STATUTE OF LIMITATIONS
Cole v. Sunnyside Marketplace, LLC., 212 Or App 509 (May 9, 2007)
On December 30, 2001, plaintiff was preparing to open the Starbucks coffee shop at Sunnyside Marketplace when she was abducted and raped. The rapist was later caught and convicted. On February 11, 2003, plaintiff filed a civil complaint against the rapist, Sunnyside Marketplace and Elliott Associates, Inc., the mall’s property manager. The complaint alleged various failures in adequate security measures. In June 2003, plaintiff amended her complaint to name Starbucks Corporation as a defendant. During the course of the litigation, plaintiff learned that Harbor Security, Inc. had been providing security services to Sunnyside Marketplace. Specifically, Harbor had contracted to patrol the mall two to three times each night between 7 p.m. and 6 a.m. In April 2004, more than two years after the incident, plaintiff filed a second amended complaint adding Harbor as a defendant. Harbor filed a motion for summary judgment contending that the statute of limitations had run on the two year anniversary of the assault, and as such, the claim against it was barred by the statute of limitations. The trial court granted Harbor’s motion. Plaintiff appealed and the Oregon Court of Appeals reversed and remanded framing the issues as follows: (1) whether the applicable statute of limitations, ORS 12.110(1) is ever properly subject to the discovery rule; and (2) if so, whether, as a matter of law, the rule did not toll the statute of limitations under the facts of this case. The court concluded that the statute of limitations that governs plaintiff’s claims in this case is subject to the discovery rule and that, under that rule, the dispositive inquiry – whether her claims were brought within two years of the time that she knew or reasonably should have known of the substantial possibility of Harbor’s liability – is a question of fact properly reserved for the jury. In so ruling, the court examined the history of case law applying a discovery provision to ORS 12.110(1) and reiterated its recent definition that under the discovery rule, the statute of limitations does not begin until:
“the plaintiff knows or, in the exercise of reasonable care should know, facts that would make an objectively reasonable person aware of a substantial possibility that all three of the following elements exist: an injury occurred, the injury harmed one or more of the plaintiff’s legally protected interests, and the defendant is the responsible party.”
The court went on to describe situations in which the relevant facts are so obvious to a reasonable person that they are said to be “inherently discoverable.” In those cases, the court has said that the discovery rule does not toll the statute of limitations. The court here held that the identity of Harbor was not inherently discoverable and that whether plaintiff should have known of Harbor’s existence earlier than she did was a question of fact for the jury.
PRODUCT LIABILITY
In Fox v. Collins, 213 Or App 451 (June 20, 2007), the Oregon Court of Appeals held that legislation which revived products liability actions previously dismissed as time barred did not violate either separation of powers under the Oregon Constitution or the Due Process Clause of the U.S. Constitution. Plaintiff brought a claim for medical malpractice against defendants arising out of a surgery performed on October 5, 1998. On December 4, 2004, over two years after the date of the injury, plaintiff amended her complaint, adding products liability claims. Defendants moved for summary judgment, asserting that the products liability claims were time barred under ORS 30.905(2) (2001). The trial court agreed and entered judgments against defendants. Plaintiffs claims were then voluntarily dismissed without prejudice pursuant to a “Stipulated Judgment of Dismissal and Order of Dismissal” entered on September 18, 2002. The judgment included an agreement that plaintiff could refile her complaint within time limits in the revival statute, Oregon Laws 2003, chapter 768, § 2. Plaintiff refiled her complaint on October 14, 2003, within the time constraints of the stipulated judgment and then filed an amended complaint on December 4, 2003. On February 5, 2004, defendants moved for summary judgment, arguing that the revival statute violated separation of powers under the Oregon Constitution and claim preclusion barred plaintiff from further litigating her claims. The trial court held the revival statute unconstitutional, dismissing plaintiff’s claims with prejudice. Plaintiff appealed.
The court of appeals, citing McFadden v. Dryvit Systems, Inc., 338 Or 528 (2005) as controlling, held that the revival statute did not violate separation of powers under Oregon’s Constitution. Defendants argued that the revival statute violated the Due Process Clause of the Fifth and Fourteenth Amendments to the U.S. Constitution. Defendants argued that the judgments dismissing plaintiff’s claims constitute vested property rights and the statute deprives them of those rights without due process. Citing State ex rel Huntington v. Sulmonetti, 276 Or 967 (1976), the court held that the revival statute did not, by retroactively amending the statute of limitations, offend the due process rights of defendants under the Fourteenth Amendment. In some cases, final judgments can be undone by legislative action and still be constitutional. The Court of Appeals reversed the trial court decision and remanded the case for further proceedings.
