In a Fee Proceeding Following a Historic Jury Verdict Exceeding $150 Million, Magistrate Judge Clarke Awarded Attorney Fees with a 30% Enhancement to Reflect the Prevailing Party’s Exceptional Success

In his opinion dated July 15, 2025, (view opinion here), Judge Mark Clarke granted the prevailing defendant/counter claimant’s Federal Civil Procedure Rule 54 motion for attorney fees. Bob Bonaparte served as defendant/counter claimant’s attorney fee expert.

Over the plaintiff’s strenuous objections and counterarguments, Judge Clarke awarded fees to defendant/counter claimant’s attorneys at their requested hourly rates and for all of the requested expenditures of time, without any reduction in either. In addition, based on the defendant/counter claimant’s “exceptional success” in the litigation, Judge Clarke awarded a 30% increase in the fee award to reflect the attorneys’ “extraordinary” success in achieving “what is likely one of the highest damage awards in the history of the state of Oregon.”

Magistrate Judge Beckerman Allows Plaintiff’s Motion to Amend to Include a Prayer for Punitive Damages

In her opinion dated July 9, 2025, (view opinion here), Judge Stacie Beckerman granted plaintiffs’ motion for leave to amend to include a prayer for punitive damages. Judge Beckerman’s opinion acknowledges that punitive damages can be available to remedy a homeowners insurance provider’s violations of the duty of care it owes to all of its Oregon policyholders pursuant to Or. Rev. Stat. § 746.230(1).

Plaintiffs Ari and Micah Hoffman own a home in Portland that suffered significant damage during the historic winter storm of January 2024. Four months after the loss, plaintiffs filed an action against their property insurer USAA in Multnomah County Circuit Court. Plaintiffs’ state-court complaint included an express allegation that the plaintiffs planned to amend their complaint to include a prayer for punitive damages. USAA removed the action to federal court.

Approximately ten months later, plaintiffs timely filed a Federal Civil Procedure Rule 15 motion to amend their pleading to include a prayer for punitive damages. Defendant opposed the motion, arguing: (1) futility; (2) prejudice; (3) undue delay; and (4) bad faith. See Foman v. Davis, 371 U.S. 178, 182 (1962). Judge Beckerman found that “the Foman factors were in plaintiffs’ favor,” and granted plaintiffs’ motion to amend. See Jensen v. Brown, 131 F.4th 677, 701 (9th Cir. 2025) (Rule 15(a)’s policy should be applied with “extreme liberality”).

Court Rejects Safeco’s Attempt to Avoid Coverage Based on Definition of “Residence Premises”

Our clients, John and Karen Durkheimer, own homes in Portland, on the coast, and in Carmel, California. All three homes are insured by Safeco.

During the January 2024 freeze, the Durkheimers’ home in SW Portland suffered hundreds of thousands of dollars of water damage due to burst pipes. Their insurer, Safeco, failed to indemnify their loss in full.

In the ensuing litigation, Safeco raised an affirmative defense asserting that plaintiffs were required to reside at the home in order to maintain coverage. In support, Safeco pointed, not to a coverage exclusion requiring residency as an express condition of coverage, but to policy definitions defining the “insured location” as the policyholders’ “residence premises” and defining “residence premises” in turn as the “family dwelling, used principally as a private residence. . . where [the policyholders] reside.” The Durkheimers readily conceded that the SW Portland home was not their sole or primary residence, but argued that the policy definitions were intended only to identify the home that was the subject of the insurance provided under the policy, and not to act as a condition of coverage.

Plaintiffs filed a Rule 12(f) motion to strike Safeco’s affirmative defense. On February 12, 2025, Judge Stacie Beckerman issued her Findings and Recommendation recommending that the defense be stricken (view opinion here). On April 1, 2025, Judge Michael Simon adopted the Findings and Recommendation and struck the defense as insufficient as a matter of Oregon law (view opinion here).

Fix Insurance by Allowing Lawsuits

Robert E.L. Bonaparte and Stephen D. Leggatt’s Letter to the Editor of The Oregonian:

We are lawyers who represent homeowners shortchanged by property insurers after disasters like fires, treefalls, or burst pipes. If our cases don’t settle, they proceed to jury trial to hold insurers accountable. Lawyers often take such cases on contingency, because under Oregon law a recovery in any amount obliges insurers to pay policyholders’ attorney fees.

Much ink has been spilled about Luigi Mangione, whose manifesto savages health insurers and their unfair coverage denials. But the debate omits a key issue.

The problem is: you can’t sue [the bastards]. Most Americans get health insurance through their job, meaning their health insurance plans are subject to the federal ERISA statute. Under ERISA, health insurers cannot be sued in state court. And before they can sue an ERISA health insurer in federal court, consumers must first “exhaust” all “administrative remedies” available from the same health insurer that denied their claims. This process is a minefield of arcane rules calculated to extinguish the insured’s right to sue.

Even if consumers clear that hurdle, their claims will be decided, not by a jury, but by a federal judge whose only function is to determine whether the insurer’s denial was “rationally based” – a very low threshold. If there was any rational basis for the insurer’s decision, the consumer’s claims will be dismissed.

