New Oregon Court of Appeals Decision Holds Written Request for Arbitration is Formal Institution of Arbitration Under ORS 742.504(12)
July, 2011
On Wednesday, July 27, 2011, the Oregon Court of Appeals, on remand from the Oregon Supreme Court, decided the case of Luka v. Tri-Met, clarifying what can qualify as formal institution of arbitration under ORS 742.504(12). Based on the decision in Bonds v. Farmers Ins. Co., 349 Or 152, 240 P3d 1086 (2010), the court held that a written request for binding arbitration was sufficient.
In Luka, the claimant sought uninsured motorist ("UM") benefits as a bus passenger involved in an accident with an uninsured motorist. Within less than two years following the accident, the claimant sent Tri-Met an affidavit confirming the absence of insurance, accompanied by a cover letter stating "[P]lease let this correspondence serve as written notice of our request to have this matter submitted to binding arbitration in accordance with ORS 742.061." When no arbitrator was selected and no other formal process had begun within two years after the accident, Tri-Met denied the claim as untimely under ORS 742.504(12). The trial court held that the letter did not qualify as formal institution of arbitration, and the Court of Appeals affirmed. The Supreme Court subsequently remanded to the Court of Appeals based on its decision in Bonds.
In re-examining the case, the court followed the Supreme Court's ruling in Bonds that formal institution of arbitration required an "obvious and express" communication of an intent to arbitrate, "such as occurs when a party sets forth, either in one document or in multiple documents that are part of a single message, a notice, offer, or demand for arbitration." Bonds, 349 Or at 162-63. When it considered the letter sent by the plaintiff, the court concluded that it was as an express communication of plaintiff's willingness to commit to the arbitration process, qualifying as formal institution of arbitration. Since it was sent less than two years following the accident, it satisfied the requirements of ORS 742.504(12) for accrual of the UM claim.
Interestingly, the court did not address the fact that the letter referenced ORS 742.061, which deals with attorney fees, rather than ORS 742.504(12), which addresses the formal institution of arbitration. Insurers should carefully examine the language used by claimants in such demands as they may now require a claimant to submit a matter to binding arbitration. Likewise, the language used in "safe harbor" letters under ORS 742.061(3) should be carefully examined and worded to avoid any unintended effect.
A copy of the decision can be viewed online at: http://www.publications.ojd.state.or.us/A141388.pdf