Oregon Claim Settlement Practices

Oregon’s unfair claim settlement practices law tells insurers what they may not do when handling a claim. The Director’s rules under it turn the law’s general duties into deadlines: how fast a claim must be acknowledged, investigated and decided. This chapter covers both, for property and casualty claims, auto claims and workers’ compensation claims.

Unfair claim settlement practices (ORS 746.230; OAR 836-080-0205 to 0250)

The statute (ORS 746.230)

An insurer, or any other person, may not commit an unfair claim settlement practice. Those listed in the statute include (ORS 746.230(1)):

• Misrepresenting facts or policy provisions in settling claims
• Failing to acknowledge and act promptly on communications about claims
• Failing to adopt and implement reasonable standards for the prompt investigation of claims
• Refusing to pay claims without conducting a reasonable investigation based on all available information
• Failing to affirm or deny coverage within a reasonable time after completed proof of loss statements have been submitted
• Not attempting in good faith to settle claims promptly and equitably once liability has become reasonably clear
• Compelling claimants to sue by offering substantially less than the amounts they ultimately recover in court
• Trying to settle a claim for less than a reasonable person would believe they were entitled to, based on advertising material that accompanied or was part of the application
• Trying to settle a claim on the basis of an application altered without the applicant’s notice or consent
• Failing, after paying a claim, to tell the insured or beneficiary on request which coverage the payment was made under
• Delaying investigation or payment by requiring a preliminary claim report and then loss forms that ask for essentially the same information
• Failing to promptly settle a claim under one coverage, where liability is reasonably clear, in order to influence settlements under other coverages of the policy
• Failing to promptly explain the basis for denying a claim, in relation to the policy, the facts or the law

Separately, an insurer may not refuse, without just cause, to pay or settle claims so often that it amounts to a general business practice in Oregon (ORS 746.230(2)). Evidence of such a practice includes a substantial increase in complaints to the Department of Consumer and Business Services, or a substantial increase in lawsuits against the insurer or its insureds by claimants.

Scope of the rules (OAR 836-080-0205, 0210)

The Director’s rules set minimum standards. Violating them is an unfair claim settlement practice under ORS 746.230. They:

• Apply to all insurance except fidelity and surety bonds
• Apply to workers’ compensation insurance only as provided in OAR 836-080-0250
• Are not exclusive, so the Director may treat other conduct as a violation too

The rules use a few defined terms:

• A first party claimant asserts a right to payment under an insurance policy because a loss the policy covers has occurred
• A third party claimant asserts a claim against a person insured under a policy
• Notification of claim is any notice to the insurer, in writing or by other means the policy accepts, that reasonably tells the insurer the facts of the claim
• The insurer includes anyone authorized to represent it on a claim who is acting within that authority, such as an adjuster

Claim files (OAR 836-080-0215)

An insurer’s claim file must contain enough detail about each claim that the pertinent events and their dates can be reconstructed. A claim file may be kept electronically (OAR 836-080-0210).

Misrepresentation and other prohibited claim practices (OAR 836-080-0220)

An insurer may not:

• Fail to fully disclose to a first party claimant all the benefits, coverages and other provisions of the policy that are pertinent to the claim, or conceal any of them
• Deny a claim because the claimant failed to show the damaged property, unless it can prove it demanded to see the property and the claimant refused without good reason
• Unless the policy itself sets the time limit, tell a claimant that written notice or proof of loss must be given within a set time and that the insurer is released if it is not, unless missing that time limit would prejudice the insurer’s rights
• Ask a first party claimant to sign a release broader than the subject matter of the claim payment
• Issue a check in partial settlement of a loss under a coverage that contains language releasing the insurer or its insured from total liability

Required claim communication practices (OAR 836-080-0225)

An insurer must…	Deadline
Acknowledge a notification of claim, or pay the claim	Not later than the 30th day after receiving the notification
Give the Director an adequate response to an inquiry about a claim	Not later than the 21st day after receiving it
Reply to other claim communications from a claimant that reasonably call for a response	Not later than the 30th day after receiving them

On receiving notice of a claim from a first party claimant, the insurer must also promptly provide the claim forms, instructions and reasonable assistance the claimant needs to comply with the policy. Doing so within 30 days also satisfies the acknowledgment requirement.

Standard for prompt claim investigation (OAR 836-080-0230)

An insurer must complete its investigation of a claim not later than the 45th day after it receives notification of the claim, unless the investigation cannot reasonably be completed in that time.

