:: Legal Updates

Click here to see the recent edition of Bodyfelt Mount's newsletter Lex Loci in pdf.

ATTORNEY FEES IN UM/UIM CLAIMS

The Oregon Supreme Court recently decided Scott v. State Farm Mutual Automobile Insurance Company, 2008 WL 2834274, a case about the recovery of attorney fees in the context of an uninsured motorists (UM) claim.  Here, plaintiff, insured by State Farm, was hit by an uninsured motorist.  In plaintiff’s initial conversation with the State Farm representative, they discussed the various types of coverage available and there was some dispute over whether plaintiff was going to pursue UM benefits.  Thereafter, plaintiff completed an application for PIP benefits.  In keeping with State Farm’s internal practice of separating PIP and UM claims, the PIP application was not sent on to the UM department.  Several weeks later, plaintiff informed State Farm of her interest in pursuing a UM claim.  State Farm sent new forms to fill out, which plaintiff completed and returned approximately six weeks after submitting her PIP application.  Almost six months went by when plaintiff’s counsel wrote to State Farm asserting that six months had passed and he would be entitled to attorney fees pursuant to ORS 742.061 if the claim did not settle.  State Farm responded by accepting coverage and consenting to arbitration.  Plaintiff then filed this action seeking UM benefits and attorney fees. 

Eventually, the UM claim settled, but the claim for attorney fees could not be resolved.  On cross motions for summary judgment, the trial court found that plaintiff had not submitted her proof of loss more than six months before State Farm accepted coverage and agreed to arbitration (the prerequisites under ORS 742.061 to be entitled recover fees).  The question came down to whether the PIP application initially submitted constituted proof of loss for the UM claim.  The trial court held it did not and dismissed plaintiff’s claim. 

On appeal, the Oregon Court of Appeals agreed.  That court concluded that plaintiff was required to submit a written claim sufficiently stating her intention to pursue a UM claim.  Plaintiff sought review by the Oregon Supreme Court, arguing, as it had below, that she submitted the required proof of loss when she completed the PIP application, that more than six months had passed before State Farm accepted coverage and consented to arbitration, and that as a result, she was entitled to fees.  The Oregon Supreme Court, in an en banc decision, agreed with plaintiff and reversed the Court of Appeals, remanding the case back to the trial court for further proceedings.  The Supreme Court diverged from the Court of Appeals’ analysis by distinguishing between the statutory terms “proof of loss” and “proof of claim” and decided that plaintiff’s PIP application contained all the information State Farm needed to know that she might seek UM benefits.  As a result, State Farm’s acceptance of coverage and consent to arbitration came more than six months after the proof of loss was submitted and plaintiff was entitled to recover her attorney fees. 

As it now stands, “proof of loss” is adequate, as defined in an earlier Supreme Court decision, if an event or submission, both for purposes of collecting on the policy itself and for obtaining attorney fees under ORS 742.061, accomplishes the purpose of a proof of loss.  That purpose is to afford the insurer an adequate opportunity for investigation, to prevent fraud and imposition upon it, and to enable it to form an intelligent estimate of its rights and liabilities before it is obligated to pay. 

The defense bar has voiced concerns over the effect this case will have on plaintiffs’ right to recover attorney fees on UM/UIM claims. A cautious insurer should begin counting its six month period to accept coverage and consent to arbitration from the first notice of a claim, instead of relying on a special UM claims form. After this decision, it is likely that the trial courts will be interpreting what constitutes proof of loss using a far broader definition than it has in the past.

STATUTE OF LIMITATIONS - DISCOVERY RULE

In Vol. 10, no. 6 of this newsletter, we reported on the Oregon Court of Appeals’ decision in Johnson v. Multnomah County Department of Community Justice, 210 Or App 591, 152 P3d 927 (2007). There, the Oregon Court of Appeals examined when the statute of limitations began to run in the situation where a teenaged girl had been raped by a man who was under post-prison supervision by the defendant. The defendant argued that the claim was barred by the statute of limitation, but the Oregon Court of Appeals disagreed, holding that a jury could find that plaintiff did not acquire sufficient knowledge to trigger the statute until years after the rape. The defendant sought review of this decision, and the Oregon Supreme Court affirmed on February 14, 2008.  Johnson v. Multnomah County Department of Community Justice, 344 Or 111, 178 P3d 210 (2008). 

