In cases involving underinsured motorists (UIM) and personal injury protection benefits (PIP), Oregon allows insureds to recover attorney fees under ORS 742.061 if the insured sues the insurer and recovers more than the insurer offered to settle. Insurers can avoid paying attorney fees by sending a “safe harbor letter” to the insured after receiving “proof of loss.” The three necessary elements for a “safe harbor letter” are: (1) acknowledging acceptance of coverage of the UIM claim, (2) admitting that the only issues are damages and liability, and (3) stipulating to binding arbitration. Often the big question in the UIM context is, what constitutes “proof of loss” sufficient to trigger the obligation to send a “safe harbor letter?”
Claims Pointer: It is best practice to send a “safe harbor letter” as soon as you have any inclination of a potential UIM claim. However, sometimes an adjuster will not know about a potential UIM claim until well after an accident occurs and after an insured is threatening a lawsuit seeking attorney fees under ORS 742.061. When that happens, don’t panic. You may have an out if you did not receive “proof of loss.” In the following case, the Oregon Court of Appeals held that, in a UIM case in which the insured sought attorney fees, that an insurer did not receive proof of loss until they had received notice of the policy limits of the other driver involved in the accident. The Court held that knowledge that the Plaintiff was injured, that the insured had filed a PIP claim, and that the insured was represented by an attorney were not enough to constitute proof of loss.
Hall v. Speers, 267 Or App 639 (December 24, 2014).
On September 16, 2006, Hall was injured in an auto accident. Hall was insured with Allstate for personal injury protection and UIM coverage. Two days later, Hall notified Allstate that the accident had occurred and that she had been injured. On September 27, 2006, Plaintiff filed an application for PIP benefits with Allstate. The application was identical to the application for UIM benefits other than the title. Soon thereafter, Allstate’s PIP adjuster opened a file and noted that the other driver was at fault, but did not communicate with the UIM adjuster. On February 5, 2007, Hall was examined by an orthopedic surgeon, who diagnosed Hall with a number of injuries resulting from the accident that would require physical therapy and steroid injections. On May 24, 2007, Hall’s attorney wrote letters to Allstate’s PIP and general liability adjusters that he represented Hall.
On January 28, 2009, more than two years after being notified of the accident, Allstate sent a “safe harbor letter” (see above). Plaintiff refused arbitration and the case went to trial before a jury. Plaintiff recovered more than the amount offered by Allstate. Hall argued to the trial court that she should be awarded attorney fees pursuant to ORS 742.061. The basis of Hall’s argument was that the PIP application, the medical examiner’s report, and her attorney’s letter to the adjusters constituted proof of loss as of May 24, 2007, more than 8 months prior to Allstate’s “safe harbor letter.” Allstate argued that it did not have proof of loss for a UIM claim until it knew the limits of the other driver’s liability policy, which Hall did not provide until two months before Allstate sent the “safe harbor letter.” The trial court agreed with Allstate, denying Hall’s request for attorney fees. Hall appealed. The Court of Appeals rejected the trial court’s argument, holding that Allstate had enough information to investigate the claim. Allstate sought review with the Oregon Supreme Court. While the case was on appeal, the Supreme Court decided Zimmerman, which spoke to a similar issue. The Supreme Court remanded the case to the Court of Appeals.
The second time before the Court of Appeals, the Court referenced Zimmerman and reached the conclusion that what Allstate had received prior to November 2008, (the PIP application, the surgeon’s report, and the letter from Hall’s attorney) did not in fact constitute proof of loss. Notably, the Court was unimpressed that the PIP application was identical to the UIM application. Also, the Court pointed out that the attorney’s letters only told Allstate that Hall was represented and that her attorney was requesting documents, medical expenses paid, and photographs. The letter mentioned nothing about a UIM claim. While that information could potentially constitute proof of loss for PIP or general liability, it was insufficient for proof of loss for purposes of UIM coverage. Because UIM coverage depends on the limits of the other driver’s insurance, there is no proof of loss until the insurer learns of those limits. Because Allstate sent its safe harbor letter within six months after receiving policy limits from Plaintiff, it complied with ORS 742.061 and was not required to pay attorney fees.
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.