Spearman v. Progressive Classic Insurance , 276 Or. App. 114 ( 2016 )

FLYNN, J.

This appeal arises from plaintiffs action alleging that his motor vehicle insurance carrier breached its contract to pay uninsured motorist benefits. After prevailing in that action, plaintiff petitioned for an award of attorney fees under ORS 742.061(1), a statute that, in general, requires insurance companies to pay an attorney fee to an insured who prevails in an action to recover insurance benefits. The trial court denied plaintiffs fee petition after concluding that defendant’s response to the insurance claim brought defendant within the scope of ORS 742.061(3), a so-called “safe harbor” from the obligation to pay fees. The “safe harbor” applies in actions to recover uninsured/underinsured motorist (UM/UIM) benefits if “the only issues are the liability of the insured or underinsured motorist and the damages due the insured.” ORS 742.061(3).

On appeal, plaintiff argues that defendant raised issues beyond the scope of ORS 742.061(3) by suggesting that plaintiff had no “unreimbursed accident-related medical expenses,” i.e., that plaintiff could recover zero dollars in his UM action. We conclude from the statutory text and context that the issues that are within the scope of ORS 742.061(3) are the issues of liability and damages that an insured would have to establish in an action against the uninsured or underinsured motorist. To the extent that our decision in Cardenas v. Farmers Ins. Co., 230 Or App 403, 215 P3d 919 (2009), suggests “damages due” is a reference to the benefit due the insured from the insurer, we disavow that suggestion. Defendant’s pleadings — which admitted that plaintiff sustained some injury in the collision— disputed only the amount of damages plaintiff sustained, as permitted by ORS 742.061(3). Accordingly, we affirm.

I. BACKGROUND

The facts pertinent to this appeal are few and undisputed. Plaintiff was injured in a collision with an uninsured motorist and submitted a claim for UM benefits to defendant, which had sold him a policy of motor vehicle insurance. When the parties were unable to resolve the UM claim, plaintiff filed the present action on the policy. Plaintiffs complaint sought recovery for only “unreimbursed accident-related medical expenses” — those expenses for which plaintiff had not already been reimbursed under other coverage. In its answer, defendant admitted that plaintiff sustained “some” injury in the collision with the uninsured motorist but disputed “the nature and extent of plaintiffs alleged injuries” and disputed “the reasonableness and necessity of some of plaintiffs accident-related medical expenses.”

Because the amount in dispute in plaintiffs action was less than $50,000.00, the trial court transferred the action to its arbitration program, ORS 36.400(3), and the arbitrator found plaintiff entitled to $6,022.80 under the UM policy. The arbitrator denied plaintiffs petition for attorney fees, however, and the trial court upheld that determination. That is the ruling to which plaintiff assigns error on appeal.

II. ANALYSIS

Plaintiff argues that, because his complaint sought only his “unreimbursed accident-related medical expenses,” defendant’s dispute regarding “the reasonableness and necessity of some of [p]laintiffs accident-related medical expenses” permitted defendant to assert that plaintiff had been fully compensated for his injuries. According to plaintiff, that position “would permit the finder of fact to determine that [p]laintiff was not entitled to any award” in the UM action and, thus, raises an issue beyond those permitted by ORS 742.061(3).

A. Pertinent Statutory Text, in General

Before examining the parties’ dispute in detail, we review the pertinent statutes. ORS 742.061(1) provides that, in an action upon an insurance policy, the insured is entitled to recover an award of reasonable attorney fees

“if a settlement [of an insurance claim] is not made within six months from the date proof of loss is filed with an insurer * * * and the plaintiff's recovery exceeds the amount of any tender made by the defendant in such action * * * ¹

As the Supreme Court has explained, that provision “applies to actions brought on insurance policies of any kind” and serves the “purpose of encouraging settlement of insurance claims without litigation.” Strawn v. Farmers Ins. Co., 353 Or 210, 221 n 8, 297 P3d 439 (2013). That general right to recover fees from recalcitrant insurers has been available to Oregon insureds — in essentially the same form as ORS 742.061(1) — since 1919. See Morgan v. Amex Assurance Company, 352 Or 363, 368, 287 P3d 1038 (2012) (discussing statutory history (citing Or Laws 1919, ch 110, § 1)).