A month later, the Oregon Supreme Court addressed a very similar issue in T.R. v. The Boy Scouts of America and City of The Dalles, 344 Or 282, 181 P3d 758 (2008). In this case, a teenaged boy enrolled in an Explorer Scout program created and operated by the City of The Dalles’ police department. The officer running the program befriended and eventually began sexually abusing the boy. Some six years later, plaintiff became aware of a similar incident involving a second officer and called to report his experience with the state police. Plaintiff also attended grand jury proceedings and claimed that that was his first notice that the city itself failed to prevent the abuse by its practices of failing to implement youth protection training, failing to train the officers, failing to investigate and discipline violations of the anti-fraternization policy, impeded attempts to investigate allegations, and continued to operate the program without protection or oversight. Plaintiff then filed a lawsuit against the city. The city claimed the lawsuit was filed too late and plaintiff’s claim was barred. The trial court agreed with plaintiff that the statute of limitations defense required resolution of a question of fact and denied the city’s motion for a directed verdict.

At trial, plaintiff was awarded $81,260 in damages and $261,701.92 in costs and attorney fees. The Court of Appeals reversed and held that plaintiff’s claim accrued when the acts of abuse were committed. On review, the Oregon Supreme Court reversed the decision of the Court of Appeals and remanded the case for further proceedings. The court reiterated that the statute of limitations does not begin to run until a reasonably prudent plaintiff perceives both the injury and the role that the defendant played in that injury. Expanding on that, the court discussed when a plaintiff has a duty to investigate and determined that the statute of limitations only begins to run if the investigation would have disclosed the necessary facts. As applied to the facts in this case, the court found that because plaintiff was a minor when the abuse occurred, a jury could have found that a teenager reasonably may not have suspected that higher city officials could have been to blame for his abuse. Additionally, plaintiff did attempt to ask questions of two different officers when the abuse was happening and the lack of reaction from those officers reinforced plaintiff’s reasonable belief that further inquiry would not be productive. The court summarized that on the record before it, a reasonable jury could have found that plaintiff, at the time the abuse was occurring, acted reasonably in not undertaking an investigation of whether the city itself had caused him harm.

Additionally, the court suggested that even if an inquiry had been made, they could not conclude that facts would have been revealed indicating the city may have caused plaintiff’s harm. It is worthwhile to note that plaintiff also brought claims against the Boy Scouts of America and the individual officer. The trial court dismissed the claims against the Boy Scouts. At trial, the court entered judgment against the officer, who had already been convicted of abusing boys. The only issue on appeal was the statute of limitations as it applied to the city.

PUNITIVE DAMAGES

In Goddard v. Farmers Insurance Company of Oregon, 344 Or 232, 179 P3d 645 (2008), the Oregon Supreme Court addressed a constitutional challenge to a punitive damage award that a jury rendered against Farmers Insurance based on its bad faith failure to settle a third party’s claim against one of its insured within the policy limits.

The facts are as follows: Farmers’ insured, Munson, while under the influence, killed another driver. The deceased’s estate made a policy limits demand which, despite the insured’s criminal conviction for negligent homicide, Farmers rejected. The wrongful death case resulted in a verdict for the deceased’s estate in the amount of $863,274. Thereafter, Munson assigned his bad faith claim to the deceased’s estate and the estate prosecuted the claim against Farmers.

That case went to trial and resulted in a special verdict for the plaintiff. The jury concluded that Farmers was 80% at fault for entry of the $863,274 wrongful death judgment. Additionally, the jury determined that because of its wrongdoing in failing to settle the wrongful death case, Farmers should pay $20,718,576 in punitive damages. The trial court reduced the compensatory damages but refused to reduce the punitive damages award. Both parties appealed to the Oregon Court of Appeals.

