Legal Updates

Oregon Court of Appeals Determines That the Terms of an Insurance Policy Can Be Superseded by a “Clear and Express” Oral Binder
May 12, 2010

The Oregon Court of Appeals, in its May 5, 2010 Stuart v. Pittman and Country Mutual Insurance Co. decision, addressed the ability of an oral binder to exceed the scope of the written policy. The defendant, Country Mutual Insurance Company, appealed a judgment against it on an action for breach of an oral insurance binder. An insurance binder is a contract for temporary insurance that is to be effective pending approval or disapproval of permanent insurance. An oral insurance binder is enforceable in Oregon under ORS 742.043(1).

The plaintiff asked the defendant insurance agent for “course of construction” coverage that would provide a “safety net” of coverage “in all instances that something goes wrong during construction.” The oral binder became effective September 1, 2003, and written documentation was received by the plaintiff in March 2004. In the interim, a severe snow and ice storm caused the interior sheathing of the house to split, water to accumulate, and mold to develop. After receiving judgment against the insolvent builder for faulty workmanship, the plaintiff filed a claim on his policy. That claim was denied as being outside the scope of his “course of construction” coverage.

The Court of Appeals found that “there is a presumption that a binder includes those terms that are usually contained in the policy for which the binder was issued,” and reinforced that the terms of the policy could only be superseded by the “clear and express terms of the binder.” The court held that even if the insurance agent agreed to provide a “safety net” of coverage “in all instances that something goes wrong,” such a binder is “too vague and obscure” to satisfy the “clear and express” requirement.

Oregon Court of Appeals Addresses Whether an Insurer’s Right to Contribution from Other Insurers Exist Independently of the Rights of the Insured
April 30, 2010

The Oregon Court of Appeals’ April 28, 2010 decision, Certain Underwriters at Lloyd’s London v. Mass. Bonding & Ins. Co., addressed, for the first time, the issue of whether an insurance issuer’s right to contribution from other issuers exists independently of the rights of the insured. In this case, the defendant issuers had settled with the common insured, while the plaintiff issuers, who were subject to an adverse judgment from the common insured, brought a claim of equitable contribution against the defendants. The court found that “the right to equitable contribution among insurers is not based on a subrogation or contract theory,” but is a right that “inures to the benefit of the insurer and not the insured.” Therefore, the court held that the defendants’ settlement with the insured did not operate to extinguish the rights of the plaintiff issuers to equitable contribution; instead, the settlement only operated to release the insured’s own claims against the defendant issuers.

UIM Benefits Made Clear: Oregon Supreme Court Determines UIM Benefits by Subtracting Tortfeasor’s Liability Payment from the Insured’s UM Policy Limit
October 5, 2009

In Vogelin v. American Family Mutual Ins. Co., SC S056655 (July 16, 2009), the Oregon Supreme Court held that UIM benefits are calculated by subtracting the tortfeasor’s liability payment from the insured’s UM policy limit.

In 2003, plaintiff was injured in an automobile collision where she sustained damages over $300,000. The driver who collided with plaintiff had liability insurance up to $25,000, which was paid to plaintiff. Plaintiff then made a claim against her insurance company for UIM benefits. Plaintiff’s UM liability limit under her own policy was $100,000. Plaintiff believed that she was entitled to the full $100,000 because her damages, less the tortfeasor’s payment, were well over $100,000. Plaintiff’s insurance company believed that she was entitled to $75,000, since plaintiff’s policy provided that the $25,000 would be deducted from her UM liability limit of $100,000.

Plaintiff filed a breach of contract claim against her insurance company in 2005. Plaintiff argued that ORS 742.504 establishes the minimum policy terms for UM and UIM insurance coverage. Plaintiff contended that under the worker’s compensation case of Bergmann v. Hutton, 337 Or 596, 101 P3d 353 (2004), ORS 742.504(7)(c) requires insurers to pay their insureds the total amount of damages they incur, less any amount paid by the tortfeasor, up to the insured’s UM liability limit. Plaintiff argued that ORS 742.502(2)(a), which mandates UIM coverage, must be read consistently with ORS 742.504(7)(c), to compel the same result. Despite the fact that her policy provided that the $25,000 would be deducted from her UM liability limit of $100,000, plaintiff argued that the $25,000 liability payment should be deducted from her total amount of damages. Because her total damages, less the $25,000 liability payment, was well over $100,000, plaintiff reasoned that she was entitled to receive her full UIM benefit of $100,000 from defendant. Defendant responded that ORS 742.502(2)(a) controlled, and as such, the $25,000 liability payment must be deducted from the amount of plaintiff’s UM policy limit of $100,000, leaving defendant to pay $75,000.

After a thorough analysis of the legislative history surrounding UIM legislation, the Oregon Supreme Court determined that the legislature intended that insurers be permitted to offset tortfeasor liability payments against the UM liability limits. The Oregon Supreme Court affirmed the court of appeals decision, and upheld the trial court’s entry of judgment for $75,000 to plaintiff.

Oregon Court of Appeals Addresses Negligence Claims Against Contractors
September 2, 2009

On September 2, 2009, the Oregon Court of Appeals in Abraham v. T. Henry Constr., Inc., et al. determined that homeowners could maintain a negligence claim against a contractor even though the homeowners entered into a contract with the contractor for the construction of a home and the statute of limitations had run on the contract. The court did not allow the negligence claim based upon a “special relationship” between the homeowners and contractor, but rather based upon a “standard of care independent of the contract” derived from the Oregon Building Code.

Source link: http://www.publications.ojd.state.or.us/A136228.htm

Oregon House Bill 2434 Reducing Statute of Limitations in Defect Claims Against "Large Commercial Structures" Becomes Law
July 19, 2009

The Oregon legislature passed House Bill 2434 this session amending ORS 12.135, which establishes the statutes of limitations and statute of ultimate repose for construction claims. Governor Kulongoski signed the House Bill 2434 into law on July 16, 2009. 2009 Oregon Laws Chapter 217 (“Chapter 217”) will put House Bill 2434 into effect on January 1, 2010. Chapter 217 will reduce the statute of ultimate repose in ORS 12.135 from 10 years to six years for a “large commercial structure.”

Source Link: http://www.leg.state.or.us/09reg/measpdf/hb2400.dir/hb2434.en.pdf [PDF]