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Scheel v. Guideone Mutual Insurance Co.

United States District Court, D. Oregon, Portland Division

June 27, 2018

GUIDEONE MUTUAL INSURANCE COMPANY, an Iowa corporation, Defendant.




         Plaintiff Gerald Scheel (“Scheel”) filed suit against Defendant GuideOne Mutual Insurance Company (“GuideOne”) for breach of an automobile insurance policy (“Policy”). Following a bench trial, judgment was entered in Scheel's favor. Currently before the court is Scheel's Motion for Attorney Fees (“Motion”). The parties disagree both on whether Scheel is entitled to attorney fees and on the reasonableness of the fees sought. Upon review and consideration, Scheel's Motion for Attorney Fees is granted in part, as he is entitled to recover some, but not all, of the attorney fees requested.[1]


         In 2002, Scheel purchased an automobile insurance policy from GuideOne. (Order and Op., ECF No. 28, at 2.) The Policy provided personal injury protection coverage for bodily injuries arising from automobile collisions. (Findings of Facts and Conclusions of Law (“Findings and Conclusions), ECF No. 57, at 3.) On July 25, 2013, Scheel was injured in an automobile collision (“Collision”). (Id. at 4.) After the Collision, Scheel's primary-care physician observed a disc herniation between the L2 and L3 vertebra, and referred him to a neurosurgeon. (Id. at 4.) Scheel underwent surgery in February, 2014. (Id.)

         On May 14, 2015, Scheel filed this lawsuit for breach of contract in Marion County Circuit Court, and GuideOne timely removed to this court. (Id. at 6.) No. tender of settlement was made in the six months after Scheel filed his complaint. (Pl.'s Memo. in Supp. of Mot. for Att'y Fees, ECF No. 59, Ex. 1 (“Motion”), at 2-3.)

         Following a bench trial, on August 15, 2017, the court issued Findings of Fact and Conclusions of Law stating that GuideOne materially breached its obligation under the Policy. (Findings and Conclusions at 9.) The court found the Collision had caused Scheel's herniation and awarded damages of $76, 266.27. (Findings and Conclusions at 7, 13.) However, the court concluded that the evidentiary record was insufficient at the time to determine whether Scheel was entitled to attorney fees under ORS 742.061, and if so, the amount of such fees. (Findings and Conclusions at 13).

         On August 28, 2015, Scheel timely filed the instant motion for attorney fees.

         Legal Standard

         Pursuant to Federal Rule of Civil Procedure 54, attorney fees must be requested by motion. Fed.R.Civ.P. 54(d)(2)(A) (2018). In diversity cases, state law governs a party's entitlement to attorney fees. Riordan v. State Farm Mut. Auto. Ins. Co., 589 F.3d 999, 1004 (9th Cir. 2009). In an insurance coverage dispute, Oregon law provides:

[I]f 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 cost of the action and any appeal thereon.

Or. Rev. Stat. § 742.061(1) (2018). Thus, ORS 742.061 sets forth four elements: (1) a plaintiff must have filed a proof of loss with its insurer; (2) settlement must not have occurred within six months of filing of that proof of loss; (3) the plaintiff must have brought a court action upon the policy; and (4) the plaintiff ultimately must have recovered more than the amount of any tender made by defendant in the action. Precision Seed Cleaners v. County Mut. Ins. Co., 976 F.Supp.2d 1228, 1236 (D. Or. 2013). If the statutory elements are met, the court “shall” award attorney fees. Id. (citing Petersen v. Farmers Ins. Co. of Or., 162 Or.App. 462, 466 (1999)).


         I. Entitlement to Fees.

         GuideOne argues Scheel is not entitled to attorney fees because he failed to submit “proof of loss” under ORS 742.061 and because he did not comply with provisions of the Policy. Scheel responds that proof of loss was made through the complaint because GuideOne was able to estimate and investigate Scheel's claim, and that the policy provisions are irrelevant in light of state law.

         A. Proof of Loss.

         GuideOne specifically argues that without evidence that the Collision caused the herniation and necessitated the surgery, Scheel failed to submit a sufficient proof of loss. Scheel responds that the complaint contains sufficient information for GuideOne to estimate its obligations.

