A bill in Oregon that would’ve allowed residents in the state to sue insurance carriers for unfair claims practices narrowly failed in session.

House Bill 3242 would’ve allowed policyholders or their beneficiaries to recover actual damages resulting from an unfair claim settlement practice prohibited under Oregon law. Unfair practices, among several others, include taking too long to reach a settlement, misrepresenting facts or policy provisions, refusing to pay claims without conducting a reasonable investigation, and essentially leaving claimants with no other choice but to go to court by offering “substantially less than amounts ultimately recovered in actions brought by such claimant.”

Both the House and Senate initially passed the bill. However, the House refused to concur with amendments made to the bill and adopted by the Senate, which sent it back for review by a Conference Committee made up of House representatives and senators. The committee recommended that the Senate’s amendments be passed. The Senate didn’t repass the measure and the House didn’t vote on the amended version by the end of the legislative session.

At issue was that the House didn’t agree with a Senate amendment that would’ve prohibited unfair claims settlement lawsuits related to an attorney’s actions in advising, presenting, or negotiating a claim on behalf of the carrier, claimant, or another person involved.

A letter penned in March on behalf of Northwest Insurance Council and National Association of Mutual Insurance Companies (NAMIC) members asked the House Business & Labor Committee to oppose the bill.

They argued that HB 3242 “ignores the rights and protections that Oregon consumers have today; will increase litigation, delay the resolution of claims, and increase insurance costs, and is premature given pending litigation in the Oregon State Supreme Court.”

“In the vast majority of claims — moments of loss, frustration, and tragedy for the insured — the insurance company ‘gets it right’ and pays claims to policyholders in a timely, professional, and reassuring manner, to the satisfaction of the policyholder. Sometimes, however, disputes arise in the claims handling/settlement process. In those cases, claimants who dispute an offer of settlement, or who feel their claim has been mishandled or improperly delayed or denied by the insurer, have rights and options under existing Oregon statutes, rules, and case law.”

The letter adds that requirements of the bill, such as “prompt” communications, aren’t defined or overbroad. The original bill gave insurance companies 20 days to resolve claims before lawsuits could be filed against them. An amendment changed that to 45 days.

According to the letter, the state’s Department of Consumer & Business Services opened 2,236 cases in 2021 based on complaints against insurers, confirming the complaint in 302 cases (13.5%) and ordered more than $7.5 million in recoveries as well as nearly $3.5 million in civil penalties across all consumer complaints received.

Other insurance trade organizations and representatives also opposed the bill for similar reasons.

In support of the bill, Oregon Consumer Justice Policy Director Chris Coughlin testified to the House Committee on Business & Labor that, “HB 3242 will clarify what consumer protections are available to consumers when an insurance company does something that is already illegal, and ensure the [statute] is aligned with current case law.

“HB 3242 ensures individuals and small businesses can protect themselves if an insurance company wrongs them during the claims handling process. Further, after hearing both sides, a jury may grant up to triple the compensation in the most egregious cases. Previously, the law had been interpreted to allow consumers to be compensated only for the money they were owed initially, but not for the harm caused by the illegal actions of the insurer.”

In addition to submitting amendments to narrow the scope of the bill to the state’s Unfair Claim Settlement Practices Act, the Oregon Department of Justice and Attorney General Ellen Rosenblum supported the bill as well as HB 3243.

Referring to a recent court ruling regarding unfair claim settlement practices, Department of Justice Deputy Legislative Director Kate Denison wrote, “The Court found that, even if the Legislature did not expressly provide a private right of action under ORS 746.230, ‘it is hard to imagine that the legislature did not intend the law, at least in part, to prevent policyholders from being forced to experience the stress of dealing with unfair insurance claim settlement practices.’

“HB 3242 is intended to embody that principle in statute. HB 3243 adds the insurance industry to the list of industries subject to enforcement under the UTPA [Unlawful Trade Practices Act]. This would allow the Attorney General, at the request of the Department of Consumer and Business Services, to take action for Insurance Code violations.”

House Bill 3243 would’ve allowed auto repair facilities to sue on behalf of their customers because it defines the “person” that can file suit under the UTPA as not only an individual but a corporation, trust, partnership, incorporated or unincorporated association, and any other legal entity except a group or someone acting under the statutory authority of Oregon or the U.S.

Rep. Anna Scharf (R-District 23) opposed both bills. She argued that insurers are already regulated by “some of the toughest consumer protection laws in the country” and that it would impose new costs on carriers that could raise insurance rates for policyholders.