Insurance Bad Faith Demand Letter - Oregon

INSURANCE BAD FAITH DEMAND LETTER

State of Oregon

[LAW FIRM LETTERHEAD]

SETTLEMENT COMMUNICATION
ADMISSIBILITY GOVERNED BY OEC 408 / ORS 40.190 AND FED. R. EVID. 408, WHERE APPLICABLE
TIME-LIMITED DEMAND

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[CLAIMS_DEPARTMENT_ADDRESS]
[CITY], [STATE] [ZIP]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]

Re: BAD FAITH / EXTRACONTRACTUAL DEMAND — OREGON
Insured/Claimant: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Policy Limits: $[____]
Date Proof of Loss Submitted: [__/__/____]
Response Deadline: [__/__/____] at 5:00 p.m. Pacific (Time-Limited Demand)

Dear [ADJUSTER_NAME]:

I. INTRODUCTION

This firm represents [CLIENT_NAME] ("our client") in connection with the above-captioned claim. The conduct described below may implicate ORS 746.230, but that statute does not itself create a standalone private damages claim. This letter demands payment of $[TOTAL_DEMAND_AMOUNT] based on [identify policy provisions and independently verified remedies] and gives notice of a potential action on the policy and a conditional attorney-fee request under ORS 742.061.

Do not invoke Moody v. Oregon Community Credit Union, 371 Or. 772 (2023) unless the facts fit its expressly narrow holding involving a surviving spouse, a deceased breadwinner's life insurance, failure to reasonably investigate and promptly pay benefits, and serious emotional harm, or Oregon counsel identifies current controlling authority extending the holding.

II. THE OREGON BAD FAITH FRAMEWORK (POST-MOODY)

A. The Statutory Duty: ORS 746.230

ORS 746.230(1) identifies the unfair claim settlement practices no Oregon insurer may commit. These include:

• (a) Misrepresenting facts or policy provisions;
• (b) Failing to acknowledge and act promptly on communications regarding claims;
• (c) Failing to adopt and implement reasonable standards for prompt investigation;
• (d) Refusing to pay claims without conducting a reasonable investigation based on all available information;
• (e) Failing to affirm or deny coverage within a reasonable time after completed proof of loss;
• (f) Not attempting in good faith to promptly and equitably settle claims where liability has become reasonably clear;
• (g) Compelling insureds to initiate litigation by offering substantially less than amounts ultimately recovered;
• (m) Failing to promptly provide the proper explanation of the policy basis, in relation to the facts or applicable law, for denying a claim.

B. Implementing Regulations — OAR 836-080-0225 to 836-080-0240

The Oregon Division of Financial Regulation has promulgated provision-specific claim-handling rules:

• OAR 836-080-0225: Generally acknowledge claim notice or pay the claim within 30 days, and appropriately reply within 30 days to pertinent claimant communications that reasonably indicate a response is expected;
• OAR 836-080-0230: Generally complete the investigation within 45 days, unless it cannot reasonably be completed in that time;
• OAR 836-080-0235: Generally accept or deny within 30 days after properly executed proofs of loss, or explain why more time is needed and provide written 45-day updates; a denial based on a policy provision, condition, or exclusion must identify it.

Counsel must confirm the current rule text, scope, and consequence before asserting a violation.

C. Moody — Narrow Common-Law Negligence Holding

In Moody, the Oregon Supreme Court recognized a common-law negligence claim for emotional-distress damages by the surviving spouse of a deceased breadwinner against the spouse's life insurer for failure to reasonably investigate and promptly pay benefits. The court relied on multiple limiting factors, including the life-insurance purpose, the parties' mutual expectation of service and reliance, and objective indicators of possibly serious emotional injury. It cautioned that the decision does not make every statutory violation or negligent contractual performance actionable for purely psychological harm.

The court also explained that the claim was not negligence per se and not a private statutory cause of action under ORS 746.230. A generic claim-denial dispute, property claim, disability claim, UM/UIM claim, or other policy dispute should not be presented as within Moody without current controlling authority and matching facts.

D. Georgetown Realty — Special Relationship for Defense Claims

Georgetown Realty, Inc. v. Home Ins. Co., 313 Or. 97, 831 P.2d 7 (1992), held that when a liability insurer undertakes the defense of its insured, a "special relationship" arises giving rise to tort duties beyond the policy itself. Where applicable, Georgetown Realty supports additional extracontractual recovery for breach of the duty to defend and settle within limits.

E. Attorney Fees — ORS 742.061

ORS 742.061(1) conditionally provides a court-fixed reasonable attorney fee as part of costs if settlement is not made within six months from filing proof of loss, an action on the policy is brought in an Oregon court, and the plaintiff's recovery exceeds the defendant's tender. State each condition accurately and do not promise a fee award.

The Oregon Supreme Court has construed ORS 742.061 expansively: Long v. Farmers Ins. Co. of Oregon, 360 Or. 791 (2017) (insurer's post-suit voluntary payment is a "recovery" triggering the fee obligation).

