Oregon's Court Of Appeals Rules That The Offer Of Judgment Rule Does Not Apply To Insurance Disputes
Oregon Rule of Civil Procedure 54 E provides a route whereby litigants can cut off an opponent’s right to recover attorney fees by making an Offer of Judgment for more than what their opponent ultimately recovers. The Rule encourages settlements by providing a way for a defending party to limit its liability and by forcing plaintiffs to take a hard look at the value of their claims when faced with an Offer of Judgment.
However, in Wilson v. TriMet, A138860 (Or. Ct. App. April 14, 2010), Oregon’s Court of Appeals ruled that ORCP 54 E does not apply to cases where an insured seeks recovery of attorney fees pursuant to ORS 742.061. That statute creates an entitlement to attorney fees whenever an insurer fails to settle within six months of receiving proof of loss and the insured’s ultimate recovery exceeds the insurer’s best offer. The Court ruled that this six month deadline was absolute, even in the face of ORCP 54 E.
The Court explained: “If an insurer is allowed to nullify a portion of the attorney fee award required by ORS 742.061 by making an offer of judgment pursuant to ORCP 54 E after six months from proof of loss … the core purposes of ORS 742.061 to reduce litigation and encourage efficient claims settlement would be defeated.” This reasoning is counterintuitive to the extent it would allow an insured to reject a generous offer seven months after providing proof of loss but then still recover all of its attorney fees after failing to beat that offer following many more months of litigation and trial. In that situation, the effect of the Wilson decision may actually be to encourage reckless prosecution of insured’s claims based on the knowledge that attorney fees are all but guaranteed if the insurer fails to make a reasonable offer within six months. The slight disincentive that ORCP 54 E offered is now gone.
The lesson to insurers in Oregon is clear: put your best offer on the table within six months of being provided with a proof of loss. Otherwise, you better be prepared to pay attorney fees regardless of any additional settlement efforts after the six month deadline.