The remedy: scrap ERISA and allow consumers to take lawsuits against health insurers to a jury. Consumers’ lawyers will function as a legion of private attorneys general, and bring recalcitrant health insurers to heel.

Presentation on Attorney Fees to OSB Business Litigation Section

On October 24, 2024, Bob Bonaparte made a presentation on recovery of attorney fees to the Oregon State Bar’s Business Litigation Section. The materials can be accessed here.

"Moody v. Oregon Community Credit Union: The Oregon Supreme Court Heralds a Significant New Development in First-Party Insurance Litigation"

In the February 2024 issue of Multnomah Lawyer (published by the Multnomah Bar Association), Stephen Leggatt analyzes the Oregon Supreme Court’s recent landmark decision affirming that policyholders harmed by insurance companies’ unfair claims settlement practices may sue their insurers for negligence and may seek award of emotional distress damages. Read the article here; view the opinion here.

Oregon Supreme Court Affirms that Policyholders May Sue Insurance Companies for Emotional Distress

Oregon Supreme Court Affirms that Policyholders May Sue Insurance Companies for Emotional Distress (and Likely Other Extra-Contractual Consequential Damages) Where the Insurer Engages in Unfair Practices Such as Unreasonable Delay, Inadequate Investigation, and Underpayment of Claims

On December 29, 2023, the Oregon Supreme Court issued its long-awaited opinion in Moody v. Oregon Community Credit Union, SC Case No. S069409. View opinion here. The new opinion affirms the Oregon Court of Appeals’ groundbreaking January 26, 2022 opinion, which for the first time recognized a private cause of action to remedy an insurer’s violation of the standard of care every insurer owes to every Oregon policyholder under ORS 746.230.

In his January 26, 2022 Moody opinion, Judge Landau of the Oregon Court of Appeals found that, because ORS 746.230 creates a duty of care that insurers owe to their Oregon policyholders, an insurer’s negligent breach of that duty gives rise to a cause of action for money damages independent and distinct from any cause of action arising out of the insurer’s breach of the insurance policy itself. Moreover, Judge Landau specifically found that where the insurer’s violation of the statutory standard of care deprives the policyholder of the “peace of mind” that is the principal reason insurance consumers purchase insurance policies, the aggrieved policyholder may seek emotional distress damages from the insurer.

The Moody defendant appealed Judge Landau’s decision, and the insurance industry spilled considerable ink on amicus briefs roundly condemning Judge Landau’s legal reasoning. The Oregon Supreme Court heard oral argument on the appeal in November 2022.

More than 14 months later, the Oregon Supreme Court rejected the insurer’s appeal and affirmed Judge Landau’s decision. Although the Oregon Supreme Court agreed entirely with the result reached by the Court of Appeals in recognizing the availability of emotional distress damages in connection with a cause of action arising out of an insurer’s violation of the ORS 746.230 standard of care, its reasoning differed in one significant respect from Judge Landau’s.

Specifically, whereas Judge Landau characterized the newly recognized cause of action as a claim of “negligence per se” distinct from garden variety negligence, expressly rejecting the argument that such a cause may only lie in connection with a separate and independent common-law negligence claim against the insurer, the Oregon Supreme Court found that the newly recognized cause is simply a special case of an ordinary negligence claim and does, in fact, require that a common-law negligence claim “otherwise exist.” However, the Oregon Supreme Court determined that, in light of the nature of the relationship between policyholder and insurer, it is reasonably foreseeable that an insurer’s violation of the statutory standard of care will create a risk of harm to a legally protected interest of the policyholder of sufficient importance to give rise to a claim of negligence. The Oregon Supreme Court further found the policyholder’s legally protected interest in freedom from the unfair practices proscribed by ORS 746.230 to be both of a kind and of sufficient importance to warrant subjecting insurance companies to liability for the policyholder’s consequential emotional distress damages.

As the Oregon Supreme Court observed, its decision brings Oregon in line with the majority of jurisdictions which have recognized for years that where an insurer engages in unfair claims settlement practices, its conduct can cause policyholders significant harm beyond or apart from deprivation of the benefits of the insurance contract itself. To seek damages for such harm, policyholders need not prove that their insurers acted in bad faith in unreasonably delaying payments, failing to perform adequate investigation of claims, or deliberately underpaying valid claims, but rather need only show that the insurer’s conduct was in violation of the statutory standard of care.

In Moody, the only extra-contractual damages at issue were emotional distress damages. However, it is well worth noting that the court expressly left open the question whether other extra-contractual consequential damages could be available in connection with the newly-recognized cause of action. Indeed, given the court’s clear instruction that the claim sounds in negligence and is co-extensive with a common-law negligence claim, the new opinion provides no reason to doubt that the entire range of damages ordinarily available in connection with a negligence claim is likewise available in connection with a so-called Moody claim premised on violation of ORS 746.230.

