Oregon House Passes SB 414 Giving Insurance Commissioner Greater Authority

A significant win for individual consumers in the often frustrating and never fair battle for coverage, it remains to be seen whether these new powers granted
to the Commissioner will assist commercial lines consumers.    "6.28.13: House" http://feedly.com/k/127kunW

Oregon Court of Appeals Confirms Holding on Attorney Block Billing

The Oregon Court of Appeals has issued a clarification of its prior decision in the long running ZRZ Realty ("Moody Avenue") environmental coverage litigation concerning attorney fees.  See link below.  The procedural aspects are of little concern other than to the litigants but it is worth noting that the court confirmed the prior decisions holding that block billing of attorney time did not necessarily render the fees unreasonable or unrecoverable. This holding has been helpful to policyholders trying to recover past defense costs from carriers that deny a defense and force the insured to litigate, something that is all too common because Oregon lacks bad faith legislation, a situation that the pending HB 3160 would help to rectify.   And as the Zidell folks pointed out in supporting that bill, if a bad faith claim had been available to them in the first place this whole multi year litigation might never have been necessary!

http://www.publications.ojd.state.or.us/docs/A121145c.pdf

Senate Passes SB 414, Giving Oregon Insurance Commissioner Power to Order Restitution

Congratulations to Sen. Shields and his allies for getting this through.  Somewhat bittersweet, as I've reported before.  The need for a bad faith cause of action or direct right action under the Claims Handling statute was brought home yet again for me today when I heard this story: a single-family homebuilder in Dallas was sued by a disgruntled customer, tendered to his insurance company which initially accepted the defense but then yanked the defense (and even tried to prevent the builder from continuing on with the same lawyer) after it hired coverage counsel who advised the insurer not to defend based on a grossly unfair contortion of the allegations against the builder as being excluded, in violation of every precept of Oregon law culminating with the Bresee decision that I blogged about earlier.  Builder had to settle the claim with his own money and then find a lawyer to sue the insurance company, which is (amazingly) still contending that it did nothing wrong.  Fortunately a good friend was willing to take it on contingency.  A perfect example of the "free breach" thinking that carriers in Oregon employ to try to keep as much of their customers' premiums as they can without having to provide coverage.

Senate votes to hold insurance companies accountable through increased agency authority:

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Oregon Supreme Court's Bresee Decision Makes the "Headlines"

The good folks at the large national firm Farella Braun posted this excellent summary of the Oregon Supreme Court's late-2012 decision in Bresee v. Farmers Insurance Exchange.  In Bresee the court made it clear that an insurer's decision to provide a defense under a liability policy must be based on only the words of the underlying complaint or other charging document itself, and that any ambiguity -- any ambiguity, including one created by the lack of specific allegations -- is construed in favor of providing the defense.  In that specific case the insurance company denied a defense based on a "completed operations" exclusion based on the insurance company's interpretation of the underlying complaint, which is said indicated that the property damage had occurred after "operations" were "complete."  As Farella's blog post points out, the court's admonition to insurance carriers that they cannot use such "reading between the lines" to deny a defense is a straightforward proposition - so straightforward, in fact, that most states permit a policyholder who is denied a defense to seek punitive or exemplary damages, via a bad faith claim, to deter insurance companies from the practice.  Unfortunately, unless HB 3160 or something like it passes, insurance companies will continue to ignore Bresee and its forebears (which they do, every day) because even though it is a clear-cut breach of their obligations to policyholders, in Oregon insurers get a "free breach," as I explained in my recent letter to Senator Betsy Johnson in support of HB 3160/the SB 414-A amendment.

Vote on SB 414, Permitting Insurance Commission to Order Restitution, Set for Today

Whether this bill will be useful to small business remains to be seen, but it is certainly a step in the right direction. However, as the "preferred alternative" by the insurance industry to real insurance claims handling reform, one has to assume that the industry will exert its pressure to keep the benefits of this change in the law restricted to consumers, who may remain unaware of the availability of recourse to the state's complaint process.

