Oregon Insurance: A Strange Party
Posted on behalf of RizkLaw on Nov 03, 2021 in Insurance Issues
Insurance is strange in that it’s a product purchasers hope to never need to use and, in many cases, never do. Apparently aware of this predicament, many insurance company advertising campaigns seek to entertain by poking fun at all that is mundane about insurance, which is, well, everything.
Bring up the topic of insurance at a cocktail party to a group and you will soon feel the wind as heads snap to check the time while others dash to hors d’oeuvres trays and restrooms. But conceptually insurance is all about parties, just 3 parties. And they are:
1. The policyholder “the first party”; 2. The insurance company “the second party”; and, in some circumstances 3. An outside “third party” making a claim.
Who makes the claim (the first or a third party) defines the claim type and the corresponding insurance coverage. Thus, a policyholder (the first party) who makes a claim against her own insurance company is making a first party claim. A homeowner who makes a claim against his own insurance company is making a first party claim. With homeowner insurance the claimant and the policyholder are one and the same. Homeowner insurance is a classic first party policy.
Auto insurance, by contrast, is a potpourri of first party and third-party coverages. An Oregon policyholder who makes a claim on his own policy for “Personal Injury Protection” (PIP) medical care or wage loss benefits, uninsured or underinsured benefits makes a first party claim. While the guy who claims he was hurt in an accident he says you caused makes a third-party claim on your policy.
Why care whether it’s a first- or third-party claim? All else being equal, first party claims are generally more powerful than claims made by third parties. The first party (the policyholder) has contractual rights against the insurance company. By contrast, third party claimants have no contractual rights to insurance benefits. But there’s more. Many Oregon laws, most notably ORS 742.061 provides for attorney fees against an insurance company who unreasonably denies PIP, UIM or UM benefits.
The classic insurance company bad faith set up in the context of a liability claim involves a well-supported demand for policy limits followed by a low or no insurance company offer. An insurance company who places its own interests ahead of its’ insured acts in “bad faith” and could be liable for “extracontractual damages” (damages more than the limits of the insurance policy). Should a jury award an amount above the policy limits of an at fault driver in this situation, the injured third party might consider purchasing the at fault driver’s rights against her own insurance company to pursue the bad faith claim.