Oregon Case Law Update: Safe Harbor Letter Not a Sure Thing

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Oregon Case Law Update: Safe Harbor Letter Not a Sure Thing

From the Desk of Joshua P. Hayward: Under ORS 742.061, a first party plaintiff is entitled to attorney fees if they recover on a first party claim.  An exception to this rule applies in the uninsured (UM) or underinsured (UIM) context: insurers can avoid paying attorney fees if within six months of the proof of loss they send a so-called “safe harbor letter” in which they accept coverage and agree to binding arbitration, leaving liability and damages as the only remaining issues.  Even if the appropriate letter is sent, however, an insurer can lose this protection by raising defenses.

Claims Pointer:  In a prior case update, we discussed the Court of Appeals opinion in Kiryuta v. Country Preferred Ins. Co., 273 Or App 469 (September 2, 2015).  Now, the Supreme Court has affirmed the Court of Appeals, thus making the rule announced in that case settled Oregon law.  Even if an insurer sends a proper safe harbor letter, if the insurer raises arguments in its pleadings that go beyond the issues of liability and damages, it can lose the protection of the safe harbor letter and be exposed to attorney fees.

Kiryuta v. Country Preferred Ins. Co., 360 Or 1 (July 14, 2016).

Roman Kiryuta (Kiryuta) sustained injuries following a motor vehicle accident with an underinsured motorist.  Country Preferred Insurance Company (Country) paid his Personal Injury Protection (PIP) claim but did not resolve his UIM claim.  Country then sent Kiryuta a letter satisfying the safe harbor requirements of Oregon law, and the case was arbitrated.  After Kiryuta prevailed at arbitration, however, the arbiter awarded him attorney fees, reasoning that Country’s defenses had raised issues beyond liability and the amount of damages due.

Country appealed the award of attorney fees to circuit court, and the court concluded that the safe harbor letter precluded the award of fees.  Kiryuta appealed to the Court of Appeals,...

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