Oregon Supreme Court reinstates $8 million punitive damages award against an insurance company

by | May 25, 2011 | Blog News, Uncategorized

In Strawn v. Farmers Ins. Co. of Oregon, S057520 (May 19, 2011), the Oregon Supreme Court reinstated an $8 million punitive damages judgment that the Oregon Court of Appeals had overturned.

In this case, the insurer used cost-containment software to evaluate its insureds’ medical expenses for personal injury protection (PIP) claims. If the insurer determined that the charge submitted by an insured’s provider exceeded a set percentage of the normal range, the insurer refused to pay the excess on the ground that it was “unreasonable.” Plaintiff filed a class action as the representative of a class who alleged that the insurer’s review process set an arbitrarily low percentage (initially, 80 percent) that resulted in the denial of claims for reasonable medical expenses. Following a jury trial, the trial court entered a judgment against the insurer for approximately $900,000 in compensatory damages and $8 million in punitive damages. The Court of Appeals reduced the punitive damages award, holding that it violated Due Process. The Supreme Court then accepted review.

Before the Supreme Court, the insurer contended that the trial court had court “cut off” its ability to rebut the reasonableness of the plaintiff’s medical expenses by excluding evidence that it, e.g., reimbursed plaintiffs in an amount that represented their reasonable medical expenses. The Supreme Court declined to reach the merits of the argument, holding that the insurer had failed to raise it below. Next, the insurer contended that it was entitled to a directed verdict on the plaintiffs’ fraud claim, contending that the plaintiffs had failed to offer direct proof of individualized reliance. The Supreme Court rejected the argument, holding that, on the facts presented, reliance could be inferred from circumstantial evidence. In particular, reliance could be inferred because the claims were based on a uniform provision in motor vehicle insurance required for drivers under Oregon’s financial responsibility laws. Finally, the Supreme Court reversed the Court of Appeals and reinstated the $8 million punitive damages claim, holding that the insurer had failed to properly preserve error. Following the verdict, the insurer had moved for a remittitur and for new trial. The trial court declined to reduce the punitive damages award on both procedural grounds (because the insurer’s motions were insufficient to challenge the verdict) and substantive grounds. The Supreme Court held that while the insurer had properly appealed the substantive basis for the trial court’s ruling, the insurer had failed to appeal from the trial court’s procedural basis and, therefore, had had waived any error.

Justice Balmer dissented.

Oregon Court of Appeals rules that an insured is not entitled to attorney fees under ORS 742.061 where the policy was issued outside of the state

by | May 21, 2011 | Blog News, Uncategorized

In Morgan v. Amex Assur. Co., 2011 WL 1878607 (Or App 2011), the insured obtained automobile insurance when she was living in Vancouver, Washington. The insurer issued a Washington insurance policy and delivered it to the insured’s Vancouver address. The insured made an underinsured motorist claim under her policy. After the insurer failed to accept coverage or tender payment, the insured filed suit. The insured accepted a pretrial offer of judgment that included “any costs and attorney fees to which plaintiff may be entitled.” The Court of Appeals held that the insured was not entitled to any attorney fees under ORS 742.061. It reasoned that attorney fees were unavailable based on a second statute, ORS 742.001, that limits the scope of Chapter 742, including ORS 742.061, to “insurance policies delivered or issued for delivery in this state.” The insured’s policy did not satisfy this second statute because it was issued and delivered in Washington.