On the punitive damage issue, the Court of Appeals deemed the award grossly excessive and therefore unconstitutional under the Due Process Clause of the Fourteenth Amendment. The court concluded that the highest permissible punitive damages award that a jury could have made was three times the compensatory damages award. The Oregon Supreme Court allowed review on plaintiff’s challenge of the Court of Appeals’ determination that the punitive damages award was unconstitutional. The Oregon Supreme Court affirmed the Court of Appeals but modified the calculations of punitive damages. It vacated and remanded with instructions to grant Farmers’ motion for new trial, limited to the punitive damages issue, unless plaintiff agreed to reduce the punitive damage award to four times compensatory damages awarded. In using the so-called “guideposts” discussed by the United States Supreme Court in its recent punitive damage cases, the Oregon Supreme Court attempted to fashion an acceptable ratio in a case, like this, in which the conduct causes only economic harm as opposed to a risk of physical harm. In doing so, the court examined the facts with regard to Farmers’ actions in the underlying wrongful death case, and concluded that the proper ratio for this case was 4:1, which is to say that the punitive damages could not exceed four times the amount of compensatory damages, which the court determined to be $690,619.20 plus prejudgment interest (which was estimated to be $589,000). The total of punitive damages was likely to be just over $5 million.

ECONOMIC LOSS DOCTRINE

The Oregon Supreme Court determined the scope of the economic loss doctrine in Harris v. Suniga, 344 Or 301, 180 P3d 12 (2008). The economic loss doctrine bars a party that has suffered purely economic loss from bringing a negligence action against the party that caused the loss, unless there is a special relationship between the parties. In this case, plaintiffs were trustees of a trust that purchased an apartment building that plaintiffs alleged had been negligently constructed by defendants. Defendants had built the apartment building for an investment company, which later sold it to plaintiffs. Plaintiffs alleged they were harmed by defendants’ negligence in constructing the building, and defendants asserted the economic loss doctrine arguing that there was an absence of a special relationship between the parties and the claim should be dismissed. The trial court granted summary judgment for defendants. On appeal, the Court of Appeals reversed. On review, the Oregon Supreme Court affirmed the Court of Appeals distinguishing between purely economic loss (such as a reduced stock price, a monetary gift to a beneficiary or an indebtedness incurred) and damage to property. Here, plaintiffs sought recovery because defendants’ negligence caused dry rot in the building that plaintiffs own. Because this case involved physical damage to property, the economic loss doctrine does not apply.

MEDICAL WRITE-OFFS ARE STILL RECOVERABLE

The Oregon Court of Appeals finally addressed the issue that trial courts around the state were deciding in various ways. In two opinions decided the same day, Cohens v. McGee, 2008 WL 2953474 and White v. Jubitz Corporation, 219 Or App 62, 182 P3d 215 (2008), the Court of Appeals decided that write-offs are recoverable economic damages. The court further concluded that write-offs are “collateral benefits” as defined by statute, and write-offs resulting from Medicare coverage are “federal Social Security benefits,” thus exempt from reduction by a court. The issue rose this way in the White case: plaintiff was injured when the barstool he was sitting on collapsed underneath him. He received medical care for which medical providers billed him over $38,000. However, because plaintiff had Medicare coverage, his medical providers wrote off over $25,000. Medicare paid the remaining amount thus discharging plaintiff’s obligation to pay the providers. Plaintiff filed a lawsuit claiming the entire $38,000 in economic damages. Defendant sought exclusion of the amount written off. The trial court denied the motion but allowed defendant leave to submit a post-verdict motion regarding the expenses that had been written off. The jury returned a verdict of $37,600 representing the full amount of medical expenses without reduction for the write-offs. Defendant filed a post-verdict motion seeking a reduction in the verdict which was denied.

On appeal, the court rejected defendant’s argument that plaintiff should not be entitled to recover damages that were never actually paid. The court engaged in an analysis of the statutory language defining economic damages. Defendant argued that the portion of expenses written-off was not “incurred” by plaintiff, i.e., he never had to pay them. However, the court determined that the expenses were incurred at the time of treatment – the measure then is what was billed, not what was paid. Additionally, the court construed the language defining whether the medical expense write-offs are collateral benefits (and thus exempt from reduction) according to statute. It determined they were. Finally, the court concluded that Medicare write-offs are “federal Social Security benefits,” which, by statute, are precluded from being reduced by the court. 

The Cohens case was remarkably similar except there plaintiff’s medical provider had written off charges pursuant to its agreement with the Oregon Health Plan. The only issue in Cohens that was not resolved by White was whether the Oregon Health Plan write-offs were benefits from a Social Security program. The court concluded that it was. The Oregon Health Plan is Oregon’s Medicaid program and it, like Medicare, is a federal Social Security program. Pursuant to statute, a court may not reduce a plaintiff’s award of damages by the amount of write-offs that an injured party receives pursuant to Medicaid coverage. 

