Source: https://www.aterwynneblog.com/oregon_business_litigatio/insurance_coverage/
Timestamp: 2019-04-20 05:21:56+00:00

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Oregon Supreme Court splits on defining "roof"
Is a plastic tarp a roof? It can be, according to the Oregon Supreme Court, which today remanded for trial a dispute between a homeowner and an insurer. In Dewsnup v. Farmers Insurance Co., the plaintiff undertook to repair the roof of his home. He removed the wood shakes and replaced them with plastic sheeting. On the first night of the repair project, a storm caused the sheeting to come loose, and rain entered the home through joints in the sublayer.
The homeowners' insurance policy excluded coverage for water damage, except that it would cover damage that resulted if the force of wind caused an opening in the roof. The insurer contended that since the plastic sheeting was not a roof, water damage that resulted when it blew off was not covered. Justice Kistler, after surveying the small body of law on temporary roofing, held that the covering of a house is a roof if it's "sufficiently durable to meet its intended purpose: to cover and protect a building against weather-related risks that reasonably may be anticipated." The homeowner offered the testimony of an expert witness regarding the adequacy and functionality of the plastic sheeting as a covering. As a consequence, the court concluded it's up to a jury to decide whether it served as a "roof" for purposes of the policy.
Justice Balmer, joined by Justice Linder, dissented, stating that no reasonable juror could conclude that the parties intended the term "roof" to include a tarp stapled to the house as a temporary covering. "It is plain that the plastic tarps were not intended to be permanent -- they were a temporary expedient, which the homeowner installed on his own after he removed the shakes as part of 'replacing the roof.'"
The Oregon Supreme Court today significantly reduced a punitive damage award against an insurance company on a claim of bad faith failure to settle. In Goddard v. Farmers Insurance Co., a jury found that an automobile insurer had in bad faith refused to settle a wrongful death claim within policy limits, and entered an award to the insured of more than $20 million in punitive damages. That punitive damages amount was 16 times greater than plaintiff's compensatory damages.
On review the Supreme Court held that, where the defendant's wrongful act resulted in economic injury but not personal injury, the ratio of punitive damages to compensatory damages should generally not exceed four to one in order to avoid violating the Due Process Clause of the US Constitution. The court ordered a new trial limited to the amount of punitive damages, unless defendant accepts the reduced award of four times compensatory damages.
Find our earlier coverage of the law of punitive damages here, here, and here.
The third time was not the charm for local plaintiffs in the U.S. Supreme Court this term. Today the court dismissed Fair Credit Reporting Act claims in a case that originated in U.S. District Court in Oregon. This was the third case from Oregon that the court decided this term (the other two are described here), and the third in which the plaintiffs were denied the relief they sought.
In Safeco v. Burr and GEICO v. Edo, the defendant auto insurers charged plaintiffs higher premiums due to their credit scores. Plaintiffs claimed that, in violation of FCRA, the insurers failed to give them notice of this "adverse action." Plaintiffs sought damages for a willful violation of FCRA. The court held that, in the case of GEICO, plaintiff's premiums were not in fact affected by her credit score and there was no duty to give FCRA notice. Safeco, in contrast, did increase premiums based on plaintiffs' credit scores. But its failure to give notice of the adverse action was based on a reasonable interpretation of FCRA and therefore was not a "willful" violation of the law.
See earlier coverage of this case in the Oregon Business Litigation Blog here.
On Tuesday the U.S. Supreme Court hears arguments in cases addressing how insurance companies interpret the Fair Credit Reporting Act. If an insurance company raises a customer's rates based on the customer's credit score, the FCRA requires the insurer to give an "adverse action" notice to the customer. The insurers claim that, when they issue policies to new customers, the setting of the premium does not constitute an increase triggering the FCRA notice requirement. But the Ninth Circuit held that FCRA requires the insurer to give such notice any time it considers a new customer's credit rating and then sets a premium higher than the company's lowest possible rate.
Also on review in the Supreme Court is whether the failure to give an adverse action notice amounts to a "willful" violation entitling the customer to a remedy under the FCRA.
For more on Geico v. Edo and Safeco v. Burr, see here , here , and here. These cases were filed in federal District Court in Oregon, marking the third time this session that the U.S. Supreme Court has considered cases originating in local courts. See the Oregon Business Litigation coverage of the other two cases here and here.
The Oregon Supreme Court, on November 16, 2006, issued a decision that will affect parties' ability to settle insured claims. In Holloway v. Republic Indemnity Company of America, the court held that the anti-assignment clause in a liability insurance policy barred assignment by the insured of both pre-loss and post-loss rights and duties.
Insurance policies typically provide that the insured cannot assign its rights under the policy without the insurer's consent. The issue in Holloway was whether a post-judgment assignment of rights as part of a settlement was barred by the anti-assignment clause. The court held that the assignment was, in fact, invalid under the terms of the policy.
The facts in Holloway reflect a common type of settlement in cases where an insurer declines coverage. In that case a party made a claim against the insured, and the insurance company refused to defend the insured under the terms of the policy. As part of a subsequent settlement, the insured agreed to allow the claimant to enter a judgment against it, and agreed to assign to the claimant its rights to any claim the insured might have against the insurer for breach of the insurance contract or for indemnity (payment of the claim). The claimant then filed suit to recover against the insurer, but the Supreme Court held that the assignment to the claimant was invalid as contrary to the anti-assignment clause of the insurance policy.
States have split on how to interpret anti-assignment clauses. Courts in many states hold that, while such clauses bar a pre-loss assignment, they do not prevent a post-loss assignment. The reasoning is that a pre-loss assignment could unfairly increase the insurer's risk of loss by a new insured, while a post-loss assignment does not increase the insurer's risk. Oregon has joined the states holding that an anti-assignment clause bars an assignment no matter when it occurs.
The result in Holloway is important to insured parties and to those seeking to recover damages from an insured party as they seek to negotiate settlements.
Significantly, though, the Supreme Court in Holloway did not consider the effect of ORS 31.825, which permits the post-judgment assignment of any cause of action an insured has against its insurer as a result of the judgment. The court noted that the plaintiff did not identify any statute that would invalidate the anti-assignment provision of the policy.
This decision is also important whether you are an insured defendant, or a company acquiring a party, because assigned rights under an insurance policy may not really be an asset, or, on the other hand, the assignment may not be protection for a claim or judgment once thought to be settled.

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