F. Punitive-Damages Pleading Gate — ORS 31.725

Do not threaten that an initial complaint will request punitive damages. ORS 31.725 prohibits a punitive-damages request when the pleading is filed and provides a later supported motion-to-amend procedure. Oregon counsel must separately verify the substantive standard, evidence, timing, and procedural requirements before mentioning a later request.

G. Interest

Do not assume a 9% prejudgment-interest award. Oregon counsel must verify the independent legal basis, rate, accrual date, and whether the amount was sufficiently ascertainable.

III. POLICY AND COVERAGE

A. Policy Details

B. Coverage Analysis

The loss falls squarely within the insuring agreement of the policy. [INSURANCE_COMPANY_NAME] has [acknowledged coverage / asserted an unsupported exclusion / reserved rights]. The insurer bears the burden of proving any exclusion, and all ambiguities are resolved against the insurer as drafter. Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464 (1992); Holloway v. Republic Indem. Co., 341 Or. 642 (2006).

IV. FACTUAL BACKGROUND

A. The Loss

On [__/__/____], [DETAILED_NARRATIVE_OF_LOSS_EVENT]. The loss was promptly reported to [INSURANCE_COMPANY_NAME] on [__/__/____]. Our client has cooperated in full with the claim investigation, provided requested documents and sworn statements, and submitted proof of loss.

B. Chronology of Bad Faith Conduct

V. SPECIFIC BAD FAITH CONDUCT

A. Unreasonable Delay — ORS 746.230(1)(b), (c), (e), (f); OAR 836-080-0225, -0230

[INSURANCE_COMPANY_NAME] unreasonably delayed the investigation, evaluation, and payment of this claim:

• [SPECIFIC_DELAY_1 — with dates]
• [SPECIFIC_DELAY_2]
• [SPECIFIC_DELAY_3]

The carrier failed to accept or deny within 30 days of proof of loss as required by OAR 836-080-0230 and failed to provide any written explanation or update, violating the rule on its face.

B. Failure to Conduct a Reasonable Investigation — ORS 746.230(1)(d)

[INSURANCE_COMPANY_NAME] refused to pay without conducting a reasonable investigation based on all available information:

• [INVESTIGATION_FAILURE_1]
• [INVESTIGATION_FAILURE_2]
• [INVESTIGATION_FAILURE_3]

C. Lowball Offers — ORS 746.230(1)(g)

The carrier's offers are grossly inadequate and appear calculated to force litigation:

This is exactly the systemic lowballing that Oregon's Court of Appeals and federal district courts have held violates ORS 746.230(1)(g).

D. Misrepresentation of Facts and Policy Provisions — ORS 746.230(1)(a)

[INSURANCE_COMPANY_NAME] has misrepresented [________________________________]. The correct reading of the policy is [________________________________].

E. Failure to Provide Proper Explanation — ORS 746.230(1)(m); OAR 836-080-0240

The denial/lowball lacks the required reference to specific policy language justifying the insurer's position.

F. Optional Moody Facts — Delete Unless the Narrow Gate Is Met

Use this section only if the client is the surviving spouse and beneficiary of a deceased breadwinner, the claim is against the spouse's life insurer, the alleged wrong is failure to reasonably investigate and promptly pay benefits, and counsel confirms all other Moody factors. Otherwise delete it rather than importing “objective indicators” into an unrelated insurance dispute.

VI. DAMAGES

A. Contract Damages (Policy Benefits)

B. Consequential Damages

Recoverable in contract for foreseeable losses caused by the breach (the Hadley v. Baxendale framework adopted by Oregon courts):

C. Emotional Distress Damages — Optional Moody Route Only

[Delete unless the narrow Moody gate above is met.] Counsel has determined that the current facts and law support a common-law negligence claim for emotional-distress damages because [state each matching factor and causation fact]. Claimed amount, if independently supported: $[____].

D. Punitive Damages

No initial pleading may request punitive damages. Any later request requires the ORS 31.725 motion-to-amend procedure and separately verified substantive support.

E. Attorney Fees — ORS 742.061

Reasonable attorney fees are mandatory under ORS 742.061 on any litigated recovery exceeding the insurer's tender, and are included in the total demand below only as estimated through the date of this letter — actual fees will continue to accrue.

F. Interest — Only If Independently Verified

Verified legal basis, rate, and accrual date: [________________________________]. Amount: $[____].

VII. DEMAND

A. Monetary Demand

[INSURANCE_COMPANY_NAME] is to pay $[TOTAL_DEMAND_AMOUNT] broken down as follows:

B. Additional Settlement Terms

• Full written withdrawal of any improper denial or reservation of rights;
• Non-disparagement / non-admission language mutually acceptable;
• Prompt correction of any adverse industry database reporting (CLUE, ISO, MIB, as applicable);
• Confidentiality of settlement terms at client's option.

