There have been repeated unsuccessful legislative attempts over the last several years to impose statutory bad faith on first party insurance claims in Oregon. In an unanimous decision published on January 19, 2018, the Oregon Supreme Court declined to take the opportunity to circumvent Oregon’s first party insurance law by imposing bad faith liability through the application of Oregon’s vulnerable person statute. Bates v. Bankers Life & Cas. Co., 849 F.3d 846 (9th Cir 2017).

The Bates case was reviewed by the Supreme Court due to receipt of a certified question from the United States Court of Appeals for the Ninth Circuit. The Bates couple, who are elderly, alleged that Bankers Life acted in bad faith by denying and delaying payment of benefits owed under their long-term care insurance policy. They asserted that Bankers Life’s bad faith actions constituted abuse of a vulnerable person under ORS 124.110(1)(b) because they qualified as wrongful withholding of money or property of a vulnerable person.

Bankers Life argued that ORS 124.110(1)(b) does not apply to its insurer-insured relationship with Bates. Bankers Life explained that it does not hold in trust or control any “money or property” owned by Bates. Rather, Bates purchased insurance from Bankers Life in exchange for the payment of premiums. Bankers Life further asserted that its contractual obligation to pay benefits under the policy did not constitute money or property of Bates.

The Court agreed with Bankers Life and held that the Elder Abuse statute only applies when a vulnerable person seeks the return of the same money or property that he or she transferred to another person. The court explained that Bates failed to show that the money they sought was the same money Bankers Life had acquired from them in the form of premium payments.

This ruling is a significant decision against policyholder attorneys who seek to utilize creative theories in an attempt to circumvent Oregon’s first party insurance law. However, we assume policyholder attorneys will continue with their efforts to persuade the Oregon legislature to pass a first party bad faith statute as many of its neighboring states have already done (e.g. Washington’s Insurance Fair Conduct Act).

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.

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