The 1999 legislature, however, created the exception set out in ORS 742.061(3), as well as a parallel exception for actions to recover personal injury protection (PIP) benefits, which is set out in ORS 742.061(2). Or Laws 1999, ch 790, § 1. Those exceptions provide:

“(2) Subsection (1) of this section does not apply to actions to recover personal injury protection benefits if, in writing, not later than six months from the date proof of loss is filed with the insurer:

“(a) The insurer has accepted coverage and the only issue is the amount of benefits due the insured; and

“(b) The insurer has consented to submit the case to binding arbitration.

“(3) Subsection (1) of this section does not apply to actions to recover uninsured or underinsured motorist benefits if, in writing, not later than six months from the date proof of loss is filed with the insurer:

“(a) The insurer has accepted coverage and the only issues are the liability of the uninsured or underinsured motorist and the damages due the insured; and

“(b) The insurer has consented to submit the case to binding arbitration.”

ORS 742.061.

The exceptions were added at the behest of insurance carriers that were concerned that recent appellate decisions applying ORS 742.061 to PIP and UM/UIM actions had increased the number of actions filed in court. Audio Recording, House Committee on Rules, Elections, and Public Affairs, SB 504, June 14, 1999, at 0:06.22 (statement of Tom Mortland, claims attorney, North Pacific Insurance Company), http://www.leg.state.or.us/listn/1999s.htm (accessed Jan 20, 2016). As originally drafted, the bill would have exempted all PIP, UM, and UIM claims from attorney fee recovery under ORS 742.061. Representatives of the insurance industry and the private plaintiffs’ bar, however, negotiated consensus amendments that limited the exemption to claims for which the insurer did not dispute coverage and consented to binding arbitration, and for which the only issues were “the liability of the uninsured or underinsured motorist and the damages due the insured.” Tape Recording, Senate Judiciary Committee, SB 504, May 13, 1999, Tape 179, Side A (statement of Robert Neuberger); Tape Recording, House Committee on Rules, Elections, and Public Affairs, SB 504, June 14, 1999, Tape 92, Side A (statements of John Powell of North Pacific Insurance Company, and J. Michael Alexander, representing Oregon Trial Lawyers Association).

B. The Statutory Text in Dispute Here

In this case, there is no dispute that plaintiff has satisfied the basic requirements for an award of fees set out in ORS 742.061(1). There is also no dispute that defendant sent the timely written notice described in ORS 742.061(3). As we recently held, however, an insurer that sends the notice described in ORS 742.061(3) may lose the ability to rely on that safe harbor if it later pursues a litigation strategy that is “broader than that contemplated by the legislature in ORS 742.061(3).” Kiryuta v. Country Preferred Ins. Co., 273 Or App 469, 474, 359 P3d 480 (2015), rev allowed, 358 Or 529 (2016). In Kiryuta, however, we were not called upon to identify the scope of issues “contemplated by the legislature in ORS 742.061(3).” The issue was whether the insurer pursued affirmative defenses it labeled “Contractual Compliance” and “Offset” by pleading them, and there was no real dispute that — if pursued — the affirmative defenses would have involved litigation of issues beyond “the liability of the uninsured or underinsured motorist and the damages due” the insured. Id. at 474.

This case calls upon us to determine whether the scope of issues “contemplated by the legislature in ORS 742.061(3)” includes a challenge to the extent of the insured’s injuries that could result in the insured recovering nothing in the UM action. Defendant does not contend that its challenge to the “extent of plaintiffs injuries” could be considered an issue of “liability of the uninsured or underinsured motorist.” Thus, this case requires us to identify the scope of issues of “the damages due the insured” and to determine whether defendant stayed within that scope. As with all issues of statutory construction, we focus primarily on statutory text and context. State v. Gaines, 346 Or 160, 171, 206 P3d 1042 (2009).

