In Spearman v. Progressive Classic Ins. Co, the Oregon Court of Appeals held that an insurer defending an uninsured motorist claim may raise defenses disputing whether the plaintiff has suffered any damages without waiving the safe harbor provisions of ORS 742.061(3). If the safe harbor statute applies, an insured may not recover attorney fees even if the insured prevails against the insurer.
The plaintiff in Spearman was injured in a car accident with an uninsured motorist. The plaintiff submitted a claim for uninsured motorists (“UM”) benefits with his insurance company, Progressive. The plaintiff was not able to resolve the claim so he brought suit against Progressive for failing to pay UM benefits. The plaintiff’s complaint sought only reimbursement for accident related medical benefits. In its answer, the insurance company admitted that the plaintiff had sustained injuries in the car accident, but disputed “the reasonableness and necessity of some of the plaintiff’s accident-related medical expenses.”
The case was transferred to a mandatory arbitration program, and the arbitrator awarded the plaintiff damages. The plaintiff then argued that he was entitled to attorney fees under ORS 742.061(1), which allows an insured to recover attorney fees against insurers who do not settle claims within six months of a proof of loss. The arbitrator denied the plaintiff’s petition for attorney fees, finding that the insurer had complied with the safe harbor provision of ORS 742.061(3). ORS 742.061(3) states that a UM/UIM plaintiff may not recover attorney fees if the insurer accepts coverage of a claim in writing, and litigates only liability of the uninsured or underinsured motorist and the damages due the insured.
On appeal, the plaintiff argued that the insurer was not entitled to safe harbor under ORS 742.061(3), because the insurer had disputed the extent of the plaintiff’s injuries, which could have resulted in the insured recovering nothing under the UM action. The plaintiff cited another recent Oregon court of appeals decision, Kiryuta v. Country Preferred Insurance, 273 Or App 469, 474, 359 P3d 480 (2015), which held that an insurer may lose the protection of the safe harbor provision if the insurer pursues a litigation strategy that goes beyond the scope of ORS 742.061(3). For instance, in Kiryuta, the defendant asserted the affirmative defenses of “contractual compliance” and “offset,” which the court held went beyond the scope of liability of the uninsured or underinsured motorist and the damages due to the insured. Therefore, the insurer in Kiryuta was not entitled to safe harbor from paying attorney fees. The plaintiff in Spearman argued that Progressive, like the insurer in Kiryuta, also raised defenses that went beyond the scope of ORS 742.061(3), and therefore waived the safe harbor protection.
The Court of Appeals rejected this argument, holding that by litigating whether some of the plaintiff’s medical expenses were reasonable and necessary, Progressive was litigating “what damages the insured would be entitled to recover from the uninsured motorist.” And that issue is squarely within the scope of the safe harbor statute. The court concluded that Progressive did not waive the safe harbor provisions, and affirmed the denial of the plaintiff’s attorney fee request.