         Under ORS742.061, the “sufficiency of information” that constitutes a “proof of loss is evaluated in terms of the purpose of the requirement: to enable the insurer to estimate its rights and liabilities under the policy.” Zimmerman v. Allstate Property and Cas. Ins. Co., 354 Or. 271, 280 (2013). “If a submission, by itself, is ambiguous or insufficient to allow the insurer to estimate its obligations, it nevertheless will be deemed sufficient if it provides enough information to allow the insurer ‘to investigate and clarify uncertain claims.'” Id. at 281-282 (citing Dockins v. State Farm Ins. Co., 329 Or. 20, 29 (1999)). An insured's complaint may qualify as proof of loss when it “would permit an insurer to estimate its obligations.” Parks v. Farmers Ins. Co. of Or., 347 Or. 374, 382-84 (2009). “Proof of loss does not require that the insured calculate the loss with sufficient specificity to enable the insurer to make a settlement offer.” Precision Seed Cleaners, 976 F.Supp.2d at 1238. If, through a reasonable inquiry, the insurer can make the necessary calculation for a settlement offer, proof of loss is established. Id.

         In Dockins v. State Farm Ins. Co., for example, the plaintiffs discovered oil seeping into their basement and notified their homeowner's insurance carrier, State Farm. Dockins, 329 Or. at 22. State Farm denied coverage, stating that, under the terms of the policy, it was not obligated to provide coverage for such seepage unless it contaminated groundwater. Id. Weeks later, the state department of environmental quality (“DEQ”) initiated an administrative action against the plaintiffs for the leak, which had contaminated the groundwater. Id. at 22-23.

         The plaintiffs sued State Farm for breach of contract. The parties subsequently settled and the plaintiffs moved for an award of attorney fees under ORS 742.061, arguing their complaint constituted proof of loss. Id. at 26. State Farm responded the complaint was insufficient because it failed to substantiate its allegation that there had been groundwater contamination and did not allege the remediation costs with adequate specificity. Id. at 30.

         The Supreme Court of Oregon concluded that the complaint sufficed to constitute a proof of loss within the meaning of the statute, explaining that the allegations provided enough information to enable State Farm to determine its existing liability:

In our view, those allegations in plaintiffs' complaint were sufficient to qualify as a proof of loss under ORS 742.061. State Farm acknowledges that its duty to defend would be triggered if there were a claim against plaintiffs based on groundwater contamination. The complaint alleges such a claim. Although it is true that the DEQ demand was not attached to the complaint and that State Farm was not required to accept plaintiffs' characterization of the DEQ demand at face value, it also is true that State Farm easily could have ascertained whether plaintiffs' characterization was accurate.

Id. The court rejected State Farm's contention that the complaint did not provide enough information on which to base a settlement offer, concluding it “ignore[d] [State Farm']s duty of inquiry.” Id.

         GuideOne asserts Scheel's complaint does not meet the minimum requirements that would permit an insurer to estimate its rights and liabilities under the Policy, because the complaint did not provide direct evidence that the surgery was related to the Collision. However, proof of loss does not require direct evidence of causation, but only sufficient information that permits an insurer to estimate its obligations. As in Dockins, in his complaint, Scheel alleged sufficient information to trigger GuideOne's duty of inquiry. The complaint alleges what the Policy covered, why the Policy applied to the Collision, that the Collision was related to the Surgery, and that GuideOne was obligated to pay for $89, 456.33 in medical benefits. (Complaint, ECF No.1, at 3-6.) The complaint directly states, “As a result of this collision, Scheel sustained serious injuries requiring back surgery.” (Complaint at 9.) Just as the plaintiff in Dockins was not required to attach the DEQ demand to the complaint, Scheel was not required to include evidence relating the surgery and Collision in his complaint. Here too, GuideOne did not have to accept Scheel's characterization at face value; rather, it was given sufficient information to investigate and clarify any uncertain claims under its duty of inquiry. Therefore, Scheel's complaint qualifies as proof of loss under ORS 742.061.

         B. Provisions of the Policy.

         GuideOne next contends Scheel is barred from receiving attorney fees because he breached the Policy by filing suit before he had complied fully with its terms - specifically, by not establishing sufficiently the relationship between the surgery and the Collision until after filing this suit. GuideOne alleges Scheel did not adhere to the proof of loss provision of the policy.

         GuideOne points to Part F of the Policy, which states:

A. No legal action may be brought against us until there has been full compliance with all the terms of this policy. In addition, under part A, no legal action ...

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