Farmers Insurance Loses $400K Arbitration Case

Minnesota Court Upholds $400,000 Arbitration Settlement in Alpine Glass vs. Farmers Suit


The U.S. District Court for the District of Minnesota issued an order on Friday upholding an arbitration settlement of more than $400,000 from Farmers Insurance and Mid-Century Insurance Company for more than 1,100 "short-pay" claims filed by Alpine Glass. The original suit by Alpine asked the court to rule that it be allowed to engage in arbitration with the insurers to settle the short-pay disputes; though Farmers had filed a counterclaim alleging that it was not liable to Alpine, the court had ordered that the companies should arbitrate the short-pay claims "in a single consolidated proceeding," according to the most recent opinion issued in the case. Farmers then motioned for the court "to vacate that award," according to court documents—and that motion also was denied with the most recent ruling.

Farmers had made several claims in its motion to have the award vacated. Among these claims, the insurer alleged that Alpine had violated Minnesota's anti-incentive statute, arguing that by promising customers "that if an insurer did not pay Alpine's bill in full, the customer would not be responsible for the difference." Farmers had argued that this was a form of an incentive to encourage the customer to purchase auto glass services, according to court documents. The court ruled against this claim as well.

In addition, Farmers had argued that no assignments of proceeds were made to Alpine Glass. (This is not the first time the assignment of proceeds issue has come up. However, previously an insurer had claimed that the assignment of proceeds clause could not apply to a glass shop. Last summer, the Minnesota Supreme Court ruled that it could.) (CLICK HERE for related story.)

However, the court dismissed this claim as well, as part of its denial of the motion, noting that it had reviewed the arbitration records in the case.

"Having reviewed that record, the Court finds that Alpine has established, by a preponderance of the evidence, that the 91 insureds did, in fact, assign their claims to Alpine. In every one of the 1,120 short-pay claims that were arbitrated-including every one of the 91 challenged claims-Farmers made a partial payment directly to Alpine," writes the judge.

The judge goes on to point out that Farmers national claims manager Michelle Keller testified that while an assignment specifically is not required, a work order must be signed by the policyholder before the invoice can be processed, and that Safelite Solutions, Farmers' claims administrator, must "look for a signed payment authorization … before it will send any payment directly to an auto glass shop."

Farmers also had argued against the arbitrator's ruling that "Farmers was paying a rate not based upon competitive pricing in the auto glass replacement industry in Minnesota" in its motion for the court to vacate the award.

However, the court ruled that under Minnesota's No-Fault Act, "an arbitrator's findings of fact are 'conclusive.'"

Farmers went on to argue that the arbitrator should have looked at each of the short-pay claims presented separately, but the judge writes that one reason for arbitration in the state is to "decrease the cost and complexity of litigation."

"The efficiencies inherent in the ability to present and consider generalized evidence are the primary reason why the Minnesota Supreme Court permits consolidation of no-fault claims in appropriate cases," writes Schiltz.

Alpine is represented by Chuck Lloyd of Livgard & Lloyd LLP in Minneapolis, along with Joshua P. Brotemarkle of Rabuse Law Firm P.A. Steven Kluz of Stoel Rives LLP and Diane B. Bratvold of Briggs and Morgan represented Farmers in the case.

STRAWN v. FARMERS INSURANCE COMPANY OF OREGON

STRAWN v. FARMERS INSURANCE COMPANY OF OREGON

MARK STRAWN, on his own behalf and as representative of a class of similarly situated persons, Plaintiff-Respondent,
v.
FARMERS INSURANCE COMPANY OF OREGON, an Oregon stock insurance company; MID-CENTURY INSURANCE COMPANY, a foreign corporation; and TRUCK INSURANCE EXCHANGE, a foreign corporation, Defendants-Appellants, and
FARMERS INSURANCE GROUP INC., a foreign corporation, Defendant.

990809080, A131605.

Court of Appeals of Oregon.

Filed: January 27, 2010.

Richard S. Yugler and Landye Bennett Blumstein LLP for petition and supplemental petition. With them on the reply was David N. Goulder.

James N. Westwood, P.K. Runkles-Pearson, and Stoel Rives LLP for response.