As a result, the newly issued Moody opinion represents a significant victory for Oregon’s insurance consumers. Prior to Moody, policyholders who suffered financial catastrophe caused by their insurers’ unreasonably delayed payment (or significant underpayment) of insurance benefits had no recourse beyond recovery of the amounts owed under the policy, and no way to repair the damage caused by the delay in paying the full amount owed. Now, under Moody, the Oregon courts have a mechanism for holding insurers accountable for the harms caused by their unfair claims settlement practices.

"Spotlight on Attorney Fees: Recent Trends in Attorney Fee Case Law"

In the November 2023 issue of Multnomah Lawyer (published by the Multnomah Bar Association), Stephen Leggatt discusses the lessons to be learned from three recent significant attorney fee decisions by Oregon courts. Read the article here.

July 19, 2023 "The Oregon State Bar’s 2022 Economic Survey Has Been Released"

In the July/August 2023 issue of Multnomah Lawyer (published by the Multnomah Bar Association), Stephen Leggatt addresses noteworthy aspects of the just-released Oregon State Bar 2022 Economic Survey. Read the article here.

"Lessons Learned Along my Attorney Fee Journey"

In the Spring 2023 issue of Trial Lawyer (published by the Oregon Trial Lawyers Association), Robert (“Bob”) Bonaparte discusses some of his more memorable career cases involving attorney fees. Read the article here.

Multnomah County Circuit Court Rejects Proportionality Theory and Other Arguments for Capping Attorney Fee Awards

Judge Melvin Oden-Orr recently issued an attorney fee ruling (Findings of Fact and Conclusions of Law) in Ciferri v. State Farm Fire & Casualty Co. Multnomah County Circuit Court Case No. 21CV14243.

Plaintiff Seth Ciferri is a tattoo artist who suffered a theft loss of an estimated $55,000 in vintage tattoo machines from the trunk of his car. State Farm applied a $1,500 business property limitation to the loss. State Farm initially prevailed on its business property theory at court-annexed arbitration. However, following its assessment of plaintiff’s draft motion for partial summary judgment, State Farm agreed to pay the full alleged contract damages of $55,000, and to refer the parties’ attorney fee dispute to the court.

State Farm argued that plaintiff’s fee award should be capped at 33% of plaintiff’s recovery (e.g., $18,000) pursuant to a provision of the original fee agreement between plaintiff and counsel. State Farm also argued that the requested award was disproportionate to the plaintiff’s recovery. The court rejected State Farm’s arguments, and awarded all attorney fees requested in the amount of $234,835, including a 1.25 multiplier.

An Insider’s Guide for the Reluctant Federal Practitioner

On September 20, 2023, Stephen Leggatt gave an MBA-sponsored CLE presentation discussing the differences between federal and Oregon procedural rules, the ways the rules shape federal and state-court litigation practice, and the pros and cons of litigation in federal vs. state court.  The presentation is available for viewing here.

The Rights of Oregon Wildfire Victims Will Expire in September 2022

A Bonaparte & Bonaparte client is featured prominently in this Oregonian article regarding the devastation wrought by the 2020 wildfires in the Santiam Canyon area. Many Oregonians lost their homes in those fires, and many have faced serious challenges in connection with rebuilding their homes.  As the article relates, thousands of Oregonians lost their homes in the 2020 fires, and only a fraction of the destroyed homes have been rebuilt to date. In many instances, affected homeowners have been unable to rebuild their homes due to the failure of their insurance companies to comply with coverage obligations under their homeowners insurance policies.

Homeowners in that situation should know that a two-year statute of limitations governs their right to bring suit against their insurers. For many victims of the 2020 fires, that time is nearly past.

The Moody Blues

On May 13, 2022, Bob Bonaparte and co-presenter Rob May (Kilmer Voorhees & Laurick) gave an MBA-sponsored CLE presentation analyzing the ways in which the Oregon Court of Appeals’ recent decision in Moody v. Oregon Community Credit Union, 317 Or. App. 233 (January 26, 2022; view opinion here) is changing the ways insurance litigation is practiced in Oregon – and the ways in which it is not.  The presentation is available for viewing here. 

First Federal Court Decision to Interpret Moody

In a fire loss case against State Farm in Baker City, plaintiffs Cassie and Johnny Owens requested leave of court to file a motion to amend their complaint in Owens v. State Farm Fire and Casualty Company, U.S.D.C. Dist. Of Oregon Case No.: 2:22-cv-00119-HL to include a claim for negligence per se under the Oregon Court of Appeals’ recent decision in Moody v. Oregon Community Credit Union, 317 Or. App. 233 (January 26, 2022). Plaintiffs’ proposed amended pleading also included a claim for punitive damages arising out of the same conduct giving rise to plaintiffs’ proposed Moody claim.

