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For years, Oregon’s primary legislative device for compelling prompt settlement of insurance claims has been the availability of an attorney fee award for insureds who recover more than the amount tendered by an insurer within six months of the proof of loss in a lawsuit seeking coverage under ORS 742.061. Prior to the decision in Long v. Farmers Ins. Co. of Oregon, 360 Or 791 (2017), most believed that an insured had to actually obtain a judgment awarding monetary damages in the suit seeking coverage to be entitled attorney fees.  However, in Long, the Oregon Supreme Court identified a new way that an insured can obtain an attorney fee award under ORS 742.061, which can apply even if the insured does not prevail in the suit seeking additional coverage.

In Long, the insured submitted a claim under a homeowner’s policy due to a water leak. Farmers promptly paid about $3,000 to the insured for the actual cash value of the claim. Shortly thereafter, the insured submitted estimates indicating that his ACV claim was worth more than $3,000.  However, no further payments were made at that time.

About two years later, the insured filed suit against Farmers seeking additional ACV coverage. Farmers subsequently issued two voluntary ACV claim payments following a court-ordered appraisal. On the eve of trial, the insured submitted a proof of loss for his replacement cost claims. Farmers adjusted and paid the RCV claim three days later.

The verdict rendered by the court after trial found that the insured was owed less for his claim than what he received from Farmers before the suit was filed. Accordingly, judgment in favor of Farmers was entered. Nevertheless, the insured filed a petition seeking an award of attorney fees under ORS 742.061. In that petition, the insured argued that he was entitled to an attorney fee award because he “recovered” more than was timely tendered by Farmers based on the voluntary payments issued after the suit was filed. The trial court denied the insured’s petition because it believed that the insured had to obtain a judgment awarding monetary damages to be entitled to attorney fees under ORS 742.061.

On review, the Oregon Supreme Court decided that the “recovery” which must exceed the amount of any timely tenders made by an insurer does not need to be based on a judgment entered in favor of the insured. Accordingly, the Court held that voluntary payments given during litigation can qualify as a “recovery” which triggers entitlement to an attorney fee award under ORS 742.061.

In this case, the Court held that the insured was entitled to an attorney fee award for the work performed by his attorneys up until the time he received the additional ACV claim payments. However, the Court also ruled that the insured was not entitled to any further attorney fees because Farmers paid the RCV claim just days after that claim was submitted and the insured did not recover any more at trial than was timely tendered by Farmers.

The Long case reiterates the importance of determining and paying the full value of a claim within six months of the claim submission because it establishes that subsequent claim payments made during litigation will result in at least some attorney fee exposure. See also Jones v. Nava, 264 Or App 235, 240-241 (2014) (confirming that tenders must be made within six months of proof of loss to avoid attorney fee exposure, even if untimely tender exceeding ultimate recovery is given prior to filing of action). However, the decision is not completely adverse to insurers because it also confirms that the requirements for an attorney fee award must be separately met for each claim submitted, even if claims arise from the same loss.

If you have any questions about this case or how it may affect any of your pending or future claims, do not hesitate to contact our office.