Court Opinion

ID: 9503244
Source: CourtListenerOpinion
Date Created: 2023-08-06 19:39:06.887405+00
Date Added: 2024-06-11T09:03:20.916318
License: Public Domain

DURHAM, J.,
dissenting.
The question before the court is whether defendant, through two letters to plaintiffs lawyer, “formally instituted arbitration proceedings” under ORS 742.504(12)(a)(B).1 If defendant did so, then the trial court correctly compelled defendant to participate in arbitration regarding plaintiffs underinsured motorist coverage (UIM) claim. If defendant did not do so, then the trial court erred in requiring the parties to arbitrate their dispute. The majority adopts the latter conclusion. I respectfully disagree.
Before addressing the majority’s answer to that ultimate question, I turn first to several intermediate conclusions that, in my view, the majority decides correctly. First, I agree that the arbitration procedures described in ORS *165742.504(10) do not bear on the correct meaning of “formally instituted arbitration proceedings” in subsection (12)(a)(B). By its terms, subsection (10) applies only if the insured and the insurer “elect by mutual agreement” to settle their UIM dispute in arbitration. Here, neither the statutorily prescribed minimum terms of UIM coverage under ORS 742.504 nor the policy that defendant issued to plaintiff constituted an agreement to arbitrate any UIM dispute. No other agreement to arbitrate exists. Consequently, the majority correctly decides that subsection (10) does not help to explain the meaning of “formally instituted arbitration proceedings” under subsection (12)(a)(B).
Second, the majority correctly determines that ORS 742.504(12)(a) contemplates that either the insured or the insurer may formally institute arbitration proceedings unilaterally, that is, without the participation, consent, or agreement of the other party. The term “or” in subsection (12)(a)(B) leaves no doubt that either party may act independently of the other to formally institute arbitration proceedings.
The majority also correctly determines that the Oregon Uniform Arbitration Act (UAA), ORS 36.600 to 36.740, does not govern the question whether the correspondence of defendant’s claims representative “formally instituted arbitration proceedings” under ORS 742.504(12)(a)(B). The UAA applies generally to arbitration proceedings that are the result of an agreement to arbitrate the underlying dispute. See ORS 36.635(1) (describing procedures for initiating arbitration between parties to an “agreement to arbitrate”). As already noted, no agreement to arbitrate exists in this case.
I turn to the majority’s analysis of the phrase “formally instituted arbitration proceedings” in ORS 742.504(12)(a)(B). The parties’ principal disagreement concerns whether a party’s offer or consent to participate in arbitration qualifies as the formal institution of arbitration proceedings under the statute.2 According to plaintiff, defendant’s first letter clearly expressed consent to arbitration but *166that consent was subject to a condition: that there be a disagreement between the parties about the “liability/damages owed by the underinsured motorist.” That condition, according to plaintiff, was satisfied when defendant’s claims representative, in a second letter, likely received by plaintiff the same day as the first letter, asserted that plaintiff was not entitled to UIM benefits, because the underinsured driver’s insurance had fully compensated him for his injuries. Defendant responds that the letters do not convey a consent to arbitration, because the first letter consented to arbitration conditionally and the second letter did not mention arbitration.
I note at this point that there is no doubt that defendant’s claims representative intended her two letters to convey defendant’s consent to arbitration. Another statute, ORS 742.061(1),* *3 authorizes an award of attorney fees against an insurer in certain litigation over an insurance policy. However, subsection (3) of that statute nullifies that authority in *167an action to recover UIM benefits if the insurer, timely and in writing, accepts coverage, leaving in dispute only the under-insured motorist’s liability and the insured’s damages, and “[i]he insurer has consented to submit the case to binding arbitration.” (Emphasis added.)
Defendant’s claims representative, Kerry Barton, testified that she intended her letters to convey consent to arbitration to obtain for defendant the protection in ORS 742.061 against an award of attorney fees to plaintiff:
“[Ms. Barton:] Just whenever I get a * * * UM or UIM claim, I automatically send what we call the binding arbitration letter, and then that went out. And then afterwards, subsequently, I was able to review all the medical records, so a second letter went out. [Plaintiffs lawyer] probably received them both on the same day, but they — they did go out at different times.
“Q: All right. And in — in the second letter, do you remember whether you stated the company’s position with respect to his client’s uninsured motorist claim?
“A: Yes, I did. I reviewed the medical records and, based on my opinion of those records and what they said, I felt that his client had been compensated already for his claim through the underlying policy.
“Q: Ms. Barton, why was the letter sent containing the offer to consent to binding arbitration?