State Farm declined to offer its consent, arguing that the proposed amendments were futile. Specifically, State Farm argued that (1) Moody was wrongly decided and did not constitute binding precedent that the District of Oregon was obliged to follow, (2) under Moody only “extreme” insurer misconduct can give rise to a claim for negligence per se against the insurer, and (3) conduct giving rise to a Moody claim against an insurer is insufficient as a matter of law to support a prayer for punitive damages. Plaintiffs filed their motion to amend, State Farm objected to the motion, and plaintiffs replied.  On April 4, 2022, Judge Andrew Hallman issued a minute order over State Farm’s objections, granting plaintiffs leave of court to state a Moody claim against the insurer for negligence per se and a prayer for punitive damages.

Federal District of Oregon Restricts an Insurer’s Assertion of a “Vacancy” Coverage Exclusion as a Matter of Oregon Law

On June 1, 2021, Judge Acosta of the District of Oregon issued a Findings and Recommendation in Davison v. Foremost Insurance Company, 20-cv-1387.  In Davison, the plaintiffs purchased an all-risk home-insurance policy to cover damage to a residential property they had inherited.  The policy contained a coverage exclusion for damage to the property caused while “the dwelling has been vacant for more than 30 consecutive days immediately before the loss.”  The policy defined “vacant” to mean “[t]he absence of most of. . . [t]he furniture. . . [and] [o]ther items needed for human occupancy as a dwelling.”  The property was subsequently damaged by fire while the plaintiffs were not using the property as a residence but rather were conducting renovations there, exclusively on weekends.  The defendant insurer denied coverage on grounds of the vacancy exclusion.

The plaintiffs moved for partial summary judgment as to the issue of the insured’s liability, only.  Judge Acosta found that, although the plaintiffs were concededly not using the property as a dwelling during the thirty days preceding the fire, the vacancy exclusion was inapplicable as a matter of Oregon law due to the continuous presence at the property of at least some furniture and household items, including chairs, tables, appliances, and food.  On that basis, Judge Acosta recommended that the court grant partial summary judgment in the plaintiffs’ favor as to the insured’s liability for breach of its indemnification obligations under the policy.

On June 23, 2021, Judge Mosman adopted Judge Acosta’s Findings and Recommendation as his own opinion, without modification.

Oregon Court of Appeals Allows Insurance Consumers to Sue for Emotional Distress

On January 26, 2022, the Oregon Court of Appeals issued its opinion in Moody v. Oregon Community Credit Union, CA Case No. A178244. View opinion here. The new opinion is groundbreaking, and allows first party plaintiffs in Oregon to claim emotional distress damages based on negligence per se under ORS 746.230. Section 746.230(1) prohibits insurers from engaging in a number of specified unfair claim settlement practices, including in particular: 

(d) Refusing to pay claims without conducting a reasonable investigation based on all available information;

(e) Failing to affirm or deny coverage of claims within a reasonable time after completed proof of loss statements have been submitted;

(f) Not attempting, in good faith, to promptly and equitably settle claims in which liability has become reasonably clear;

(g) Compelling claimants to initiate litigation to recover amounts due by offering substantially less than amounts ultimately recovered in actions brought by such claimants;

(h) Attempting to settle claims for less than the amount to which a reasonable person would believe a reasonable person was entitled after referring to written or printed advertising material accompanying or made part of an application;

ORS 746.230(1)(d)-(h). 

Prior to Moody, an insured’s primary remedy against an insurer was an action for breach of contract.  The Moody court changed Oregon law, establishing for the first time that Section 746.230(1) creates an independent standard of care owed by an insurer to its insureds, such that an insurer’s violation of the statute can give rise to a cause of action in tort.  Moreover, observing that “an elementary principle of insurance law is that insurance policies do not merely provide for the payment of funds in case of loss; they also provide the policyholder peace of mind,” the Moody court found that an insurer’s violation of any of the provisions of Section 746.230(1) can give rise specifically to a claim for negligence per se, in connection with which a wronged plaintiff may seek damages for emotional distress caused by the insurer’s unfair claim settlement practices.

The Moody court’s ruling provides an important new tool to lawyers seeking to vindicate the rights of insureds and can be expected to make it more expensive for insurers to deny or delay payment of valid claims.  That said, we can expect the Moody decision to be vigorously appealed.  As of now, however, the Moody decision is the law of the land.

Medford Wildfire Case Ruling Allows Attorney Fees Against Insurer for its Delay in Paying ALE (Additional Living Expense)

A renter in Talent, Oregon lost everything when her rental home burned up in the September 8, 2020, Almeda fire. She engaged Bonaparte & Bonaparte to file suit against her insurer (Lemonade Insurance Company) to recover compensation for her contents and unpaid ALE. In July 2021—11 months after the fire—Lemonade made a supplemental ALE payment, but disputed the insured’s entitlement to attorney fees. On September 30, 2021, Judge Charles Kochlacs of the Jackson County Circuit Court ruled that the insured was entitled to attorney fees based on the insurer’s delayed ALE payment. [See Opinion here.]

Insurance Law Handbook - Chapter 45

The Oregon State Bar invited Robert Bonaparte to author the chapter on attorney fees in the 2020 Insurance Law Handbook. Click here to read the chapter (which is co-authored by Dean Heiling).

