Insurer may dispute both existence and extent of claimed injury caused by uninsured driver without risking attorney fees.
In Spearman v. Progressive Classic Insurance Company, 361 Or 584 (2017), the Oregon Supreme Court recently expanded the scope of defense arguments available to insurers in certain disputes involving their policy holders. The case stems from a plaintiff who sought accident-related medical benefits from his own insurance company after an uninsured motorist injured him. The plaintiff later sued Progressive for failure to pay those benefits as his uninsured motorist (“UM”) coverage required. Progressive admitted that the plaintiff sustained injuries in a collision with an uninsured driver, but the insurer disputed the reasonableness and necessity of some of the medical expenses.
Under ORS 742.061(3), Oregon law provides that attorney fees may be awarded to prevailing plaintiffs in such cases unless the insurer agrees to arbitrate and limits its defense to challenging only the liability of the uninsured driver and the “damages due the insured.” This “safe harbor” provision is similar to one applicable to personal injury protection (“PIP”) coverage in the state under ORS 742.061(2). The plaintiff in Spearman argued that, while Progressive did agree to arbitrate, its argument disputing whether the collision caused any injuries needing treatment went beyond merely questioning the amount of damages to which he was entitled. Thus, he contended, the insurer should not have been allowed the shelter of a safe harbor protected from having to pay attorney’s fees. As in other contract claims, attorney fees are not generally payable by a losing party in litigation unless contract terms or a statute allow them.
The Court refused to read the UM provision as indistinguishable from the PIP provision, which limits the insurer to contesting only “the amount of benefits due the insured” under his or her PIP policy. Unlike UM coverage, the Court explained, PIP is “no-fault” insurance. The insurer could not have established that it owed the plaintiff nothing in a PIP claim, assuming that the plaintiff was in fact insured. But in the UM claim at issue in Spearman, the insurer could have proved that even admitted injuries did not require medical treatment. An argument asserting as much would still be an argument that the “damages due the insured” were zero. Thus, the Court explained that the UM statute does not require the insurer’s admission that any amount of damages is due an injured plaintiff.
The firm does not accept personal injury cases, but the statutory interpretation in Spearman is a good demonstration of the importance of careful contract drafting. The plaintiff argued that the PIP and UM statutes essentially meant the same thing. But the Court rejected that assertion based primarily on the legislature’s “conscious choice to create separate safe-harbor provisions for [PIP and UM claims] to reflect the differences between the two types of insurance.”
Attorney for contracts and business law
Each provision in a contract is important. If you have questions about this post, corporate contracts and agreements, or other business law issues, please contact the firm.