Zimmerman v. Allstate Property & Casualty Insurance , 354 Or. 271 ( 2013 )

No. 46 October 3, 2013 271
IN THE SUPREME COURT OF THE
STATE OF OREGON
Sara Marie ZIMMERMAN,
Respondent on Review,
v.
ALLSTATE PROPERTY AND CASUALTY
INSURANCE COMPANY,
an Illinois corporation;
and Allstate Insurance Company,
an Illinois corporation,
Petitioners on Review.
(CC 0812-17951; CA A146460; SC S060011)
En Banc
On review from the Court of Appeals.*
Argued and submitted September 26, 2012; resubmitted
January 7, 2013.
Joel S. DeVore of Luvaas Cobb, Eugene, argued the cause
and filed the briefs for petitioners on review.
Gordon S. Gannicott of Hollander, Lebenbaum &
Gannicott, Portland, argued the cause and filed the brief for
respondent on review.
Charles Rabinowitz, Portland, filed the brief for amicus
curiae Oregon Trial Lawyers Association.
LANDAU. J.
The decision of the Court of Appeals is reversed. The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.
______________
*  Appeal from Multnomah County Circuit Court, Judith Matarazzo, Judge.
246 Or App 680, 267 P3d 203 (2011).
272 Zimmerman v. Allstate Property and Casualty Ins.
Plaintiff was injured in an automobile accident. Two years later, plaintiff’s
insurer, Allstate, learned that plaintiff was likely to pursue an underinsured
motorist claim against it. It sent a letter to plaintiff, in which it accepted coverage
for the claim and expressed its willingness to submit to binding arbitration.
The parties contested some of plaintiff’s damages, and the matter went to trial.
The jury returned a verdict for plaintiff, and plaintiff then attempted to collect
attorney fees pursuant to ORS 742.061(1). Allstate countered that attorney fees
were improper, as it was protected by the safe harbor provision of ORS 742.061(3).
Held: Allstate’s letter accepting coverage and offering to arbitrate was sufficient
to trigger the statutory safe harbor of ORS 742.061(3).
The decision of the Court of Appeals is reversed. The judgment of the circuit
court is reversed, and the case is remanded to the circuit court for further
proceedings.
Cite as 354 Or 271 (2013) 273
LANDAU, J.
ORS 742.061(1) provides that, if a settlement of an
insurance claim is not made “within six months from the
date proof of loss is filed with an insurer” and the insured
recovers more than any amount that the insurer has ten-
dered, the insured is entitled to an award of attorney fees.
ORS 742.061(3) provides a “safe harbor” for the insurer in
underinsured motorist (UIM) cases: No attorney fees will
be awarded if, within six months of the filing of the proof of
loss, the insurer states in writing that it accepts coverage,
that the only remaining issues are the liability of the
underinsured motorist and the amount of damages due the
insured, and that it consents to binding arbitration.
At issue in this case is what constitutes a “proof of
loss” in a claim for UIM benefits and what suffices to trigger
the safe harbor provision. The insured provided notice of an
injury automobile accident to her insurer, but did not submit
a UIM benefits claim at that time. Nearly two years later,
the insurer learned of a possible UIM claim. Shortly after
that, the insurer agreed in writing that it accepted coverage,
that the only remaining issues were liability and damages,
and that it was willing to submit to binding arbitration.
After recovering on her UIM claim, the insured asked for
attorney fees under ORS 742.061(1). The insurer claimed
the benefit of the safe harbor provision of ORS 742.061(3).
The Court of Appeals concluded, however, that the insurer
did not send its safe harbor letter within six months of the
insured’s “proof of loss.” According to the Court of Appeals,
the “proof of loss” was the initial report of injury two years
earlier. Zimmerman v. Allstate Property and Casualty Ins.,
246 Or App 680, 681, 267 P3d 203 (2011). We conclude that
the initial report of injury did not provide sufficient infor-
mation to constitute a proof of loss for a UIM claim and
that the insurer’s safe harbor letter sufficed to trigger the
statutory exception to an attorney fee award. We therefore
reverse the decision of the Court of Appeals.
I. FACTS
The relevant facts are not disputed. In 2006, plain-
tiff Sarah Zimmerman purchased an automobile insurance
policy from Allstate. The policy included personal injury
274 Zimmerman v. Allstate Property and Casualty Ins.
protection (PIP) benefits with a limit of $15,000. It also
included UIM coverage with a limit of $100,000 per person.
On December 22, 2006, Zimmerman was injured in
an automobile accident when her car was struck by another
that had failed to stop at a stop sign. Several hours after
the accident, Zimmerman gave a recorded statement to the
Allstate claims department. She explained that her car had
been totaled, that she had been injured, and that the other
driver, Louis Alvis, had admitted liability and had been
cited by the police. The record does not disclose whether
Zimmerman reported any information about whether Alvis
was insured at that time, but the parties assume that Alvis
was insured.
On January 26, 2007, an Allstate representative
wrote to Zimmerman explaining the nature of PIP benefits
and enclosed an application for those benefits, along with
a medical authorization form and a provider form, which
allowed Allstate to obtain accident-related medical records.
Zimmerman filled out the application and returned it to
Allstate along with the signed medical authorization and pro-
vider forms. In the following months, Allstate corresponded
with Zimmerman or her attorney concerning medical records
on a number of occasions. Allstate ultimately paid Zimmerman
$13,310.72 in PIP benefits over the course of the next year.
In December 2007, Zimmerman’s treating physician
informed Allstate that Zimmerman “continues to suffer from
left neck and upper back pain,” which can cause headaches.
The physician also reported that X-rays showed a reversed
cervical spine and that medical research suggested the pos-
sibility of future instability in that area. But no further bills
for medical expenses were submitted to Allstate after that
date.