INSURANCE COVERAGE FOR CLIMATE CHANGE

First Party Claims for Fire, Wind, Landslide, and Flood

Robert Bonaparte of Shenker & Bonaparte, LLP

Kyle Sturm of Foreman, Sturm & Thede, LLP  

I.       Introduction

Climate change has profound actuarial implications for the insurance industry. More frequent catastrophic events such as floods, drought, fires, and hurricanes, whether or not attributable to climate change, challenge the insurance industry’s ability to predict and price risk in the first-party context. By extension, increased risk may result in increased premiums or reduced coverage. 

Although beyond the subject of this paper, insurers face potential enterprise liability for failure to disclose information regarding the emerging risk of climate change to an unknowing public. By analogy, as solvent asbestos defendants become increasingly rare, plaintiffs began targeting insurers directly, claiming that insurers had a duty to disclose their knowledge of asbestos risk.

This paper narrowly focuses on first-party property claims under personal and commercial policies. All these cases are relevant to climate change because they address issues stemming from shifts in the environment.

II.    The Insurance Industry Will Respond to Climate Change 

According to a recent survey among actuaries, climate change is the top risk for the insurance industry, beating out cyber damages, financial instability, and terrorism. The survey demonstrates a shift from previous years, when climate change lagged well behind other risks. It has been estimated that natural disasters caused about $340 billion in damages globally in 2017, with insurance companies paying out $138 billion.

When the Camp Fire broke out in California in 2018, it became the most destructive fire on record in the state. At least 88 people died, 150,000 acres burned, and 18,000 structures were destroyed. The Insurance Information Institute estimates that insured losses from the fire will ultimately reach between $8.5 billion and $10.5 billion. In September of 2019, it was announced that PG&E agreed to an $11 billion settlement with insurance companies for the Northern California wildfires in 2017 and 2018. The insurance companies sought to recoup roughly $20 billion from PG&E due to the payouts to the wildfire victims.

Six of the 10 most destructive California wildfires have occurred in the last four years. According to the National Oceanic and Atmospheric Administration, a total of 219 weather and climate events cost $1.5 trillion from 1980 to 2017. Reports from the federal government warn these events are becoming more frequent, intense, and widespread. It is no surprise, then, that the industry will respond through a combination of premium and policy adjustments. As of the date of this paper, the authors are unaware of any specific claim change policy endorsements, but we expect that to change in the future.

III.  Key First Party Considerations

1.      Oregon’s one-way attorney fee statute runs in favor of insureds: ORS 742.061. Attorney fees are treated the same way in Washington pursuant to case law. Olympic Steamship Co., Inc. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991).

2.      The insured need not obtain a judgment in Oregon: a mid-litigation payment by the insurer triggers its attorney fee obligation. See Long v. Farmers, 360 Or. 791, 388 P.3d 312 (2017).

3.      The efficient proximate cause doctrine is applied in Oregon. The rule provides that when a loss is caused by a combination of covered and specifically excluded risks, the loss is covered if the covered risk was the triggering or “efficient proximate cause” of the loss. See Largent v. State Farm, 116 Or. App. 595, 598, 842 P.2d 445 (1992), rev den 316 Or. 528, 854 P.2d 940 (1993). The rule is also applied in Washington See Vision One, LLC v. Philadelphia Indem. Ins. Co., 174 Wash.2d 501, 276 P.3d 300 (2012).

4.      Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 836 P.2d 703 (1992), remains the leading Oregon case holding that insurance contract interpretation is a matter of law, and setting forth the blueprint for policy interpretation. In Washington, insurance policy interpretation is similarly a matter of law, and ambiguities are construed against the insurance company. Queen City Farms, Inc. v. Cent. Nat’l Ins. Co of Omaha, 126 Wash.2d 50, 882 P.2d 123 (1989).

5.      The interpretation of certain terms (e.g., “roof”), however, cannot be decided as a matter of law, and may present a factual issue for the jury. See Dewsnup v. Farmers, 349 Or. 33, 47, 239 P.3d 493 (2010).

6.      Many lawsuits filed in state courts against insurers will be removed to federal court based on diversity.

7.      A federal judge serving as mediator—unlike a private mediator—can suspend mediation and order an insurer’s adjuster to resume mediation with authority to settle at a higher figure.

IV.    Wildfire

a.      Anatomy of a Case: Nelson v. Liberty; Nelson v. Rough & Ready

1.      The Wildfire

On August 8, 2015, a fire started at a sawmill owned by Rough & Ready Lumber Company in Cave Junction, Oregon. Southern Oregon, at this time of year, was hot and windy. The fire began as a grass fire, and then spread to nearby trees, and then leaped across a road to engulf a rural acreage owned by Greg and Ronda Nelson. The fire caused superheated smoke to blast not only vertically, but also horizontally. Ironically, the Nelsons operated a fire-fighting company, and Greg Nelson was in California fighting a wildfire.

2.      The Damages

The wildfire directly damaged both business property and personal property (structure and contents) on the Nelsons’ land. Although the wildfire came within 50 feet of the home, the flames did not directly come into contact with the home. However, smoke from the wildfire entered the home through open windows and doors.

