Oregon Case Law Update: Safe Harbor Letter Not a Sure Thing
From the Desk of Joshua P. Hayward: Under ORS 742.061, a first party plaintiff is entitled to attorney fees if they recover on a first party claim. An exception to this rule applies in the uninsured (UM) or underinsured (UIM) context: insurers can avoid paying attorney fees if within six months of the proof of loss they send a so-called “safe harbor letter” in which they accept coverage and agree to binding arbitration, leaving liability and damages as the only remaining issues. Even if the appropriate letter is sent, however, an insurer can lose this protection by raising defenses.
Claims Pointer: In a prior case update, we discussed the Court of Appeals opinion in Kiryuta v. Country Preferred Ins. Co., 273 Or App 469 (September 2, 2015). Now, the Supreme Court has affirmed the Court of Appeals, thus making the rule announced in that case settled Oregon law. Even if an insurer sends a proper safe harbor letter, if the insurer raises arguments in its pleadings that go beyond the issues of liability and damages, it can lose the protection of the safe harbor letter and be exposed to attorney fees.
Kiryuta v. Country Preferred Ins. Co., 360 Or 1 (July 14, 2016).
Roman Kiryuta (Kiryuta) sustained injuries following a motor vehicle accident with an underinsured motorist. Country Preferred Insurance Company (Country) paid his Personal Injury Protection (PIP) claim but did not resolve his UIM claim. Country then sent Kiryuta a letter satisfying the safe harbor requirements of Oregon law, and the case was arbitrated. After Kiryuta prevailed at arbitration, however, the arbiter awarded him attorney fees, reasoning that Country’s defenses had raised issues beyond liability and the amount of damages due.
Country appealed the award of attorney fees to circuit court, and the court concluded that the safe harbor letter precluded the award of fees. Kiryuta appealed to the Court of Appeals, and that court reversed the circuit court, holding that because Country raised issues in its pleadings in addition to the liability of the underinsured motorist and the damages due to Kiryuta, it was ineligible for the protections of its safe harbor letter. Country appealed.
The Supreme Court reviewed the pleadings at issue, noting that in its Answer to Kiryuta’s Complaint, Country raised affirmative defenses of “Offset” and “Contractual Compliance.” The Court focused its analysis on the “Contractual Compliance” defense, concluding that Country had opened the arbitration to issues beyond motorist liability and damages due by alleging that plaintiff’s UIM benefits were subject to “all terms and conditions” of the insurance policy. The Court explained that the broad affirmative defense of contractual compliance extended the boundaries of relevancy in the arbitration proceedings to any “terms and conditions” of the policy that could defeat Kiryuta’s claims for benefits, including those that could potentially result in denial of coverage for plaintiff’s losses. Because Country’s arbitration pleadings expanded the scope of arbitration beyond the restrictions of the safe harbor statute, it was not entitled to the protections of its safe harbor letters, and an award of attorney fees was proper. The case was remanded to the circuit court to award reasonable attorney fees.
View full opinion at: http://www.publications.ojd.state.or.us/docs/S063707.pdf
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.
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