K-12 budget meltdown, wine and beer: Oregon Legislature today | OregonLive.com:

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A Nice Summary of How Insurance Reform In Oregon Has Fared This Legislative Session

The Lund Report has a great piece today recapping how it came to be that SB 414 and SB 814 moved through the Legislature while HB 3160 has stalled, again.  It continues to be painful to see how successfully the insurance industry has distorted the issues and the relationship between a private right of action and the regulatory oversight exercised by the Insurance Commission.  As my former colleague Jim Guse of Ball Janik points out in this piece, Washington's bad faith law has had the entirely salutary effect of shortening the time in which claims are paid, and removing the incentive that carriers now have in Oregon to "roll the dice" on coverage litigation, exposing their small business insureds (in liability cases) to potentially disastrous consequences - including unpaid judgments, which for a contractor can mean the loss of a license.

Shields Pushes to Empower DCBS as Effort to Put Insurance Under UTPA Flounders | The Lund Report:

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Insurance Industry Invests Heavily in Defeating Bad Faith Legislation

HB 3160, which among other things would give small business owners a private right of action against insurance companies for violating the state Unfair Claims Settlement Practices Statute, is still alive as the legislative session draws nearer its close, and the insurance industry and those that might be held to account under the bill continue to invest heavily in lobbying efforts to make sure that it again does not make it to the floor.  Among the canards that the industry continues to throw out there is that this is 'radical' reform, but failing to note that most states have some version of this kind of private right of action, or some other bad faith right of action, under state law.  I recently worked on a survey of bad faith law in the Pacific Northwest as my firm continues to expand its practice base, and was dismayed to note that Oregon lags behind even conservative states like Montana and Idaho in giving small business owners the leverage that they need, through a potential bad faith claim, to get insurance companies to step up when the going gets rough.  My Father's Day wish?  That the legislators currently on the fence, including Sen. Betsy Johnson, realize that this bill is not about enriching "tort lawyers" but is about bringing the insurance code into the modern era to protect ordinary Oregonians, including Oregon's small business owners.


Dozens of lobbyists tie up bill to let consumers sue insurance companies | OregonLive.com:

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Letter to Sen. Johnson Supporting SB414 - Small Business Needs Protection Beyond Environmental Claims

Here is the letter that I just sent to Senator Betsy Johnson urging her to support SB414, which has a work session scheduled for today.  In it I describe the experience of my client Anderson Brothers, Inc. with its attempt to get its insurance company to help defend it against an environmental claim, and explain that although the SB814 amendment to the OECAA was great work, most coverage problems faced by small business are not covered by the OECAA, and that SB414 would therefore help level the tremendously un-level playing field in Oregon.

Oregon Insurance Reform Champions Continue to Press for Broader Change

Champions of changes to the insurance code that would benefit policyholders, both commercial and individual, are not giving up hope on the idea behind HB3160, which was to remove the exemption of insurance companies from the Oregon Unfair Trade Practices act.  One key component of that effort was to enact a private right of action for violations of Oregon's Unfair Claims Settlement  Practices Act (UCSPA).  At this point the consumer protections in that law are only enforceable by the Insurance Division, which does not have the resources to act on every instance of insurer misbehavior, and has limited ability to make consumers whole.  The insurance industry howled at the idea of being subject to the Unfair Trade Practices Act, so legislators are now proposing a more focused amendment to the UCSPA in SB 414, available here.  While not perfect, this legislation would be a broad-based improvement that would help level the incredibly uneven playing field that Oregon's small businesses now must play on to get their insurance companies to honor their contracts and step up when called upon.

Governor Signs SB814, amending Oregon's unique environmental insurance coverage law

The Governor of Oregon has now signed into law far-reaching changes to ORS 465.475 et seq, the Oregon Environmental Cleanup Assistance Act.  The changes include, most notably, addition of a specific cause of action against an insurer for bad faith denial of coverage, patterned on the Washington Insurance Fair Conduct Act (IFCA).  Although constitutional challenges to the statute are a near-certainty, many provisions of the law will be beyond challenge and may help change the power dynamic between carriers and policyholders on environmental coverage issues in Oregon.  And as I have mentioned before, in light of the staggering projected cost of the Portland Harbor Superfund Site ($2 billion and growing), if this law does what it was designed to do it may be the largest change in Oregon insurance law by total dollar value in recent memory.  Many, many businesses (large and small) have become ensnared in the Superfund action and this law will help skilled policy-holder side lawyers representing those businesses clear some of the significant hurdles to getting indemnity coverage to fund the cleanup.

