By Seth Row and Dan Thenell

1. Bad Faith Law In the
Pacific Northwest
Oregon, Alaska, Idaho, Montana
Seth H. Row
Parsons Farnell & Grein, LLP
Daniel E. Thenell
Thenell Law Group PC

2. Oregon - Third-Party Claims
• Two-Part Requirement:
• Existence of a “special relationship”
• Exists when carrier has undertaken defense of an
insured. Strader v. Grange Mut. Ins. Co., 179 Or.
App. 329, 333, 39 P.3d 903 (2002).
• Often, but not always, described as a fiduciary
relationship
• Complained-of conduct must violate SOC not
explicitly or implicitly a part of the contractual
obligation. Strader v. Grange Mut. Ins. Co., 179 Or.
App. 329, 333, 39 P.3d 903 (2002).

3. Oregon - Standard of Care
• Insurers are held to SOC that exists independent
of the terms of the contract. Georgetown Realty
v. Home Ins. Co., 313 Or. 97, 110–111, 831 P.2d
7 (1992).
• Potential liability if insurer fails to use such care
as would have been exercised by an ordinarily
prudent insurer with no policy limit applicable to
the claim. Santilli v. State Farm Life Ins. Co., 278
Or. 53, 61–62, 562 P.2d 965 (1977).
• E.g., unreasonable failure to settle

4. Oregon - Denial of Defense
• Carrier position: no bad faith where carrier has
not assumed defense in a third party case. Farris
v. United States Fidelity & Guaranty. Co., 284 Or.
453, 587 P.2d 1015 (1978).
• Farris vulnerable to challenge???
• Farris limits arrows in policyholder’s quiver to,
e.g., attorney fees (provided by statute, ORS
742.061)

5. Oregon - First-Party Claims
• Might be able to bring action for tort of
outrageous conduct or tort of intentional
interference with economic relations against
insurance company
• Example of outrageous conduct: Green v. State
Farm Fire & Casualty Co., 667 F.2d 22, 24 (9th
Cir. 1982).
• A difference of opinion as to meaning and
application of contract terms will “rarely, if ever”
amount to outrageous conduct. State Farm Mut.
Auto. Ins. Co. v. Berg, 70 Or. App. 410, 418, 689
P.2d 959 (1984).

6. Oregon - Negligence Per Se
• Applies in the absence of a special relationship
• Requirements:
• defendants violated a statute or rule;
• plaintiff was injured as a result of that violation;
• plaintiff was a member of the class of persons
meant to be protected by the statute or rule; and
• the injury plaintiff suffered is of a type that the
statute or rule was enacted to prevent.
• Carrier position: violations limited to proving
element of breach claim

7. Oregon – Potential
Legislation
House Bill 3160 – Insurers included in state’s Unlawful Trade
Practices Act.
Proposed language, “Real estate, goods or services” means [those] real estate,
goods or services, including insurance, that are or may be obtained primarily
for personal, family or household purposes, that with respect to insurance, are
or may be obtained for purposes other than personal, family or household
purposes . . .
What does that mean?
Insurance companies can be sued for possible fraud by its
insured and/or third-party tort claims for money it owes.

8. Oregon – SB 814
 Amends Oregon environmental
insurance claims law to add IFCA-type
bad faith cause of action
 Sets out “environmental unfair claims
handling practices”
 Treble damages, punitive damages
 Also imposes other requirements on
environmental claims handling
including Cumis-type requirement

9. Alaska
 Every insurance policy contains an implied
duty of Fair Dealing and Good Faith.
 Alaska’s Unfair Claims Settlement Act
applies to all persons transacting a
business of insurance who participate in
the investigation, adjustment, negotiation
or settlement of a claim under all types of
insurance.

10. Alaska
Alaska recognizes bad faith in First-Party
Claims.
See Jackson v. American Equity Ins. Co., 90
P.3d 136 (2004) (breach of the covenant of
good faith and fair dealing exposes the insurer
to a claim of bad faith).

11. Alaska
Alaska does not recognize a cause of action
for bad faith in Third-Party Claims.
See O.K. Lumber Co., Inc. v. Providence
Wash Ins. Co., 759 P.2d 523 (1988) (the
duty of good faith and fair dealing is a
product of the fiduciary relationship
created by the contract between the
insurer and the insured).

