Argued and submitted September 26, 2012
Resubmitted January 7, 2013.
On review from the Court of Appeals. No. CC 0812-17951, CA C146460 [*]
Joel S. DeVore of Luvaas Cobb, Eugene, argued the cause and filed the briefs for petitioners on review.
Gordon S. Gannicott of Hollander, Lebenbaum & Gannicott, Portland, argued the cause and filed the brief for respondent on review.
Charles Rabinowitz, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association.
ORS 742.061(1) provides that, if a settlement of an insurance claim is not made "within six months from the date proof of loss is filed with an insurer" and the insured recovers more than any amount that the insurer has tendered, the insured is entitled to an award of attorney fees. ORS 742.061(3) provides a "safe harbor" for the insurer in underinsured motorist (UIM) cases: No attorney fees will be awarded if, within six months of the filing of the proof of loss, the insurer states in writing that it accepts coverage, that the only remaining issues are the liability of the underinsured motorist and the amount of damages due the insured, and that it consents to binding arbitration.
At issue in this case is what constitutes a "proof of loss" in a claim for UIM benefits and what suffices to trigger the safe harbor provision. The insured provided notice of an injury automobile accident to her insurer, but did not submit a UIM benefits claim at that time. Nearly two years later, the insurer learned of a possible UIM claim. Shortly after that, the insurer agreed in writing that it accepted coverage, that the only remaining issues were liability and damages, and that it was willing to submit to binding arbitration. After recovering on her UIM claim, the insured asked for attorney fees under ORS 742.061(1). The insurer claimed the benefit of the safe harbor provision of ORS 742.061(3). The Court of Appeals concluded, however, that the insurer did not send its safe harbor letter within six months of the insured's "proof of loss." According to the Court of Appeals, the "proof of loss" was the initial report of injury two years earlier. Zimmerman v. Allstate Property and Casualty Ins., 246 Or.App. 680, 681, 267 P.3d 203 (2011). We conclude that the initial report of injury did not provide sufficient information to constitute a proof of loss for a UIM claim and that the insurer's safe harbor letter sufficed to trigger the statutory exception to an attorney fee award. We therefore reverse the decision of the Court of Appeals.
The relevant facts are not disputed. In 2006, plaintiff Sarah Zimmerman purchased an automobile insurance policy from Allstate. The policy included personal injury protection (PIP) benefits with a limit of $15, 000. It also included UIM coverage with a limit of $100, 000 per person.
On December 22, 2006, Zimmerman was injured in an automobile accident when her car was struck by another that had failed to stop at a stop sign. Several hours after the accident, Zimmerman gave a recorded statement to the Allstate claims department. She explained that her car had been totaled, that she had been injured, and that the other driver, Louis Alvis, had admitted liability and had been cited by the police. The record does not disclose whether Zimmerman reported any information about whether Alvis was insured at that time, but the parties assume that Alvis was insured.
On January 26, 2007, an Allstate representative wrote to Zimmerman explaining the nature of PIP benefits and enclosed an application for those benefits, along with a medical authorization form and a provider form, which allowed Allstate to obtain accident-related medical records. Zimmerman filled out the application and returned it to Allstate along with the signed medical authorization and provider forms. In the following months, Allstate corresponded with Zimmerman or her attorney concerning medical records on a number of occasions. Allstate ultimately paid Zimmerman $13, 310.72 in PIP benefits over the course of the next year.
In December 2007, Zimmerman's treating physician informed Allstate that Zimmerman "continues to suffer from left neck and upper back pain, " which can cause headaches. The physician also reported that X-rays showed a reversed cervical spine and that medical research suggested the possibility of future instability in that area. But no further bills for medical expenses were submitted to Allstate after that date.
In July 2008, Zimmerman's lawyer sent a demand letter to Safeco, Alvis's insurer. At that point, counsel thought that Zimmerman's claim had a value in excess of $100, 000.
