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Spearman v. Progressive Classic Insurance Co.

Supreme Court of Oregon

June 22, 2017

Alex SPEARMAN, Petitioner on Review,
v.
PROGRESSIVE CLASSIC INSURANCE COMPANY, a Wisconsin corporation, Respondent on Review.

          Argued and submitted November 14, 2016

         On review from the Court of Appeals CC 1302-01718, CA A155674.[*]

          Willard E. Merkel, Merkel & Associates, Portland, argued the cause and fled the brief for petitioner on review.

          James B. Rich, Harris, Wyatt & Amala, LLC, Salem, argued the cause and fled the brief for respondent on review.

          Lisa T. Hunt, Law Office of Lisa T. Hunt, LLC, Lake Oswego, fled the brief for amicus curiae Oregon Trial Lawyers Association.

          Before Balmer, Chief Justice, and Kistler, Walters, Landau, and Brewer, Justices, and DeHoog, Judge of the Court of Appeals, Justice pro tempore. [**]

         [361 Or. 585] Case Summary: After plaintiff successfully recovered damages from his insurer under the uninsured motorist coverage of his automobile insurance policy, he sought attorney fees from the insurer. The insurer asserted that a fee award was not proper because it had met the "safe harbor" against a fee award of ORS 742.061(3). That safe harbor applies if (among other things) an insurer does not raise issues beyond the liability of the uninsured motorist and "the damages due the insured." Plaintiff asserted that "damages due the insured" requires an insurer to agree that it owes some amount above zero in benefits, and that the insurer here had raised issues beyond "the damages due the insured" by challenging the nature and extent of plaintiff's injuries and the reasonableness and necessity of his medical expenses. The trial court declined to award fees, and the Court of Appeals affirmed. Held: (1) The phrase "damages due the insured" refers to the type of damages that would be payable in uninsured and underinsured motorist cases: namely, the damages that the insured would be legally entitled to recover from the uninsured or underinsured motorist; and (2) the insurer did not raise issues beyond the "damages due the insured."

         The decision of the Court of Appeals and the judgment of the circuit court are affirmed

          [361 Or. 586] LANDAU, J.

         ORS 742.061(1) generally provides for an award of attorney fees when an insured brings an action against his or her insurer and recovers more than the amount tendered by the insurer. ORS 742.061(3) provides a "safe harbor" for the insurer in uninsured motorist (UM) cases: An insured is not entitled to attorney fees if, within six months of the filing of a proof of loss, the insurer states in writing that it has accepted coverage, that it agrees to binding arbitration, and that the only remaining issues are the liability of the uninsured motorist and the "damages due the insured."

         At issue in this case is what the safe-harbor statute means when it refers to the "damages due the insured." The insurer, Progressive Classic Insurance Company, responded to plaintiff's claim by agreeing that the accident was covered by the policy, but challenging the nature and extent of plaintiff's injuries, as well as the reasonableness and necessity of his medical expenses. Plaintiff argues that, by reserving the right to challenge the nature and extent of his injuries, Progressive raised issues that went beyond the "damages due the insured." According to plaintiff, to qualify for the safe harbor in ORS 742.061(3), an insurer must agree that it owes some amount above zero in benefits, so that the only remaining issues must concern the particular amount above zero that the insurer owes.

         The trial court and the Court of Appeals, Spearman v. Prosressive Classic Ins. Co., 276 Or.App. 114, 366 P.3d 821 (2016), both rejected plaintiff's construction of the safe-harbor statute. For the reasons that follow, we do as well and affirm the decision of the Court of Appeals and the judgment of the circuit court.

         I. FACTS

         Plaintiff purchased an automobile insurance policy from Progressive. The policy included UM coverage with a limit of $25, 000.

         Plaintiff was injured in an automobile accident with an uninsured motorist. Plaintiff filed a proof of loss for UM benefits with Progressive. Within six months, Progressive sent a letter to plaintiff that stated:

[361 Or. 587] "Pursuant to ORS 742.O6l(3)(a) and (b), please be advised that Progressive Classic Insurance Company has accepted coverage for the above matter and the only issues are the liability of the [u]ninsured motorist and damages due to [plaintiff]. Progressive Classic consents to submit this case to binding arbitration if we cannot resolve this matter."