VIII. TIME-LIMITED DEMAND

THIS DEMAND EXPIRES AT 5:00 P.M. PACIFIC ON [__/__/____].

Consequences of Non-Response

If [INSURANCE_COMPANY_NAME] fails to tender the full demand by the deadline, our client will:

1. File suit in the Circuit Court of the State of Oregon for [COUNTY] County seeking:
   - All policy benefits and any independently supported interest;
   - Attorney fees under ORS 742.061;
   - Consequential damages;
   - Emotional-distress damages only if the narrow Moody route is supported;
   - A later motion concerning punitive damages only if ORS 31.725 and the substantive law are satisfied;

2. File a complaint with the Oregon Division of Financial Regulation (DCBS), P.O. Box 14480, Salem, OR 97309-0405; telephone 1-888-877-4894; online at dfr.oregon.gov;

3. Withdraw this demand and pursue full damages without limit, including publication of the carrier's conduct in the matter as an exemplar for other Oregon practitioners and plaintiffs' lawyers;

4. Pursue discovery of the carrier's full claim file, reserve history, internal communications, and prior regulatory actions — materials that Oregon courts have repeatedly ordered produced in bad-faith cases.

IX. DOCUMENT PRESERVATION NOTICE

This letter is formal notice to preserve all documents and ESI related to this claim, including:

• The complete claim file, including every version of notes, draft letters, and internal memoranda
• Reserve history and every reserve change, with accompanying narrative explanations
• All communications (email, text, Teams/Slack, voicemail) involving the adjuster, supervisors, claims managers, coverage counsel, and SIU
• All inspection, investigation, engineering, and cause-and-origin reports (including drafts)
• All estimates, including Xactimate/Symbility native files
• Phone recordings of all calls with our client and any witnesses
• Claim-handling manuals, guidelines, bulletins, and job aids in effect on the date of loss and thereafter
• Training materials applicable to this class of claim
• Prior complaint data and resolution history on similar claims
• Reinsurance communications
• Quality assurance / internal audit reports touching this file or this line of business

Spoliation will be met with appropriate discovery sanctions, including adverse inferences and where warranted, default judgment.

X. CONCLUSION

[INSURANCE_COMPANY_NAME]'s handling of this claim raises the policy and claim-practice issues stated above. ORS 746.230 is not itself a private damages claim, and Moody applies only if its narrow factual and legal gate is met. Our client invites a documented response and resolution by the deadline stated in this letter.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME], OSB # [____]
[ADDRESS]
[CITY], Oregon [ZIP]
[PHONE] | [EMAIL]

Counsel for [CLIENT_NAME]

ENCLOSURES:
☐ Policy declarations page and full policy
☐ Sworn proof of loss
☐ Chronological log of claim communications
☐ Contractor estimate / expert reports
☐ Medical records documenting emotional distress (if applicable)
☐ Correspondence from insurer
☐ Photographs and other proof of loss

CC:

• [CLIENT_NAME]
• Oregon Division of Financial Regulation (upon filing of complaint)

OREGON BAD FAITH QUICK REFERENCE

SOURCES AND REFERENCES

• ORS 746.230 — Unfair claim settlement practices — https://oregon.public.law/statutes/ors_746.230
• ORS 742.061 — Attorney fees in actions on insurance policies — https://oregon.public.law/statutes/ors_742.061
• ORS 31.730 — Standards for punitive damages — https://oregon.public.law/statutes/ors_31.730
• ORS 31.735 — Distribution of punitive damages — https://oregon.public.law/statutes/ors_31.735
• ORS 82.010 — Legal rate of interest — https://oregon.public.law/statutes/ors_82.010
• ORS 31.600 — Comparative fault — https://oregon.public.law/statutes/ors_31.600
• OAR 836-080-0225 — https://secure.sos.state.or.us/oard/view.action?ruleNumber=836-080-0225
• OAR 836-080-0230 — https://secure.sos.state.or.us/oard/view.action?ruleNumber=836-080-0230
• OAR 836-080-0235 — https://secure.sos.state.or.us/oard/view.action?ruleNumber=836-080-0235
• Moody v. Oregon Community Credit Union, 371 Or 772 (2023) — https://ojd.contentdm.oclc.org/digital/api/collection/p17027coll3/id/10848/download
• Georgetown Realty, Inc. v. Home Ins. Co., 313 Or. 97, 831 P.2d 7 (1992)
• Farris v. U.S. Fidelity & Guaranty Co., 284 Or. 453, 587 P.2d 1015 (1978) — https://law.justia.com/cases/oregon/supreme-court/1978/284-or-453-0.html
• Employers' Fire Ins. Co. v. Love It Ice Cream Co., 64 Or. App. 784 (1983)
• Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464 (1992)
• Long v. Farmers Ins. Co. of Oregon, 360 Or. 791 (2017) — https://www.stlaw.com/on-attorney-fees-and-safe-harbors-oregon-law-in-pip-and-uim-disputes/
• Oregon Division of Financial Regulation — https://dfr.oregon.gov/