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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 EMPLOYMENT 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 | |
