Wrongful denials of insurance coverage and similar problems can pose considerable difficulties for policyholders. Homeowners, business owners and commercial contractors are right to expect prompt and comprehensive payments from insurance companies that match the expectations created by policy provisions, and the statements of agents and brokers. In many cases, consumers must resort to insurance litigation to enforce their rights.
A bill currently before the Oregon State Legislature would strengthen the rights of insurance policyholders and third parties to bring legal actions for prohibited insurance practices. House Bill 4136 also authorizes class actions against persons who violate insurance regulations, and sets a one-year statute of limitations for harmed individuals to file claims seeking damages for bad faith insurance practices.
The most important provision of the bill: in addition to allowing people to recover actual damages caused by agent or insurance company actions, Oregon’s bad faith insurance bill authorizes punitive damages that are designed to punish a wrongdoer in civil suit, above and beyond one-for-one compensatory damages for actual losses.
Courts would also be able to award reasonable attorney fees and court costs to plaintiffs who prevail in bad faith insurance litigation. However, attorney fees would not be awardable to class action plaintiffs.
HB 4136 also authorizes Oregon’s Attorney General and county District Attorneys to investigate any person who has engaged in or is about to engage in insurance practices that are prohibited under Oregon’s insurance law. Parties who fail to obey investigative demands would be subject to court injunctions, including prohibitions from engaging in continued alleged violations, as well as contempt of court citations.
Insurance Industry Lobbyists Testify Against Bad Faith Insurance Reform
HB 4136, which has 13 legislative co-sponsors, was referred to the House Judiciary Committee in February 2012. Soon after, representatives from insurance trade associations urged legislators to reject the bill at a public hearing on the merits of bad faith insurance reform, including speakers from the American Insurance Association or AIA, the National Association of Mutual Companies or NAMIC, the Northwest Insurance Council or NWIC and the Property Casualty Insurers Association of America or PCI.
Opponents say that HB 4136 would increase insurance costs by encouraging litigation and increasing payouts by insurance companies in Oregon. Industry lobbyists told the committee that experiences in neighboring California and Washington suggest that the costs of such a law would exceed the benefits. While admitting that mistakes in processing claims do occur, the insurance interests contend that Oregon’s existing Unfair Claim Settlement Practices Act provides sufficient legal and regulatory protections to insurance consumers, and ensures that insurance carriers make fair and timely adjustments to wrongfully denied or underpaid claims.
Advocates of bad faith insurance reform point out that absent significant legal consequences, insurance companies can downgrade and delay payouts knowing that the worst punishment they will suffer is being made to pay in full. The significant consequences created by adding punitive damages and prosecutorial investigative authority will likely make agents and adjusters think twice before defrauding clients of the full coverage and honest service they deserve.
The House Judiciary Committee tabled the bill when the legislature adjourned in March, but further action is possible in the next session.
Badges of Bad Faith: Recognizing Prohibited Insurance Practices
Policyholders should understand the basic nature of unfair or deceptive insurance practices if they are having trouble with claims. An Oregon insurance claims lawyer can explain how the following actions may lead to legal action under current and future insurance law provisions:
- Delaying, discounting or denying payments without a reasonable basis
- Failing to acknowledge notification of a claim with a prompt reply
- Failing to either affirm or deny coverage despite adequate proof of loss
- Attempting to settle a claim for less than a reasonable amount
- Altering policy terms without notice to the policyholder
- Requiring duplicate or irrelevant information from claimants
Bad faith is not the only unacceptable conduct that causes problems, delays and losses to insurance claimants. Homeowners and business owners who depend on insurance agents and brokers for adequate coverage can seek damages for negligence when those insurance representatives have failed to identify coverage gaps, undervalued policy limits against client wishes, or failed to follow through on acquiring coverage in a timely fashion.
Insurance litigation opens up complex issues of liability that require a keen eye for the arcane details of liability, property, fire and casualty loss policies and other insurance products. An experienced Oregon insurance coverage dispute attorney can explain a client’s options in light of the latest legal developments and the unique circumstances of each case.