Proposed legislation would increase insurers' liability for Unfair Claims Practices Act violations in Oregon and Nevada
March, 2009
By
Ronald J. Clark,
Andrew B. Downs
Legislation has been introduced in both Nevada and Oregon that, if passed in its present form, would increase the exposure of insurers for violations of those states' Unfair Claims Practices Acts.
Nevada
On March 2, 2009, legislation was introduced in the Nevada Assembly which, if enacted in its present form, will increase the liability of insurance companies for violations of Nevada's Unfair Claims Practices Act, NRS 686A.310. AB 224 would modify that Act by expressly authorizing the recovery of attorney's fees by policyholders and by adding a new unfair practice- the denial of the payment of an amount due if that amount is not in dispute.
Like Oregon and many other states, Nevada has an Unfair Claims Practices Act, NRS 686A.310. Unlike most states with similar statutes, the Nevada statute expressly permits insureds to file suit against insurers based upon technical violations of that statute.
The proposed amendment would add the words "including, without limitation, costs and reasonable attorney fees" to the damages provision. This would operate to allow insureds to recover attorneys fees, which they cannot recover presently unless they prove both that the insurer breached the implied covenant of good faith and fair dealing, and that it also defended against the insured's lawsuit in bad faith. Merrick v. Paul Revere Life Ins. Co., 500 F.3d 1007 (9th Cir. 2007).
In addition, the proposed amendment would add a subsection (q) making the following an unfair practice:
"Denying the payment of any amount due pursuant to a provision of first-party coverage under an insurance policy if that amount is not in dispute."
If this becomes law, it may well operate to increase the exposure of insurers in extra-contractual litigation and it will increase the cost of litigation.
Oregon
On February 23, 2009, legislation seeking to establish first and third-party "bad faith" rights was introduced in the Oregon legislature. House Bill 2791 would permit a person to bring an action against an insurer or "another person" who permits or performs an unfair claims practice under Oregon's Unfair Claims Settlement Practices statute, ORS 746.230. If enacted, this legislation would allow a prevailing insured to recover triple the amount of actual and consequential damages and attorney fees. It would also permit an insured to use a final order by the Department of Consumer and Business Services imposing a civil or administrative penalty for a violation of ORS 746.230, or a judgment for a violation rendered by a court, as prima facie evidence that an insurer or "another person" committed an unfair practice under the statute.
Currently, no private right of action exists in Oregon for unfair or improper claims handling. This bill would not only create a private right of action against an insurer, but also potentially exposes individuals to liability, including insurer employees, independent adjusters, accountants, consultants, attorneys and others who assist the insurer in the claims process by its inclusion of the "another person" language. HB 2791 was referred to the Oregon House Judiciary Committee on March 2.
Like the Nevada proposal, this bill would increase the cost of litigation. In particular, the effort to impose civil liability on individuals who owe no personal duty to insureds and claimants is bad public policy that will operate only to increase costs with no benefit to consumers.