In July 2008, Zimmerman’s lawyer sent a demand
letter to Safeco, Alvis’s insurer. At that point, counsel thought
that Zimmerman’s claim had a value in excess of $100,000.
On September 24, 2008, a Safeco adjuster telephoned
an Allstate employee to advise that Zimmerman would
likely pursue a UIM claim against Allstate. The Allstate
employee referred the matter to a UIM adjuster within the
Cite as 354 Or 271 (2013) 275
company. Two days later, Allstate’s UIM adjuster sent a letter
to Zimmerman’s lawyer confirming that Allstate had
received a notice of Zimmerman’s accident in December
2006 and enclosing a proof of loss form for UIM benefits.
The letter confirmed that there was Allstate UIM coverage
in force at the time of the accident and that the insurer
accepted coverage for the claim arising from the accident.
“With confirmation of coverage,” the letter continued, “we
will focus our efforts to determine the only remaining
issues of liability and damages in this claim.” The letter
explained that, “[i]f your client plans to make an uninsured
or underinsured motorist claim with Allstate * * * [she] will
need to complete the enclosed” form so that it could conduct
its investigation of the UIM claim. The letter concluded by
stating that, in the event that Allstate is unable to reach an
agreement concerning the amount of the UIM benefits due
under the policy, it was “willing to submit to binding arbi-
tration of the claim.” Apparently around the same time,
Allstate also requested that Zimmerman provide informa-
tion about Alvis’s insurance coverage, specifically, his policy
limits.
On October 3, 2008, Zimmerman’s lawyer wrote
Allstate to report that Alvis was insured by Safeco at the
time of the 2006 accident. As for policy limits, the letter
explained that, “[a]s you know, an insurance company
usually does not voluntarily disclose its insured’s policy
limits, prior to a lawsuit being filed. You asked for a copy of
Safeco’s dec[larations] page. We do not have it and cannot
compel it prior to litigation being filed.” The letter went on
to say that counsel nevertheless had learned that the policy
had $25,000 in personal injury limits. The letter further
explained that Safeco had acknowledged that the claim had
a value of $25,000, but that it had not yet tendered the policy
limits. The letter concluded with the following:
“PROOF OF LOSS
“I feel that this letter coupled with the demand letter
to Safeco, dated July 8, 2008, is a sufficient proof of loss
for both the UIM claim as well as the PIP wage loss claim.
If you disagree, let me know ASAP and provide the forms
necessary to complete the proof of loss.”
276 Zimmerman v. Allstate Property and Casualty Ins.
Five days later, Safeco tendered its $25,000 policy
limits to Zimmerman. Zimmerman’s lawyer immediately
informed Allstate of that fact and asked for permission to
accept the tender in exchange for a full release from further
liability. In addition, counsel reminded Allstate of its UIM
coverage with policy limits of $100,000 and that, once Safeco
pays its policy limits, Allstate’s liability would remain
$75,000.
Safeco paid Zimmerman the $25,000. Allstate con-
tested Zimmerman’s claim for an additional $75,000.
Zimmerman then initiated this action against Allstate
for breach of its policy. The case was tried to a jury, which
returned a verdict in plaintiff’s favor in the amount of
$100,000. The trial court deducted the $25,000 that Safeco
had paid and entered judgment against Allstate for $75,000,
plus costs.
Zimmerman requested attorney fees under ORS
742.061(1). In relevant part, that statute provides,
“(1)  Except as otherwise provided in subsection[  *  *
] *
(3) of this section, if settlement is not made within six
months from the date proof of loss is filed with an insurer
and an action is brought in any court of this state upon any
policy of insurance of any kind or nature, and the plaintiff’s
recovery exceeds the amount of any tender made by the
defendant in such action, a reasonable amount to be fixed
by the court as attorney fees shall be taxed as part of the
costs of the action and any appeal thereon.”
According to Zimmerman, because Allstate made no tender
whatever in this case, she is now entitled to attorney fees,
having prevailed at trial.
Allstate objected to the request, claiming the benefit
of the exception set out in subsection (3) of that same stat-
ute, which provides:
“(3)  Subsection (1) of this section does not apply to
actions to recover uninsured or underinsured motorist
benefits if, in writing, not later than six months from the
date proof of loss is filed with the insurer:
“(a)  The insurer has accepted coverage and the only
issues are the liability of the uninsured or underinsured
motorist and the damages due to the insured; and
Cite as 354 Or 271 (2013) 277
“(b)  The insurer has consented to submit the case to
binding arbitration.”
Specifically, Allstate contended that, within six months of
the letter from Zimmerman that she denominated her “proof
of loss,” the insurer sent her a letter accepting coverage and
consenting to arbitration.
Zimmerman responded with two arguments. First,
she argued that, regardless of what she may have said in
later correspondence, the proof of loss actually had been sub-
mitted nearly two years earlier, when she initially reported the
accident to Allstate in December 2006. Because the insurer’s
letter accepting coverage and consenting to arbitration was
not tendered within six months of that report, she argued,
Allstate is not entitled to the benefit of the statutory safe
harbor. Second, Zimmerman argued that, in any event, the
safe harbor applies only when the insurer has accepted cov-
erage and the only issues are liability of the underinsured
motorist and damages. According to Zimmerman, because
Allstate never disputed the tortfeasor Alvis’s liability, the safe
harbor simply does not apply. Aside from that, she argued,
Allstate’s consent to arbitration was inadequate.
Allstate replied that the December 2006 report
could not constitute a proof of loss of a UIM claim, because
of the nature of UIM liability. Allstate argued that, among
other things, a predicate of UIM liability is ascertainment
of the tortfeasor’s insurance policy limits; depending on
those limits, there may or may not be any UIM liability.
