Moody v. Oregon Community Credit UnionMoody v. Oregon Community Credit Union
In this civil appeal, plaintiff assigns error to the trial court‘s rulings dismissing her negligence per se claims and striking her allegations of emotional distress damages against defendant. After plaintiff‘s husband was accidentally killed on a camping trip, defendant denied insurance coverage under an accidental death policy. Plaintiff sued defendants for, among other things, negligence, alleging that defendants failed to conduct a reasonable investigation of husband‘s death and failed to settle her claim in good faith. Plaintiff alleged that defendants violated
Reversed and remanded.
Bradley A. Cascagnette, Judge.
Travis Eiva argued the cause and filed the briefs for appellant.
R. Daniel Lindahl argued the cause for respondent. Also on the brief were Stuart D. Jones and Bullivant Houser Bailey PC.
Before Powers, Presiding Judge, and Egan, Judge, and Landau, Senior Judge.
LANDAU, S. J.
Reversed and remanded.
LANDAU, S.
I. BACKGROUND
We take the facts from the allegations of the complaint. McLaughlin v. Wilson, 365 Or 535, 537, 449 P3d 492 (2019). Defendant contracted to provide life insurance coverage and benefits in the amount of $3,000 to be paid on the death of plaintiff‘s husband, Troy. The policy further provided that, if Troy suffered an accidental loss of life, it would pay the benefit amount to plaintiff.
Troy was accidentally shot and killed by a friend on a camping trip. Plaintiff timely filed a claim with defendant, but defendant denied the claim. Defendant asserted that its policy excluded accidents caused by or resulting from the insured being under the influence and that the exclusion applied because the sheriff‘s toxicology report stated that there was evidence that Troy had tested positive for marijuana.
Plaintiff initiated this action, alleging that defendant was mistaken in denying benefits because Troy died because of being accidentally shot by another person, not because he had been using marijuana. Plaintiff advanced a number of claims for relief, among them a claim for breach of contract and another for negligence per se, based on defendant‘s failure to conduct a reasonable investigation of Troy‘s death and its failure, in good faith, to settle her claim—all in breach of
Defendant moved to dismiss the negligence per se claim on the ground that Oregon does not recognize such tort claims for what is essentially a breach of contract claim. It also moved to strike the allegation of damages for emotional distress. The trial court granted the motions and entered a limited judgment dismissing the second and third claims.
Meanwhile, while the appeal was pending, the case proceeded on plaintiff‘s breach of contract claim. Defendant tendered the $3,000 in claimed coverage, and the trial court entered a judgment in favor of plaintiff on that claim.
II. ANALYSIS
Plaintiff assigns error both to the dismissal of her negligence per se claim and to the striking of her allegation of damages for emotional distress. In her briefing, she combines her arguments on both assignments, as does defendant in response. As the issues are necessarily intertwined, we do likewise.
Plaintiff acknowledges that, ordinarily, the remedy for a violation of the terms of a contract—including an insurance policy—is a claim for breach of contract. But, she argues, Oregon courts recognize an exception to that general rule when a breach of the contract
In reviewing the trial court‘s decision to dismiss plaintiff‘s claims, our task is to determine whether, viewing the allegations of the complaint in the light most favorable to plaintiff, she has failed to state a claim as a matter of law. Hernandez v. Catholic Health Initiatives, 311 Or App 70, 72, 490 P3d 166 (2021).