Before WOLLHEIM, Presiding Judge, and BREWER, Chief Judge,[ 1 ] and SERCOMBE, Judge.

SERCOMBE, J.

Petitions for attorney fees allowed in amount of $595,647.

SERCOMBE, J.

In Strawn v. Farmers Ins. Co., 228 Or App 454, 457, 209 P3d 357, rev allowed, 347 Or 258 (2009) (Strawn II), defendants Farmers Insurance Company of Oregon, Mid-Century Insurance Company, and Truck Insurance Exchange (collectively "Farmers") appealed a class action judgment awarding plaintiffs $898,323.80 in compensatory damages and prejudgment interest, $8 million in punitive damages, and more than $2.6 million in attorney fees, and a supplemental judgment awarding plaintiffs additional attorney fees. On appeal, we vacated both judgments with instructions to grant Farmers' motion for a new trial limited to punitive damages, unless plaintiffs agreed to remittitur of punitive damages to four times their compensatory damages and prejudgment interest. Otherwise, we affirmed. Id. at 488. Plaintiffs, who prevailed on appeal, now petition for attorney fees arising from and related to Strawn II and request that we make findings pursuant to ORAP 13.10(7) in support of our decision.

For the reasons explained below, we allow plaintiffs' petitions for attorney fees in part and order an attorney fee award of $542,469 for plaintiffs' "fee-shifting" claims under ORS 742.061(1), an attorney fee award of $41,136 for the common fund claims portion of the appeal, and an attorney fee award of $12,042 for plaintiffs' time litigating their initial attorney fee petition.[ 2 ] We deny plaintiffs' request for an additional incentive award to class representative Strawn.

Plaintiffs' class action claims arose out of Farmers' claims handling process with respect to the payment of personal injury protection benefits to its insureds. Plaintiffs brought claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and declaratory relief. The first three of those claims were tried to a jury. The jury found in plaintiffs' favor and awarded $1.5 million in compensatory damages and prejudgment interest and $8 million in punitive damages on the fraud claim. The court granted declaratory relief. After a post-verdict claims administration process, the judgments noted above were entered. Strawn II, 228 Or App at 457.

On appeal, Farmers raised eight assignments of error "spanning nearly every stage of the case—from the court's order granting class certification, through trial and post-verdict proceedings, to the award of attorney fees." Id. at 461-62. We affirmed in all respects except for the amount of the punitive damages award. We concluded that" a punitive damages award that is four times plaintiffs' actual or potential harm is all that due process will bear." Id. at 485. Accordingly, we vacated the judgment for punitive damages with instructions to grant Farmers' motion for a new trial on punitive damages, unless plaintiffs were to agree to remittitur of punitive damages to four times their compensatory damages and prejudgment interest. Id.

Thus, plaintiffs successfully defended the parts of the judgments relating to their contractual claims, the fraud claim, and a portion of the punitive damages. As noted above, plaintiffs rely on two different bases for an allowance of attorney fees on appeal, depending on whether the fees were incurred to defend the judgment on the contractual claims or to defend the parts of the judgment that pertained to the fraud claim and the punitive damages award. Plaintiffs rely on ORS 742.061 for a fee-shifting award arising from their contractual claims against Farmers;[ 3 ] they rely on the equitable common fund doctrine for an award to compensate class counsel for defending the verdict on their fraud claim and punitive damages recovery on appeal; they also depend on the common fund doctrine in support of their request for an incentive award for Strawn, the class representative. Lastly, plaintiffs petition for supplemental attorney fees for the time and effort they have spent seeking their fees on appeal.[ 4 ]

"[W]hen an attorney fees petition comports with the requirements of ORAP 13.10(5), * * * our inquiry into the request generally will be limited to the objections that are filed by the party opposing the petition." Kahn v. Canfield, 330 Or 10, 13-14, 998 P2d 651 (2000); see also Dockins v. State Farm Ins. Co., 330 Or 1, 6, 997 P2d 859 (2000) (Dockins II). Here, Farmers objects to both petitions for attorney fees on various grounds. Although Farmers does not object to plaintiffs' entitlement to some award of attorney fees under ORS 742.061(1), it argues that the amount of fees that plaintiffs initially requested is unreasonable. Farmers likewise contends that the amount of fees requested in the supplemental petition is unreasonable. Lastly, Farmers asserts that plaintiffs are not entitled to any award of attorney fees as compensation for work done in defense of the verdict on plaintiffs' fraud claim and the punitive damages recovery or as an incentive award for the class representative.