The problem, Allstate asserted, is that Zimmerman did not
report Alvis’s policy limits, and there was no way for Allstate
to determine them at that time. In support of that assertion,
Allstate offered an affidavit of staff counsel, who testified
that, based on his more than 20 years of experience in the
industry, liability insurers do not reveal their liability limits
because of concern for the privacy rights of their own policy-
holders. Allstate noted that, in fact, it had asked Zimmerman
for that information, but her counsel explained that she
could not obtain that information until litigation had been
initiated.
278 Zimmerman v. Allstate Property and Casualty Ins.
The trial court agreed with Zimmerman on the
second argument, that the attempt to take advantage of the
statutory safe harbor failed because Allstate never contested
Alvis’s liability. The court explained that Zimmerman’s read-
ing of the statute in that regard actually “makes no sense
to me,” but it felt obligated to follow what it saw as the plain
wording of the statute.
Allstate appealed. The Court of Appeals affirmed,
albeit on a different ground from the one the trial court
adopted. The court agreed with Zimmerman on the first of
the two arguments that she had advanced to the trial court,
namely, that the proof of loss had occurred when Zimmerman
originally reported the accident to Allstate, which was more
than a year before any attempt to satisfy the requirements
of the safe harbor provision of ORS 742.061(3). The court
explained that, although the initial report of the accident
did not expressly include a request for UIM benefits, it was
sufficient to constitute a “proof of loss” for a UIM claim
because it included enough information to trigger a duty of
the insurer to investigate. 246 Or App at 681-82.
II. ANALYSIS
On review, Allstate argues that the Court of Appeals
erred in concluding that Zimmerman’s initial report consti-
tutes a “proof of loss” of UIM benefits. According to Allstate,
the information that Zimmerman provided in her request for
PIP coverage did not include enough information to trigger
a duty to investigate a claim for UIM benefits, because of
the nature of UIM coverage. An obligation to provide UIM
benefits, Allstate explains, does not arise until the tort-
feasor’s insurance coverage has been exhausted. In this
case, the insurer argues, there was no mention of even the
possibility that Alvis’s Safeco limits were not adequate to
cover Zimmerman’s damages until September 2008, when
a Safeco adjuster mentioned the possibility to an Allstate
adjuster. Allstate notes that only two days after it received
from Safeco notice of a possible UIM claim, it sent its letter
to Zimmerman accepting coverage and offering to arbitrate
damages. In that regard, Allstate argues, it is telling that
Zimmerman herself denominated her October 2008 demand
letter that followed—in which she first mentioned the subject
of UIM coverage—her “proof of loss” for her UIM claim.
Cite as 354 Or 271 (2013) 279
Zimmerman argues that her accident report in
December 2006 provided Allstate with sufficient information
to constitute a proof of loss for a UIM claim. She acknowl-
edges that she did not mention UIM until nearly two years
later. Nevertheless, she contends that, under this court’s
case law, a report is adequate to constitute a proof of loss if it
provides enough information to enable the insurer to estimate
its obligations. In this case, she argues, Allstate “knew the
tortfeasor was at total fault, had liability insurance (likely the
state minimum $25,000 in coverage) and that Zimmerman
had $100,000 of UIM coverage under her Allstate insurance
contract.” In the alternative, Zimmerman argues that,
even if the proof of loss was not filed until the October 2008
letter that she denominated as her proof of loss, Allstate’s
letter in which it purported to accept coverage and consent
to arbitration was insufficient to trigger the statutory safe
harbor of ORS 742.061(3), because that provision applies only
when both the tortfeasor’s liability and the amount owed to
the insured remain in dispute. In this case, she contends,
Allstate never disputed the tortfeasor’s liability. She further
argues that, in any event, the safe harbor does not apply
because Allstate’s consent to arbitrate was inadequate.
A. “Proof of Loss”
We begin with the question whether Zimmerman’s
December 2006 accident report to Allstate constituted a
“proof of loss” within the meaning of ORS 742.061(1) as to
her claim for UIM coverage. The meaning of the term “proof
of loss” is a question of statutory construction, governed by
familiar rules that require us to examine the text of the
statute in context, along with relevant legislative history
and other aids to construction. State v. Gaines, 346 Or 160,
169-72, 206 P3d 1042 (2009).
As we have noted, ORS 742.061(1) provides that, if
a settlement of an insurance claim is not made “within six
months from the date proof of loss is filed with an insurer”
and the insured recovers more than any amount that the
insurer has tendered, the insured is entitled to an award
of attorney fees. The statute does not define the term “proof
of loss.” Ordinarily, when the legislature has not defined
a statutory term, we assume that the legislature used its
280 Zimmerman v. Allstate Property and Casualty Ins.
words consistently with their ordinary meanings. State v.
Murray, 340 Or 599, 604, 136 P3d 10 (2006). When the term
has acquired a specialized meaning in a particular industry
or profession, however, we assume that the legislature used
the term consistently with that specialized meaning. Tharp
v. PSRB, 338 Or 413, 423, 110 P3d 103 (2005).
Such is the case with the term “proof of loss,” which
is a term of art that has long been used in the insurance
industry. For at least a century, insurance policies have com-
monly conditioned certain coverage obligations on require-
ments that insureds provide a notice or proof of loss within
a specified period of time. See, e.g., Weidert v. State Ins. Co.,
19 Or 261, 275, 24 P. 242 (1890) (timely proof of loss was a
condition of coverage under the policy). The underlying
rationale for such requirements is that, while insurers
generally have the advantage over insureds in many aspects
of the relationship,
“[t]he major area in which the insurer works at a disadvan-
tage is in information concerning the individual insured.
In essence, except for relatively rare exceptions in which
relevant information is available through public records or
the insurer’s own historical files, the insurer must rely on
the insured or other interested parties to provide all details
that affect the insurance relationship.”