         Progressive paid plaintiff some benefits, but the parties were unable to resolve their dispute about the extent of the insurer's UM liability. So plaintiff filed an action against Progressive in circuit court. Plaintiffs complaint alleged:

"4. That on or about August 5, 2012, Plaintiff, an insured person under the terms of Defendant's aforesaid insurance policy, was operating the insured vehicle southbound on NE 82nd Avenue near its intersection with NE Brazee Street, public roadways in Portland, Multnomah County, Oregon, when he stopped his automobile [for] traffic stopped ahead and was struck by an automobile operated by [a named driver].
"5. That the aforesaid accident was caused by an uninsured vehicle and motorist as defined in the policy and at ORS 742.5O2(2)(a)."

         It further alleged that, as a result of the accident, plaintiff was required to incur medical expenses that should have been reimbursed as part of his uninsured motorist coverage. And it alleged that plaintiff had "performed all preconditions to the recovery of benefits under the policy of insurance" that Progressive had issued. Plaintiff prayed for an award of his unpaid UM damages in an amount not to exceed the $25, 000 UM policy limit.

         In its answer, Progressive alleged that it "[a]dmits the allegations contained in paragraph 4, except that [it] lacks information and knowledge as to whether or not plaintiff was stopped at impact." Progressive further stated that it "admits that plaintiff sustained 'some' injury as a result of the alleged accident; but disputes the nature and extent of plaintiff's alleged injuries." It also admitted that plaintiff had submitted a claim for some medical expenses, but denied "the reasonableness and necessity of some of plaintiff's accident-related medical expenses."

         [361 Or. 588] Plaintiff served Progressive with a request for admissions. In response, Progressive admitted that plaintiff had done everything required of him to be eligible for uninsured motorist benefits; admitted that plaintiff had suffered "some" injury, although Progressive disputed the nature and extent of the injury; and admitted that plaintiff had suffered "some" economic damages, although Progressive denied "the reasonableness, necessity, relatedness, and extent" of the economic damages that plaintiff had claimed.

         The matter was transferred to the court's arbitration program, and the arbitrator awarded plaintiff $6, 022.80 under the UM provisions of the policy. Plaintiff requested attorney fees under ORS 742.061(1). Progressive asserted that it was entitled to the safe harbor of ORS 742.061(3). The arbitrator agreed with Progressive and denied the fee request.

         Plaintiff challenged in circuit court the arbitrator's failure to award attorney fees. The parties did not dispute that the conditions generally necessary for a fee award under ORS 742.061(1) had been met. The sole dispute was over whether Progressive had met the requirements for the safe harbor set out in ORS 742.061(3). Relying on this court's decision in Grisby v. Progressive Preferred Ins. Co., 343 Or. 175, 182-83, 166 P.3d 519, adh'd to as modified on recons. 343 Or. 394, 171 P.3d 352 (2007), plaintiff argued that, because Progressive had raised issues that could have resulted in an award of zero damages, the insurer had raised issues beyond "the damages due the insured." Plaintiff argued that, although Grisby concerned a statutory provision that applied only to personal injury protection (PIP) benefits, its holding should be extended to this case. That means, he contended, that Progressive "was required to frame its pleadings to concede that the trier of fact was required to award some damages." (Emphasis in original.)

         The trial court rejected plaintiff's argument and denied the fee request. Plaintiff appealed. Before the Court of Appeals, he advanced the same argument that he had in the circuit court: that Grisby's reasoning as to the PIP safe harbor should apply to ORS 742.061(3), and that Progressive's dispute as to the reasonableness of plaintiff's medical bills [361 Or. 589] meant that Progressive had raised issues beyond the quantum of "damages due the insured."

         Progressive responded it had satisfied the safe-harbor requirements of ORS 742.061(3) in that it had accepted coverage, agreed to arbitration, and challenged only the damages due plaintiff. Grisby, it argued, was distinguishable because that case had interpreted a different statute with different text concerning PIP-not UM-benefits.

         Sitting en banc, the Court of Appeals affirmed. Key to understanding the safe-harbor statute, the court explained, is the nature of the particular category of insurance to which it applies, namely, UM coverage. At the core of every action to recover UM benefits is the idea that the uninsured motorist "would be liable to the insured in a civil action for some amount of damages for bodily injury." 276 Or.App. at 121. Thus, the court reasoned, the phrase "damages due the insured" in ORS 742.061(3) refers to "the amount of damages (if any) that the insured would be entitled to recover from the uninsured motorist." Id. at 127. A dispute over the "damages due the insured" in the context of a claim for UM benefits ...


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