3.      Litigation Tip #1: Mapping the Wildfire

Plaintiffs’ counsel hired a university trained cartographer who had been employed by Apple Maps. The cartographer walked the property with the Nelsons, tracked the progress of the fire with the guidance of the Nelsons, and corroborated the progress of the fire by reference to evidence of searing, scorching, and burning of the property.

4.      Litigation Tip #2: Identifying the Target Defendants

Plaintiffs’ counsel evaluated the Nelsons’ claims against Rough & Ready as well as against the Nelsons’ homeowners insurer (Liberty Insurance Corporation). Although the Nelsons operated a fire-fighting company on their property, the Nelsons did not carry business insurance. The Nelsons’ claims against Liberty were limited to personal property (structure and contents) covered under their homeowners policy.

To avoid statute of limitation issues, plaintiffs’ counsel filed two separate suits against Rough & Ready and Liberty on February 1, 2017.

5.      Litigation Tip #3: Dealing with the Oregon Department of Forestry’s Claims

The Oregon Department of Forestry (ODF), through the office of the Oregon Department of Justice (DOJ), pursues cost recovery actions against potentially responsible parties. In this case, the DOJ had interviewed dozens of witnesses, and had ascertained the cause and origin of the wildfire to be negligent operations at the Rough & Ready sawmill. The DOJ’s findings were contained in a report. However, the DOJ refused to release the report based on the assertion of various statutory privileges.

When threatened with a subpoena, and following the settlement of its cost recovery action, the DOJ eventually released the report to plaintiffs’ counsel. The DOJ candidly explained that there was a limited amount of money available from the tortfeasor Rough & Ready, and that any recovery by the Nelsons could negatively impact the ODF’s recovery.

6.      Litigation Tip #4: Handling the Separate Claims Against the Insurer and the Tortfeasor

Plaintiffs’ counsel proposed a global mediation to resolve the separate suits against Rough & Ready and Liberty. Rough & Ready agreed to participate. Liberty declined.

As a consequence, plaintiffs’ counsel negotiated to resolve the Nelsons’ claim against Rough & Ready, which of course demanded and obtained a full release. Plaintiffs’ counsel and Rough & Ready’s counsel agreed in the settlement document that the resolution was limited to damaged business property. Plaintiffs’ counsel then continued its claim against Liberty for damaged personal property.

7.      Litigation Tip #5: Mid-Litigation Payments

In July 2018, approximately 1 ½ years following suit, Liberty issued an adjustment payment to the Nelsons in the amount of $13,676. Plaintiffs’ counsel immediately asked Liberty to acknowledge its obligation to pay attorney fees under Long v. Farmers Ins. Co., 360 Or. 791, 388 P.3d 312 (2017).

When Liberty’s counsel refused to acknowledge its obligation, plaintiffs’ counsel filed a motion for partial summary judgment. By that stage, Liberty had amended its answer to include a defense of subrogation prejudice (due to plaintiffs’ release of Rough & Ready). Plaintiffs’ motion for partial summary judgment also sought dismissal of Liberty’s subrogation prejudice defense.

Josephine County Circuit Court Judge Robert Bain issued his ruling on April 9, 2019. Judge Bain ruled that: (1) Liberty owed attorney fees to the Nelsons due to its mid-litigation payment; and (2) Liberty was estopped from asserting its subrogation prejudice defense.

8.      Litigation Tip #6: Make Repeated Settlement Overtures

Following the summary judgment ruling, plaintiffs’ counsel again requested Liberty to resolve the case and to negotiate or litigate the attorney fees. Liberty refused.

9.      Litigation Tip #7: Proceed to Trial

Five days before trial, Liberty issued a second adjustment payment to the Nelsons in the amount of $12,194. Plaintiffs’ counsel again asked Liberty to acknowledge its obligation to pay attorney fees under Long v. Farmers Ins. Co., 360 Or. 791, 388 P.3d 312 (2017). Liberty again refused.

By the time of trial (May 7, 2019) there were only $23,000 of damages in dispute. Plaintiffs’ counsel proposed to compromise the damage claim, and to negotiate or litigate the attorney fees. Liberty refused.

The trial proceeded on the factual issue whether smoke from the wildfire had damaged the home. Liberty argued strenuously that it was not obligated to pay for dry cleaning the clothes of an insured who sits close to the campfire, and likewise was not obligated to pay for smoke damage from a wildfire that did not directly come into contact with the home. There were industrial hygienists on both sides of the case. The jury awarded $10,000 to the Nelsons. The Grants Pass Courier published a front-page article with the headline: Jury’s smoke damage award to Cave Junction couple may be unprecedented.