I. FEE SHIFTING AWARD
In their initial petition for attorney fees, plaintiffs seek $1,065,560 for their fee shifting claims under ORS 742.061(1), itemized as $969,256.80 in fees and $96,303.38 in costs and expenses. Plaintiffs' itemized fee request results from (1) the determination of the total number hours spent on plaintiffs' appeal and the multiplication of those hours by class counsel's hourly rates, resulting in a" lodestar" amount of fees; (2) the allocation of hours to distinguish time spent on plaintiffs' fee-shifting claims from time spent defending plaintiffs' common-law fraud claim and punitive damages recovery, and a reduction of the lodestar based on that allocation; (3) the application of a fee enhancement or multiplier to that reduced lodestar; and (4) a request for costs and expenses not included in that reduced lodestar. We begin our analysis of plaintiffs' fee-shifting request by noting the standard that applies to such an award. We then address each of the four steps in plaintiffs' calculation method, taking into consideration Farmers' objections.

A. Standard
ORS 742.061(1) provides for an award of a "reasonable amount" of attorney fees for work done on appeal in an action" upon any policy of insurance." In determining a reasonable attorney fee award under ORS 742.061, we consider the factors enumerated in ORS 20.075. See also Dockins II, 330 Or at 5-6 (citing those same factors as stated in DR 2-106). ORS 20.075 provides:

"(1) A court shall consider the following factors in determining whether to award attorney fees in any case in which an award of attorney fees is authorized by statute and in which the court has discretion to decide whether to award attorney fees:
"(a) The conduct of the parties in the transactions or occurrences that gave rise to the litigation, including any conduct of a party that was reckless, willful, malicious, in bad faith or illegal.
"(b) The objective reasonableness of the claims and defenses asserted by the parties.
"(c) The extent to which an award of an attorney fee in the case would deter others from asserting good faith claims or defenses in similar cases.
"(d) The extent to which an award of an attorney fee in the case would deter others from asserting meritless claims and defenses.
"(e) The objective reasonableness of the parties and the diligence of the parties and their attorneys during the proceedings.
"(f) The objective reasonableness of the parties and the diligence of the parties in pursuing settlement of the dispute.
"(g) The amount that the court has awarded as a prevailing party fee under ORS 20.190.
"(h) Such other factors as the court may consider appropriate under the circumstances of the case.
"(2) A court shall consider the factors specified in subsection (1) of this section in determining the amount of an award of attorney fees in any case in which an award of attorney fees is authorized or required by statute. In addition, the court shall consider the following factors in determining the amount of an award of attorney fees in those cases:
"(a) The time and labor required in the proceeding, the novelty and difficulty of the questions involved in the proceeding and the skill needed to properly perform the legal services.
"(b) The likelihood, if apparent to the client, that the acceptance of the particular employment by the attorney would preclude the attorney from taking other cases.
"(c) The fee customarily charged in the locality for similar legal services.
"(d) The amount involved in the controversy and the results obtained.
"(e) The time limitations imposed by the client or by the circumstances of the case.
"(f) The nature and length of the attorney's professional relationship with the client.
"(g) The experience, reputation and ability of the attorney performing the services.
"(h) Whether the fee of the attorney is fixed or contingent."
We do not find that the factors set out in ORS 20.075(1) affect the amount of the fee-shifting award. The criteria in ORS 20.075(2), however, are material, and we now turn to the application of those factors.

