Understanding the Oregon Supreme Court’s Ruling on Insurance Notice Requirements

The Oregon Supreme Court's recent ruling in the case of Bellshaw v. Farmers Insurance Company has significant implications for the insurance industry, especially regarding the notice requirements as stipulated by Oregon law. This pivotal decision clarified that insurers fulfill their legal obligations by utilizing language approved by the state's insurance regulator, even if this language does not entirely align with current legislative amendments. The verdict, delivered in April 2025, overturned a substantial $26.3 million judgment against Farmers Insurance, effectively narrowing insurer liability under Oregon Revised Statute (ORS) 746.290(2).

The dispute originated from a class action lawsuit filed by Steven Bellshaw, an Oregon policyholder. He argued that Farmers Insurance failed to comply with ORS 746.290(2)(b), which mandates that every policy display a conspicuous statement approved by the director of the Department of Consumer and Business Services (DCBS) reflecting the provisions of ORS 746.280. Notably, this statute prohibits insurers from mandating specific motor vehicle repair shops for policyholders. Amendments made by the Oregon Legislature in 2007 added subsections (2) through (4), augmenting the disclosure and conduct requirements for insurers recommending repair shops. Farmers Insurance, however, utilized notice language based solely on ORS 746.280(1), which was approved for use in a 1993 bulletin. This bulletin was later withdrawn in 2003, but the company continued using the same language.

The trial court, siding with Bellshaw, ruled that ORS 746.290(2) imposed an independent duty on insurers to ensure their notices reflected the complete provisions of ORS 746.280, leading to a statutory penalty exceeding $26 million under ORS 746.300. However, the Oregon Supreme Court overturned this decision, emphasizing the sole responsibility of insurers to use director-approved language as their compliance obligation. Justice Garrett, writing for the majority, clarified that the law centers on the director’s approval of notice language, which serves as a safe harbor against liability. Legislative history further revealed that the inclusion of 'approved by the director' was intentionally added in 1977 to provide insurers with clarity and protection from inconsistent or evolving requirements.

The Supreme Court remanded the case for further consideration of whether Farmers actually employed DCBS-approved language, noting inconsistencies like the withdrawal of the 1993 bulletin and the subsequent 2016 approval of Farmers' form by DCBS post-lawsuit. The Court chose not to address the legal ramifications of these approvals and withdrawals, instead underscoring that regulatory compliance hinges on the director’s sanctioned language. In dissent, Justice James, with Justice Masih concurring, argued that the majority's view potentially shields insurers from accountability, asserting that statutory obligations should demand the inclusion of complete and updated content. Nonetheless, the majority held firm, stating that the statutory and historical context established by lawmakers confirmed that insurers are not independently liable if they use the DCBS’s approved wording. This ruling provides significant guidance for insurers, affirming that approved regulatory language, although possibly outdated, is definitive in establishing compliance. Policyholders might question the sufficiency of disclosure under older notices, but the Court affirmed that such concerns should lead to regulatory, not judicial, remedies. Ultimately, this landmark decision underscores the interplay between insurer obligations, legislative changes, and regulatory oversight within the auto insurance framework, guiding insurers in reviewing their compliance measures moving forward.