Nov 16th, 2016

Prelitigation Handling of ORS 20.080 Claims

Chris Parker

       Chris Parker

Settlement demands seeking $10,000 or less trigger possible attorney fees recovery by a plaintiff under Oregon Revised Statute (“ORS”) 20.080 – an issue often overlooked by claims handlers unfamiliar with that statute.  ORS 20.080 provides that the plaintiff recovers attorney fees on any tort claim for personal injury or property damage in which the plaintiff prevails and the alleged damages are $10,000 or less, provided the plaintiff made a demand for payment of $10,000 or less more than 30 days before commencing the action.  However, attorney fees are not recoverable if, before commencement of the action, the defendant tendered to the plaintiff an amount not less than the damages the plaintiff is ultimately awarded.  ORS 20.080 can be a useful tool for plaintiff’s attorneys, particularly in low value admitted liability cases, such as rear-end accidents.  In such cases, an offer should be made on the defendant’s behalf before suit is filed to help prevent the plaintiff’s attorney from recovering fees.

The offer must be made before suit is “commenced” to potentially prevent recovery of attorney fees.  The rule in Oregon is that an action is not commenced until it filed and served.[i]    However, the date of commencement relates back to the date of filing if the plaintiff serves the defendant within 60 days of filing.[ii]  What this means is that to protect against attorney fees under ORS 20.080, the offer must normally be made before suit is filed.  Otherwise all the plaintiff needs to do is complete service within 60 days and there will be no way to prevent plaintiff from recovering all of his or her attorney fees in the event of an adverse award.

Some claims handlers may look to the offer of judgment rule (ORCP 54 E), believing it can be used as a means of cutting off the ongoing accrual of fees after suit is filed.  However, the Oregon Supreme Court has ruled that ORCP 54 E does not prevent the ongoing accrual of attorney fees in a case filed under ORS 20.080.[iii]  In other words, once suit is filed, settling the case is the only way to prevent the ongoing accrual of attorney fees.

Claims handlers may have difficulty making an offer within 30 days of receipt of a demand letter for various reasons.  One common reason is that certain medical or billing records may appear to be missing from the demand.  ORS 20.080 addresses this issue in subsection (3), requiring documentary support for damages to be included with the demand, if reasonably available to the claimant.   However, unless something is missing that is critical to evaluating whether the plaintiff, in fact, suffered the alleged personal injury or property damage, the best practice is to make at least some offer within 30 days of receipt of the letter.

Another potential trap is assuming that the claimant’s attorney will negotiate before suit is filed.  This normally will not happen because the attorney has absolutely no incentive to respond to the defendant’s prelitigation offer.  The typical practice is for the claimant’s attorney to simply wait for the 30 days to expire, and then file a lawsuit seeking attorney fees.  Once suit is filed, an initial, low offer becomes the benchmark that plaintiff needs to improve upon to recover attorney fees.  That is not a desirable situation.  The best practice is offering at the outset the amount that the carrier determines an arbitrator[iv] will likely award, taking into account all the information available to the carrier, including the claimant’s potential comparative fault.

ORS 20.080 cases can be frustrating to litigate due to the attorney fee exposure and the inability to cut off the ongoing accrual of fees via an offer of judgment.  However, by getting a reasonable prelitigation offer in place, cases become easier to defend and resolve for what they are actually worth.  So, it is important when handling small-value claims in Oregon to be on the lookout for prelitigation demand letters sent pursuant to ORS 20.080 and to make sure to get a reasonable offer in place before suit is filed.  The demand letter may not reference the statute, so any demand of $10,000 or less should be acted on quickly.

[i] ORS 12.020(1).

[ii] ORS 12.020(2).

[iii] Powers v. Quigley, 345 Or. 432, 198 P.3d 919 (2008).

[iv] In Oregon, every case alleging $50,000 or less is subject to mandatory arbitration.  ORS 36.400.