The net result of White and Cohens is that any defendant in a personal injury case should be evaluating their exposure based upon the total amount billed by medical providers instead of the amount actually paid. 

 

WRONGFUL DEATH CAP UPHELD

In a decision handed down on February 22, 2008, the Oregon Supreme Court upheld the $500,000 cap on non-economic damages in wrongful death cases: Hughes v. PeaceHealth, ___ Or ___ (February 22, 2008).

In this case, plaintiff’s daughter died while under the care of certain PeaceHealth medical providers. Plaintiff filed a lawsuit against PeaceHealth alleging wrongful death. The case went to trial and the jury returned a verdict for plaintiff including one million dollars in non-economic damages. The trial court applied ORS 31.710 to reduce the non-economic damages award to $500,000. Plaintiff appealed arguing that the statutory cap on non-economic damages violated her right to a jury trial under Article I, section 17, of the Oregon Constitution, as well as the Remedy Clause of Article I, section 10. The Oregon Court of Appeals affirmed the trial court’s application of the damages cap based on a 1995 case in which almost identical constitutional challenges to the statutory damages cap were rejected. Plaintiff sought review by the Oregon Supreme Court.

In analyzing whether the statutory cap violates the Remedy Clause, the Oregon Supreme Court used its familiar methodology of determining whether the common law of Oregon recognized a cause of action similar to plaintiff’s (here, wrongful death) when the Oregon Constitution was written in 1857. The court, reiterating its numerous rulings in the past on this issue, again declared that in Oregon, wrongful death is an entirely statutory cause of action that did not exist in common law in 1857. As such, there was no violation of the Remedy Clause.

With regard to the right to jury trial argument, the court revisited its 1995 decision in Greist v. Phillips, 322 Or 281, 906 P2d 789 (1995), in which it held that the right to a jury trial did not pertain to wrongful death actions. The court declined plaintiff’s invitation here to disavow Greist. Instead, the court held fast to its prior ruling that because the common law in 1857 did not recognize a right to unlimited damages in a wrongful death action, the present statutory limitation on noneconomic damages does not violate plaintiff’s right to a jury trial. It is worth noting that this decision was rendered by the majority, albeit only four justices (De Muniz, Gillette, Balmer, Kistler). Two justices (Durham, Walters) wrote separate, dissenting opinions.

NEW LEGISLATION EFFECTIVE JANUARY 1, 2008

There were several significant pieces of legislation introduced during the 2007 legislature. Although all of the bills did not pass, several did. The laws described below become effective on January 1, 2008, unless otherwise noted. Following are summaries of some of the bills. The full text and measure history of the bills identified is available on the Legislature’s website at
http://www.leg.state.or.us/searchmeas.html.

EMPLOYMENT
Senate Bill 248 – This bill regulates noncompetition and arbitration agreements between employers and employees entered into after January 1, 2008. Such agreements will be voidable unless the employer provides written notice at least two weeks in advance of the first day of employment informing the employee that a noncompetition or arbitration agreement is required as a condition of employment. The two week notice does not apply when the agreement is entered into upon subsequent bona fide advancement of the employee. Additionally, there are new restrictions on the types of employees for whom such agreements are valid. Noncompetition agreements are only valid for administrative, executive, and professional employees (those who are exempt under Oregon wage laws) with respect to whom the employer has a “protectable interest” and whose annual gross salary and commissions exceed the medial family income for a four-person family as decided by the U.S. Census Bureau (which is currently about $62,000 per year).

Senate Bill 946 – This bill went into effect on May 25, 2007. This bill, which applies to employers with 6 or more employees in Oregon (with additional qualifying events such as the length of employment and average number of hours worked per week), allows employees who are the victims of domestic violence, sexual assault or stalking to take unpaid leave from work for a reasonable period of time to seek assistance. This bill allows leave for an “authorized purpose” such as seeking legal assistance or working with law enforcement; seeking medical treatment or recovering from injuries; obtaining counseling or services from a victim services provider; or relocating or taking steps to secure a safe home for the employee. This bill also applies to parents or guardians of minor children who are victims.

