Burns v. American Family Mutual Ins.

An insurer is liable for arbitration-related attorney fees under ORS 742.061(1) if the insurer refuses to pay the damages awarded during binding arbitration.

Petitioner filed suit after Insurer refused to pay damages awarded during a binding arbitration.  Petitioner appealed a supplemental judgment denying his request for attorney fees incurred in arbitration.  On appeal, Petitioner argued that “once the conditions of ORS 742.061(1) are satisfied,” an insured may recover all attorney fees from a policy dispute if an insurer leaves the safe harbor under ORS 742.061(3).  In response, Insurer asserted that after the parties participate in arbitration, ORS 742.504(10)—not ORS 742.061(1)—controls “whether attorney fees are available.” Insurer further argued that arbitration-related attorney fees are precluded under Wick v. Viking, 105 Or App 33, 803 P2d 1199 (1990).  An insurer is liable for arbitration-related attorney fees under ORS 742.061(1) if the insurer refuses to pay the damages awarded during binding arbitration.  The Court found that, although Insurer sailed into the safe harbor of ORS 742.061(3), Insurer lost its shelter by refusing to honor the arbiter's determination.  The Court determined that such “disingenuous” behavior is not covered by the prohibition on arbitration-related attorney fees under ORS 742.504(10), as articulated in Wick.  Thus, the Court held that Insurer was liable for Petitioner’s attorney fees incurred during arbitration.  Supplemental judgment reversed and remanded; otherwise affirmed.