Oregon Insured Limited to Contract Damages

On October 28, 2016, the 9th Circuit Court of Appeals issued an unpublished opinion in the Braun-Salinas v. American Family Ins. Group d/b/a American Family Mut. Ins. Co., 14-cv-35369 (9th Circuit) lawsuit affirming Magistrate Judge John Acosta of the U.S. District Court for the District of Oregon, in his granting of summary judgment.  The decision holds that an insured is limited to recovering contractual damages from an insurer, and dismisses tort and negligence per se claims.  We previously wrote on Judge Acosta’s decision here [http://mlrlegalteam.com/oregon-federal-court-finds-insured-limited-contract-damages/], which gives a detailed background of the dispute and legal arguments.

In this case, the insureds sued the insurance company to recover tort damages, or “extra-contractual damages,” under theories of negligence per se and tortious “bad faith” based upon the insurer’s denial of certain underinsured motorist benefits arising from a motor vehicle accident.  In support of these claims, the insured alleged that Am Fam failed to conduct a reasonable investigation, did not make a reasonable and timely settlement offer, and compelled the insureds to initiate litigation, each of which was a violation of the Oregon Unfair Claims Settlement Practices Act, ORS 746.230.  The insureds argued the Act was part of the insurer’s obligation to act in good faith and deal fairly with the insured and a breach of the  Act constituted negligence per se and “bad faith.” 

 Judge Acosta dismissed the insureds’ tort claims on summary judgment, reaffirming the Oregon principle that an insured is limited to recovering contractual damages from an insurer.  On appeal, the 9th Circuit affirmed Judge Acosta’s ruling.  Specifically, the 9th Circuit recognized that Oregon’s highest and intermediate courts have allowed a negligence per se case only where a “negligence claim otherwise exists.”  Oregon appellate courts have rejected arguments that a violation of the Oregon Unfair Claims Settlement Practices Act, ORS 746.230, gives rise to a statutory claim.  The insured argued that the Oregon Unfair Claims Settlement Practices Act, ORS 746.230, provides a “standard of care” for negligence claims.  The 9th Circuit found this argument unpersuasive, noting that the Oregon Court of Appeals has declined to recognize a common law negligence claim for failure to pay first-party insurance benefits. The Court noted the only way to bring a tort claim would be to establish a “special relationship,” which the insureds failed to prove.  Therefore, Judge Acosta did not error in granting summary judgment.

The attorneys at MLR have decades of combined experience addressing the issues concerning extra-contractual liability in insurance matters in Oregon.  Please do not hesitate to contact us with any questions concerning this case or any other matter you see on the website.

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