“A: When we receive notice of a UM or UIM claim, if we notify the plaintiff attorney that we’re willing to submit it to binding arbitration, it makes it — and I believe it’s within six months of notice of the claim, it makes it so that they’re not entitled to attorney fees.
“If we don’t consent to binding arbitration and they file suit, then they’re entitled to attorney’s fees no matter what the award is. So that’s why we send that.”
That testimony supports the trial court’s observation that, although Ms. Barton may have intended to secure for defendant the protection of ORS 742.061 against an award of attorney fees, her correspondence could be equally effective *168in formally instituting arbitration proceedings under ORS 742.504(12)(a)(B).4
The majority, after consulting dictionary definitions of “formally” and “institute,” concludes that, to formally institute arbitration proceedings under ORS 742.504(12)(a)(B), “an insured or insurer must expressly communicate to the other party that the initiating party offers to arbitrate or otherwise commits to the arbitration process.” 349 Or 152 at 162. The majority thus accepts the trial court’s premise that, in this context, an offer or a consent to arbitrate constitutes a formal institution of arbitration proceedings. However, the majority reasons that defendant’s second letter was insufficient to convey defendant’s offer to arbitrate because it did not expressly state that the condition stated in the first letter had been satisfied:
“The first letter indicated a willingness to arbitrate, depending on whether a future event — disagreement— occurred. The second letter did not definitively state that a disagreement existed, nor did it mention arbitration.
“* * * [A] party that wishes to satisfy the time limits of ORS 742.504(12)(a)(B) by formally instituting arbitration proceedings must explicitly offer to arbitrate or demand arbitration to expressly begin that process. Where, as here, a party’s consent to arbitrate is contingent on some future *169event and that party does not expressly advise or acknowledge to the other party that that event has occurred, no ‘formal institution’ of arbitration proceedings has occurred.”
Id. at 163-64 (footnote omitted).
I agree with the trial court and the majority that a party’s written offer or consent to arbitration serves to formally institute arbitration proceedings under ORS 742.504(12)(a)(B). Where no agreement to arbitrate exists, the parties have no authority to present any claims to an arbitrator, and no administrative structure (such as a civil court system) exists to receive complaints or demands for relief by any party. Consequently, the only practical step that a party may take in this context is to notify the other party in writing that the initiating party consents, demands, offers, or otherwise commits to participate in arbitration over the dispute. That step is the formal institution of arbitration proceedings; that first step toward arbitration will lead to binding arbitration of the dispute if the other party also consents.
The majority, however, falls into error in concluding that defendant’s correspondence was too indefinite to offer or consent to arbitration. Defendant’s first letter contained an unambiguous consent to arbitration of the UIM dispute, but the consent was subject to a condition: that there be a disagreement on the “liability/damages owed by the under-insured motorist.” The second letter, described by Ms. Barton in her testimony, confirmed defendant’s position that plaintiff already had been fully compensated for his injuries through the other driver’s insurance policy.
In my view, the only permissible legal construction of defendant’s two letters is that defendant’s consent to arbitration became unconditional and, thus, legally effective. The second letter stated, in legal effect, that the alleged underin-sured motorist had no further liability, and owed no additional damages, to plaintiff and, thus, plaintiff was not entitled to any UIM benefits from defendant. That message fully satisfied the condition stated in the first letter. It is of no legal consequence that defendant’s claims representative expressed defendant’s consent to arbitration in two letters rather than one, or that the second letter did not state in express terms that the condition set out in the first letter was *170satisfied. The majority’s conclusion that that sort of additional particular message is essential in this context simply embroiders the statute with a requirement that has no basis in the terms of ORS 742.504(12)(a)(B). It is also inconsequential that the second letter from the claims representative offered to consider additional information about plaintiffs injuries. That statement did nothing to alter the legal effect of the second letter: the condition of “disagreement” set out in the first letter was satisfied, because, in defendant’s opinion, plaintiff had been fully compensated by other insurance and was entitled to no UIM benefits from defendant. The existence of a disagreement between the parties became obvious and, thus, the conditional consent to arbitration expressed in the first letter became unconditional.
The trial court correctly determined that defendant consented to arbitration. The majority errs in overturning the trial court’s judgment.
I dissent.
De Muniz, C. J., joins in this dissenting opinion.

