Kelley v. State Farm Mutual Auto. Ins. Co.

Under ORS 742.061(1), insurance companies are required to to pay attorney fees to the insured unless the insurance companies actions fall within the attorney fee "safe harbor."

Kelley was injured in a car accident with an uninsured driver. On day after the accident, State Farm sent Kelley a “safe harbor letter,” indicating that Kelley had a right to make a claim for under-insured motorist (UIM) benefits as part of his insurance plan, and that Kelley’s claim would have to be limited to “liability and damages. In this letter, State Farm “consent[ed] to the submission of [Kelley’s] underinsured claim to binding arbitration.” The case related to the incident went to trial, in which State Farm raised the issue of whether Kelley’s shoulder was injured in the accident. Kelley won the trial and petitioned for attorney fees, which he received. The trial court held that State Farm nullified the protection of the safe harbor letter by raising the issue of Kelley’s shoulder injury. State Farm appealed the judgment for attorney fees under ORS 742.061(1), which requires insurance companies to pay attorney fees to the insured unless the insurance company falls within the attorney fee “safe harbor.” The Court held that State Farm did not raise any issues outside of the scope of the “safe harbor.” Judgment reversed and remanded.