Lee R. Russ and Thomas F. Segalla, Couch on Insurance 3d
§ 186:1 (2005).
Ordinarily, what is sufficient to constitute a proof
of loss under a policy depends on the type of insurance at
issue. See generally Couch on Insurance 3d § 189:4 (“the
contents of proofs of loss tend to vary by type of insurance”).
But a common thread in all cases is that the sufficiency of
information to constitute a proof of loss is evaluated in terms
of the purpose of the requirement: to enable the insurer to
estimate its rights and liabilities under the policy. Id.
Oregon law has long been consistent with that gen-
eral principle. For example, in Sutton v. Fire Insurance Exch.,
265 Or 322, 509 P2d 418 (1973), the plaintiff was the victim
of a burglary. He submitted a written list of the property
stolen to the insurer the following day. The insurer disputed
the value of some of the items that were stolen, and the
Cite as 354 Or 271 (2013) 281
plaintiff initiated an action on the policy. The trial court
directed a verdict in favor of the insurer on the ground that
the plaintiff had failed to comply with the requirement in
the policy that a written, signed proof of loss be submitted;
apparently, there was no evidence that the plaintiff had
signed the list of stolen property that he had submitted to
the insurer. Id. at 323-24. This court reversed, concluding
that the plaintiff had fully satisfied the purpose of the proof
of loss requirement:
“Substantial, as distinguished from strict, compliance
of the proof of loss requirement is all that is required.
14 Couch, Cyclopedia of Insurance Law (2d ed) § 49:390;
3 Richards, Insurance § 547 (5th ed 1952); Vance, Insurance,
897-898 (3d ed 1951).
“The test of whether the insured substantially complied
with the proof of loss requirement should be whether the
proof submitted by the insured fulfilled the purpose of the
proof of loss:
“ The purpose of a provision for proof of loss is to
‘
afford the insurer an adequate opportunity for investi-
gation, to prevent fraud and imposition upon it, and to
enable it to form an intelligent estimate of its rights and
liabilities before it is obliged to pay. Its object is to fur-
nish the insurer with the particulars of the loss and all
data necessary to determine its liability and the amount
thereof.’ 14 Couch, supra, § 49:373, p 15.”
Id. at 325.
Consistently with that understanding of the term
as it is commonly used in insurance policies, this court’s
cases arising under ORS 742.061 and its predecessors have
taken a pragmatic and functional, as opposed to strict and
formalistic, approach in defining the term “proof of loss.” It
refers to any “event or submission” that accomplishes the
purpose of a proof of loss, that is, “to afford the insurer an
adequate opportunity for investigation, to prevent fraud and
imposition upon it, and to enable it to form an intelligent
estimate of its rights and liabilities before it is obliged to
pay.” Dockins v. State Farm Ins. Co., 329 Or 20, 28-29, 985
P2d 796 (1999). This court has emphasized that insurers
“operate under a duty of inquiry.” Parks v. Farmers Ins. Co.,
347 Or 374, 381, 227 P3d 1127 (2009). If a submission, by
282 Zimmerman v. Allstate Property and Casualty Ins.
itself, is ambiguous or insufficient to allow the insurer to
estimate its obligations, it nevertheless will be deemed suf-
ficient if it provides enough information to allow the insurer
“to investigate and clarify uncertain claims.” Dockins, 329
Or at 29.
As we have noted, what is sufficient to satisfy that
test necessarily depends on the facts of each case and, in
particular, on the nature of the insurance coverage at issue.
Our prior cases illustrate the point.
In Dockins, for example, the plaintiffs discovered oil
seeping into their basement. They immediately notified their
homeowner’s insurance carrier, State Farm, which denied
coverage, explaining that, under the terms of the policy, it
was not obligated to provide coverage for such seepage unless
it contaminated groundwater. 329 Or at 22. Several weeks
later, the Oregon Department of Environmental Quality
(DEQ) initiated an administrative action against the plain-
tiffs for the release of oil from a tank on their property, which
DEQ had determined had contaminated the groundwater.
The plaintiffs initiated an action against State Farm for
breach of contract, alleging in their complaint that they
would incur costs and expenses to remediate the leaking oil
tank, which had resulted in groundwater contamination. Id.
at 23. Approximately nine months later, the parties settled.
Id. at 24.
The plaintiffs then moved for an award of attorney
fees under ORS 742.061. State Farm opposed the motion, argu-
ing, among other things, that the plaintiffs had never filed a
proof of loss as to their third-party claim for liability for the
clean-up costs. 329 Or at 24. The plaintiffs responded that
their complaint constituted such a proof of loss. Id. at 26.
State Farm rejoined that the complaint could not constitute
a proof of loss because it failed to substantiate its allegation
that there had been groundwater contamination and, in any
event, did not allege the remediation costs with adequate
specificity. Id. at 30.
This court concluded that the complaint sufficed to
constitute a proof of loss within the meaning of the statute,
explaining that the allegations provided enough information
to enable State Farm to determine its existing liability:
Cite as 354 Or 271 (2013) 283
“In our view, those allegations in plaintiffs’ complaint
were sufficient to qualify as a proof of loss under ORS
742.061 *  *. State Farm acknowledges that its duty to
*
defend *  * would be triggered if there were a claim
*
against plaintiffs based on groundwater contamination.
The complaint alleges such a claim. Although it is true
that the DEQ demand was not attached to the complaint
and that State Farm was not required to accept plaintiffs’
characterization of the DEQ demand at face value, it also is
true that State Farm easily could have ascertained whether
plaintiffs’ characterization was accurate.”
Id. As for the specificity of the amount of liability alleged in
that complaint, the court noted State Farm’s contention that
the allegation did not provide enough information on which
to base a settlement offer but nevertheless concluded that,
in advancing it, State Farm “ignores its duty of inquiry.” Id.