SB 814 :: Oregon Legislature Bill Tracker - Your Government - The Oregonian:

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New York investigates insurance companies’ cyber security

I was very interested to read this morning that Governor Cuomo of New York will investigate insurance companies’ cyber security.  According to the article the focus of the investigation will be what safeguards insurers have in place to protect customers' sensitive personal and financial information.  Hopefully this inquiry will take into account commercial-lines policyholders' data as well.  Recent experience has made me skeptical about how well insurers do just about anything related to information management.  I recently had an insurer claim that it would have to review reams of paper files to find information on a group of claims that are currently being adjusted.  Investigation revealed that in fact the carrier has multiple electronic data repositories, but many them do not talk to each other, and that much coordination relies on information kept in the heads of certain supervisors!

Insurers demand a great deal of sensitive information about commercial policyholders in the underwriting process, from social security numbers and driving records of employees, to information on security systems.  I will be very interested to see what New York turns up about the cyber security measures, or lack thereof, at the nation's larger insurers.

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Utah Court Holds That "Fairly Debatable" Defense to Bad Faith Goes to the Jury

Here in Oregon with our relative paucity of reported bad faith cases we don't see too much of it, but in other states insurers can be sued for bad faith for a claim denial, unless the claim's validity was "fairly debatable" (or a similar standard).  Now that it looks like at least for environmental claims we'll have something like a bad faith claim, this defense will get more play.  A recent decision out of Utah came to what seems like a common sense decision about whether a "fairly debatable" defense can be the subject of a carrier-side summary judgment motion.  No, said the court in Jones v. Farmers Ins. Exchange - by its nature, there is a factual component to such a defense and it is for the jury.  Since carriers usually do not fare so well in jury trials, this kind of approach will hopefully have the result of prompting reasonable settlements, which is good public policy.

Washington and Now Idaho Limit Attorney-Client Privilege in Bad Faith Cases

My former colleagues at Bullivant Houser Bailey have done a nice job of summarizing two recent decisions, one from Washington and one from Idaho, limiting the application of the attorney-client privilege where outside coverage counsel participates in a fact investigation for coverage purposes.  Both decisions (Idaho's Stewart Title v. Credit Suisse in federal court, Washington's Cedell v. Farmers in state court) made it clear that an insurance company cannot seek to shield a coverage determination made in bad faith behind the privilege by using outside counsel, whether it's a first-party or a third-party coverage issue.  In both cases the insured sought discovery of counsel's work product to support a bad-faith claim.  It is hard enough to prove bad faith in either state; it's nice to see judges recognizing a common carrier tactic for what it is: an effort to make it nearly impossible.



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Understanding Coinsurance Problems In Builder's Risk Policies

Coinsurance is a difficult subject to understand, but it can have many implications for coverage in the context of ongoing-operations and first-party coverage, particularly in the Builder's Risk arena.  We have litigated under many of these policies and find coinsurance to be one of the knottier problems.  One of our excellent summer clerks helped me address these issues last year in an article for the OSB's Construction Law newsletter, available here.

Oregon Senate Committee Makes "Do Pass" Recommendation for Insurance UTPA Bill

Reports of the demise of HB 3160, which would remove the exemption of insurance from claims under Oregon's Unfair Trade Practices Act (UTPA), may have been wrong.  The Oregon Senate Consumer and Small Business Committee has made a "do pass" recommendation on the bill.  However, the measure has been referred to the Rules committee.  As the legislative session winds down, predictions had been that the opposition of small-town insurance brokers, in-state carriers like The Standard, and Associated Oregon Industries was going to again spell defeat for this common-sense measure.  Hopefully proponents will succeed in pulling out a victory in the coming days.

HB 3160 :: Oregon Legislature Bill Tracker - Your Government - The Oregonian:

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Speaker of Oregon House Signs SB 814, Amending Oregon Environmental Insurance Claims Law

SB 814 :: Oregon Legislature Bill Tracker - Your Government - The Oregonian:

Now all that remains is for the Governor to sign, and the largest change in Oregon insurance law (in potential dollar value) in recent memory will kick in.  Check back for a full analysis of the potential ramifications of this new law on policyholders, particularly those involved in the Portland Harbor Superfund Site.
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