(Article from Insurance Law Alert, February 2017)
For more information, please visit the Insurance Law Alert Resource Center. The Oregon Supreme Court ruled that the term “recovery,” as used in a state statute that imposes attorneys’ fees against insurers under certain circumstances, does not require an actual monetary judgment against the insurer. Rather, an insurer’s voluntary payments satisfy the “recovery” requirement of the statute. Long v. Farmers Ins. Co. of Oregon, 2017 WL 445087 (Or. Feb. 2, 2017).
Farmers made several payments to a homeowner for damage caused by a water leak. The homeowner sued, alleging that her losses exceeded Farmers’ payments and that Farmers failed to submit to an appraisal process. The court ordered an appraisal, after which Farmers made two additional payments. Following a trial, the homeowner petitioned for attorneys’ fees under ORS 742.016, which provides that
if settlement is not made within six months from the date proof of loss is filed with an insurer and an action is brought . . . and the plaintiff’s recovery exceeds the amount of any tender made by the defendant in such action, a reasonable amount to be fixed by the court as attorney fees shall be taxed as part of the costs of the action.
The parties disputed the meaning of “recovery” in the statute. The homeowner argued that the term refers to “any kind of restoration of a loss, including a voluntary payment,” whereas Farmers argued that it is limited to money judgments in a civil action.
The court deemed the provision ambiguous and concluded that legislative history and overall statutory language indicated an intent to encompass voluntary payments as part of “recovery.” In particular, the court noted that “recovery” has not been limited to monetary judgments in other statutory contexts and that the compensatory purposes of the statute would be furthered by an interpretation that includes voluntary payments as “recovery.” In so ruling, the court explained: “the insured received a sum from the insurer that exceeded any amount timely tendered, a result that indicates that, at least in some practical sense, the insured prevailed in the action.” However, the court emphasized that a declaration of coverage is insufficient to trigger ORS 742.061; a policyholder must also obtain a monetary recovery after filing an action, although that recovery need not be a formal judgment.