 That subsection of ORS 742.504 provides:
“(12)(a) The parties to this coverage agree that no cause of action shall accrue to the insured under this coverage unless within two years from the date of the accident:
“(B) The insured or the insurer has formally instituted arbitration proceedings!.]”

 For purposes of this discussion, there is no material difference in the legal consequences that result from an “offer” to participate in arbitration and a “consent” to arbitration. Both an “offer” and a “consent” to arbitration, however *166phrased, commit the communicating party to participate in arbitration concerning the underlying dispute.

 ORS 742.061 provides, in part:
“(1) Except as otherwise provided in subsections (2) and (3) of this section, if settlement is not made within six months from the date proof of loss is filed with an insurer and an action is brought in any court of this state upon any policy of insurance of any kind or nature, and the plaintiffs recovery exceeds the amount of any tender made by the defendant in such action, a reasonable amount to be fixed by the court as attorney fees shall be taxed as part of the costs of the action and any appeal thereon. If the action is brought upon the bond of a contractor or subcontractor executed and delivered as provided in ORS 279B.055,279B.060,279C.380 or 701.430 and the plaintiffs recovery does not exceed the amount of any tender made by the defendant in such action, a reasonable amount to be fixed by the court as attorney fees shall be taxed and allowed to the defendant as part of the costs of the action and any appeal thereon. If in an action brought upon such a bond the surety is allowed attorney fees and costs and the contractor or subcontractor has incurred expenses for attorney fees and costs in defending the action, the attorney fees and costs allowed the surety shall be applied first to reimbursing the contractor or subcontractor for such expenses.
“(3) Subsection (1) of this section does not apply to actions to recover uninsured or underinsured motorist benefits if, in writing, not later than six months from the date proof of loss is filed with the insurer:
"(a) The insurer has accepted coverage and the only issues are the liability of the uninsured or underinsured motorist and the damages due the insured; and
"(b) The insurer has consented to submit the case to binding arbitration.” (Emphasis added.)

 The trial court stated, correctly, that the court must focus on defendant’s conduct and its legal effect, not on defendant’s intent and whether defendant might have intended to comply with one particular statute rather than another:
“If I conclude that [the] insurance company initiated formal arbitration proceedings, it may not matter whether they intended to or not.
“[T]here are often unintended legal consequences of people’s conduct, and they may have intended to begin a process, to use a term that’s not in the statute, under another statute for purposes [of] cutting off attorney fees and unwittingly have satisfied another statute.”
The legislature, in my view, should consider the effect of the majority’s conclusion on both ORS 742.504(12)(a)(B) and ORS 742.061. The implication of the majority’s reasoning is that the standard operating procedure that defendant’s claims representatives have followed for many years to consent to arbitration under ORS 742.061(3)(b) may be legally insufficient, thus exposing defendant to unanticipated claims for attorney fees. In my view, the legislature could not have intended to require a party to use magic words or phrases to effectively consent to arbitration. The legislature may wish to make clear that consenting to arbitration can be accomplished by any written communication that in substance commits the party to arbitration.