Oregon Supreme Court Overturns $26.3 Million Judgment Against Farmers Insurance

In a landmark decision, the Oregon Supreme Court has overturned a substantial $26.3 million class-action judgment against Farmers Insurance Co. of Oregon. This verdict comes as a pivotal moment in the interpretation of the state’s “choice-of-shop” statute, a regulation designed to ensure that auto insurance policyholders are free to choose their preferred repair service providers without coercion from insurers. The case had initially seen lower courts ruling against Farmers Insurance, citing insufficient information disclosure to policyholders, which led to the awarding of damages. However, the Supreme Court has now clarified that Farmers adhered to its legal responsibilities by utilizing language in its notices that were approved by the state's Department of Consumer and Business Services (DCBS).

The Oregon 'choice-of-shop' statute is integral to protecting consumer rights by prohibiting insurance companies from dictating where policyholders must have their vehicles repaired as a condition for claim settlements. This law mandates that insurers must comprehensively inform policyholders of their rights during the insurance claims process. Initially, the legal battle arose due to findings by lower courts that the notification tactics used by Farmers fell short of including all statutory requirements. These courts awarded significant damages to claimants, imposing a hefty penalty on the insurance provider. Nevertheless, the recent Supreme Court ruling has effectively reversed this decision based on the premise that Farmers had employed DCBS-approved language in its notices, thereby meeting the state's compliance standards.

Delving into the historical precedence, the Supreme Court highlighted the legislative intent behind adopting agency-approved wording, which is deemed sufficient to comply with statutory obligations. Notably, there is an absence of records depicting DCBS-approved language between the years 1977 and 1993. However, a 1993 bulletin provided specific language guidelines for choice-of-shop notifications, indicating that no further approvals were necessary if insurers adopted the suggested phrasing. This language was embraced by Farmers in 1994 and has continued to be in use, even through legislative changes made to the statute in 2007, which did not alter the notice requirements. As of now, no additional guidance has been issued by the DCBS post these amendments.

In a separate evaluation, the Oregon Division of Financial Regulation's 2022 market conduct examination unveiled that Farmers had not secured required approvals for certain policy forms concerning emergency declarations. The evaluation additionally noted a lack of adequate notification to policyholders regarding additional benefits accorded under Oregon law. Farmers contested these findings, assuring that policyholders received the benefits through their regular claims processes and confirmed obtaining the necessary approvals by December 2022. With an AM Best Financial Strength Rating of A (Excellent), Farmers Insurance Co. of Oregon underscores its resilience and commitment to policyholders. Despite not providing public comments regarding ongoing legal matters, Farmers stands as a key player in Oregon's auto insurance sector, alongside major competitors like State Farm Group, Progressive Insurance Group, and Berkshire Hathaway Insurance Group.