On May 19, 2011 the Oregon Supreme Court, in Strawn v. Farmers, ___ Or ___ (Slip Op. May 19, 2011) put an end to a decade long class action case against Farmers Insurance. The lawsuit alleged that between 1997 and 1998 Farmers reduced benefits to their own insured customers in violation of their duty of good faith and fair dealing on insurance contracts. The plaintiffs’ in that case alleged that Farmers reduced PIP payments for arbitrary and unfair reasons.
Personal Injury Protection benefits provide coverage for medical expenses and wage loss, regardless of fault, to the insured parties. These benefits are required by Oregon Law and provide a safety net for persons injured in an auto accident, since PIP provides immediate access to medical care and wage loss before the ultimate determination of liability. Once liability is determined, the at fault party’s carrier pays for all of the PIP loss.
In 1997 Farmers began its “Bring Back A Billion” campaign, in which they focused on reducing the amount of claims paid, as opposed to raising premiums, to boost the company’s profit. They targeted PIP payments as a means of reducing outlays. Farmers hired a company that reviewed the PIP medical bills and reduced the claims submitted, ostensibly because the bill was in excess of what was customarily charged in a particular region. The plaintiffs’ claimed that the medical bill reviews were actually just arbitrary reductions that had no rational basis. The reductions were often relatively small amounts, but affected a large number of people.
The case was a “class action” a type of lawsuit that allows a large number of people with relatively small losses to band together and make a larger claim against a company. Class actions are designed to help address situations where one company engages in conduct that affects a large number of people, but creates only small losses per individual that a person on their own wouldn’t pursue.
In this case, the jury found for the class plaintiffs and awarded them about $800,000.00 in damages. The jury, obviously unhappy with the company’s behavior, also awarded $8,000,000 in punitive damages, a punishment that is designed to deter the company from such unconscionable behavior in the future.
The case proceeded to the Oregon Court of Appeals, which upheld the damage award but remanded the case for reduction of the punitive damages. The Oregon Supreme Court took review and decided that the entire jury award, including punitive damages, should be upheld. The decision is a victory for insurance consumers.
At Personal Injury Lawyers James F. O’Rourke, Jr. and Associates, we strive to protect our personal injury clients from any unfair treatment by insurance carriers, including their own.