Senate Bill 2 - This bill prohibits discrimination on the basis of sexual orientation in employment, housing and public accommodation. “Sexual orientation” is broadly defined to include “actual or perceived heterosexuality, homosexuality, bisexuality or gender identity, regardless of whether the individual’s gender identity, appearance, expression or behavior differs from that traditionally associated with the individual’s sex at birth.” This bill authorizes a victim of sexual orientation discrimination to file a civil action for actual damages, punitive damages and attorney fees.

House Bill 2260 – This bill amends ORS 659.885(3) to expand available relief to employees who prevail on employment discrimination claims by allowing compen-satory and punitive damages in Oregon State Court. This will apply to new lawsuits filed after January 1, 2008. Currently, the statute allows recovery of injunctive relief such as reinstatement, back pay and attorney fees.

House Bill 2372 – This bill requires employers to provide one 30 minute unpaid break for every four hours worked for nursing mothers to express milk, unless it would create an undue hardship on the employer. The employer must make a reasonable effort to provide the employee with a private location to express milk. A public restroom is not considered a private location.

House Bill 2254 – This bill amends ORS 652.750 by adding that employees can have access to inspect or obtain a certified copy of their personnel file within 45 days of their request. The employee and employer may agree to extend this time frame if personnel records are not readily available. Violations can result in a fine of $1,000.

House Bill 2485 – This bill amends ORS 659A.174 to permit employees to use their accrued paid sick leave (in addition to vacation leave) while on leave under the Oregon Family Leave Act (OFLA).

House Bill 2460 – This bill amends the definition of “family leave” in ORS 659A.150(3) by specifying that family leave does not include workers’ compensation leave taken by an eligible employee (in other words, OFLA leave does not run concurrently with workers’ compensation leave).

House Bill 2635 – This bill amends ORS 659A.150(4) to include grandparents and grandchildren within the definition of covered “family members” under OFLA. This bill also creates a cause of action (prospectively and retroactively) for retaliation for OFLA-related rights.

House Bill 2255 – This bill amends current law to make discrimination or retaliation for making a wage claim an unlawful employment practice.

House Bill 2258 – This bill amends ORS 652.120 adding that when an employee puts an employer on notice that the employee has been underpaid by more than 5% of gross wages due, the employer must pay the unpaid amount within three days of notice. If the underpayment is less than 5% of gross wages, the employer may wait to pay on the next regular payday.

House Bill 2259 – This bill went into effect on June 1, 2007. This bill amends ORS 654.062 to increase the amount of time in which a retaliation complaint may be filed with BOLI related to the reporting of workplace safety violations or filing an OSHA complaint. An employee now has 90 days (increased from 30 days) of having reasonable cause to believe a violation has occurred. BOLI must complete its investigation and notify the complainant within 90 days of filing the complaint.

House Bill 2007 – This bill provides, among other things, that any privilege, immunity, right or benefit granted by state law to married individuals is granted to individuals who are in a same-sex domestic partnership.

Senate Bill 583 – This bill went into effect on October 1, 2007. This bill requires any person (including an employer) that “owns, maintains or possesses” individual personal information to notify the individual after a security breach.

PERSONAL INJURY SETTLEMENTS WITH MINORS
House Bill 3083 – This bill amends ORS 126.826 to allow minor settlements up to $25,000 without court approval.  the settlement agreement is binding on the minor and has the effect as if the minor were a competent adult entering into the settlement agreement. There are a couple of requirements:
1)  the person entering the settlement on behalf of the minor must have legal custody of the minor,
2)  a conservator cannot have been appointed for the minor,
3)  the settlement funds must be deposited directly into a federally insured savings account in the sole name of the minor with notice of the deposit to the minor,
4)  the person entering into the settlement agreement on behalf of the minor must complete an affidavit or verified statement attesting that the person has made a reasonable inquiry and
   (A) To the best of the person's knowledge, the minor will be fully compensated by the settlement; or
   (B) There is no practical way to obtain additional amounts from the party entering into the settlement agreement with the minor.