12. Alaska
The Insurer’s standard for investigating
claims?

13. Alaska
Pursuant to ACC § 26.040 for a First-Party Claim, an Insurer
must:
Within 10 working days after receipt of notification of a
claim, give written acknowledgement to the first-party claim
identifying the person handling the claim.
Upon receipt of notification of a claim, promptly provide
necessary claim forms, instructions, and assistance so that the
first-party claimant is able to comply with legal, policy, or
contract provisions and other reasonable requirements.

14. Alaska
Pursuant to ACC § 26.040 for a Third-Party Claim, an
Insurer must:
Within 10 working days after notification of the claim
fro ma third-party claimant, give written
acknowledgement to the third-party claimant.
Upon receipt of notification of a claim from a third-
party, promptly provide necessary claim forms,
instructions and assistance that is reasonable so that
the third-party claimant is able to comply with any
reasonable requirements.

15. Alaska
Pursuant to ACC § 26.050 an insurer:
Shall promptly undertake the investigation of a claim
after notification of the claim is received, and shall
complete the investigation within 30 working days, unless
the investigation cannot reasonably be completed using
due diligence.
The person transacting the business of insurance shall
give written notification to the claimant that specifically
states the need and reasons for additional investigative
time and also specifies the additional time required to
complete the investigation. Notification must be given no
later than 30 days after receiving claim.

16. Alaska
Pursuant to ACC § 26.070 an Insurer:
Shall advise a first-party claimant in writing of the acceptance
or denial of the claim within 15 working days after receipt of a
properly executed statement of claim, proof of loss, or other
acceptable evidence of loss unless another time limit is specified
in the insurance policy, insurance contract, or other coverage
document.
If additional time is needed, however, written notice can be
given to the insured stating the reasons for the additional time.
The insurer must pay within 30 days after receipt of a properly
executed statement of claim, proof of loss, or other acceptable
evidence of loss, for part of claim not in dispute.

17. Alaska
Pursuant to ACC § 26.070(c)
At least 60 calendar days before expiration of
the applicable statute of limitations, an insurer
must notify the claimant, in writing, and its effect
upon the claim.

18. Idaho
A claim for bad faith exists where “(1) the
insurer intentionally and unreasonably
denied or withheld payment, (2) the claim
was not fairly debatable, (3) the denial or
failure to pay was not the result of a good
faith mistake, and (4) the resulting harm is
not fully compensable by contract
damages.”Lakeland True Value Hardware, LLC v. Hartford Fire Ins. Co., 153 Idaho 716,
721, 291 P.3d 399, 404 (2012)

19. Idaho, cont’d
 Insurer may be liable even if conduct was merely
negligent. McKinley v. Guar. Nat. Ins. Co., 144 Idaho 247,
251, 159 P.3d 884, 888 (2007).
 “[T]he insured has the burden of showing that the claim
was not fairly debatable.” Robinson v. State Farm Mut.
Auto. Ins. Co., 137 Idaho 173, 176, 45 P.3d 829, 832
(2002).
 No coverage by estoppel. Robinson v. State Farm Mut.
Automobile Ins. Co., 137 Idaho 173, 178, 45 P.3d 829
(2002).
 “Third-parties cannot maintain a bad faith cause of action
against another’s insurer.” Selkirk Seed Co. v. State Ins.
Fund, 135 Idaho 649, 654, 22 P.2d 1028 (2000).
 Damages: compensatory damages including emotional
distress, punitive damages
 Attorney fees: I.C. 41-1839

20. Montana
 Generally, common-law claims replaced by claim under
Unfair Claims Settlement Practices Act, MCA ' 33-18-201 et
seq.
 Common-law claims by insureds for claims handling
violations are abrogated. MCA § 33–18–242(3).
 But claims for breach of duty to defend not covered.
Watters v. Guaranty Nat’l Ins. Co., 3 P.3d 626, 638 (Mont.
1999).
 Third-parties may still bring tort claim. Brewington v.
Employers Fire Ins. Co., 992 P.2d 243, 247-48 (Mont. 1999).
 No need to prove pattern as to many of the enumerated
prohibited practices. MCA § 33–18–242(2).
 Coverage by estoppel. Farmers Union Mutual Ins. Co. v.
Staples, 90 P.3d 381, 387 (Mont. 2010).
 Damages: compensatory, punitive damages – attorney fees

21. Seth H. Row
503.222.1812
srow@pfglaw.com
www.pfglaw.com
@sethrow
@orinsurancelaw
nwpolicyholder.blogspot.com
Daniel E. Thenell
503.892.3936
dan@thenelllawgroup.com
www.thenelllawgroup.com