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Jul-15-2011 16:38printcomments

Oregon's High Court Upholds $9 Million Judgment Against Farmer's Insurance

The majority opinion in the case noted that the high court considered the defendant’s arguments in the petition for review.

Oregon Supreme Court
Oregon Supreme Court photo courtesy: oregonappeals.net

(SACRAMENTO) - The Oregon Supreme Court has has upheld a $8.9 million judgment against Farmer’s Insurance Co. of Oregon, following a class action complaint decrying the company’s practices related to payment of personal injury protection (PIP) benefits.

The decision, issued July 8, marked the Supreme Court’s second opinion in the case.

“One of the issues that we resolved in our prior opinion was whether plaintiffs had presented sufficient evidence of classwide reliance to create a jury question on plaintiffs' fraud claim. We concluded that plaintiffs had done so,” Associate Justice Virginia Linder wrote in the majority decision.

In sum, the Beaver State’s high court held that the total $8.9 million judgment arose from a jury’s determination that Farmer’s Insurance failed to faithfully comply with Oregon Revised Statutes (ORS) that mandate minimum personal injury protection benefits.

Oregon law, for instance, affords benefits to insureds injured in an accident. Under statute, Oregon auto insurers are required to cover "all reasonable and necessary expenses of medical, hospital, dental, surgical, ambulance and prosthetic services incurred within one year after the date of the person's injury," up to an identified limit.

The Personal Injury Protection Benefits to Oregonians are codified at O.R.S. § 742.520. The class action was filed by Mark Strawn, in Circuit Court for the County of Multnomah, on his behalf and as representative of a class of similarly situated persons.

The company, he alleged, reduced payments for covered benefits thereby breaching its contractual obligations to policyholders. Farmers’ practices constituted fraud, he said.

The trial court in Multnomah County entered a jury judgment against Farmer’s Insurance for approximately $900,000 in compensatory damages and $8 million in punitive damages. Subsequently, the trial court entered a supplemental money judgment that awarded statutory attorney fees, an attorney fee sanction, and unpaid fees and costs of the claims administrator.

The insurance company appealed the Circuit Court of Multnomah County’s opinion in Strawn v. Farmers Ins. Co. of Oregon. The 2009 opinion reported at 228 Or App 454, 209 P3d 357.

The Court of Appeals concluded that the punitive damages award exceeded federal constitutional limits, in violation of the Due Process Clause of the Fourteenth Amendment to the United States Constitution.

The court determined that, because the harm was uniquely economic and because the conduct of defendants was only moderately reprehensible, punitive damages could not exceed a multiple of four times the compensatory damages plus prejudgment interest.

The Supreme Court ordered a new trial on punitive damages unless the plaintiffs agreed to remittitur of punitive damages to four times their compensatory damages and interest.

The majority opinion in the case noted that the high court considered the defendant’s arguments in the petition for review.

“The petition for reconsideration is allowed; prior opinion adhered to without modification; motion regarding ex parte communications is denied,” Linder wrote for the majority.

“On review, the Supreme Court said it rejected Farmers's arguments regarding liability, but we concluded that the Court of Appeals had erred in considering Farmers's challenge to the constitutionality of the punitive damages award,” the opinion said.

“In short, we have reconsidered our decision in light of the points raised by We conclude that neither premise is correct, and that Farmers's legal arguments therefore fail,” the opinion read.

The Supreme Court case is Strawn v. Farmer's Ins. Co., Or. Sup., No. S057629

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The reporter is based in Sacramento, Calif. where he covers insurance litigation.




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COLLI July 15, 2011 7:35 pm (Pacific time)

Well done Oregon Supreme Court.

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