In Richard Harris, et al. v. Safeco Insurance Company of Illinois, the U.S. District Court for the District of Oregon clarified when policyholders may recover litigation-related emotional distress damages under Oregon’s unfair settlement practices statute (ORS § 746.230(1).)
Following a house fire in August 2022, the plaintiffs filed a claim under their Safeco insurance policy for Additional Living Expenses (“ALE”). Due to delays in payment, they initiated legal action. By late 2024, the plaintiffs pursued a single claim of negligence per se, seeking both economic and noneconomic damages, including emotional distress.
Safeco sought to exclude damages tied to litigation-related emotional distress. The plaintiffs responded that their emotional-distress stemmed from Safeco’s wrongful handling of the claim, not the litigation itself, which the court found to be a factual issue for the jury. The court then addressed the plaintiffs other argument that litigation-related emotional distress damages are recoverable in cases alleging a violation of ORS § 746.230(1).
After reviewing Oregon Supreme Court precedent on the issue of emotional-distress damages in other areas and federal court precedent involving the recovery of emotional-distress damages for insurance claims, the court concluded that litigation-related emotional distress damages are only recoverable under ORS § 746.230(1)(g). This provision prohibits insurers from compelling policyholders to file lawsuits to obtain benefits, making litigation-related stress foreseeable and compensable in limited circumstances.
While emotional distress damages may be available in insurance disputes, recovery for litigation-related distress is narrowly limited to cases where an insurer’s conduct violates ORS § 746.230(1)(g). This underscores the importance of understanding the specific protections afforded under Oregon’s insurance regulations.
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