Once again Oregon legislatures are looking at removing the exemption of insurance companies from the Oregon Unfair Trade Practices Act. SB 728 makes violations of Oregon’s Unfair Claims Settlement Practices Act (the “UCSPA”) an unlawful trade practice subject to private rights of action. Currently, the Insurance Division is the only enforcement entity for the consumer protections in the UCSPA, but the Insurance Division does not have the resources to investigate and take corrective action on every instance of insurer misbehavior. Instead, without any real consequences, many carriers routinely fail to honor the claim communication timelines and reasonable settlement obligations under the UCSPA, leaving the impacted insured with little recourse.
Of course, the insurance industry has marshaled its substantial resources against SB 728. The industry raises the specter of unbridled lawsuits to convince lawmakers that the current system is working fine. The truth is that there are good and bad insurers. The good ones timely respond to tenders, honor defense obligations, and settle claims with the insured’s interest in mind. The bad ones fail to respond to tenders, unlawfully deny tenders of defense, and refuse to settle claims even when liability is reasonably clear and settlement is in the best interest of the insured. SB 728 will not penalize the good carriers. SB 728 will, however, force the bad carriers to internalize the cost of failing to comply with the UCSPA.
The insurance industry says that the current system is sufficient to protect consumers. Under the current system, there is no accountability for violations of the UCSPA. Oregon law establishes civil penalties for violation of “any provision of the Insurance Code” and provides that the violator “shall * * * pay to the General Fund of the State Treasury a civil penalty.” ORS 731.988(1). Such a penalty is imposed either by a state agency or “in an action brought in the name of the State of Oregon in any court of appropriate jurisdiction.” ORS 731.988(7). There is no enforcement mechanism for consumers. See Bonner v. Union Pac. Flexible Program, No. CV 09-364-ST, 2010 WL 1424280, at *8 (D Or Feb. 8, 2010) report and recommendation adopted, 2010 WL 1424320 (D Or Apr. 7, 2010) (“Plaintiff brings a claim based upon a violation of Oregon’s insurance law, specifically the Unfair Claim Settlement Practices Act. Oregon courts have determined that violations of this Act are not independently actionable.”) (citation omitted). Instead, a consumer may file a complaint with the Department of Financial Services (the “Department”). Once the complaint is filed, the Department will pass it along to the insurer for a response. The Department states that most complaints are resolved one way or another in 60 days, but the Department does not have the ability to compel an insurer to settle a claim. While the Department may impose civil penalties against insurers for not following the law, when it comes to the individual claimant suffering actual harm, the Department defers to the court system. Unfortunately, as noted above, an insurer is unaccountable to an individual claimant under the UCSPA. Thus, in 2018 the Oregon Department of Consumer and Business Services published 79 enforcement orders against insurers, none of which actually addressed the underlying claimant’s actual harm in any way.
While not perfect, SB 728 would be an improvement. SB 728 provides Oregonians with a process by which to hold insurance companies accountable under existing Oregon insurance law.