PREMISES LIABILITY
Johnson v. Short, 213 Or App 255 (June 6, 2007)
Plaintiff was a delivery person who had delivered packages to defendants’ home, on average, every month or two for five or six years. On October 31, 2001, plaintiff went to deliver a package to defendants’ home. The weather was “gray and drizzly.” Plaintiff noticed the steps going up to the porch were very slick because they were completely covered in wet moss or algae. Plaintiff was exceedingly cautious when he went up the steps, dropped off the package on the doorstep and went back down by the same route. Although plaintiff held on to the side of the house, he slipped and injured himself. Unbeknownst to plaintiff, there was a second set of steps to the porch. Defendants moved for summary judgment arguing that plaintiff was a “licensee” as opposed to “invitee” and that plaintiff recognized the hazards of the slippery steps and used them anyway. Additionally, defendants argued they provided an alternate route of safe steps and so eliminated the unreasonably dangerous condition of the slippery steps. The trial court granted the motion for summary judgment.
On appeal, the court reversed and remanded, concluding that plaintiff was an “invitee” (which imposes a higher standard of care for defendants) and that there were disputed issues of material fact pertaining to whether defendants breached their duty of care owed to plaintiff. The court noted the significant distinction between the duty of care the property owner/possessor owes to a visitor depending on whether the visitor is an invitee or licensee. The duty to an invitee is to “warn of latent dangers” and to “protect the invitee against dangers in the condition of the premises about which the [possessor] knows or should reasonably have known.” Additionally, the invitee must also establish that entry was for the purpose pertaining to the possessor’s “economic advantage.” In contrast, the duty to a licensee is as follows:
1. the possessor knows or has reason to know of the condition and should realize that it involves an unreasonable risk of harm to such licensees, and should expect that they will not discover or realize the danger, and
2. he fails to exercise reasonable care to make the condition safe, or to warn the licensees of the condition and the risk involved, and
3. the licensees do not know or have reason to know of the conditions and the risk involved.
Here, the court stated the decisive inquiry as whether, at the time the plaintiff was injured, he was on defendant’s premises pursuant to an express or implied invitation and whether his presence was of material benefit to defendants. The court found that the totality of the circumstances established an implied invitation. The court specifically declined to decide this issue on the residential nature of the premises, or the nature of the item being delivered. The court further found disputed issues of fact regarding whether defendants provided a safe alternative and whether plaintiff had an appreciation of the danger presented.
WRONGFUL DEATH
Union Bank of California, N.A. v. Copeland Lumber Yards, Inc., 213 Or App 308 (June13, 2007)
The issue presented in this case is the meaning of Oregon’s wrongful death statute, ORS 30.020(1), which provides that the decedent’s personal representative may bring an action for wrongful death “if the decedent might have maintained an action, had the decedent lived, against the wrongdoer for an injury done by the same act or omission.” Specifically, at issue was whether a personal representative can bring a wrongful death action when the decedent already recovered damages for personal injury based on the same act or omission that is the basis for the wrongful death claim. The Oregon Court of Appeals affirmed the trial court’s decision that if a decedent already recovered damages for the same act or omission, the statute precludes a wrongful death action.
In this case, an individual was exposed to asbestos during his employment, and later diagnosed with asbestos-related disease and ultimately mesothelioma. He brought a personal injury action against the asbestos manufacturers. He settled a portion of that claim and the rest went to trial, resulting in a verdict in his favor. Some months later, the individual died. Later, the personal representative of the individual’s estate initiated this wrongful death action. Although other jurisdictions have held a decedent’s prior settlement or judgment does not bar a subsequent wrongful death action, the Oregon Supreme Court has long regarded wrongful death claims to be derivative of the decedent’s rights. In this case, the individual did not meet the definition of the wrongful death statute because he could not have maintained the action had he lived -- because he had already done so.
