with enough specificity to enable State Farm to make a settlement offer. Again, in so arguing, State Farm ignores its duty of inquiry. There is no basis in this record to hold that, if it had undertaken an inquiry, State Farm could not have made that calculation." Id. at 30, 985 P.2d 796.

The court concluded that the allegations in ...