C. “LAJctions to Recover Uninsured or Underinsured Motorist Benefits”

Because ORS 742.061(3) applies to “actions to recover uninsured or underinsured motorist benefits,” we begin by exploring the nature of those benefits. UM/UIM coverage is a mandatory part of every Oregon motor vehicle insurance policy. ORS 742.502. The benefit that must be paid under that coverage is “all sums that the insured * * * is legally entitled to recover as general and special damages from the owner or operator of an uninsured vehicle because of bodily injury sustained by the insured caused by accident ***.” ORS 742.504(l)(a).² The purpose of UM/UIM coverage is to “‘put the person injured by an uninsured motorist in the same position he would be in had he been injured by an insured motorist.’” Vega v. Farmers Ins. Co., 323 Or 291, 306 n 13, 918 P2d 95 (1996) (quoting legislative history of ORS 742.504).

Consistent with that purpose, “[s]ums that the insured, *** is legally entitled to recover as *** damages from the owner or operator of an uninsured vehicle” is further defined to mean “the amount of damages that * * * [a] claimant could have recovered in a civil action from the owner or operator at the time of the injury after determination of fault or comparative fault and resolution of any applicable defenses,” although this amount is subject to permitted limitations on the “benefits payable under the terms of the policy[.]” ORS 742.504(2)(j). In other words, at the core of any action to recover UM/UIM benefits is the premise that an uninsured or underinsured motorist would be liable to the insured in a civil action for some amount of damages for bodily injury.

D. “[DJamages Due the Insured”

Given the purpose of UM/UIM benefits, defendant argues, the scope of “damages due the insured” in the UM/ UIM safe harbor should be understood as the damages that would be due the insured in a negligence action brought by the insured against the uninsured or underinsured motorist brought by the insured. See Vega, 323 Or at 306 n 13 (purpose of UM/UIM coverage is to “put the person injured by an uninsured motorist in the same position he would be in had he been injured by an insured motorist”). Plaintiff, however, urges us to conclude that “damages due the insured” means the same thing as “the amount of the benefits due the insured from the insurance carrier” and that a dispute suggesting that the insurer owes no benefit exceeds the scope of the safe harbor. Beyond the fact that the legislature did not use the text plaintiff proposes, the text that the legislature did use presents at least two obstacles to plaintiffs interpretation.

First, the phrase “damages due” is otherwise used in the pertinent statutes to refer to what the insured could recover from the uninsured motorist, not from the insurer. ORS 742.061 describes the amount due from the insurer as “the plaintiffs recovery.” Throughout ORS 742.504, the term “damages” is used to refer to what the insured could recover in a civil action against the uninsured driver, while what the insurer pays is referred to as “all sums that the insured” is entitled to recover as damages from the uninsured driver, subject to limitations imposed under the terms of the policy.

Second, if “damages due the insured” means “benefits due the insured from the insurer,” then it was redundant for the legislature to specify in ORS 742.061(3) that the insurer also can raise issues related to “liability of the uninsured or underinsured motorist.” It is redundant because the benefit due already depends upon whether and to what extent the uninsured motorist would be liable for the plaintiffs damages. See ORS 742.504(2)(j) (taking into account comparative fault). We are charged to construe statutes so that no part is meaningless if it is possible to do that. See ORS 174.010; Vsetecka v. Safeway Stores, Inc., 337 Or 502, 510, 98 P3d 1116 (2004) (“When, as in this case, a statute contains multiple provisions, ORS 174.010 directs us to read those provisions, if possible, in a way that will give effect to all of them.”). Nevertheless, plaintiff urges us to interpret the scope of issues that may be raised under ORS 742.061(3) as equivalent to the scope of issues that may be raised under ORS 742.061(2), a scope that the Supreme Court has said precludes disputes that could result in the insured recovering no benefits. Grisby v. Progressive Preferred Ins. Co., 343 Or 175, 182-83, 166 P3d 519, adh’d to as modified on recons, 343 Or 394, 171 P3d 352 (2007).

