Debate over Proposed Legislative Changes to Oregon's Insurance Industry Liability

In an ongoing discussion at the Oregon legislative level, focus is once again on Senate Bill 174, a proposed piece of legislation that aims to bring the insurance industry under the purview of Oregon’s Unlawful Trade Practices Act (UTPA). This significant move could reshape the landscape of liability that insurers face, by allowing them to be held accountable under broader consumer protection laws. The legislative push seeks to eliminate the exemption that the insurance industry has enjoyed since the UTPA's inception in 1971, a statute that delineates business conduct rules covering civil penalties, price discrimination, antitrust enforcement, and fair marketing practices. The initial exclusion of insurance from this law was influenced by industry concerns over duplicated regulation, as explained by Kenton Brine, president of the NW Insurance Council.

The crux of the proposal involves the potential shift in how disputes regarding claims handling are processed. Currently, these disputes are managed exclusively through existing insurance regulatory processes. However, under Senate Bill 174, such disputes would become actionable under the UTPA. Brine emphasizes that this change would broaden the potential for liabilities, thereby encompassing both significant and minor violations, including those administrative in nature which currently fall under Oregon's Insurance Code. His concern is that this legislative change opens up new avenues for litigation against insurers, affecting both first-party and third-party claims. Even minor transgressions, such as document formatting errors, could become a basis for legal action.

This expansion of liability arrives at a crucial time for Oregon’s property insurance market, which is currently navigating the financial challenges associated with increased wildfire risks. The potential consequences of SB 174, according to Brine, include heightened legal uncertainty and a rise in operating costs for insurers. Such additional expenses are anticipated to eventually fall on policyholders in the form of increased premiums. It's worth noting that Oregon lawmakers have previously deliberated similar bills. A notable instance occurred in 2023 when a similar version of this bill nearly passed but failed due to last-minute procedural issues in the Senate. The legislative process is fraught with timing challenges, which could impede its progress even if it passes one chamber of the legislature.

The discussion surrounding insurance and UTPA inclusion is not unique to Oregon. As per the Oregon Department of Justice, the state currently stands among 22 others that grant exemption to insurance under their respective UTPA statutes. Conversely, a majority of 33 states incorporate insurance within their consumer protection frameworks, including neighboring Washington. Evidence suggests that adopting these practices does not necessarily translate to higher insurance premiums, as seen in Connecticut, where insurance regulation falls under both the Unfair Insurance Practices Act (CUIPA) and the Connecticut Unfair Trade Practices Act (CUTPA). This dual oversight model provides a comprehensive regulatory framework, addressing industry-specific issues alongside broader consumer protection mandates. As the conversation continues, stakeholders in Oregon's insurance industry await the legislative outcome, contemplating its potential ramifications on future operational costs and market stability.