 

ECONOMIC LOSS DOCTRINE IS REFINED
In Harris v. Suniga, ___ Or App ___ (December 6, 2006), the Oregon Court of Appeals held that deterioration to the physical structure of a building because of defective construction is property damage and not “economic loss,” and that the economic loss doctrine does not bar a negligence claim by a subsequent purchaser against the builder to recover damages for the costs of repairing structural damage due to defects in construction. The court reminded the parties that the Oregon Supreme Court had held in a 1979 case that a subsequent purchaser of a building can bring a negligence claim against the builder. The court rejected the notion that recent cases have called the 1979 case into question.

In Simpkins v. Connor, et al, ___ Or App ___ (December 27, 2006), plaintiff, the widow of defendants’ patient, filed a negligence claim alleging that defendant hospital failed to produce some of the medical records of her late husband. Because of this, plaintiff lost the ability to file a medical malpractice or wrongful death action against the hospital and one of its doctors. The trial court found that plaintiff’s complaint failed to state a claim for negligence. The Oregon Court of Appeals reversed concluding that plaintiff’s complaint sufficiently stated a claim for relief. Although the court agreed that because plaintiff alleged negligence resulting in purely economic harm she was required to allege some duty beyond the common-law duty to avoid foreseeable harm, the court found that former ORS 192.525(2) created a duty on health care providers to produce medical records to patients. Even without citing that statute in her complaint, plaintiff’s complaint was found sufficient to withstand a motion for judgment on the pleadings.

In Bunnell v. Dalton Construction, Inc., ___ Or App ___ (December 27, 2006), another purely economic loss case based on home construction, plaintiffs sued the builder of their home after discovering substantial damage caused by water leakage due to defectively installed siding. The trial court granted defendant’s motion for summary judgment on the basis that claims for economic harm are not recoverable in negligence in the absence of a special relationship between the parties that gives rise to a duty beyond the ordinary duty to avoid a foreseeable risk of harm. For the same reasons discussed in Harris v. Suniga, above, the court reversed the trial court’s judgment and remanded for further proceedings.

In Wild Rose Ranch Enterprises, LLC, v. Benton County, ___ Or App ___ (December 27, 2006), the court addressed another economic loss case. In this case, plaintiff purchased certain mineral rights from a third party after the County had told plaintiff it could resume mining activities without a conditional use permit. Within six months, and after plaintiff had purchased the mineral rights and entered into a contract with a different company to operate the quarry, the County sent a letter to plaintiff ordering it to cease operation of the quarry until a conditional use permit had been issued. Plaintiff did so, applied for the permit and the County denied the application. Plaintiff sued the County based on negligence and negligent misrepresentation, seeking the purchase price of the mineral rights and the lost revenues from the contract. At trial, the jury returned a verdict in plaintiff’s favor. The County appealed asserting that Oregon law does not permit a plaintiff to recover for purely economic harm caused by negligence or negligent misrepresentation unless a special relationship exists between the parties that gives rise to a defendant’s duty to protect a plaintiff from such economic harm. Plaintiff argued that a County ordinance which provided that the Planning Official shall provide the official interpretation of the Code was sufficient to create the requisite duty on the County to protect plaintiffs from economic loss resulting from erroneous land use information. The court disagreed indicating that the ordinance does not suggest that the County intended to create tort liability in situations where the planning official’s interpretation of the code proved to be faulty. Likewise, the court found no intent by the County to undertake to protect plaintiff’s economic interests. The court reversed the trial court’s judgment finding that the trial court erred in denying defendant’s motion for a directed verdict at trial.

COURT ADDRESSES STANDARD OF CAUSATION IN WRONGFUL DEATH ACTION
The Oregon Supreme Court allowed review of the court of appeals’ decision in Joshi v. Providence Health System, 198 Or App 535, 108 P3d 1195 (2005) to address two related causation questions: (1) whether the “but for” standard or the “substantial factor” standard applies to this wrongful death action; and (2) whether expert testimony that defendants’ conduct probably increased the chance of decedent’s death creates a jury question as to causation. Joshi v. Providence Health Systems, ___ Or ___ (December 21, 2006). In this case, plaintiff’s husband sought treatment for symptoms in the emergency room, underwent certain diagnostic studies and was then released home. Within days, he was back in the emergency room where it was determined that he had suffered a stroke, but treatment was unsuccessful and he died two days later. At trial, the court directed a verdict for the defendants because plaintiff’s expert could not testify that the deceased probably would have survived if defendants had correctly diagnosed and treated him. The court of appeals affirmed determining that the relevant causation standard was “evidence of a reasonable probability that, but for the defendant’s negligence, the plaintiff would not have been harmed.” Plaintiff argued the standard of causation should have been the “substantial factor” test.

