In State v. Ramos, 267 Or App 164, ___ P3d ___ (2014), the Oregon Court of Appeals recently addressed an insurance company’s right to restitution from an insured that submitted a fraudulent insurance claim. The court determined that an insurance company is entitled to restitution for various expenses associated with investigating and processing a fraudulent insurance claim, including attorney fees, investigative expenses, and other related costs.
The insured set fire to her restaurant business and made an insurance claim for the resulting damage to the restaurant and equipment. The insured was later convicted of arson, in connection with setting the fires, and attempted aggravated theft, in connection with submitting the fraudulent insurance claim. The State sought approximately $28,000 in restitution for the insured’s insurance company. In support, the State presented evidence that the insurance company paid those amounts to a law firm, a forensics company, two investigators, and a court reporting company in connection with its investigation.
The insured appealed the trial court’s order granting restitution to her insurance company. In particular, the insured objected to two categories: (1) attorney fees paid in connection with the investigation of the insured’s claim, and (2) the fees paid to investigators’ for time spent providing grand jury and trial testimony. Alternatively, the insured contended no restitution should be ordered for expenses incurred after the claim was denied. The State responded that the insurance company was a victim of the insured’s attempted theft by deception and was, therefore, entitled to restitution for economic damages it sustained as a result of the insured’s commission of the crime. The Court of Appeals agreed with the State and upheld the trial court’s restitution award.
The court began its analysis by citing the requirements for criminal restitution: (1) criminal activity, (2) economic damages, and (3) a causal relationship between the two. The court also reiterated Oregon law that the defendant’s criminal activities must be the “but for” cause of the damages, but that the damages need not be the direct result of the defendant’s criminal activities. The court concluded that the evidence satisfied these requirements: the insured, with intent to defraud, made a false insurance claim; the insurance company undertook an investigation solely because the insured filed the claim; and the insurance company’s investigation addressed the harm posed by the insured’s actions. Based on the facts presented by the State, the Court of Appeals found that all of damages that were part of the restitution order satisfied these requirements and upheld the restitution award.
MLR has represented clients seeking criminal restitution for false insurance claims. Please contact us with any questions or concerns about this matter or any other matter you see addressed in the Insurance Coverage Blog.