On September 24, 2008, a Safeco adjuster telephoned an Allstate employee to advise that Zimmerman would likely pursue a UIM claim against Allstate. The Allstate employee referred the matter to a UIM adjuster within the company. Two days later, Allstate's UIM adjuster sent a letter to Zimmerman's lawyer confirming that Allstate had received a notice of Zimmerman's accident in December 2006 and enclosing a proof of loss form for UIM benefits. The letter confirmed that there was Allstate UIM coverage in force at the time of the accident and that the insurer accepted coverage for the claim arising from the accident. "With confirmation of coverage, " the letter continued, "we will focus our efforts to determine the only remaining issues of liability and damages in this claim." The letter explained that, "[i]f your client plans to make an uninsured or underinsured motorist claim with Allstate * * * [she] will need to complete the enclosed" form so that it could conduct its investigation of the UIM claim. The letter concluded by stating that, in the event that Allstate is unable to reach an agreement concerning the amount of the UIM benefits due under the policy, it was "willing to submit to binding arbitration of the claim." Apparently around the same time, Allstate also requested that Zimmerman provide information about Alvis's insurance coverage, specifically, his policy limits.
On October 3, 2008, Zimmerman's lawyer wrote Allstate to report that Alvis was insured by Safeco at the time of the 2006 accident. As for policy limits, the letter explained that, "[a]s you know, an insurance company usually does not voluntarily disclose its insured's policy limits, prior to a lawsuit being filed. You asked for a copy of Safeco's dec[larations] page. We do not have it and cannot compel it prior to litigation being filed." The letter went on to say that counsel nevertheless had learned that the policy had $25, 000 in personal injury limits. The letter further explained that Safeco had acknowledged that the claim had a value of $25, 000, but that it had not yet tendered the policy limits. The letter concluded with the following:
"PROOF OF LOSS
"I feel that this letter coupled with the demand letter to Safeco, dated July 8, 2008, is a sufficient proof of loss for both the UIM claim as well as the PIP wage loss claim. If you disagree, let me know ASAP and provide the forms necessary to complete the proof of loss."
Five days later, Safeco tendered its $25, 000 policy limits to Zimmerman. Zimmerman's lawyer immediately informed Allstate of that fact and asked for permission to accept the tender in exchange for a full release from further liability. In addition, counsel reminded Allstate of its UIM coverage with policy limits of $100, 000 and that, once Safeco pays its policy limits, Allstate's liability would remain $75, 000.
Safeco paid Zimmerman the $25, 000. Allstate contested Zimmerman's claim for an additional $75, 000. Zimmerman then initiated this action against Allstate for breach of its policy. The case was tried to a jury, which returned a verdict in plaintiff's favor in the amount of $100, 000. The trial court deducted the $25, 000 that Safeco had paid and entered judgment against Allstate for $75, 000, plus costs.
Zimmerman requested attorney fees under ORS 742.061(1). In relevant part, that statute provides,
"(1) Except as otherwise provided in subsection * * * (3) of this section, if settlement is not made within six months from the date proof of loss is filed with an insurer and an action is brought in any court of this state upon any policy of insurance of any kind or nature, and the plaintiff's recovery exceeds the amount of any tender made by the defendant in such action, a reasonable amount to be fixed by the court as attorney fees shall be taxed as part of the costs of the action and any appeal thereon."
According to Zimmerman, because Allstate made no tender whatever in this case, she is now entitled to attorney fees, having prevailed at trial.
Allstate objected to the request, claiming the benefit of the exception set out in subsection (3) of that same statute, which provides:
"(3) Subsection (1) of this section does not apply to actions to recover uninsured or underinsured motorist benefits if, in writing, not later than six months from the date proof of loss is filed with the insurer:
"(a) The insurer has accepted coverage and the only issues are the liability of the uninsured or underinsured motorist and the damages due to the insured; and
"(b) The insurer has consented to submit the case to binding arbitration."
Specifically, Allstate contended that, within six months of the letter from Zimmerman that she denominated her "proof of loss, " the insurer sent her a letter accepting ...