Standards for prompt and fair settlements (OAR 836-080-0235)

Accepting or denying the claim. Not later than the 30th day after receiving properly executed proofs of loss from a first party claimant, the insurer must tell the claimant whether the claim is accepted or denied.

• A denial based on a specific policy provision, condition or exclusion must refer to that provision
• A denial must be in writing, with a copy (or the ability to reproduce it) kept in the claim file

When more time is needed. If the insurer needs more time to decide, it must tell the claimant so, with the reason, within the same 30 days. After that, it must notify the claimant in writing of the reason more time is needed 45 days after the first notice and every 45 days after that, for as long as the investigation stays open.

Other settlement standards:

• An insurer may not refuse to settle a first party claim on the ground that someone else should pay, unless the policy provides otherwise
• If the insurer is negotiating directly with a claimant who is not an attorney and is not represented by one, and a statute of limitations or policy time limit is approaching, the insurer must warn the claimant in writing. The warning goes to a first party claimant at least 30 days before the insurer believes the time limit may expire, and to a third party claimant at least 60 days before
• An insurer may not tell a third party claimant that their rights may be impaired if a form or release is not completed within a set time, except to tell them about a relevant statute of limitations

Automobile claims (OAR 836-080-0240)

Auto physical damage claims carry their own standards. These are covered in detail in the chapter on Oregon uninsured motorist coverage and auto claim rules. In brief:

• A total loss is settled with a comparable replacement vehicle or a cash settlement that includes taxes, license and transfer fees, less the deductible and any itemized deductions the rule allows, with the insurer’s valuation information provided to the insured
• The claim is reopened if the insured notifies the insurer, within 35 days of receiving payment, that a comparable vehicle cannot be bought for that amount, unless the insurer named a specific available comparable vehicle at settlement
• When liability is reasonably clear, an insurer may not steer a third party claimant to their own insurer just to avoid paying the claim
• An insurer may not require unreasonable travel to inspect a replacement vehicle, get an estimate or have repairs made, and may not require that a particular shop do the repairs
• A repair estimate must be enough to repair the damage satisfactorily, and must identify every crash part not made by the original manufacturer
• On request, the insurer includes the insured’s deductible in its subrogation demand, and shares the recovery at least proportionately

Workers’ compensation claims (OAR 836-080-0250)

For a workers’ compensation insurer, the duty not to refuse a claim without a reasonable investigation means taking the steps a reasonably prudent person, who knows the legal standards for compensability, would take in a good faith effort to learn the facts. Those steps take into account the cost of the investigation and the likely value of the claim.

When deciding whether an investigation was reasonable, the Director looks only at what was in the claim record at the time of the denial. An insurer may not rely on a fact that was not documented in the record when it denied the claim to show that its investigation was reasonable.

Sidenote

Know this...

Three deadlines anchor Oregon claim handling. 30 days to acknowledge a claim, 45 days to finish investigating it, and 30 days after proof of loss to accept or deny it, with written updates every 45 days if more time is needed. Do not confuse the 21 days an insurer has to answer an inquiry from the Director with the 30 days it has to reply to a claimant.

Lesson summary

• ORS 746.230 lists the unfair claim settlement practices, including misrepresenting policy provisions, refusing to pay without a reasonable investigation, failing to settle in good faith once liability is reasonably clear, and forcing claimants to sue by lowballing them.
• Refusing to pay claims without just cause often enough to be a general business practice is itself a violation.
• The Director’s rules (OAR 836-080-0205 to 0250) apply to all insurance except fidelity and surety bonds, and to workers’ compensation only through OAR 836-080-0250.
• An insurer must acknowledge a claim within 30 days, answer the Director within 21 days, and reply to other claimant communications within 30 days (OAR 836-080-0225).
• An investigation must be completed within 45 days of notification, unless that is not reasonably possible (OAR 836-080-0230).
• A claim must be accepted or denied within 30 days after proof of loss. A denial is in writing and cites the provision relied on. If more time is needed, the claimant is told within 30 days, then every 45 days (OAR 836-080-0235).
• An unrepresented claimant gets written warning of an expiring time limit at least 30 days (first party) or 60 days (third party) before it runs out.
• Claim files must allow the claim’s events and dates to be reconstructed (OAR 836-080-0215).
• A workers’ compensation denial is judged only on the claim record at the time of denial (OAR 836-080-0250).