Lachenmeier, Enloe & Rall - February, 2004 Publication

New Attorney Fee Decisions

The Court of Appeals recently decided two cases involving attorney fees that will probably impact files that you have on your desk right now.

Offer of Judgment Cuts Off ORS 20.080 Attorney Fees

     The Court of Appeals has answered a question that has been a point of contention for years: Does an offer to allow judgment under ORCP 54E cut off a claim for attorney fees made pursuant to ORS 20.080? The Court answered, “Yes.”

     ORS 20.080 allows an award of attorney fees if there is a pre-filing demand of $5,500 or less. If, however, an offer is made before the complaint is filed, and the plaintiff does not get an award greater than the offer, no attorney fees will be awarded. ORCP 54E allows an offer of judgment to be made at any time after the filing of the complaint. The offer will cut off entitlement to costs and attorney fees after the date of the offer, unless the plaintiff receives an award greater than the offer. Some trial courts have held that ORCP 54E offers do not cut off attorney fees in ORS 20.080 claims. In Bell v. Morales, 207 Or App 326, the Court held to the contrary.

     In Bell, the plaintiff made a pre-filing demand for $5,500, to which the insurer failed to respond. After the complaint was filed, the insurer served an offer of judgment in the amount of $2,584, which included $496 in PIP. This was rejected and plaintiff was awarded only $1,200 at arbitration. In addition, plaintiff was awarded $1,500 in attorney fees, the amount incurred until the date of the offer. The trial court reversed the arbitrator, awarding all of plaintiff’s attorney fees, and defendant appealed.

     A preliminary matter was whether the offer was made in a form that could be accepted. Plaintiff argued that, since she was not authorized to collect the PIP, she could not accept an offer that was inclusive of PIP. The Court dispensed with that argument, saying that it was clearly a “new money” offer of $2,088 and was not conditional.

     A 1956 case, Colby v. Larson, had been relied upon by courts holding ORCP 54E ineffective in such situations. The Colby case dealt with ORCP 54E’s predecessor, ORS 17.055. In adopting ORCP 54E, the legislature substantially revised ORS 17.055, so the Bell Court took another look at the Colby reasoning. Under ORS 17.055, an offer made after the complaint was filed could deny all recovery of costs to a plaintiff. Since attorney fees in the claims eligible under ORS 20.080 often exceed the value of the claim, that statute provided an incentive for a defendant to ignore a pre-filing demand. An offer for the full amount of the prayer could then be made just before trial, thereby preventing plaintiff from recovering attorney fees. The Colby court addressed that problem by holding ORS 17.055 ineffective with respect to ORS 20.080 claims.

By contrast, an offer under ORCP 54E can only cut off fees and costs incurred after it is made. As stated by the Court,

ORCP 54 E provides a post-filing incentive to pursue settlement by allowing a defendant a chance--or a second chance--to propose a fair offer of judgment that stops recovery of attorney fees incurred from a correspondingly later date--that is post-filing--if the plaintiff's complaint does not yield a larger judgment.

This decision makes good sense and will certainly be welcome when we find ourselves needing a “second chance” to cut off attorney fees.

No Attorney Fees in Disputes as to Reasonableness
of PIP Expenses

     In Grisby v. Progressive Preferred Ins. Co., 207 Or App 592, the Court held that the plaintiff/insured was not entitled to attorney fees on a PIP claim in which the only dispute was whether the claimed expenses were reasonable and necessary.

     Plaintiff was injured in an accident and made a PIP claim with Progressive. Progressive sent plaintiff a letter in accordance with ORS 742.061 informing him that he “had PIP coverage for reasonable and necessary medical expenses directly related to the accident and that Progressive would consent to submitting any dispute as to the amount of benefits to binding arbitration.” About $4,000 in chiropractic expenses were denied and the case went to court-annexed arbitration. Plaintiff appealed the arbitration award in favor of Progressive and a jury awarded these expenses. Plaintiff then sought an award of $49,626 for 115 hours of attorney time ($431 per hour!), which the trial court denied.

     The dispute centered on the interpretation of ORS 742.061(2). That statute provides that attorney fees may not be awarded if, within 6 months of proof of loss, “the insurer has accepted coverage and the only issue is the amount of benefits due the insured,” and has agreed to binding arbitration. Plaintiff argued that Progressive, by refusing to pay for certain expenses, had not “accepted coverage.” The Court disagreed, stating:

“An insurer's acknowledgment of coverage means that the insurer agrees that a policy exists that provides coverage for the person, the vehicle, and the event and that the injury for which benefits are sought arose out of the use, occupancy, or maintenance of an insured vehicle. It does not mean, however, that the insurer agrees to pay for every medical service requested under the policy.”

Plaintiff also argued that the dispute was not “only” about “the amount of benefits due.” After a discussion of the legislative history, the Court concluded that disputes as to the “amount of benefits” may encompass “disputes concerning whether treatment is related to the covered injury.”

Please direct any questions in this area of law to the author, Tim Heinson, at 503-768-9600, or by email to tim@lerlaw.com.