This court also had occasion to apply its functional
test for determining a proof of loss in Scott v. State Farm
Mutual Auto. Ins., 345 Or 146, 190 P3d 372 (2008). In that
case, the plaintiff was injured in a car accident on January 8,
2002. The other driver was uninsured. She reported the claim
to her insurer, State Farm, on January 11. She informed the
insurer of her injuries, and the State Farm representative
explained to her the various types of coverage available to
her, including uninsured motorist benefits. She told the State
Farm representative that she was not sure, at that point,
whether she would pursue UM coverage. She was referred
to State Farm’s personal injury protection department,
which sent to her a claim for PIP coverage. On January 20,
she completed the form, which stated that the information
provided in it would be used “to determine if you are entitled
to benefits under the policyholder’s insurance contract.” State
Farm received the form and processed a claim for PIP bene-
fits, but it did not process a claim for UM benefits. 345 Or at
149. The following week, State Farm’s claims representative
spoke with the plaintiff, who informed him that she might
pursue a UM claim. The claims representative immediately
wrote the other driver to inform him that the plaintiff was
making such a claim and asking him whether he in fact had
insurance. Id. at 150.
284 Zimmerman v. Allstate Property and Casualty Ins.
Approximately six months later, the plaintiff initi-
ated an action against State Farm for UM benefits. The
claim ultimately settled, and the plaintiff asked for attorney
fees under ORS 742.061. State Farm opposed the request
arguing, among other things, that the plaintiff had failed
to file a proof of loss for a UM claim more than six months
before the settlement. Plaintiff responded that her original
claim for benefits constituted such a proof of loss. Id. at 150-
51.
This court sided with the plaintiff. The court explained:
“By January 11, State Farm was aware that plaintiff
was receiving medical treatment for injuries sustained in
a car accident with an uninsured motorist. By January 20,
plaintiff had completed and submitted an ‘application for
benefits,’ which stated that [t]he information provided will
enable us to determine if you are entitled to benefits under
the policyholder’s insurance contract *  *. The application
*
included a description of the accident and the resulting injury
to plaintiff, as well as contact information for the doctor
who treated her.”
Id. at 156. Moreover, the court noted, the fact that, shortly
after that, State Farm sent a letter to the other driver
informing him that the plaintiff was making a UM claim
clearly indicated that State Farm was aware of the claim. In
short, the court concluded, the plaintiff’s submissions were
“sufficient to enable State Farm to estimate its obligations
regarding plaintiff’s UM claim, or to do so after a reasonable
investigation.” Id.
Most recently, this court addressed the issue in Parks.
In that case, the plaintiffs owned a rental house that was
insured under a “Landlord Protector Package” issued by
Farmers Insurance Company. The plaintiffs learned that
police had discovered a methamphetamine lab in the house,
had seized the house, and had placed it under quarantine.
The plaintiffs called Farmers and told an agent about the
seizure and quarantine of the property. 347 Or at 376. About
a month later, the plaintiffs called the agent again and
informed her that, to date, they had paid approximately $6,700
to clean up the property and expected to pay up to $3,000
more to get the property in shape to rent. The agent informed
the plaintiffs that the damage was not covered because the
Cite as 354 Or 271 (2013) 285
policy contained an exclusion for “pollution.” Id. at 377. A
year later, the plaintiffs initiated an action against Farmers
for breach of contract. Among other things, they alleged
that the property had suffered “accidental physical damage”
that should have been covered under their landlord pro-
tection policy. According to the plaintiffs the damage included
methamphetamine cleanup costs, vandalism, and diminu-
tion in the value of the property. Id. at 378.
The parties ultimately settled “all claims alleged in
this matter,” and the plaintiffs sought attorney fees under
ORS 742.061. Id. at 378. Farmers objected, arguing that
the plaintiffs had never submitted a proof of loss. The plain-
tiffs countered that their telephone reports of damage con-
stituted the required proof of loss. Farmers replied that
the telephone calls were insufficient, because they did not
provide enough information to enable it to determine that it
was liable for vandalism damage, which Farmers considered
the only covered loss. Id. at 379.
This court rejected Farmers’ contention. The court
first noted that the pollution exclusion was not so clearly
applicable that it excused Farmers from a duty to further
investigate the claim. Id. at 386. In any event, the court con-
tinued, the fact that Farmers regarded vandalism damage
as the only covered loss was not controlling; the plaintiffs
clearly reported the methamphetamine cleanup costs to
Farmers, and their complaint was framed broadly enough
to include those costs. Id. at 388. Nothing in the terms of the
settlement—which applied to “all claims in this matter”—
excluded those costs. It follows, the court concluded, that
the original telephone reports were adequate to constitute a
proof of loss within the meaning of ORS 742.061. Id.
In each of the foregoing cases, this court concluded
that the insured had provided enough information to con-
stitute a “proof of loss,” because the information was “suf-
ficient to enable [the insurer] to estimate its obligations
regarding [an insured’s] claim, or to do so after a reasonable
investigation.” Scott, 345 Or at 156. In none of them, however,
did the court address the sufficiency of a submission to con-
stitute a proof of loss for a possible future UIM claim. As we
have noted, the sufficiency of a submission to constitute a
286 Zimmerman v. Allstate Property and Casualty Ins.
“proof of loss” within the meaning of ORS 742.061 depends
on the nature of the insurance coverage at issue. See Couch
on Insurance 3d § 189:4 (proof of loss requirements may
differ for UM/UIM claims because of nature of UM/UIM lia-
bility). That requires us to consider the nature of UIM insur-
ance coverage generally.