The Oregon Supreme Court affirmed the court of appeals’ decision indicating that a plaintiff in a wrongful death case must demonstrate that the defendant’s negligent act more likely than not brought about the death of the decedent. The court concluded that under the wrongful death statute, both the reasonable probability standard of causation, as well as the substantial factor standard, are encompassed, and which standard to be applied depends upon the circumstances of the case. In this case, the court rejected the notion that the “substantial factor” standard should be applied. On the second issue, the court declined to adopt plaintiff’s theory of the last chance of survival citing the language in the wrongful death statute which requires that a plaintiff prove that a defendant’s negligence act caused the decedent’s death. In this case, plaintiff’s expert testified that at most, defendants’ failure to timely diagnose his condition deprived decedent of a 30% chance of surviving a stroke. Because plaintiff failed to prove the elements of the wrongful death action as set forth in the statute, the trial court correctly directed a verdict for defendants.

ANTI-ASSIGNMENT CLAUSE IN INSURANCE POLICY HELD TO BE UNAMBIGUOUS
In Holloway v. Republic Indemnity Company of America, 341 Or 642 (November 16, 2006), the Oregon Supreme Court examined an anti-assignment clause in a “Workers’ Compensation and Employers’ Liability Policy.” The clause stated “[y]our rights or duties under this policy may not be transferred without our written consent.” The insured employer had two employees, one of whom sexually harassed the other. The victim brought an action against the employer. The employer tendered the defense to its insurance company, but the insurer refused to defend. The employer then settled with the victim paying a certain sum and assigning to the victim all of the insured’s rights to any claim the insured employer might have against the insurer. The victim then brought this action against the insurer alleging breach of contract. On cross motions for summary judgment, the trial court held that the insurer had no duty to defend or indemnify due to certain exclusions in the policy. As such, judgment was entered for the insurer. The victim appealed. The court of appeals reversed the trial court holding that the victim’s complaint against the insured alleged conduct that did not fall within the insurance policy’s exclusions and that the purported assignment to the victim was valid because the language was ambiguous and should be construed against the insurer. On review, the Oregon Supreme Court reversed, holding that the assignment of rights under the policy from the insured to the victim was not valid. The court reasoned that the anti-assignment clause restricted the assignment of the insured’s rights unambiguously. Because the insured had not obtained the insurer’s written consent of the assignment, the assignment was not valid.

TIPS FOR EMPLOYERS
As of January 1, 2007, Oregon minimum wage increased to $7.80 per hour. The Oregon Bureau of Labor and Industries has new minimum wage posters available to replace the old posters. BOLI also has its new Wage and Hour Handbook available for purchase. Check the website at www.oregon.gov/boli.

For those of you who respond to BOLI complaints and have routinely sought extensions to file your position statement, be warned! BOLI has proposed amendments to the administrative rules regarding civil rights complaint timelines. (OAR 839-003-0025 and 0065). The amendments will clarify existing policy that the civil rights division notifies a respondent within 30 days of a complaint. The respondent then has 14 days to file a written response. While the proposed rule does not specify, BOLI has stated that they will allow the respondent one ten-day extension to file its response, but no more. If the complaint involves an OSHA claim, no extension will be granted. The safest way to proceed upon receipt of a complaint is to call the person identified by BOLI in its notice immediately to request a ten day extension.