10.  Litigation Tip #8: Pursuing Attorney Fees

Plaintiffs’ counsel then proceeded to file a petition for attorney fees under ORCP 68. The attorney fee trial was held September 25, 2019, and the matter remains under advisement.

b.      Anatomy of a Case: Oregon Shakespeare Festival Association v. Great American Insurance Company, D. Or. Case No. 1:15-cv-01932-CL (2016)

1.      The Wildfire

In late July and early August, 2013, smoke from several nearby wildfires filled the Allen Elizabethan Theater, causing the Oregon Shakespeare Festival (OSF) to cancel performances and lose business income. The fires caused smoke, soot, and ash to accumulate on the surface of the hard plastic seats and concrete ground of OSF’s open-air theater. The smoke, ashes, and dust permeated the interior of the theater, coating the HVAC, lighting, and electrical systems. OSF canceled four separate evening performances due to health concerns from the poor air quality caused by the wildfire smoke.

2.      The Damages

OSF suffered loss of business income due to the cancellations.

3.      Litigation Tip #1: Damage to Air in the Theater is “Physical Damage”

The insurer disputed whether the smoke that filled the partially-enclosed, open-air facility constituted “direct physical loss or damage.” OSF claimed that the wildfire smoke caused injury or harm to the interior of the theater, which included the air within the theater. The insurer argued that the air in the theater was not “property,” and that air is not physical. The Court summarily rejected the insurer’s assertion of three exclusions, and cited Oregon cases finding coverage for smoke and vapors from a meth lab in a rental home. See Farmers Ins. Co. v. Trutanich, 123 Or. App. 6, 858 P.2d 1332 (1993); Largent v. State Farm F&C Co., 116 Or. App. 595, 842 P.2d 445 (1992), rev den 316 Or. 528, 854 P.2d 940 (1993).

V.    Wind

a.      Anatomy of a Case: MacDonald v. American Family Insurance Company

1.      The Wind Event

In November 2012, the barn of plaintiffs Tom and Karen MacDonald suffered heavy damage during a severe wind storm. Plaintiffs lived in a valley in Lake County, Oregon with vertical bluffs rising 7,200 feet in elevation. Plaintiffs promptly reported the damage to the insurer, which assigned a new adjuster, whose only prior work experience was as a physical therapist, to inspect the loss and to adjust the claim.

2.      The Damages

The untrained adjuster dramatically underestimated the damages, and plaintiffs hired counsel to bring an action against the insurer.  

3.      Litigation Tip #1: Consider the Association of Co-Counsel

Plaintiffs engaged experienced counsel (Carl Burnham of the Yturri Rose firm in Ontario) who filed an action. Subsequently, Carl Burnham associated as co-counsel Robert Bonaparte of Shenker & Bonaparte based on the firm’s insurance coverage expertise. The case proceeded to successful mediation.

VI.    Landslide

a.      Anatomy of a Case: Hendrickson v. Farmers Insurance

1.      The Landslide Event

At 5:00 a.m. on October 8, 2008, the home of plaintiffs Kathei and David Hendrickson, perched on the top of a hill, slid down the hill without warning. The descent of the home was arrested mid-slope for a few minutes by a stump, allowing a neighbor to extend a ladder over the cliff-side and haul Kathei Hendrickson to safety. Plaintiffs’ home continued its descent, and crashed into two neighboring homes at the foot of the hill.

2.         Litigation Tip #1: Use Experts Creatively to Challenge the “Earth Movement” Exclusion

Like most homeowners policies, plaintiffs’ policy devoted a full page or more to its “earth movement” exclusion. Virtually no domestic homeowners policies cover landslide.

Plaintiffs’ counsel engaged Portland expert Scot Mills, whose firm GeoDesign, Inc. had done work on the OHSU tram, to analyze the claim. Just 10 days before the loss, plaintiffs had hired an arborist to cut down an 80-year-old cedar tree. There was evidence that a water line had been severed in the process, causing water equivalent to that of a 30,000 gallon swimming pool to be trapped at the top of the hill, walled in by plaintiffs’ west retaining wall. Plaintiffs’ expert argued that the home was destroyed when its west retaining wall failed as a result of “earth pressure.” See, e.g., Simon v. Encompass Insurance Company, 2005 Ohio App. LEXIS 5164 (2005), discretionary appeal not allowed, 108 Ohio St.3d 1489, 843 N.E.2d 795 (2006) (“hydrostatic pressure and earth pressure are not the same as earth movement, as defined in Encompass’ policy. Therefore, the earth movement exclusion is inapplicable”). 

3.      Litigation Tip #2: Separate Claims for Structure and Contents

Plaintiffs’ policy provided coverage for water damage to personal property caused by broken pipes. The court allowed both the earth pressure claim for damaged structure and the water damage claim for damaged personal property to proceed to a jury.

The jury found in favor of the insurer on the structure claim, and in favor of plaintiffs on the water damage claim to personal property, and awarded damages. The court entered a JNOV. The Oregon Court of Appeals affirmed without opinion.

4.      Litigation Tip #3: Pursue Tortfeasors

Plaintiffs filed a third party action against the arborist, and obtained a settlement.