State financial responsibility laws typically require
motorists to maintain some form of automobile liability insur-
ance. See generally Irvin E. Schermer and William J. Schermer,
Automobile Liability Insurance § 1.1 (4th ed 2012); Couch
on Insurance 3d § 109:1. If an at-fault driver who causes
another person to suffer injury or loss has not complied with
the state financial responsibility law, that driver is said to
be “uninsured.” Automobile Liability Insurance § 38.1. To pro-
vide compensation for victims of such accidents in which the
tortfeasor failed to comply with the financial responsibility
law, states enacted uninsured motorist, or UM, laws that
required, as part of the financial responsibility law, every
motor vehicle liability policy to include UM coverage, usually
equal to the minimum amount of liability coverage that the
tortfeasor should have obtained. Id.
Experience showed that to be inadequate in a num-
ber of situations, especially those in which the tortfeasor actu-
ally complied with the minimum requirements of the finan-
cial responsibility law, but the coverage was inadequate to
fully compensate injured persons. The tortfeasor was not
uninsured, as he or she had complied with the financial
responsibility law. But he or she was regarded as “under-
insured,” because of the inadequacy of the minimum cov-
erage that applied. In response to that inadequacy, states
adopted underinsured motorist, or UIM, statutes that require
certain UIM coverage as part of all automobile liability poli-
cies. Id.
States adopting UIM statutes generally have
adopted one of two different approaches to defining precisely
what it means to be “underinsured.” Some states define a
driver to be underinsured if the driver’s liability limits are
inadequate to cover an injured person’s damages. That is
known as the “uncompensated damage” or “limits-to-damage”
Cite as 354 Or 271 (2013) 287
approach. Others define a driver to be underinsured if the
driver’s liability limits are less than the injured person’s
liability limits. That is known as the “comparison of limits”
or “limits-to-limits” approach. Id. § 38.3.
Oregon automobile liability insurance law has tracked
the essential pattern that we have described. See generally
Vogelin v. American Family Mutual Ins. Co., 346 Or 490, 501-
06, 213 P3d 1216 (2009) (describing history of legislative
adoption of Oregon UM and UIM statutes). The legislature
first adopted a financial responsibility statute requiring each
driver to maintain a certain level of liability insurance. ORS
742.450(4) provides that, “[e]very motor vehicle liability insur-
ance policy issued for delivery in this state shall provide
liability coverage to at least the limits specified in” the motor
vehicle code. The motor vehicle code, in turn, sets the mini-
mum limit at $25,000 for “bodily injury to or death of one
person in any one accident.” ORS 806.070(2)(a).
In 1967, the legislature adopted a requirement that
all motor vehicle liability policies in Oregon provide UM cov-
erage. ORS 742.502(1). And, in ORS 742.502(2)(a), it required
that the amount of UM coverage generally must be at least
the amount required for bodily injury liability coverage under
ORS 806.070, the state financial responsibility law.
In 1981, the legislature then added to the statutory
scheme a requirement that automobile liability insurance
policies include UIM coverage as well, adopting the compari-
son of limits approach to defining what constitutes an “under-
insured” motorist:
“[u]nderinsured motorist coverage [must provide for dam-
ages] *  * arising out of the ownership, maintenance or
*
use of a motor vehicle with motor vehicle liability insurance
that provides recovery in an amount that is less than the
insured’s uninsured motorist coverage. Underinsurance
coverage shall be equal to uninsured motorist coverage less
the amount recovered from other motor vehicle liability
insurance policies.”
ORS 742.502(2)(a) (emphasis added.) See also Mid-Century
Ins. Co. v. Perkins, 344 Or 196, 212-16, 179 P3d 633 (2008)
288 Zimmerman v. Allstate Property and Casualty Ins.
(Oregon’s UIM statute adopts “limits-to-limits” approach to
defining an “underinsured” driver).
It is worth emphasizing that, regardless of which
approach a state takes to define what constitutes “underin-
sured,” the threshold determinant is the tortfeasor’s policy
limits. Under either approach, in the absence of that infor-
mation, it cannot be determined whether that driver is
underinsured. Under Oregon law, for example, if the tort-
feasor’s insurance policy limits equal the insured driver’s
uninsured motorist coverage limits, there is no UIM lia-
bility. Mid-Century Ins. Co., 344 Or at 218 (plaintiffs were
not entitled to UIM benefits because they were “injured by
motorists with liability limits equal to the limits of their own
uninsured motorist coverage”).
It is also worth emphasizing that the comparison
of the tortfeasor’s and the insured’s liability limits produces
only an insurer’s potential UIM liability. The insurer’s actual
UIM liability depends on the amount of the injured insured
driver’s damages and any payments that have been received
from the tortfeasor. See Vogelin, 346 Or at 506 (UIM liability
is determined “by subtracting the tortfeasor’s liability pay-
ment from plaintiff’s UM liability limit”). Indeed, an insurer
has no UIM liability unless and until the insured has
exhausted the limits of the underinsured tortfeasor’s insur-
ance coverage. ORS 742.542.
With this information about the nature of UIM
coverage in mind, we turn to the sufficiency of Zimmerman’s
December 2006 accident report to constitute a proof of loss
for a UIM claim. It is undisputed that the information that
Zimmerman provided to Allstate at that time mentioned
nothing about a possible UIM claim. Zimmerman’s argument
is instead that the information that she provided, coupled
with information that her doctor provided over a year later,
was sufficient to trigger an investigation that conceivably
could have revealed at least a potential UIM claim:
“By December 31, 2007, at the latest, Allstate had complete
information about Zimmerman’s injuries, medical expenses
and medical prognosis. Allstate knew the tortfeasor was at
total fault, had liability insurance (likely the state minimum
Cite as 354 Or 271 (2013) 289
$25,000 in coverage) and that Zimmerman had $100,000 of
UIM coverage under her Allstate insurance contract.”