E. Pertinent Statutory Context of ORS 742.061(2), as Construed in Grisby

As plaintiff points out, ORS 742.061(2) and (3) were adopted together, and the statutory text describing the scope of each provision is nearly identical, differing in only one respect: for the safe harbor on a UM/UIM action, “the only issues” can be “the liability of the uninsured or underin-sured motorist and the damages due the insured,” while, for the safe harbor on a PIP action, the “only issue” can be “the amount of benefits due the insured.” It is Grisby’s construction of “benefits due the insured” as used in subsection (2) that plaintiff urges us to adopt as the scope of subsection (3). We decline to treat the textual distinction as meaningless.

In Grisby, the plaintiff successfully sued to recover benefits under his PIP coverage when his insurer, after paying for some medical expenses and loss of income related to the injury, denied payment for additional chiropractic treatment that it considered to be unrelated to the plaintiffs accident. 343 Or at 177. When the trial court denied the plaintiffs request for an attorney fee, citing ORS 742.061(2), the plaintiff appealed. We reasoned that the dispute regarding payment for the chiropractic treatment was merely a dispute about the “amount of benefits due the insured,” an issue permitted by ORS 742.061(2). Grisby v. Progressive Preferred Ins. Co., 207 Or App 592, 601, 142 P3d 531 (2006). But the Supreme Court disagreed.

The Supreme Court reasoned that the legislature’s use of

“the limiting words ‘the only issue’ * * * emphasizes the legislature’s apparent intent to limit the attorney fee exception of ORS 742.061(2)(a) to disputes over the quantum of benefits and to exclude from the effect of that provision other disputes about the ‘benefits due the insured.’”

343 Or at 182 (emphases in original). The court then reasoned that the defendant’s dispute as to whether it was obligated to pay for the claimed services “at all” was more than a dispute about the “amount” the insurer should pay for those services because “[o]nly after the trier of fact had agreed with plaintiff on that preliminary issue could it turn to the issue of the amount of benefits that plaintiff should receive under the policy.” Id. at 182-83 (emphases in original). In other words, Grisby held that the scope of issues that an insurer may raise under ORS 742.061(2) is limited to the “amount [greater than zero] of benefits due the insured.” Id. at 184.

We reject plaintiffs contention that Grisby also describes the scope of issues that may be raised under ORS 742.061(3). Grisby construed the one aspect of subsection (2) for which the text differs from subsection (3). For a UM/UIM action, the legislature has not described the scope of permitted issues as “benefits due the insured,” but as “the liability of the uninsured or underinsured motorist and the damages due the insured.” Plaintiffs proposal would read out the reference to “liability,” because any successful contention that the uninsured motorist has no liability to the insured necessarily means that the insured is entitled to recover no damages from the uninsured motorist and, thus, no benefits under the UM/UIM policy. See ORS 742.504(l)(a).

Moreover, even if plaintiff means only that we should follow Grisby to identify the scope of the issue regarding “the damages due the insured,” we cannot treat that phrase as equivalent to “the amount of benefits due the insured” without ignoring the legislature’s use of distinct terms in the two provisions. There are several textual problems with that argument. As we have already explained in our textual analysis, “damages due the insured” has a meaning different from “benefits due the insured from the insurer.”

In addition, incorporating Grisby’s construction of the PIP safe harbor would require us to ignore the distinct contexts to which the two safe harbor provisions apply. Grisby’s construction of “amount of benefits” specifically looked to the statute describing PIP benefits. As the court emphasized, that statute distinguishes between disputes about the “amount of benefits” and disputes about the denial of benefits. Unlike the term “benefits due” in the context of a PIP claim, the term “damages due” in a UM/UIM claim does not refer to “the damages due the insured [from the insurer].” As the nature of a claim for UM/UIM benefits and the text of ORS 742.061(3) indicate, “damages due the insured” is a reference to damages due the insured from a liable uninsured motorist. It has a different meaning than the phrase “benefits due” that the Supreme Court addressed in Grisby.

F. Cardenas

Plaintiff argues that this court has already held that Grisby’s interpretation of subsection (2) applies to subsection (3) as well. In Cardenas, we held that the insurer raised an issue beyond the scope of the UM/UIM safe harbor when it asserted, as an affirmative defense to the entire action, that the insured had signed an agreement to release her UM claim in exchange for $800. 230 Or App at 412. That holding is fully consistent with our interpretation of ORS 742.061(3). The defense of “release” asserted in Cardenas is clearly an issue beyond the issues of liability and damages that the insured would confront in an action against the uninsured motorist. That is not, however, the rationale that we gave for our holding in Cardenas.