UNDERINSURED MOTORIST COVERAGE
Heffner v. Farmers Ins. Co.of Oregon, 213 Or App 289 (June 13, 2007)
The facts were undisputed in this underinsured motorist action. Plaintiffs’ minor daughter was in an auto accident and suffered $100,000 in non-economic damages and her parents paid $50,000 in medical expenses. The driver who caused the accident was underinsured. Plaintiffs obtained liability insurance coverage on each of their three vehicles. One carrier, Farmers Insurance Company, issued a policy for each of two vehicles, and another carrier (but a member of Farmers Insurance Group of Companies) issued a policy for the third vehicle. All three policies contained identical provisions. Each provided underinsured motorist coverage up to $100,000 “for bodily injury sustained by any person in any one occurrence.” The policies further provided that “[t]he limit for ‘each person’ is the maximum for bodily injury sustained by any person in any one occurrence.” Further, each policy had an “other insurance” clause that said:
"If any applicable insurance other than this policy is issued to you or a family member by us or any other member company of the Farmers Insurance Group of Companies, the total amount payable among all such policies shall not exceed the limits provided by the single policy with the highest limits of liability."
Plaintiffs submitted a claim to defendants for UIM benefits under all three policies. Plaintiffs also brought their own claims, seeking reimbursement for their daughter’s medical expenses. Defendants denied both claims. A breach of contract action followed. Defendants agreed that the minor daughter was entitled to an award of $100,000 for her noneconomic losses, however, they contended they were not required to pay the $50,000 in medical expenses because the policies provided coverage only to an insured who sustained bodily injury. Although plaintiffs (parents) were insureds, they suffered no bodily injury, and the minor daughter did not personally incur those expenses. Additionally, defendants argued that the “other insurance” clause limited the amount to be paid out to $100,000. The trial court agreed with defendants on both arguments and entered judgment in favor of defendants. The parent plaintiffs appealed. The Oregon Court of Appeals agreed with the trial court and affirmed its opinion. The court rejected plaintiffs’ argument that the $100,000 per person limit does not prevent them from claiming up to the same amount under each of the other policies when the limits of one have been exhausted.
Scott v. State Farm Mutual Auto. Ins. Co., 213 Or App 351 (June 13, 2007)
The issue in this case was whether plaintiff, the insured, was entitled to attorney fees in connection with her uninsured motorist claim. Plaintiff, a State Farm insured, was involved in a car accident in which the other driver was uninsured. Shortly after the accident, a State Farm claims representative handling uninsured motorist (UM) claims called plaintiff and took her recorded statement. At that time plaintiff was unsure whether she would be bringing a UM claim. Plaintiff was referred to the PIP department for coverage of her medical treatment. The PIP adjuster provided plaintiff with an “application for benefits” form. Plaintiff completed and submitted that form. State Farm used that form exclusively for PIP claims; it did not have a separate form for UM/UIM claims. State Farm had separate processing for PIP and UM claims and did not allow UM claims representatives to see PIP file materials without authorization. Accordingly, in keeping with State Farm’s usual practice, plaintiff’s app-lication for benefits form was not sent to the UM department.
Within approximately three weeks of the accident, plaintiff again spoke to the UM claims representative indicating she might pursue a UM claim. The claims representative sent a medical authorization form to plaintiff, which was signed and returned. Nearly six months later, plaintiff’s counsel wrote to the UM claims representative asserting that State Farm had received notice of plaintiff’s claim more than six months earlier and that plaintiff had not received any written notice from State Farm containing the language approved in ORS 742.061. The letter warned that if the claim did not settle, plaintiff would have the right to recover her attorney fees. State Farm responded by accepting coverage and consenting to binding arbitration. Plaintiff later sued State Farm and sought attorney fees pursuant to ORS 742.061, which provides for an award of attorney fees to a plaintiff if, among other conditions, “settlement is not made within six months from the date proof of loss is filed with an insurer.”
All aspects of the claim settled with the exception of the attorney fee claim. State Farm moved for summary judgment on that issue and plaintiff responded with a cross-motion. The trial court granted State Farm’s motion and denied plaintiff’s motion. Plaintiff appealed. The Oregon Court of Appeals affirmed the trial court’s decision concluding that plaintiff had not presented any evidence that she had submitted anything in writing that informed State Farm of her intention to pursue a UM claim more than six months before State Farm’s letter accepting coverage. The court stated that plaintiff’s later decision to pursue a UM claim did not transform her earlier PIP application into a proof of loss for UM purposes.