(Emphasis added.) Thus, in Zimmerman’s view, at least by
December 31, 2007, Allstate did know both that Alvis’s limits
were only $25,000 and that Zimmerman’s damages exceeded
that amount. That contention, however, does not stand up to
scrutiny.
First, there is a complete absence of evidence that
Allstate was aware of Alvis’s policy limits or that the insurer
could have acquired that information before September 2008.
The evidence, in fact, is to the contrary. It is undisputed that
neither Allstate nor Zimmerman knew of Alvis’s policy limits
as of Zimmerman’s first report in December 2006. It is also
undisputed that Allstate had no way of requiring the tort-
feasor to disclose his policy limits at that time. Allstate’s
staff counsel testified that, based on his more than 20 years
of experience in the industry, liability insurers do not reveal
their liability limits because of concern for the privacy rights
of their own policyholders. Nothing in the record contradicts
that testimony. In fact, when Allstate asked Zimmerman’s
counsel for that very information, counsel replied that she did
not know the answer, explaining: “As you know, an insurance
company usually does not voluntarily disclose its insured’s
policy limits, prior to a lawsuit being filed. You asked for a
copy of Safeco’s dec[larations] page. We do not have it and
cannot compel it prior to litigation being filed.”
Zimmerman nevertheless suggests that Allstate
should have simply assumed that Alvis had the minimum
amount of liability coverage. She offers no basis for the
assumption, however. Alvis’s liability limits could well have
been $25,000, $50,000, $100,000, or $1 million.1
Zimmerman insists that, in any event, information
about Alvis’s policy limits was irrelevant in this case, because
Allstate never attempted to find it. Indeed, she argues,
“Allstate’s estimate of Zimmerman’s UIM benefit was always
1
Amicus curiae Oregon Trial Lawyers Association suggests that Allstate could
have acquired that information by subpoena or request for production. Allstate,
however, was not a party to any litigation at that time and thus had no right to
do either. See generally ORCP 36 A (“[p]arties” may obtain discovery by means of,
among other things, requests for production).
290 Zimmerman v. Allstate Property and Casualty Ins.
zero, irrespective of liability policy limits.” To begin with,
Zimmerman offers no support in the record for her assertion
that Allstate’s estimate of her UIM benefit “was always zero.”
The fact that Allstate ultimately took that position does not
mean that, nearly two years before the first mention of a
UIM claim, Allstate had already determined it had no UIM
liability. Aside from that, her argument injects an element of
subjective intention—whether Allstate ever intended to pay
UIM benefits—into what is essentially an objective inquiry:
Whether the information that Zimmerman provided was suf-
ficient “to afford the insurer an adequate opportunity for
investigation * * * and to enable it to form an intelligent esti-
mate of its rights and liabilities.” Dockins, 329 Or at 29
(citations omitted); see also Scott, 345 Or at 156 (noting
insurer’s duty of “reasonable investigation”).
Second, even supposing for the sake of argument that
it is appropriate to assume that the tortfeasor’s policy limits
do not exceed the statutory minimum, there is likewise a
complete absence of evidence that, as of even December
2007—a year after Zimmerman’s initial accident report that
she contends constituted her proof of loss—her damages
exceeded those limits. Up to that point, her medical expenses
totaled $13,310.72, an amount well within Alvis’s assumed
$25,000 liability limits. In December 2007, Zimmerman’s
doctor reported that Zimmerman continued to complain of
neck and upper back pain and that there was an unspecified
possibility of future headaches and spinal instability. Nothing
in the physician’s report suggested that Zimmerman cur-
rently experienced headaches or spinal instability or that
she would incur any particular amount of medical expenses
or other damages in the foreseeable future, much less that
those expenses or damages would exceed Alvis’s liability
limits. Nor did the report, or any other information that
Zimmerman supplied Allstate, suggest that she would be
bringing a claim for damages in excess of those liability
limits.
Contrary to Zimmerman’s contentions, the record in
this case shows that the first mention of a possible UIM claim
did not occur until September 2008, when the tortfeasor’s
Cite as 354 Or 271 (2013) 291
insurer notified Allstate that its policy limits might not be
adequate to cover the total damages that Zimmerman was
asserting in her demand. Two days later, Allstate sent its
letter asking Zimmerman for information about a possible
UIM claim. Indeed, Zimmerman’s own counsel responded
in her October 3, 2008 letter with what she denominated a
“PROOF OF LOSS,” with the explanation that she felt, “this
letter coupled with the demand letter to Safeco, dated July 8,
2008, is a sufficient proof of loss for both the UIM claim as
well as the PIP wage loss claim. If you disagree, let me know
ASAP and provide the forms necessary to complete the proof
of loss.”
In those circumstances, we conclude that the infor-
mation that Zimmerman provided to Allstate in December
2006 was not sufficient even to trigger an obligation to
investigate a UIM claim. Not until the September 2008 call
from Safeco did Allstate learn of the possibility of a UIM claim.
Assuming for the sake of argument that that call, combined
with the information that Zimmerman had earlier provided,
constituted information “sufficient to enable [Allstate] to esti-
mate its obligations” or at least “to do so after a reasonable
investigation,” Scott, 345 Or at 156, that leads to the con-
clusion that the proof of loss was filed in September 2008,
well within six months of Allstate’s filing of its safe harbor
letter.
In reaching that conclusion, we emphasize—as we
have done in other cases—the importance of an insurer’s
“duty of inquiry.” Dockins, 329 Or at 28. For a transmittal of
information to constitute a “proof of loss” within the mean-
ing of the statute, it is not necessary that it enable the
insurer to determine precisely its obligations. Id. In the con-
text of a UIM claim, it is likewise not always necessary for
the information to include the tortfeasor’s precise limits. In
this case, for example, Allstate received information from
Safeco about the likelihood of a UIM claim, which information
triggered Allstate’s safe harbor letter—even before Allstate
knew Alvis’s precise UM limits. As we noted, determining what
constitutes a “proof of loss” is a pragmatic and functional
inquiry.