As framed by the arguments of the parties, the issue before us is to determine when a party to a contract may sue another party to the same contract for negligence. Obligations specified in the terms of a contract are based on the intentions of the parties to a given transaction, while obligations in tort are imposed by law, apart from any such contractual obligations. Abraham I, 230 Or App at 568 (citing Conway v. Pacific University, 324 Or 231, 237, 924 P2d 818 (1996)). Ordinarily, if one party to the contract fails to meet a contractual obligation, the remedy is an action for breach of the contract. Id. If an injured party to a contract seeks to maintain a tort claim, such a claim must be based on the breach of a standard of care independent of the contract. As the Oregon Supreme Court explained in Georgetown Realty v. The Home Ins. Co., 313 Or 97, 106, 831 P2d 7 (1992):
“When the relationship involved is between contracting parties, and the gravamen of the complaint is that one party caused damage to the other by negligently performing its obligations under the contract, then, and even though the relationship between the parties arises out of the contract, the injured party may bring a claim for negligence if the other party is subject to a standard of care independent of the terms of the contract. If the plaintiff‘s claim is based solely on a breach of a provision in the contract, which itself spells out the party‘s obligation, then the remedy normally will be only in contract, with contract measures of damages and contract statutes of limitation.”
In some cases, that independent standard of care will arise from a special relationship between the parties. In Georgetown, for example, the court held that an insurer that had assumed a contractual relationship to defend an insured was in a special relationship with that insured and, as a result, was subject to tort liability for a violation of the standard of care that applies to that particular relationship. Id. at 110-11.
In other cases, such an independent standard of care may be expressed in a statute or administrative rule. Abraham I illustrates the point. In that case, the plaintiffs entered into a contract with the defendants for the construction of a house. After construction was completed, the plaintiffs discovered water leakage caused by defective construction. They sued the defendants for both breach of contract and negligence, based on the defendants’ violation of the Oregon Building Code. The trial court dismissed both claims—the contract claim because it was time-barred and the negligence claim because one party to a contract generally may not bring a tort action against another party to the same contract in the absence of a special relationship creating an independent duty. 230 Or App at 567. We concluded that although the contract claim was indeed time-barred, the trial court had erred in granting summary judgment on the negligence claim. We explained that, although generally a party to a contract may not bring a tort claim against another party to the contract, an exception applies when the tort claim is predicated on a violation of a standard of care that exists independent of the contract. Id. at 569. We said that such an independent standard of care may derive either from a special relationship between the parties or
The violation of such an independent standard of care is not all that is required to state a negligence claim against another party to a contract. A negligence claim based on a statutory violation requires that a plaintiff plead and ultimately prove that
“(1) defendants violated a statute; (2) that plaintiff was injured as a result of that violation; (3) that plaintiff was a member of the class of persons meant to be protected by the statute; and (4) that the injury plaintiff suffered is of a type that the statute was enacted to prevent.”
McAlpine v. Multnomah County, 131 Or App 136, 144, 883 P2d 869 (1994), rev den, 320 Or 507 (1995).
With those legal principles in mind, we conclude that plaintiff‘s complaint satisfies each of the four requirements for stating a claim for negligence per se. First, plaintiff alleges that defendant violated a statute, specifically,
“An insurer or other person may not commit or perform any of the following unfair claim settlement practices:
“(a) Misrepresenting facts or policy provisions in settling claims;
“(b) Failing to acknowledge and act promptly upon communications relating to claims;
“(c) Failing to adopt and implement reasonable standards for the prompt investigation of claims;
“(d) Refusing to pay claims without conducting a reasonable investigation based on all available information;
“(e) Failing to affirm or deny coverage of claims within a reasonable time after completed proof of loss statements have been submitted;
“(f) Not attempting, in good faith, to promptly and equitably settle claims in which liability has become reasonably clear;
“(g) Compelling claimants to initiate litigation to recover amounts due by offering substantially less than amounts ultimately recovered in actions brought by such claimants;
