Today, the Oregon Supreme Court issued a decision in Scott v. State Farm Mutual Ins. Co., which effectively overrules Court of Appeals decisions in Mosley v. Allstate and Weatherspoon v. Allstate, and creates a huge exposure for attorney fees in Oregon Uninsured/Underinsured (“UM/UIM”) claims. If you are an insurer that handles Oregon UM/UIM claims, the deadline to avoid attorney fee exposure by complying with the “safe harbor” provisions of ORS 742.061(3) has been significantly reduced and, depending on the submissions received, may have already passed.

In Scott, the claimant was involved in an accident with an uninsured driver and initially applied for no-fault Personal Injury Protection (“PIP”) benefits by completing an Application for Benefits. She was ambivalent whether she would pursue a UM claim, but was sent a medical authorization to complete and return if one would be made. Within less than six months after the authorization was received, State Farm sent an ORS 742.061(3) “safe harbor” letter that confirmed coverage, that the only issues were liability and damages, and consented to resolving the claim through binding arbitration.

By sending such a letter within six months after a Proof of Loss is received, an insurer can avoid exposure for attorney fees in a UM/UIM claim. However, no statute defines the term “Proof of Loss” and it has been a hotly debated issue over the years. In Dockins v. State Farm Mut. Ins. Co., the Oregon Supreme Court defined Proof of Loss in the context of an environmental claim under a homeowner’s policy. It held that "any event or submission that would permit an insurer to estimate its obligations (taking into account the insurer's obligation to investigate and clarify uncertain claims) qualifies as a 'proof of loss' for purposes of the statute." In the Mosley and Weatherspoon cases, the Court of Appeals subsequently looked at Proof of Loss in the context of UM/UIM claims, where ORS 742.504(5)(a) refers to a “Proof of Claim,” holding that it required a written submission that contains full particulars regarding the accident, injuries and claims. An Application for PIP benefits was held not to be a Proof of Loss for a UM/UIM claim.

Scott was the Oregon Supreme Court’s first look at the issue since Dockins. It effectively overruled the Mosley and Weatherspoon decisions, holding that a “Proof of Loss” under ORS 742.061 is different from a “Proof of Claim” in ORS 742.504(5)(a). As a result, a Proof of Loss that determines the availability of attorney fees in a UM/UIM claim is no different than in any other insurance claim. Since State Farm had received an Application for Benefits on the PIP claim more than six months before the “safe harbor” letter was provided to plaintiff, State Farm was placed on notice of its potential obligations sufficient to qualify as a Proof of Loss under ORS 742.061, entitling the claimant to attorney fees on her UM claim.

This decision essentially "guts" the effectiveness of the safe harbor provisions in ORS 742.061(3). Since the test for Proof of Loss is any event or submission that would permit an insurer to estimate its obligations, the court has essentially created a six month deadline from the time an insurer receives notice of an accident to comply with ORS 742.061(3). Notices may be contained in PIP applications, letters, and might even be buried in communications having nothing to do with a claim for UM/UIM benefits. For that reason, automobile insurers should docket six months from any accident as a deadline to comply with the “safe harbor” provisions of ORS 742.061(3).