ATTORNEY FEES
Grigsby v. Progressive Preferred Ins. Co. , ___ Or ___ (August 9, 2007)
Plaintiff was injured in an auto accident. He filed a claim for injury-related expenses with his insurer, Progressive. Progressive accepted coverage for PIP benefits but indicated it would not pay benefits that did not meet the criteria of “reasonable and necessary medical expenses directly related to the accident.” Progressive also agreed to submit to PIP arbitration. Progressive then paid plaintiff for certain medical expenses and income loss, but denied payment for chiropractic treatments asserting that the treatment was not related to the accident. The parties arbitrated the dispute, and the arbitrator ruled in Progressive’s favor. Plaintiff sought a trial de novo. The jury awarded plaintiff his chiropractic treatment and the trial court entered judgment in plaintiff’s favor. Plaintiff then requested an award of attorney fees under ORS742.061(1), which generally provides that an insured who sues on an insurance policy and recovers more than the insurer offered in settlement is entitled to a reasonable attorney fee. The trial court denied the request on the basis that the plaintiff’s claim came within the exception set out in ORS 742.061(2)(a) for actions in which the insurer accepts coverage and the only issue is the amount of benefits due the insured. Plaintiff appealed and the court of appeals affirmed. Plaintiff petitioned for review. The only issue before the Oregon Supreme Court was whether plaintiff was entitled to recover his attorney fees. The Oregon Supreme Court reversed the Oregon Court of Appeals and remanded the case for further proceedings holding that plaintiff’s action came within the scope of the attorney fee provision for actions on insurance policies, ORS 742.061, and that plaintiff was entitled to recover a reasonable fee from his insurer.
The Supreme Court analyzed the text and context of the statute at issue. The court found that this was not a case in which the insurer had accepted coverage and the only issue was the amount of benefits due the insured as stated in ORS 742.061(2)(a). The court agreed with plaintiff that “accepting coverage” is not limited to a one-time decision by the insurer that a particular accident is within the scope of the policy that it had issued, but rather is an ongoing series of decisions “accepting” or “denying” coverage of particular claims for services rendered by medical providers. Here, when plaintiff’s chiropractor submitted a claim for services rendered, Progressive denied it. Because Progressive did not “accept coverage” of the claim for those services, it did not meet one of the requirements for the exception set our in ORS 742.061(2)(a). Because that exception did not apply, and the other requirements of ORS 742.061 had been satisfied, plaintiff was entitled to recover reasonable attorney fees. Additionally, the court drew a distinction between a dispute by the insurer over the amount of benefits, and a dispute by the insurer as to whether to pay for certain benefits at all because they were unrelated to the accident. The court concluded that an issue as to the amount of benefits in ORS 742.061(2) refers to a dispute concerning the dollar level of a claim for services that a provider submits to an insurer, and not to an insurer’s denial of a particular claim for services. A dispute over an insurer’s denial of a particular claim for benefits (here, the chiropractor’s claim for services) is not one over the “amount of benefits.”
TIPS FOR EMPLOYERS – OREGON
The 2007 Oregon Legislature passed several bills of interest to employers. These laws will take effect January 1, 2008.
• Senate Bill 2 amended Oregon antidiscrimination law by making sexual orientation a protected class. If an employee believes he has been discriminated against based upon his sexual orientation, he may now file a claim with the Oregon Bureau of Labor and Industries or file a civil suit similar to other claims of discrimination.
• House Bill 2372 requires employers of 25 or more employees to accommodate the needs of breastfeeding mothers. This bill creates 30 minute unpaid rest breaks for female employees to express milk during the workday and requires that the employer make reasonable efforts to provide a private location near the employee’s work area, other than a public restroom or toilet stall.
• House Bill 2485 provides that employees who take Oregon family leave may use accrued paid sick leave if the employer provides it. This changes existing law in which employees who take family leave can use paid sick leave only for their own personal, serious health condition, or for parental leave, unless the employer provides otherwise.
• House Bill 2635 now includes an employees’ grandchildren and grandparents in the list of qualifying family members with a serious health condition for which OFLA provides protected leave.
• House Bill 2460 changes Oregon law that currently allows an employer to deduct “serious health condition” absences covered by workers’ compensation laws from an employee’s OFLA leave. Now, any absence covered under workers’ compensation will not reduce the employee’s 12 week OFLA leave.
• House Bill 2260 potentially increases civil penalties against employers in discrimination suits. It allows employees in many discrimination claims to recover both compensatory damages and punitive damages.
• House Bill 2255 allows employees to seek remedies such as reinstatement and back pay for up to two years for claims against their employers regarding wage related claims.
