Paton v. American Family Mutual Ins. Co

An insurance company's express consent to the arbitration process suffices to "formally institute" arbitration proceedings under ORS 742.504(12)(a)(B).

Plaintiff Paton appealed lower court ruling that defendant American Family Mutual Insurance Company’s (American Family's) letter stating that Insurance Company “hereby consents to submit this case to binding arbitration” did not “formally institute” arbitration proceedings. Paton who was insured by American Family was injured in an auto accident with an underinsured motorist. Shortly before the two year anniversary of the accident the insurance company sent the Paton a letter stating that it “hereby consents to submit this case to binding arbitration”. Paton then filed a UIM (Underinsured Motorist) claim against American Family shortly after the two-year anniversary of the accident. American Family moved for summary judgment arguing that the suit was invalid, because the statutory limit of two years to file suit had expired. The trial court agreed with American Family, and found that the letter sent by American Family did not “formally institute” arbitration. Paton argued on appeal that the letter was an express communication showing the American Family's willingness to commit to arbitration, which “formally institutes” arbitration proceedings. The Court of Appeals held that American Family's letter “expressly communicated” to Paton that it was committed to the arbitration process, and thus “formally instituted” arbitration proceedings within the required two-year period. Reversed and remanded.