VII.    Flood

The typical homeowners policy does not cover flood damage. Flood insurance may be purchased through the National Flood Insurance Program (NFIP), and a few private insurers, subject to a 30-day waiting period. The NFIP provides coverage up to $250,000 for structure, and up to $100,000 for contents.

a.      Anatomy of a Case: Hatley v. Truck Insurance Exchange, 261 Or. 606, 494 P.2d 426 (1972)

1.      The “Flood” Event

A vandal left a hose on all night, causing damage to the insured’s home.

2.      Litigation Tip #1: Parse the Asserted Exclusion Carefully

The insurer asserted that the damage was excluded from coverage under a surface and flood water exclusion:

“This policy does not insure against…Loss caused by, resulting from, contributed to or aggravated by any of the following…flood, surface water, waves, tidal water or tidal wave, overflow of streams or other bodies of water, or spray from any of the foregoing, all whether driven by wind or not.”

The  court found that the hose water was not “surface water” because “[t]he term ‘surface water,’ particularly when used in conjunction with flood, waves, and tidal water, was intended to mean water ‘diffused over the surface of the ground, derived from falling rains or melting snows.’ We have been cited to no cases either in the field of property insurance or that of water law in which water from any but a natural source is held to be surface water.”

b.      Anatomy of a Case: Veloz v. Foremost Insurance Co. Grand Rapids, 306 F. Supp.3d 1271 (D. Or. 2018)

In Veloz, Sabino Veloz’s rental property was damaged after a water main burst and water flowed downhill to Veloz’s house. Foremost Insurance Company denied Veloz’s claim based partly on a flood and surface water exclusion in Veloz’s insurance policy that provided:

“Loss caused by…Flood Water, surface water, waves, tidal water, tidal waves, storm surge, tsunami or overflow of a body of water or spray from any of these whether or not driven by wind…This exclusion applies whether or not there was widespread damage and whether or not it was caused by a human activity or an act of nature.”

Foremost claimed that the damage was caused by “surface water” or “flood water” from the water main. Foremost argued that it did not matter if the cause of the released water was man-made because the insurance policy provides that the exclusion applies to “human activity,” citing Citi Gas Convenience v. Utica Mut. Ins. Co., No. 15-6691, 2016 U.S. Dist. LEXIS 15503 (E.D. Pa. Feb. 9, 2016), which involved similar policy language.

The Veloz court was not convinced by Foremost’s arguments and reliance on Citi Gas. Instead, it held “that the terms ‘surface water’ and ‘flood water’ unambiguously refer to natural water sources and that no reasonable insured would interpret those terms to refer to water that escapes from a man-made source such as a water main.” In coming to its decision, the court relied on the finding in Hatley that flood and surface water is water arising from a natural source. The court distinguished Citi Gas based on subtle differences in the policy wording. The court held that the “it” in Foremost’s policy “refers to structural damage,” not to the source of the water. In other words, if the Veloz policy had excluded “flood and surface water caused by a man-made source” rather than excluding “damage… caused by a human activity,” the court may have found that the water damage was excluded from coverage.

c.       Anatomy of a Case: Barnard v. State Farm

1.      The “Flood” Event

On August 14, 2015, the failure of an under-sink water heater resulted in flooding of the home, causing structural damage to the insureds’ home and damage to the insureds’ personal property.

2.      Litigation Tip #1: Consider Tort Claims

The insureds alleged both misfeasance and malfeasance by State Farm’s adjuster, including the unauthorized removal of the water heater. The removal of the water heater may have compromised the potential claim against the manufacturer.

The insureds brought the following claims: (i) for breach of contract and for breach of the implied covenant of fair dealing, in two separate counts, (ii) for tortious interference with business relationships, (iii) for negligence, (iv) for negligent misrepresentation, (v) for intentional misrepresentation, (vi) for bad faith and unfair dealing, (vii) for intentional infliction of emotional distress, and (viii) for conversion.

State Farm filed a Rule 12 motion to dismiss the sixth claim for bad faith and unfair dealing. The court declined to dismiss the insureds’ bad faith claim based on the following:

Further support for that conclusion may be found in the Barnards’ allegations that State Farm’s claims representative, in an act of expressly conceded impropriety, removed from the insured premises the water heater the failure of which caused the water intrusion at issue, thereby compromising the key evidence which would otherwise have supported a claim against the manufacturer of the heater…A finder of fact assuming the truth of that allegation and drawing all reasonable inferences therefrom in the Barnards’ favor could reasonably conclude that State Farm, by and through its conduct in compromising or eliminating the Barnards’ alternative avenue of recourse for seeking compensation for their loss in the event resolution of their claim on the policy proves insufficient to compensate them completely, created a special relationship with the Barnards that carried with it an extra-contractual duty of care to ensure that the insured premises were restored to their pre-loss condition without exceeding the limits of coverage under the policy. Again, the Barnards have alleged that State Farm breached that extra-contractual duty of care…For this reason, also, State Farm has not established that it is entitled to dismissal of the Barnards’ bad faith claim at this pleading stage of these proceedings.

See Barnard v. State Farm, D. Or. Case No. 3:17-cv-01340-PK (2017) (Findings and Recommendation) (Judge Paul Papak).