• House Bill 3539 protects employees’ religious practices, such as dress, using employer-provided vacation to attend religious observances, and religious celebrations.
• Senate Bill 946 provides employees reasonable leave to seek legal and medical assistance as the result of domestic violence, sexual assault or stalking.
• Senate Bill 583, the Consumer Identity Theft Protection Act, requires employers who store personal information used in the course of business to immediately notify anyone whose information has been breached.
TIPS FOR EMPLOYERS – WASHINGTON
Beginning October 1, 2009, In Washington, employees will be entitled to five weeks of paid leave, up to $250 per week, for the care of a newborn or newly adopted child. Additionally, the employee’s job is guaranteed through six weeks of leave (unpaid qualifying week and five weeks of paid leave) and employers may not retaliate or discriminate for seeking or utilizing leave or participating in an investigation or appeal of denial of benefits. The leave must run concurrently with FMLA/WFMLA-covered leave. The Washington Department of Labor and Industries will establish and administer a family and medical leave insurance program to fund this measure.
PUNITIVE DAMAGES
The United States Supreme Court handed down its opinion in the Philip Morris USA v. Williams, 127 S Ct 1057 (2007) case on February 20, 2007. This case originated in Multnomah County, Oregon, where a jury awarded the wife of a deceased cigarette-smoker $821,000 in compensatory damages and $79.5 million in punitive damages. The trial court reduced the punitive damages award which was later restored by the Oregon Court of Appeals. The Oregon Supreme Court rejected Philip Morris’ arguments that the trial court should have instructed the jury that it could not punish Philip Morris for injury to persons not party to the lawsuit, and that the $79.5 million award was grossly excessive when compared to the compensatory damages. The United States Supreme Court vacated and remanded the Oregon Supreme Court’s decision holding that a punitive damages award based in part on a jury’s desire to punish a defendant for harming non-parties amounts to a taking of property from the defendant without due process. In other words, the Due Process Clause forbids a state to use a punitive damages award to punish a defendant for injury inflicted on strangers to the litigation. The Supreme Court did not consider the question of whether the award was constitutionally grossly excessive.
Another punitive damages case decided recently is Vasquez-Lopez v. Beneficial Oregon, Inc., 210 Or App 553, 152 P3d 940 (2007). In that case, plaintiffs, two immigrants who neither read nor spoke English, prevailed at trial against a mortgage company who was alleged to have engaged in predatory lending practices by fraudulently inducing them to borrow money at an extremely disadvantageous interest rate and lying to them about what their monthly payments would cover. The jury awarded compensatory damages of $31,639.73 and punitive damages, as well as attorney fees. The punitive damages award of $500,000 was reduced by the trial court to $237,592.50. Beneficial appealed on several bases, one of which was that the punitive damages award should have been reduced even more. Plaintiffs cross-appealed arguing that the punitive damages award should not have been reduced at all. The Oregon Court of Appeals held that the trial court erred in reducing the jury’s award. The court examined the standard of gross excessiveness and the appropriate guideposts to consider in determining when an award is grossly excessive and thus in violation of the Due Process Clause. The court found that the trial court’s formulaic analysis of the ratio between the compensatory damages and punitive damages was in error.
The appropriate denominator in the punitive-to-compensatory ratio calculation is the amount of potential compensatory damages instead of actual damages. The court then went on to compare the potential damages to the punitive damages and found that the ratio between the two was permissible and appropriate under the circumstances.
WHEN DOES THE STATUTE OF LIMITATIONS BEGIN TO RUN?
In Johnson v. Multnomah County Department of Community Justice, 210 Or App 591, 152 P3d 927 (2007), the parties argued over whether the statute of limitations barred plaintiff’s lawsuit. The facts are as follows: In 1997, when plaintiff was 14 years old, she was raped by Ladon Stephens. At that time, and unbeknownst to plaintiff, Stephens was under post-prison supervision by defendant Multnomah County Department of Community Justice. More than five years after the rape, plaintiff served a tort claim notice. Normally, notice is required within 180 days after the alleged injury. However, there is a “discovery rule” under which the plaintiff has 180 days from the time when plaintiff knew, or in the exercise of reasonable care, should have known, facts that would make an objectively reasonable person aware of a substantial possibility that all three of the following elements exist: an injury occurred, the injury harmed plaintiff, and the defendant was the responsible party. The defendant argued there was sufficient information reported in the newspapers to put plaintiff on notice in 2002 when Stephens was arrested for another rape and the highly publicized 2001 murder of 14 year old Melissa Bittler. The dispositive question in this case was when plaintiff knew or reasonably should have known of a substantial possibility that defendant was responsible for the injury. Plaintiff argued that she did not have knowledge until December 2003, within 180 days of filing her tort claim notice, when her parents told her that Stephens was under defendant’s supervision at the time of herrape. The trial court ruled in defendant’s favor and dismissed the complaint. On review, the court of appeals decided that a jury could find that plaintiff did not acquire sufficient knowledge that would trigger the statute. As such, the court of appeals reversed and remanded the case for further proceedings.
