Lachenmeier, Enloe & Rall - February, 2004 Publication

Your Legislature at Work
Justice Prevails

Every other year, Oregonians watch and wait while the Oregon Legislature toils in Salem, to help bring more justice to the laws which cover us all, but often finding it difficult to reach an agreement. 2009 has departed from that history, at least in terms of attorney fee claims in bodily injury and property damage claims.

As of this writing, both houses of the Legislature have passed amendments to ORS 20.080 and this measure will be heading to the governor for his signature. This measure, Senate Bill 306, will remedy many of the injustices which have been present for so long in ORS 20.080 and should increase the likelihood that claims will settle for their fair value without the need for litigation. Of course, there will always be a need for litigation, where honest differences of opinion exist about the value of a claim, or whether the claim is owed at all, but there should be far fewer cases filed just to secure a fee for the plaintiff’s attorney.

Before these amendments, ORS 20.080 had become a cottage industry for certain plaintiffs’ attorneys. As every casualty insurer knows, a claim for bodily injury or property damages in the amount of $5,500 or less, where a demand for payment has been made to the defendant not less than 10 days before the commencement of the action, has given rise to a claim for attorney fees in addition to damages. This statute has frequently provided the statutory basis for the “tail wagging the dog”. In other words, an injury claim with a likely damages value of $3,500, for example, could have been settled, but for the fact that the plaintiff’s attorney had sent an ORS 20.080 demand letter to the insured, which had not found its way to the insurer in time for the insurer to make a $3,500 offer and cut off a claim for attorney fees. This circumstance could then lead to an arbitration or trial which otherwise would not have needed to occur. Through this process, a $3,500 claim could grow into a $7,500 claim, or even more, once the court awarded the plaintiff’s attorney a fee for prosecuting the case which did not need to take up space in the court system in the first place. This could even happen in a case where the jury awards less than what the insurer believes is the fair value of the claim, but the plaintiff’s attorney receives a fee anyway because the insurer did not have a fair chance to make an offer.

It has been the sense of many in the insurance industry that some plaintiffs’ attorneys (certainly not all) make an extra effort to set up attorney fees under ORS 20.080. They will send an ORS 20.080 demand letter to the insured and make a point of not providing a copy of that letter to the insurer. Or, they will provide a copy to the insurer, but not provide any basis with which to evaluate the claim, hoping to avoid a pre-litigation offer which would cut off an attorney fee. Until now, there has been nothing within the provisions of ORS 20.080 to provide for any sort of Proof of Loss and a plaintiff’s attorney has been able to send an ORS 20.080 demand letter without providing any supporting documentation for the insurer to decide that plaintiff was even injured, much less that $5,500 or some other amount is owed.

The Oregon Legislature has now amended ORS 20.080 to solve the injustices inherent in its provisions. These amendments increase the 10 day notice period to 30 days and require the demand letter to go to not only the potential defendant (the insured) but also to the insurer. The amendments also provide for a Proof of Loss type requirement, so as to provide a basis for the insurer to evaluate the claim, rather than to receive just a bare bones demand letter with no supporting documentation. Specifically, the following documentation must be supplied:

“(3) A written demand for the payment of damages under this section must include the following information, if the information is in the plaintiff’s possession or reasonably available to the plaintiff at the time the demand is made:

(a) In an action for an injury or wrong to a person, a copy of medical records and bills for medical treatment adequate to reasonably inform the person receiving the written demand of the nature and scope of the injury claimed; or

(b) In an action for damage to property, documentation of the repair of the property, a written estimate for the repair of the property or a written estimate of the difference in the value of the property before the damage and the value of the property after the damage.”

After all, since the reason for an attorney fee claim in the first place is to provide an incentive for an insurer to pay a claim which appears to be owed, the insurer needs to be shown why the claim is owed. This particular amendment does seem to provide for some discretion to be exercised by the judge, so that if the judge feels some, but not enough, supporting documentation was provided, the attorney fee claim can be denied.

These amendments also increase the amount of damages which can be claimed under ORS 20.080, from $5,500 to $7,500, and then increase it again to $10,000, in 2012. This will probably not a big problem, since the statute has been rewritten to provide a basis for insurers to evaluate claims before the action is commenced, which should be the goal.

The only additional feature, in this writer’s opinion, that could have made the statute even more fair and even handed, would have been to make the claim for attorney fees reciprocal. In other words, if the jury’s verdict were less than the amount of the offer, the court could award an attorney fee to the defendant for having to go through the exercise of a trial. This would probably have reduced further yet the incidence of litigation being filed. But, alas, the notion of providing for attorney fees in favor of the defendant is quite controversial and not at all likely to generate majority support in the current political climate.

The amendments to ORS 20.080 which did pass (assuming SB 306 will be signed by the governor, which seems likely), will take effect on January 1, 2010. The amended statute will apply to all cases, whether the accident occured before or after the effective date, except for cases which have already been filed before the effective date. In other words, if a lawsuit was filed in 2009, it will be controlled by the old statute. If it is filed in 2010, it will be controlled by the new statute, even if the accident occurred in 2009. This could result in a rush to file smaller cases under the old statute in 2009, so insureds should be put on notice to immediately provide to their insurers any demand letters they receive from plaintiffs’ attorneys.

The amendments contained within SB 306 add a refreshing sense of justice to these smaller claims. In the 30+ years that this writer has defended insureds and insurers in personal injury litigation, I have frequently seen juries award less than the plaintiff had been offered to settle the case. Perhaps elimination of the impediment to settlement which had been imposed by unfair attorney fee claims under the old provisions of ORS 20.080 will help reluctant plaintiffs understand that they should accept a fair settlement offer when it is made. If they still do not understand, of course, I will stand ready, willing, and able to help them understand, and ask juries to award reluctant plaintiffs the fair compensation to which they are entitled.

Please direct any questions you may have concerning these amendments, or the fair jury value or arbitration value of injury claims, to the writer by contacting Jay Enloe at 503-768-9600 or jay@lerlaw.com.