It appears that the parties (and the court) in Cardenas assumed that “damages due the insured” is equivalent to “benefit due the insured from the insurer” and focused, instead, on whether it is significant that the phrase “amount of’ does not appear in the UM/UIM safe harbor. According to the insurer, because Grisby focused on the words “amount of benefit due,” that textual distinction made Grisby inapplicable and allowed UM/UIM insurers to safely raise any dispute relevant to what — or whether — the insured will recover on the UM/UIM claim. Cardenas, 230 Or App at 409 (emphasis added).

In the course of considering the insurer’s argument, we cited legislative history suggesting that the wording difference between the PIP and UM/UIM safe harbors reflects a “housekeeping” change consistent with the fact that “the statutes governing PIP define an insured’s entitlement (if any) not as ‘damages,’ but as ‘benefits.’” Id. at 411 (citing Tape Recording, House Committee on Rules, Elections, and Public Affairs, SB 504, June 14, 1999, Tape 92, Side A (statement of Tom Mortland)). We relied on that statement of intent to emphasize why we rejected the “argument that the use of ‘amount of benefits due the insured’ in the PIP provision and ‘damages due the insured’ in the UM provision reflects the legislature’s intention to give each provision a radically different scope.” Id. at 412.

We did not (and do not now) read that statement of intent as suggesting — contrary to what the text and context indicate — that the legislature intended the phrase “liability of the uninsured or underinsured motorist and the damages due the insured” to mean the same thing as “amount of benefits due the insured.” Rather, the statement recognizes that the reference to “damages” in ORS 742.061(3) is a reference to the essence of a UM claim — damages the insured would be entitled to recover from the uninsured motorist. The legislature used the phrase “amount of benefits” in the PIP safe harbor because “damages” are not an issue, but it did not use the word “benefits” in the UM/UIM safe harbor because, in that context, “benefits” and “damages” do not have the same meaning.

Indeed, unlike the amount payable in PIP benefits, which are set by statute at fixed dollar máximums for a short list of qualifying expenses — primarily, medical expenses and wage loss — and are limited primarily to the one-year period following injury,³ the “amount of benefit” ultimately payable on a UM/UIM claim is subject to a wide range of variables. Factors that affect the amount of benefit due on a UM/UIM claim include amounts paid on behalf of the uninsured driver, amounts paid in workers’ compensation or disability benefits, and amounts that must be credited to the insurer by virtue of the insured having settled with the liable driver for less than all of the liability insurance. ORS 742.504(7). In addition, the amount of benefit is determined by amounts of other similar coverage available to the insured, the dollar limits the insured has purchased in liability coverage, and whether the insured elected in writing lower UM limits than that amount. ORS 742.502; ORS 742.504(9). Thus, if “damages due the insured” means “the amount of benefit due from the insurer,” the range of potential issues would be much broader than simply the insured’s “entitlement (if any)” to damages in an action against the uninsured motorist. Cardenas does not hold that the legislature intended the UM/UIM safe harbor to encompass such a broad range of issues.

In explaining our holding, however, we seemingly accepted the premise that “damages” means “benefits” and reasoned:

“[I]f omitting the phrase ‘amount of was intended to indicate that a dispute about ‘damages’ can include any dispute that has an impact on the amount of damages, the exception to insurer liability in UM cases nearly swallows the rule; it is difficult to think of any UM claim that is not ultimately about whether the insured is entitled to damages and, if so, how much.”

Cardenas, 230 Or App at 410.

