by Soha Lang | 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.
by Soha Lang | 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.
by Soha Lang | Apr 22, 2011 | Blog News, Uncategorized
In Smith v. Truck Ins. Exchange, Inc., No. A142954 (Or App Apr 20, 2011), the Oregon Court of Appeals addressed an alleged third-party beneficiary’s claim for underinsured motorist (“UIM”) coverage. Plaintiff was injured while driving a vehicle owned by MD&D; Construction (“MD&D;”). She made a claim for UIM coverage to the insurer, Truck Insurance Exchange, alleging that it had issued insurance on the vehicle. When the insurer denied the claim, plaintiff sued the insurer, asserting claims for breach of contract and declaratory relief alleging that she was a third-party beneficiary on the policy. In addition she sued the broker, alleging that the broker had negligently failed to obtain the insurance. The trial court dismissed the suit on the pleadings, holding that she was not the real party in interest and that she had failed to state facts sufficient to constitute claims for relief in the complaint.
The Court of Appeals reversed on the claims against the insurer and affirmed on the claim against the broker. It first held that the complaint alleged that plaintiff was a permissive user of the vehicle and therefore adequately alleged that she was a third-party beneficiary for the purpose of the breach of contract theory. Next, the court held that plaintiff had no claim against the broker because nothing indicated that she was an intended beneficiary of the broker’s promise to obtain insurance. Finally, the court held that plaintiff’s declaratory judgment claim was insufficient because she had failed to name the insured, MD&D;, as a party in the suit. Nonetheless, the court declined to affirm the dismissal but instead gave plaintiff the opportunity on remand to add MD&D;.
by Soha Lang | Oct 22, 2009 | Blog News, Uncategorized
In Lease Crutcher Lewis WA LLC v. National Union Fire Co. of Pittsburgh, Western District of WA, Dkt No. 2:08-cv-01862-RSL, Order on Motion to Dismiss dated October 20, 2009, Judge Robert Lasnik ruled that an independent adjuster could be liable for bad faith claim handling, but could not be independently sued under Washington’s Insurance Fair C onduct Act (“IFCA”).
Bad Faith
The independent adjuster filed a motion to dismiss based on the theory that an independent adjuster, hired by an insurance company to handle a claim, owes no duty and has no personal liability to an insured for actions taken on behalf of the insurer. The court found that this proposition was completely unsupported by authority. Citing to agency law Washington’s insurance code, the court found that the independent adjuster “had a statutory duty to act in good faith toward [the insured], [and that] the Court need not determine whether the parties had a fiduciary relationship or whether a common law duty of good faith also existed in these circumstances.”
IFCA
After considering the IFCA statute and legislative history, the Court concluded “that the legislature intended to create a private cause of action for damages and attorney’s fees against only the insurer, not its employees or agents.”
By Misty Edmundson
by Soha Lang | Oct 14, 2009 | Blog News, Uncategorized
Water’s Edge Homeowners Ass’n v. Water’s Edge Associates, Dkt. No. 37415-3-II, __ P.3d __, 2009 WL 3087495 (2009).
Division Two of the Washington Court of Appeals affirmed a Clark County trial court’s ruling that an $8.75 Million stipulated judgment amount was unreasonable, and further found that the trial court did not abuse its discretion when it found that $400,000 would have been a reasonable settlement amount.
This was a construction defect action arising out of a condominium conversion project in Clark County, WA. After a failed mediation, the defendants and the plaintiff in the case stipulated to a covenant judgment and assignment of bad faith claims and then moved for a reasonableness hearing. The defendants’ insurers, Farmer’s Insurance Exchange, Truck Insurance Exchange and Mid-Century Insurance Company then intervened to participate in the reasonableness hearing and to conduct limited discovery.
After hearing a full day of argument at the reasonableness hearing and taking the case under advisement for five months, the trial court ruled that $8.75 million was not a reasonable stipulated judgment amount. Instead, the court found that a $400,000 settlement would have been reasonable.
The court of appeals affirmed and found that the trial court did not abuse its discretion. Additionally the court stressed that the trial court correctly found that expectation or remediation damages were not appropriate because the it had dismissed all the contractual warranty claims and thus, the normal cost of repair damages under the Association’s warranty claims were unavailable.
Furthermore, the court of appeals found that when disputing the reasonableness of a settlement, the insurer does not have the burden to prove fraud or collusion, rather “after the parties establish reasonableness, the Chaussee factor is merely whether there is any evidence of bad faith, collusion, or fraud . . . . Nor does any “evidence of bad faith, collusion, or fraud” appear to invoke the typical standard for proof of fraud, which must be proved by evidence that is clear, cogent, and convincing. The burden here was not on Farmers but, rather, on the HOA to prove its settlement was reasonable.”
Finally, the court also held that the trial court properly dismissed the case, as opposed to entering a final judgment in an amount it had already deemed unreasonable or in an amount that the parties’ had not stipulated to.
Farmers Insurance Exchange, Truck Insurance Exchange and Mid-Century Insurance Company were represented by Tyna Ek and Misty Edmundson of Soha & Lang, P.S.
By Misty Edmundson
