Violation of Statute Allows Suit for Negligent Failure to Resolve
Insurance Claim

Post 4706

Christine Moody, individually, and in her capacity as the Personal
Representative of the Estate of Steven "Troy" Moody, Deceased v. Oregon
Community Credit Union, aka OCCU, an Oregon entity, association, union,
or corporation et al., Defendants, and Federal Insurance Company, an
Indiana corporation, 371 Or. 772, SC S069409, Supreme Court of Oregon
(December 29, 2023)

Plaintiff, whose husband was accidentally shot and killed during a
camping trip, brought this action against defendant, a first-party life
insurer, claiming, among other things, that defendant had negligently
failed to investigate and pay her claim for policy benefits, causing her
to have fewer financial resources to navigate the loss of a
bread-winning spouse and, consequently, to suffer economic harm and
emotional distress.

FACTS

In the case now before the Supreme Court it must consider whether
plaintiff has alleged a legally protected interest sufficient to subject
defendant to liability for emotional distress damages. To decide
whether that alleged interest is a legally protected interest sufficient
to subject defendant to liability for emotional distress damages.
Plaintiff has alleged a viable common-law negligence claim against
defendant for emotional distress damages. Therefore, the trial court
erred in granting defendant's motions to dismiss plaintiffs negligence
claim and in striking her claim for emotional distress damages.

ZALMA OPINION

The state of Oregon, like many states, has enacted statutes punishing
insurers for bad faith claims handling. The insurer, after a change in
allegations, paid the plaintiff the $3,000 life insurance limit, only to
find itself sued for negligent claims handling. The suit was dismissed
by the trial court and reversed by the Court of Appeals and the Oregon
Supreme Court. Since the statute requires fair claims handling the
plaintiffs allegations allowed it to sue the insurer for emotional
distress damages when it initially refused to pay because of an
exclusion.  This is a limited decision and stretches the obligations of
an insurer beyond fairness and even with a clear and unambiguous
exclusion it can be sued for emotional distress.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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