To the extent our discussion in Cardenas suggests that “damages due the insured” in the UM/UIM safe harbor has the same scope as “amount of benefits due the insured” in the PIP safe harbor, we disavow that interpretation of the statute and of Cardenas. The holding, and real point, of Cardenas is that the class of issues permitted under the UM/UIM safe harbor is drawn more narrowly than the class of all issues that ultimately affect the amount the insured will recover in the UM action. We agree with that understanding of the scope of ORS 742.061(3). In reaching that conclusion, however, we emphasize that the statutory language — not Grisby — compels that interpretation. If the issue of “damages due” in a UM/UIM claim were so broad as to encompass all of the issues that determine the “amount of benefit due,” the exception to insurer liability in UM/ UIM cases would nearly swallow the rule; “it is difficult to think of any UM claim that is not ultimately about whether the insured is entitled to [benefits] and, if so, how much.” Cardenas, 230 Or App at 410.

G. The Issues Raised by Defendant’s Pleadings

Our determination that “damages due the insured” is a reference to the amount of damages (if any) that the insured would be entitled to recover from the uninsured motorist provides a clear answer to the remaining question. Although we agree with plaintiff that defendant’s pleadings were enough to put at issue the possibility that plaintiff would recover no benefit in the UM action, the allegations raised issues only as to the damages that the insured would be entitled to recover from the uninsured motorist.

In its answer, in response to plaintiff’s allegation that he sustained noneconomic damages, defendant admitted that plaintiff sustained “some” injury in the collision with the uninsured motorist but disputed “the nature and extent of [plaintiff’s alleged injuries.” On its face, that allegation disputes only the amount of plaintiffs damages. Although plaintiff contends the allegation could have permitted a determination that plaintiff is entitled to zero noneconomic damages, ORS 742.061(3) does not preclude disputes about individual categories of damages. A dispute about whether plaintiff sustained economic damages would still be a dispute regarding the amount of the damages due the insured as a result of the collision.

Next, in response to plaintiffs allegation of economic damages for medical expenses, defendant’s answer disputed “the reasonableness and necessity of some of [p]laintiffs accident-related medical expenses.” In response to two of plaintiffs requests for admissions, defendant similarly disputed some, but not all, of plaintiffs alleged injuries: “Admit that Plaintiff sustained ‘some’ injury as a result of the accident alleged in the Complaint; however, Defendant denies the nature and extent of Plaintiffs injuries” and “Admit that some of the treatment was necessary; Defendant denies the reasonableness, necessity, relatedness and extent of some of Plaintiffs treatment.” Again, facially, those allegations dispute only the amount of plaintiffs damages.

Our answer is not altered by the possibility that defendant’s pleadings could permit a finding that plaintiff is entitled to none of the UM benefits he sought. Plaintiffs choice to plead only a portion of his damages does not convert defendant’s dispute about the extent of damages plaintiff sustained in the collision into a dispute about more than “the damages due” to plaintiff.

Affirmed.

1 Although “the text presupposes that the insured has been the plaintiff and that he has gained a recovery against the insurer * * *, the reach of the statute has been extended beyond its literal words where the position of the parties was functionally the same though procedurally different.” Travelers Ins. Co. v. Plummer, 278 Or 387, 391, 563 P2d 1218 (1977) (explaining predecessor statute).

2 ORS 742.504 describes the minimum terms that must be included in all Oregon motor vehicle insurance policies. The statute as amended after the briefing of this appeal now refers only to “damages” rather than “general and special damages” but otherwise retains the quoted language. Or Laws 2015, ch 5, § 3. The 2015 amendments do not apply to this dispute. Or Laws 2015, ch 5, § 7.

3 ORS 742.524(1) provides that PIP benefits include the following:

“(a) All reasonable and necessary expenses of medical, hospital, dental, surgical, ambulance and prosthetic services incurred within one year after the date of the person’s injury, but not more than $15,000 in the aggregate for all such expenses of the person. * * *

“(b) * * * 70 percent of the loss of income from work during the period of the injured person’s disability until the date the person is able to return to the person’s usual occupation. This benefit is subject to a maximum payment of $3,000 per month and a maximum payment period in the aggregate of 52 weeks. ***

“(c) If the injured person is not usually engaged in a remunerative occupation and if disability continues for at least 14 days, the expenses reasonably incurred by the injured person for essential services * * * in lieu of the services the injured person would have performed without income during the period of the person’s disability *** subject to a maximum payment of $30 per day and a maximum payment period in the aggregate of 52 weeks.”

There also is a limited benefit for funeral expenses and child care.