“(h) Attempting to settle claims for less than the amount to which a reasonable person would believe a reasonable person was entitled after referring to written or printed advertising material accompanying or made part of an application;
“(i) Attempting to settle claims on the basis of an application altered without notice to or consent of the applicant;
“(j) Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made;
“(k) Delaying investigation or payment of claims by requiring a claimant or the claimant‘s physician, naturopathic physician, physician assistant or nurse practitioner
to submit a preliminary claim report and then requiring subsequent submission of loss forms when both require essentially the same information;
“(l) Failing to promptly settle claims under one coverage of a policy where liability has become reasonably clear in order to influence settlements under other coverages of the policy;
“(m) Failing to promptly provide the proper explanation of the basis relied on in the insurance policy in relation to the facts or applicable law for the denial of a claim; ***”
Plaintiff alleges that defendant violated paragraphs (d) and (f) in failing to pay her claim without conducting a reasonable investigation and in failing to settle in good faith after liability became reasonably clear. It is uncontested that the statute applies to defendant. Under Abraham I, the statute thus
Defendant nevertheless argues that the complaint fails as a matter of law for four reasons, none of which we
find persuasive. First, defendant argues that plaintiff errs in relying on Abraham I for the proposition that the violation of a statute may support a claim for negligence per se. According to defendant, Abraham I “is not precedential since the Supreme Court used a different rationale to decide the case.” As noted above, in Abraham I, we concluded that the Oregon Building Code created a standard of care independent of the contract between the plaintiffs and the contractors they hired to build their home for the purposes of the plaintiffs’ negligence per se claim. 230 Or App at 573-74. The defendant contractors petitioned for review, arguing that we erred; according to the defendants, only a special relationship may create an independent standard of care for purposes of stating a negligence per se claim. Abraham v. T. Henry Construction, Inc., 350 Or 29, 36, 249 P3d 534 (2011). The Supreme Court affirmed, “on somewhat different grounds.” Id. at 33. The court determined that it was not necessary to decide whether, apart from a special relationship between the parties, a statute or regulation may establish a standard of care for negligence per se purposes. Id. at 36. In the court‘s view, the plaintiffs’ claim was adequately predicated on the common-law duty to avoid foreseeable harm, because “the terms of the contract do not purport to alter or eliminate defendants’ liability for the property damage plaintiffs claim to have suffered.” Id. Thus, nothing in the Supreme Court‘s decision suggests that our decision in Abraham I was incorrect. The court decided that it did not need to address that question. Defendant cites no authority for the proposition that, when the Supreme Court affirms a decision of ours on a different ground, our opinion loses any precedential value, and we are aware of none. We reject defendant‘s argument without further discussion.
Second, defendant argues that, in any event, Abraham I cannot be read to stand for the proposition that an applicable statute, by itself, may establish the standard of care for the purposes of a negligence per se claim. Defendant argues that, for any negligence per se claim to stand, a plaintiff must first be able to allege a common-law negligence claim. Only then, the insurer contends, may a plaintiff add a claim for negligence based on the violation of a statute. Defendant argues that, because plaintiff here has
failed to allege a common-law negligence claim independent of her negligence per se claim, the latter fails as a matter of law. In support for that curious argument, defendant cites a footnote in the Supreme Court‘s decision in Deckard v. Bunch, 358 Or 754, 370 P3d 478 (2016).
In Deckard, the plaintiff was injured when he was hit by a motor vehicle driven by an intoxicated driver who was driving home from a social engagement where the host had served the driver multiple alcoholic drinks. The plaintiff sued the social host under
Based on that footnote, defendant argues that the Supreme Court requires that, to state a claim for negligence, a common-law claim must “otherwise exist.” In our view, defendant reads more into the footnote than a fair reading will bear. All the court said in Deckard was that, if all the other elements of a negligence claim otherwise exist, a statute or rule may supply the standard of care for a negligence per se claim. When pressed at oral argument, defendant could not cite a single appellate court decision holding that an independently alleged common-law negligence claim
is a necessary precondition for alleging a negligence per se claim. We reject that argument as well.
