For the second time in two months, a federal court in Washington state has rejected an insurer’s attempt to avoid the consequences of its wrongful failure to defend its insured by effectively changing its mind and later—in this case much later—offering a defense. Continue Reading In Washington, insurers can’t “unring the bell” after wrongful denial of coverage
A recent decision from the U.S. District Court for the Western District of Washington again demonstrates the decidedly pro-policyholder nature of insurance-coverage law in the state of Washington. Like so many coverage cases, 2FL Enterprises, LLC v. Houston Specialty Insurance Co., arose from underlying construction-defect litigation. Continue Reading In Washington, an Insurer Cannot Refuse to Defend, Change Its Mind, and Still Expect to Control the Defense or Avoid Bad Faith
Insurers control the defense of claims against their insureds, but this control comes with the risk that failing to settle a case could result in a verdict much greater than the available limits under the policy. And if it was reasonable and possible to settle before this calamitous end, the insurer could be on the hook for the entire judgment, which is just what happened to an auto insurer in a recent case. Continue Reading Insurer learns hard lesson in failing to settle
Yesterday the Supreme Court of Oregon overruled Stubblefield v. St. Paul Fire & Marine (1973) and paved the way for a more commonsense approach to negotiating stipulated judgments. Stipulated judgments have been a well-worn, though somewhat perilous, mechanism for insureds to resolve liability claims against them when their insurers defend in bad faith. In doing so, however, the parties to the stipulated judgment were tasked with navigating needlessly technical steps along the way. In Brownstone Homes Condo. Ass’n. v. Capital Specialty Ins. Co., the court removed one of the insurer’s “gotcha” defenses to an otherwise valid stipulated judgment. Continue Reading Oregon Supreme Court eases the path to hold insurers accountable for bad-faith practices
Under Oregon law, insurers typically have only limited incentives to treat their policyholders fairly and to handle claims with the utmost good faith. As of now, Oregon has no statutory “bad faith” remedy. The insurance industry is the only industry to get an exemption from Oregon’s Unfair Trade Practices Act. And, despite the general evolution of tort law in the state, Oregon courts have been slow to recognize common-law bad-faith remedies outside of certain limited circumstances. In Oregon, an insurer can, in many instances, wrongfully deny a claim, lose in coverage litigation with its policyholder, and ultimately be forced to pay exactly what it should have paid in the first place, after years of unreasonable delay and expense.
ORS 742.061 has long provided policyholders with a valuable weapon in a state that otherwise does little to incentivize prompt and fair claims handling by insurers. Under ORS 742.061, a policyholder is entitled to an award of reasonable attorneys’ fees where 1) the insurer does not resolve a claim within six months of the filing of a proof of loss; 2) “an action is brought in any court of this state upon any policy of insurance of any kind or nature;” and 3) the policyholder ultimately recovers more than the insurer has offered. In our experience, insurers who lose in court will typically try to dull the sting of this statutory fee provision by arguing that the rates charged were too high or the hours worked were excessive. Whether the coverage claims were litigated in state court or in Oregon’s federal courts, however, insurers have ultimately paid fee awards after the policyholder prevailed.
Faced with a policyholder’s attorney-fee claim that approached $3.5 million, however, Continental Casualty Corp. and Transportation Insurance Co. (collectively “Continental”) decided to get creative in federal district court in Oregon. In Schnitzer Steel Indus., Inc. v. Continental Casualty Corp., Schnitzer Steel sued Continental, its liability insurers, over unpaid defense costs arising from the Portland Harbor Superfund site. The parties litigated for more than three years. Ultimately a jury found for the insured, Schnitzer, on every claim presented, awarding more than $8.6 million in damages. Pursuant to ORS 742.061, Schnitzer then moved for an award of attorneys’ fees incurred in the coverage litigation totaling nearly $3.5 million. Continue Reading Insurer attempts to avoid multi-million dollar attorney-fee award in Oregon
With the sanctity of any time-honored tradition, insurers resist discovery of their claim file with the ritualistic incantation that it is protected from discovery because it was prepared in anticipation of litigation, and therefore qualifies as work product. To support this argument, oftentimes insurers outsource the adjustment of the claim (a normal business activity) to outside attorneys, and then refuse to provide the attorney’s file, or communications with the insurer and the attorney, on the basis that those documents are protected by the attorney-client privilege. Courts across the county have been increasingly dismissive of these arguments, holding that an insurer cannot cloak its claim file with privilege simply by paying a lawyer to do what is otherwise an everyday claim handling activity for the insurer. Oregon finally has a chance to weigh in on this issue and level the playing field for insureds.
In Liberty Surplus Insurance v. Seabold Construction, the Supreme Court of Oregon has the opportunity to decide whether an insurer can conceal its claim handling by outsourcing it to lawyers. Continue Reading Insurers really don’t want you to know what’s in their files.
Insurers often loudly proclaim that, outside of certain very limited circumstances, there is no such thing as “bad faith” claims-handling under Oregon law. We believe that position, based on a narrow reading of outdated case law, is wrong. Nonetheless, insurers generally operate in Oregon under the assumption that they will never be exposed to extra-contractual or punitive damages. Consequently, even for entirely covered claims, low-ball settlement strategies are entirely too common, as the insurers see no real economic disincentive to mistreating their own policyholders. That could change for the better, however, if either of two bills introduced in the Oregon Senate become law this legislative session. Continue Reading 2015 Legislative Session Could Bring “Statutory Bad Faith” to Oregon
A federal judge in Arizona recently picked the insured to win a discovery battle familiar to coverage lawyers, ordering that the insurer must produce its training and claims-handling manuals. This is excellent news to insureds left trying to determine why the insurer’s answer to coverage is so often “no” or, only slightly better, “a lot less than you thought you were going to get.”
In White Mountain Communities Hosp. Inc. v. Hartford Cas. Ins. Co. (Dec. 8, 2014), White Mountain operated a hospital in rural eastern Arizona and had purchased a property policy from Hartford. A very large forest fire, known as the Wallow Fire, burned about 841 square miles of forest in the area around the hospital, resulting in the evacuation of thousands of residents — and potential patients for the hospital.
That loss of business income comprised the great majority of the hospital’s covered losses. Hartford paid only $40,028 for property damage, but an additional $683,520 for the hospital’s lost income from the many missing patients. White Mountain estimated its business-interruption damages much more severely than Hartford because of the expected slow return of residents to the area, figuring that the fire would cost between $2.8 million and $3.2 million in lost income.