WHETHER INSURED IS ENTITLED TO UIM BENEFITS REQUIRES COMPARISON OF INSURED'S POLICY LIMITS TO TORTFEASOR'S POLICY LIMITS
In Mid-Century Insurance Company v. Perkins, ___ Or App ___ (December 13, 2006), the Oregon Court of Appeals found that liability limits are compared with UIM limits to determine whether a claimant is underinsured. The issue before the court was whether Perkins was injured by an “underinsured” vehicle as defined under Oregon law. Mid-Century issued an automobile insurance policy to Perkins with $100,000 limits per person. The policy included uninsured motorist (UM) coverage and underinsured motorist (UIM) coverage for an accident caused by an underinsured vehicle, which the policy defined as “a motor vehicle that is insured for an amount less than the underinsured motorist limits.” Perkins was injured in an automobile accident caused by Elster. Elster had an automobile insurance policy with $100,000 in liability coverage and Perkins recovered those policy limits. Perkins then sought UIM benefits from Mid-Century contending that his damages exceeded his recovery under Elster’s policy. Mid-Century filed a declaratory judgment action to determine whether Mid-Century is obligated to pay underinsurance benefits to Perkins in light of the $100,000 limits in both Perkins’ and Elster’s policies.

After resolving a question of whether Oregon or Washington law applied (the court applied Oregon law), the court went on to discuss the evolution of UM and UIM motorist coverage under Oregon law. In that context, the court explained the Bergmann v. Hutton case (decided in December 2004) in which the Oregon Supreme Court did not compare the insured’s policy limits and the tortfeasor’s policy limits to determine whether the insured is underinsured, but rather compared the insured’s damages to the tortfeasor’s policy limits. Here, Perkins argued, based on Bergmann, that if the insured’s damages exceed the insured’s recovery from the tortfeasor, it follows that the tortfeasor is underinsured and that the insured is entitled to UIM benefits up to the limits of his policy, in addition to any amounts he recovered from Elster’s policy. The court distinguished this case and the Bergmann case on the basis that the question in Bergmann was not whether the insured was entitled to UIM benefits, but rather, whether the insurer could offset certain payments when calculating those benefits. Finally, the court determined that the definition of an underinsured vehicle in Perkins’ policy required a comparison of the amount of Elster’s policy and the amount of Perkins’ policy. If the amount of Elster’s policy is “an amount that is less than” Perkins’ policy, Elster is underinsured within the meaning of the statute and Perkins’ policy and Perkins’ is entitled to UIM benefits. In this case, because Perkins’s UM/UIM coverage had $100,000 limits and Elster’s liability policy had $100,000 limits, Elster was not underinsured.

PUNITIVE DAMAGES AWARD UPHELD
In Groth v. Hyundai, ___ Or App ___ (December 13, 2006), the Oregon Court of Appeals upheld the jury’s verdict in plaintiff’s favor of $1.9 million in non-economic damages (which the court reduced to $500,000 pursuant to ORS 31.710), and $8.3 million in punitive damages. In this case, plaintiff’s husband was a machinist working on a solid bronze impeller, which was spinning at approximately 1500 rpm, and was held inside the lathe by clamps. The impeller broke free from the clamps, smashed through the plastic viewing window and struck plaintiff’s husband in the chest, killing him. The court examined the guidelines set by the United States Supreme Court to determine whether an award of punitive damages violated the Due Process Clause of the Fourteenth Amendment and concluded that the award was not excessive. On cross-appeal, plaintiff argued that the trial court improperly reduced the award of non-economic damages. The court disagreed, reiterating that there was no right of action for wrongful death at common law and wrongful death claims are purely statutory in nature.

ADVANCED PAYMENT BY INDIVIDUAL TOLLED STATUTE OF LIMITATIONS
In Hamilton v. Paynter, ___ Or ___ (December 7, 2006), the Oregon Supreme Court addressed the issue of whether an advanced payment by an individual (not an insurer) to an injured party tolls the statute of limitations. In this case, Hamilton had been injured in a car accident. Some months later, the defendants (not their insurers) paid Hamilton $1,000 as a partial payment for the injuries she suffered. They did not provide her with written notice of the statute of limitations. Time passed and Hamilton ultimately filed a complaint, but it was filed more than two years after the accident. The trial court dismissed the complaint based upon the statute of limitations. On appeal, the court of appeals affirmed. The Oregon Supreme Court reversed concluding that the statute, ORS 12.155, had been too narrowly construed. The statute provides in essence that if a person who makes an advanced payment does not also provide written notice of the date the statute of limitations will expire, then the time between the date the first advanced payment was made and the date notice is given of the statute of limitations is not part of the period limited to commence the action. In this case, the defendants asserted that the statute applied only to insurers, not to individuals. The court found otherwise and remanded the case back to the trial court for further proceedings.