292 Zimmerman v. Allstate Property and Casualty Ins.
B.  Statutory “Safe Harbor”
We turn, then, to Zimmerman’s alternative argument
that, even if the proof of loss was not filed until October 2008,
Allstate’s letter purporting to accept coverage and consent to
arbitration was insufficient to trigger the statutory safe har-
bor of ORS 742.061(3). Zimmerman contends that the Allstate
letter was deficient in two respects, each of which we address
in turn.
Zimmerman first asserts that the statutory safe har-
bor provision applies only when both the tortfeasor’s liability
and the amount owed to the insured remain in dispute. In this
case, she contends, Allstate never disputed the tortfeasor’s
liability. Allstate responds that Zimmerman misreads the
statute that sets out the safe harbor. According to Allstate,
that statute provides that the safe harbor applies if an
insurer sends a writing in which it states that it accepts cov-
erage and acknowledges that the only issues are the tort-
feasor’s liability and the amount owed to the insured. It is
undisputed, Allstate notes, that it sent such a writing.
The issue, once again, is one of statutory construc-
tion. ORS 742.061(3) provides that the attorney fee provision
of subsection (1) of that statute does not apply if an insurer
timely responds to a proof of loss with a writing that spells
out certain information:
“(3)  Subsection (1) of this section does not apply to
actions to recover uninsured or uninsured motorist benefits
if, in writing, not later than six months from the date proof
of loss is filed with the insurer:
“(a)  The insurer has accepted coverage and the only
issues are the liability of the uninsured or underinsured
motorist and the damages due the insured; and
“(b)  The insurer has consented to submit the case to
binding arbitration.”
In this case, it is undisputed that, within six months of the
October 3, 2008 letter that Zimmerman denominated her
proof of loss, Allstate sent her a letter that accepted coverage
and stated that “the only remaining issues” were the tort-
feasor’s liability and the amount of damages. Thus, Allstate
did all that the statute requires.
Cite as 354 Or 271 (2013) 293
Zimmerman does not dispute that Allstate sent such
a letter. She asserts, however, that Allstate’s acknowledge-
ment of the remaining issues of liability and damages was
mere “lip service” and should not be taken seriously. Zimmerman
notes that, at least by the time of trial, Allstate did not
contest the tortfeasor’s liability. As we have noted, it was
on that ground that the trial court concluded that the safe
harbor provision of ORS 742.061(3) did not apply.
The statute, however, does not by its terms specify that,
once an insurer has acknowledged that the only remaining
issues are liability and damages, an insurer is thereafter fore-
closed from conceding liability if it wants to avoid paying
attorney fees under ORS 742.061(1), and we are loath to read
such a requirement into the statute. ORS 174.010 (“In the
construction of a statute, the office of the judge is simply to
ascertain and declare what is, in terms or in substance, con-
tained therein, not to insert what has been omitted, or to omit
what has been inserted.”). As the trial court correctly observed,
such a reading of the statute “makes no sense,” particularly
in the light of the obvious purpose of the statute to provide an
incentive for insurers to settle claims.
Zimmerman alternatively asserts that, in any event,
the safe harbor does not apply because Allstate failed to agree
to arbitration, as the statute requires. Allstate points out
in response that, in its September 2008 letter, it clearly
stated that, if the parties are unable to reach agreement on
the amount of liability, Allstate “is willing to submit to bind-
ing arbitration.” Zimmerman rejoins that such a simple state-
ment is insufficient. Relying on this court’s decision in Bonds
v. Farmers Ins. Co., 349 Or 152, 240 P3d 1086 (2010), she
argues that what is required is a more formal, noncontingent
offer to arbitrate.
As we have noted, ORS 742.061(3)(b) provides that
the attorney fee provision of subsection (1) of that statute
does not apply if an insurer timely supplies a writing that
states, among other things, that “[t]he insurer has consented
to submit the case to binding arbitration.” In this case,
Allstate declared in writing that, it “is willing to submit to
binding arbitration.” That declaration adequately expressed
consent to submit to binding arbitration.
294 Zimmerman v. Allstate Property and Casualty Ins.
This court’s decision in Bonds is not to the contrary.
At issue in that case was the construction of a different stat-
ute, ORS 742.504(12)(a)(B). That statute provides that,
unless “[t]he insured or the insurer has formally instituted
arbitration proceedings” within two years of the date of an
accident, certain claims for insurance coverage will be time-
barred. In that case, the insurer sent the plaintiff policy-
holder a letter stating that, “ ‘[s]hould we disagree’ ” on issues
of liability and damage, the insurer “  ‘consents to submit
this matter to binding arbitration.’ ” 349 Or at 154. The issue
was whether the insurer’s statement that it was willing to
arbitrate amounted to “formally institut[ing] arbitration pro-
ceedings” within the meaning of the statute. Id. at 155. This
court concluded that conditional consent to arbitrate does not
amount to actually instituting arbitration proceedings. Id.
at 163-64. The court did not address, much less express a con-
clusion about, what constitutes “consent[ ] to submit to bind-
ing arbitration” within the meaning of ORS 742.061(3)(b).
We conclude that Allstate’s letter accepting cov-
erage and offering to arbitrate was sufficient to trigger the
statutory safe harbor of ORS 742.061(3). The Court of Appeals
erred in reaching a contrary conclusion.
The decision of the Court of Appeals is reversed.
The judgment of the circuit court is reversed, and the case
is remanded to the circuit court for further proceedings.