DOES A SETTLEMENT AGREEMENT BETWEEN AN INJURED PERSON AND A TORTFEASOR PRECLUDE AN ACTION BY THE TORTFEASOR AGAINST HIS INSURANCE AGENT FOR FAILING TO PROCURE ADEQUATE INSURANCE?
In Terrain Tamers Chip Hauling, Inc. v. Insurance Marketing Corp. of Oregon, 210 Or App 534, 152 P3d 915 (2007), the Oregon Court of Appeals reviewed the Stubblefield lines of cases. In Stubblefield v. St. Paul Fire & Marine, 267 Or 397, 517 P2d 262 (1973), a settlement which included a covenant not to execute on a judgment eliminated an insured’s “legal obligation to pay damages” and thus precluded a claim against the insurer. In Lancaster v. Royal Ins. Co. of America, 302 Or 62, 726 P2d 371 (1986), the court found that a covenant not to execute “personally” did not unconditionally covenant not to execute – arguably real property was open to execution – and the court allowed an action to be maintained against the insurer. In Terrain Tamers, the court summarized the rule: “The key lies in recalling the Supreme Court’s explanation in Lancaster that for the rule of Stubblefield to apply, the settlement must ‘unambiguously’ and ‘unconditionally’ eliminate any liability for which insurance coverage might otherwise be triggered.” 210 Or App at 917. The question in Terrain Tamers was whether a settlement agreement between an injured person and a tortfeasor precluded an action by the tortfeasor against his insurance agent for failing to procure adequate insurance. The court of appeals found that the covenant not to execute was conditioned “upon the good faith prosecution of an action against [the agent] and the payment of any proceeds from that action” and therefore not unconditional. The court held that the settlement agreement did not unambiguously eliminate any further liability of the insured, leaving the insured at least potentially liable, and the action could proceed against the agent.
BURDEN OF PROOF ON INSURED TO PROVE “SUDDEN AND ACCIDENTAL”
On March 28, 2007 the Oregon Court of Appeals considered the question of who has the burden of proof of “sudden and accidental.” In Employers Insurance of Wausau v. Tektronix, 211 Or App 485, __ P3d __ (March 28, 2007), the court summarized the general rule that the insured has the burden of proof that a claim is within the grant of coverage and the insurer has the burden of proof of any applicable exclusions. The “sudden and accidental exception to the pollution exclusion” provides: “* * * but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.” The court followed the reasoning that this language is like a grant of coverage and held: “Provisions of insurance policies generally can be divided into two categories: provisions that grant coverage and provisions that limit or exclude coverage. The exception at issue, which provides coverage that otherwise would not exist for property damage arising from pollution, logically falls in the ‘coverage’ category—a category in which, under the common law, an insured has the burden of proof.”
“Courts also have offered a number of practical and policy justifications for placing the burden on the insured. First, they note that, when the burden is on the insured, the insured has ‘an incentive to strive for early detection that it is releasing pollutants into the environment * * *.’ (Citations omitted). Second, they reason that, as a practical matter, the insured is the party in a better position to ‘prove a negative,’ i.e., that the discharge, dispersal, release, or escape was not sudden and accidental. Oregon courts have similarly relied on ‘considerations of fairness, convenience and policy’ when allocating the burden of proof. (Citations omitted). We are persuaded that such considerations weigh in favor of placing the burden on the insured in this case. The facts regarding an unintended and unexpected discharge are within the peculiar knowledge of Tektronix, and policy considerations support additional incentives for detecting and preventing ‘sudden and accidental’ discharges, dispersals, releases, and escapes.”
The Tektronix court also discussed other issues in pollution coverage cases, including a review of the rules of late notice. However, the most important, and the only new law in the case, is the burden of proof of “sudden and accidental” pursuant to the pollution exclusion.
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.
