Spearman v. Progressive Classic Ins. Co.

• Decision Date: 27 January 2016
• Docket Number: 130201718,A155674.
• Citation: 366 P.3d 821,276 Or.App. 114
• Parties: Alex SPEARMAN, Plaintiff–Appellant, v. PROGRESSIVE CLASSIC INSURANCE COMPANY, a Wisconsin corporation, Defendant–Respondent.
• Court: Oregon Court of Appeals

276 Or.App. 114

366 P.3d 821

Alex SPEARMAN, Plaintiff–Appellant,

v.PROGRESSIVE CLASSIC INSURANCE COMPANY, a Wisconsin corporation, Defendant–Respondent.

130201718

A155674.

Court of Appeals of Oregon, In Banc.

Argued and Submitted Jan. 21, 2015.

Resubmitted En Banc Oct. 15, 2015.

Decided Jan. 27, 2016.

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

James B. Rich, Salem, argued the cause for respondent. With him on the brief was Harris, Wyatt & Amala, LLC.

Before HADLOCK, Chief Judge, and ARMSTRONG, ORTEGA, SERCOMBE, DUNCAN, EGAN, DeVORE, LAGESEN, TOOKEY, GARRETT, FLYNN, Judges, and HASELTON, Senior Judge, and NAKAMOTO, Judge pro tempore.

FLYNN, J.

This appeal arises from plaintiff's action alleging that his motor vehicle insurance carrier breached its contract to pay uninsured motorist benefits. After prevailing in that action, plaintiff petitioned for an award of attorney fees under ORS 742.061(1), a statute that, in general, requires insurance companies to pay an attorney fee to an insured who prevails in an action to recover insurance benefits. The trial court denied plaintiff's fee petition after concluding that defendant's response to the insurance claim brought defendant within the scope of ORS 742.061(3), a so-called "safe harbor" from the obligation to pay fees. The "safe harbor" applies in actions to recover uninsured/underinsured motorist (UM/UIM) benefits if "the only issues are the liability of the insured or underinsured motorist and the damages due the insured." ORS 742.061(3).

On appeal, plaintiff argues that defendant raised issues beyond the scope of ORS 742.061(3) by suggesting that plaintiff had no "unreimbursed accident-related medical expenses," i.e., that plaintiff could recover zero dollars in his UM action. We conclude from the statutory text and context that the issues that are within the scope of ORS 742.061(3) are the issues of liability and damages that an insured would have to establish in an action against the uninsured or underinsured motorist. To the extent that our decision in Cardenas v. Farmers Ins. Co., 230 Or.App. 403, 215 P.3d 919 (2009), suggests "damages due" is a reference to the benefit due the insured from the insurer, we disavow that suggestion. Defendant's pleadings—which admitted that plaintiff sustained some injury in the collision—disputed only the amount of damages plaintiff sustained, as permitted by ORS 742.061(3). Accordingly, we affirm.

I. BACKGROUND

The facts pertinent to this appeal are few and undisputed. Plaintiff was injured in a collision with an uninsured motorist and submitted a claim for UM benefits to defendant, which had sold him a policy of motor vehicle insurance. When the parties were unable to resolve the UM claim, plaintiff filed the present action on the policy. Plaintiff's complaint sought recovery for only "unreimbursed accident-related medical expenses"—those expenses for which plaintiff had not already been reimbursed under other coverage. In its answer, defendant admitted that plaintiff sustained "some" injury in the collision with the uninsured motorist but disputed "the nature and extent of plaintiff's alleged injuries" and disputed "the reasonableness and necessity of some of plaintiff's accident-related medical expenses."

Because the amount in dispute in plaintiff's action was less than $50,000.00, the trial court transferred the action to its arbitration program, ORS 36.400(3), and the arbitrator found plaintiff entitled to $6,022.80 under the UM policy. The arbitrator denied plaintiff's petition for attorney fees, however, and the trial court upheld that determination. That is the ruling to which plaintiff assigns error on appeal.

II. ANALYSIS

Plaintiff argues that, because his complaint sought only his "unreimbursed accident-related medical expenses," defendant's dispute regarding "the reasonableness and necessity of some of [p]laintiffs accident-related medical expenses" permitted defendant to assert that plaintiff had been fully compensated for his injuries. According to plaintiff, that position "would permit the finder of fact to determine that [p]laintiff was not entitled to any award" in the UM action and, thus, raises an issue beyond those permitted by ORS 742.061(3).

