Insurance Bad Faith Demand Letter - Oregon

INSURANCE BAD FAITH DEMAND LETTER

State of Oregon

[LAW FIRM LETTERHEAD]

CONFIDENTIAL SETTLEMENT COMMUNICATION
PROTECTED UNDER OEC 408 / ORS 40.190 AND FED. R. EVID. 408
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. [INSURANCE_COMPANY_NAME]'s handling of this matter is the precise conduct that ORS 746.230 was enacted to prohibit and that the Oregon Supreme Court in Moody v. Oregon Community Credit Union, 371 Or. 772, 542 P.3d 24 (2023), made actionable in negligence per se. This letter is a formal, time-limited demand for payment of $[TOTAL_DEMAND_AMOUNT] — policy benefits wrongfully withheld plus consequential and extracontractual damages — and notice that our client intends to pursue every remedy Oregon law provides if this claim is not resolved by the deadline below.

For decades, Oregon was perceived as a "no bad faith" jurisdiction — a perception grounded in Farris v. U.S. Fidelity & Guaranty Co., 284 Or. 453 (1978), and its progeny. The Moody decision decisively changed that landscape. Oregon now permits first-party insureds to recover emotional distress damages, consequential damages, and attorney fees when carriers violate ORS 746.230. This letter documents why our client is entitled to do exactly that.

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;
• (h) Failing to promptly provide a reasonable explanation of the basis in the policy for denial, compromise, or delay;
• (i) Failing to provide forms required for timely submission of proof of loss;
• (j) Attempting to settle a claim on the basis of an application altered without notice to the insured.

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

The Oregon Division of Financial Regulation has promulgated detailed rules imposing concrete timelines on claim handling:

• OAR 836-080-0225: Acknowledge all pertinent communications concerning a claim within 10 working days;
• OAR 836-080-0230: Accept or deny a claim within 30 days after completed proof of loss; if more time is needed, provide a written explanation and update every 45 days;
• OAR 836-080-0240: Written denials must reference specific policy language supporting the denial.

Violation of these rules is a per se violation of ORS 746.230.

C. Moody — Negligence Per Se with Emotional Distress Damages

In Moody v. Oregon Community Credit Union, 371 Or. 772 (2023), Christine Moody was denied life insurance benefits after her husband was accidentally shot and killed on a camping trip; the insurer asserted a "under the influence" exclusion based on marijuana metabolites. The Oregon Supreme Court held:

1. ORS 746.230 imposes statutory duties on insurers that protect a defined class (policyholders) from a specific harm (wrongful denial/delay of benefits) that is both economic and emotional;
2. An insured may therefore maintain a negligence per se claim predicated on violation of ORS 746.230;
3. Emotional distress damages are available without traditional physical-impact or independent-tort-duty limitations, where: (a) there is a relationship of mutual reliance; (b) the insurer's role includes avoiding financial and emotional harm; and (c) there are objective indicators of potentially serious emotional injury.

Farris v. U.S. Fidelity & Guaranty Co., 284 Or. 453 (1978), and Employers' Fire Ins. Co. v. Love It Ice Cream Co., 64 Or. App. 784 (1983), have been narrowed to their facts and can no longer be used to categorically defeat first-party extracontractual recovery.

Post-Moody decisions — Butters v. Travelers Home & Marine Ins. Co., Hinzman v. Foremost Ins. Co., Mohammad v. Liberty Ins. Corp., Thanh Huynh v. Truck Ins. Exchange, and LiquidAgents Healthcare LLC v. Evanston Ins. Co. — have allowed ORS 746.230 negligence per se claims to proceed past motions to dismiss and motions for summary judgment.

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) is mandatory ("shall") and provides reasonable attorney fees to the insured if (a) settlement is not made within six months of proof of loss and (b) the insured's recovery in litigation exceeds any tender by the insurer. The six-month clock runs from proof of loss submitted on [__/__/____], meaning fees are available on litigation filed after [__/__/____]. There is no corresponding fee-shifting for the insurer; this is a one-way statute favoring the insured.

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 — ORS 31.730 and 31.735

Punitive damages are available in Oregon when the plaintiff proves by clear and convincing evidence that the defendant acted with malice or showed a reckless and outrageous indifference to a highly unreasonable risk of harm and acted with conscious indifference to the health, safety, and welfare of others (ORS 31.730(1)). Systemic bad faith claim handling — deliberately lowballing to compel litigation, manipulating reserves, destroying reasonable defenses — is exactly the conduct Oregon juries have punished.

Under ORS 31.735, punitive awards are distributed: 30% to the plaintiff; 60% to the Criminal Injuries Compensation Account of the Oregon Department of Justice Crime Victims' Services Division; and 10% to the State Court Facilities and Security Account. The 70% diversion to the State is real, but so is the 30% that goes to the plaintiff in a substantial award.

G. Interest — ORS 82.010

Prejudgment/post-judgment interest on liquidated insurance claims accrues at 9% per annum under ORS 82.010(2) from the date payment became due.

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 Reasonable Written Explanation — ORS 746.230(1)(h); OAR 836-080-0240

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

F. Objective Indicators of Emotional Harm (for Moody Purposes)

Our client has suffered: [list — loss of housing, inability to afford repairs, forced displacement, medical treatment for anxiety/depression, documented sleep disturbance, strained family relationships, suicidal ideation, documented PTSD, etc. as applicable]. These are objective indicators of potentially serious emotional injury as contemplated by Moody.

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 — Moody

Under Moody, our client may recover emotional distress damages flowing from [INSURANCE_COMPANY_NAME]'s violation of ORS 746.230 without physical impact. Our client's emotional distress is documented by [treatment records / testimony / contemporaneous records]: $[____].

D. Punitive/Exemplary Damages — ORS 31.730

[INSURANCE_COMPANY_NAME]'s conduct satisfies the clear and convincing standard of ORS 31.730 because [AGGRAVATING_FACTS — repeated similar conduct, ignoring prior warnings, institutional incentive structures, deliberate disregard of evidence, violation of the Insurance Code, etc.]. We reserve the right to take discovery on the reserve history, the carrier's Oregon claim-handling manuals, prior regulatory actions by DFR, and prior judgments for bad faith conduct.

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. Statutory Interest — ORS 82.010

9% per annum from [__/__/____] to date: $[____].

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, with interest under ORS 82.010;
   - Attorney fees under ORS 742.061;
   - Consequential damages;
   - Emotional distress damages under Moody / negligence per se;
   - Punitive damages under ORS 31.730;

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 our client's claim is the exact type of conduct that the Oregon Legislature prohibited in ORS 746.230 and that the Oregon Supreme Court in Moody declared to be tortious. The window for resolving this matter on favorable terms — without the public record of a bad-faith lawsuit, without a regulatory complaint, without a jury considering punitive damages — is closing. We urge [INSURANCE_COMPANY_NAME] to use it wisely.

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 to 836-080-0240 — Unfair claim settlement practices rules
• Moody v. Oregon Community Credit Union, 371 Or. 772, 542 P.3d 24 (2023) — https://law.justia.com/cases/oregon/supreme-court/2023/s069409.html
• 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/