Third, defendant argues that, even if a plaintiff may state a claim for negligence per se based solely on the violation of a statute, plaintiff in this case may not do so because the Supreme Court has determined that
The court began by reviewing the general rule that the breach of a contract resulting in pecuniary loss will not support a claim for emotional distress damages. Id. at 455-56. The court then noted that, nevertheless, such emotional distress damages may be recovered if the claim sounds in tort, rather than contractual liability. Id. at 456. In that regard, the court noted that the legislature had enacted
when it prohibited certain claims settlement practices in
Assuming for the sake of argument that the court‘s dictum in Farris answered the question whether
Finally, defendant contends that, if nothing else, plaintiff‘s negligence per se claim fails because it alleges noneconomic damages for the emotional distress resulting from the insurance company‘s violations of
In Farris, the court did observe that “[t]he statutes express no public policy which would promote damages for emotional distress. Concern about the insured‘s peace of mind does not appear to be the gravamen of the statutory policy.” 284 Or at 458. As we have noted, however, the court‘s brief observation was in no way a holding; it was plainly dictum. We have held in a number of prior cases that “dictum—even Oregon Supreme Court dictum—about the construction of a statute has no particular precedential force.” Godfrey v. Fred Meyer Stores, 202 Or App 673, 680, 124 P3d 621 (2005), rev den, 340 Or 672 (2006); see also Sundermier v. PERS, 269 Or App 586, 594, 344 P3d 1142 (2015), rev den, 357 Or 415 (2015) (“when *** the court mentions an interpretation of a statute by way of dictum, that interpretation is not binding“). The Supreme Court likewise does not regard its prior suggestions about what a statute means in dicta as having any precedential value. SAIF v. Allen, 320 Or 192, 204, 881 P2d 773 (1994) (“[T]his court has declined to apply the doctrine of stare decisis to dictum in earlier statutory construction cases.“).
Aside from that, what the court said in Farris was directed at a different question. Again, the court was concerned in that case with whether the legislature, in enacting
covered instances,
The issue here is different. The question whether the legislature intended to create a statutory cause of action is separate from the question of whether the violation of a statute may support a negligence per se claim. See Bob Godfrey Pontiac, 291 Or at 325-26 (describing distinction). As pertinent here, the question is whether the type of harm that plaintiff suffered is the type of harm that the legislature wanted the statute to prevent. Id. The fact that the legislature may not have intended to create a private right of action for recovery of emotional distress damages does not necessarily mean that the legislature did not enact
With that in mind, we turn to the statute. At the outset, we note that an elementary principle of insurance law is that insurance policies do not merely provide for the payment of funds in case of loss; they also provide the policyholder peace of mind. See, e.g., 14 Couch on Ins. § 198:4 n 1 (3d ed 2021) (“security and peace of mind are principal benefits of insurance” (citing National Sur. Corp. v. Immunex Corp., 176 Wash 2d 872, 297 P3d 688 (2013))); Masood v. Safeco Ins. Co. of Oregon, 275 Or App 315, 361, 365 P3d 540 (2015), rev den, 359 Or 525 (2016) (quoting insurance company website marketing replacement cost policy to provide “peace of mind“).3 The Oregon Supreme Court recognized that
principle in Farris, noting that “insurance contracts *** are made for economic and financial peace of mind.” 284 Or at 465.4 A corollary to that principle is that statutes regulating the business of insurance—notice of cancellation requirements, for instance—are likewise intended to ensure peace of mind for policyholders. See, e.g., 43 Am Jur 2d Insurance § 385 (2021) (“The primary purpose of such statutes is to ensure peace of mind for a policyholder.“). Thus, when the Oregon legislature enacted the Insurance Code “for the protection of the insurance-buying public,”
That certainly appears to be the point of a number of the provisions of
communicate with, investigate, and settle claims. Paragraph (f) prohibits failing to do so “in good faith.” And paragraph (g) prohibits “compelling claimants to initiate litigation” to obtain the benefits to which they are entitled. Violations of those provisions certainly have economic consequences. But it cannot be denied that such violations commonly have significant emotional consequences for policyholders as well. The legislature may well have declined to provide a private right of action for damages when it enacted
We conclude that the trial court erred in dismissing plaintiff‘s negligence per se claim and striking her allegation of emotional distress damages.
Reversed and remanded.