The Oregon Supreme Court reversed a $26.3 mn class-action award against Farmers, ruling that omitting statutory details from a director-approved notice does not expose an insurer to liability.
The justices held that the legislature intended carriers to rely on wording the director approves to meet choice-of-shop requirements.
Oregon’s choice-of-shop rule bars insurers from requiring policyholders to use a specific repair shop as a condition for claim approval.
Enacted in the 1970s, the law also imposes precise notice requirements that explain the rule’s provisions and outline the insured’s rights and duties during the claims process.
A district court and the Oregon Court of Appeals both found Farmers Insurance Co. of Oregon in breach of that statute because its notices omitted references to certain statutory sections.
Farmers countered that the director of the Department of Consumer and Business Services had approved the notice language it used, even though it lacked some details.
The court noted no record exists of any director-approved notice language from 1977 until 1993. In 1993, the department issued a bulletin specifying approved wording and stated that carriers using that text need not seek further approval.
Farmers began using the 1993 wording and dispatched those notices to Oregon policyholders. Lawmakers amended the statute in 2007 to add new requirements but left notice specifications unchanged.
Since 2007, the DCBS has not issued further guidance, and Farmers has continued to send the same notice it adopted in 1994.