A. Pertinent Statutory Text, in General

Before examining the parties' dispute in detail, we review the pertinent statutes. ORS 742.061(1) provides that, in an action upon an insurance policy, the insured is entitled to recover an award of reasonable attorney fees

"if a settlement [of an insurance claim] is not made within six months from the date proof of loss is filed with an insurer * * * and the plaintiff's recovery exceeds the amount of any tender made by the defendant in such action * * *."¹

As the Supreme Court has explained, that provision "applies to actions brought on insurance policies of any kind" and serves the "purpose of encouraging settlement of insurance claims without litigation." Strawn v. Farmers Ins. Co., 353 Or. 210, 221 n. 8, 297 P.3d 439 (2013). That general right to recover fees from recalcitrant insurers has been available to Oregon insureds—in essentially the same form as ORS 742.061(1) —since 1919. See Morgan v. Amex Assurance Company, 352 Or. 363, 368, 287 P.3d 1038 (2012) (discussing statutory history (citing Or. Laws 1919, ch. 110, § 1)).

The 1999 legislature, however, created the exception set out in ORS 742.061(3), as well as a parallel exception for actions to recover personal injury protection (PIP) benefits, which is set out in ORS 742.061(2). Or. Laws 1999, ch. 790, § 1. Those exceptions provide:

"(2) Subsection (1) of this section does not apply to actions to recover personal injury protection benefits if, in writing, not later than six months from the date proof of loss is filed with the insurer:

"(a) The insurer has accepted coverage and the only issue is the amount of benefits due the insured; and

"(b) The insurer has consented to submit the case to binding arbitration.

"(3) Subsection (1) of this section does not apply to actions to recover uninsured or underinsured motorist benefits if, in writing, not later than six months from the date proof of loss is filed with the insurer:

"(a) The insurer has accepted coverage and the only issues are the liability of the uninsured or underinsured motorist and the damages due the insured; and

"(b) The insurer has consented to submit the case to binding arbitration."

ORS 742.061.

The exceptions were added at the behest of insurance carriers that were concerned that recent appellate decisions applying ORS 742.061 to PIP and UM/UIM actions had increased the number of actions filed in court. Audio Recording, House Committee on Rules, Elections, and Public Affairs, SB 504, June 14, 1999, at 0:06.22 (statement of Tom Mortland, claims attorney, North Pacific Insurance Company), http://www.leg.state.or.us/listn/1999s.htm (accessed Jan. 20, 2016). As originally drafted, the bill would have exempted all PIP, UM, and UIM claims from attorney fee recovery under ORS 742.061. Representatives of the insurance industry and the private plaintiffs' bar, however, negotiated consensus amendments that limited the exemption to claims for which the insurer did not dispute coverage and consented to binding arbitration, and for which the only issues were "the liability of the uninsured or underinsured motorist and the damages due the insured." Tape Recording, Senate Judiciary Committee, SB 504, May 13, 1999, Tape 179, Side A (statement of Robert Neuberger); Tape Recording, House Rules, Elections and Public Affairs Committee, SB 504, June 14, 1999, Tape 92, Side A (statements of John Powell of North Pacific Insurance, and J. Michael Alexander, representing Oregon Trial Lawyers Association).

B. The Statutory Text in Dispute Here

In this case, there is no dispute that plaintiff has satisfied the basic requirements for an award of fees set out in ORS 742.061(1). There is also no dispute that defendant sent the timely written notice described in ORS 742.061(3). As we recently held, however, an insurer that sends the notice described in ORS 742.061(3) may lose the ability to rely on that safe harbor if it later pursues a litigation strategy that is "broader than that contemplated by the legislature in ORS 742.061(3)." Kiryuta v. Country Preferred Ins. Co., 273 Or.App. 469, 474, 359 P.3d 480 (2015), rev. allowed, 358 Or. 529, ––– P.3d –––– (2016). In Kiryuta, however, we were not called upon to identify the scope of issues "contemplated by the legislature in ORS 742.061(3)." The issue was whether the insurer pursued affirmative defenses it labeled "Contractual Compliance" and "Offset" by pleading them, and there was no real dispute that—if pursued—the affirmative defenses would have involved litigation of issues beyond "the liability of the uninsured or underinsured motorist and the damages due" the insured. Id. at 474, 359 P.3d 480.

This case calls upon us to determine whether the scope of issues "contemplated by the legislature in ORS 742.061(3)" includes a challenge to the extent of the insured's injuries that could result in the insured recovering nothing in the UM action. Defendant does not contend that its challenge to the "extent of plaintiff's injuries" could be considered an issue of "liability of the uninsured or underinsured motorist." Thus, this case requires us to identify the scope of issues of "the damages due the insured" and to determine whether defendant stayed within that scope. As with all issues of statutory construction, we focus primarily on statutory text and context. State v. Gaines, 346 Or. 160, 171, 206 P.3d 1042 (2009).

C. "[A]ctions to Recover Uninsured or Underinsured Motorist Benefits "

Because ORS 742.061(3) applies to "actions to recover uninsured or underinsured motorist benefits," we begin by exploring the nature of those benefits. UM/UIM coverage is a mandatory part of every Oregon motor vehicle insurance policy. ORS 742.502. The benefit that...