B. Reasonableness of Total Hours
Plaintiffs assert that the time spent by class counsel on plaintiffs' appeal was reasonable, and plaintiffs have submitted declarations by class counsel and an outside expert in support of that assertion. Plaintiffs base their fee-shifting request on 1,537 hours of appellate time and 94.4 hours of class administration time. Included within plaintiffs' 1,537 hours of appellate time are 61.55 hours that arose from and relate to a prior appeal initiated by Farmers that occurred during the course of this litigation. See Strawn v. Farmers Ins. Co., 195 Or App 679, 98 P2d 1158 (2004) (Strawn I). The 94.4 hours of class administration time represent time that plaintiffs assert counsel spent working on certain post-judgment proceedings in the trial court, communications with class members after November 23, 2005, and expenses for claims administration after December 9, 2005, necessary to the pendency of the appeal.

Farmers objects to the total number of hours spent by class counsel on appeal as excessive because the appeal involved the preparation of only a single brief and oral argument and class counsel's hours included duplicative work.Farmers argues, based on the submitted declaration of an outside expert, that class counsel's total appellate hours should be reduced to, at most, 700 hours of appellate time. Furthermore, Farmers argues that, in any event, we should refuse plaintiffs' request for fees related to Strawn I, where Farmers was designated as the prevailing party and no costs were allowed.

Plaintiffs respond that their overall time is reasonable given (1) the procedural and substantive complexity of the underlying case and the appeal and (2) the approach undertaken by Farmers on appeal. Plaintiffs note that, on appeal, Farmers had advanced eight assignments of error spanning nearly every stage of the case, it combined assignments of error that should have been separately stated, and it raised issues that it had failed to preserve. See Strawn II, 228 Or App at 461-62, 466-69, 473-75. Finally, plaintiffs reassert that time related to Strawn I is properly part of their recovery.

We agree with Farmers that the overall amount of time plaintiffs seek for litigating the appeal is excessive. Farmers has made a sufficient showing that the amount of time plaintiffs expended in this case lies outside the reasonable range for an appeal, even for a complex class action of this magnitude. We conclude that some of the time spent on preparation of the appellate brief was excessive and reduce the fees in the amount of $64,500. We also reduce plaintiffs' appellate time to eliminate the 61.55 hours that plaintiffs spent on Strawn I. Plaintiffs may only recover the fees incurred in Strawn II, where they are the prevailing party and are entitled to costs; they may not now recover the fees incurred in Strawn I, where they were not the prevailing party and were not entitled to costs. In addition, we deny plaintiffs' request for fees attributable to the 94.4 hours of class administration time. The class must instead seek a supplemental judgment in the trial court for that time. We calculate the value of plaintiffs' attorney fees on the appeal to be $373,966.

C. Allocation of Hours to Fee-Shifting Claims
Plaintiffs have made an allocation to distinguish the hours that class counsel spent on an action "upon any policy of insurance" under ORS 742.061(1)—i.e., the hours spent on their fee-shifting claims—from the hours incurred solely in connection with their claim for common-law fraud and punitive damages recovery. Plaintiffs contend that roughly 11 percent of their time was spent defending their verdict on the fraud claim and their punitive damages recovery.

Farmers objects to the allocation as made by plaintiffs and argues that 20 percent of plaintiffs' appellate time should be allocated to the nonfee-shifting claims. One of Farmers' experts contends that the allocation made by plaintiffs was unreasonable, in part, because the work necessary to defend the verdict on the fraud claim and punitive damages recovery was substantial, as demonstrated by the amount of briefing provided on those matters by plaintiffs. Farmers also contends that, in addition to the hours devoted to the fraud claim and punitive damages recovery, the hours that class counsel spent on the assignment of error concerning the mootness of the declaratory judgment claim is also not compensable under ORS 742.061(1). With respect to the declaratory judgment claim, Farmers asserts that (1) the work class counsel "performed on appeal [was] essentially procedural and so far removed from the direct object of obtaining a money judgment," as required under McGraw v. Gwinner, 282 Or 393, 578 P2d 1250 (1978), and (2) the work was unique and not duplicative of any work that advanced the actual fee-shifting claims.

In response, plaintiffs contend that Farmers' expert inflated the amount of briefing time required on the fraud claim and punitive damages recovery. In addition, plaintiffs assert that the assignment of error regarding punitive damages was one of the most straightforward assignments to respond to because the principal cases were well known, the factors to be considered were established, and one of plaintiffs' attorneys was active in participating in many recent punitive damages cases in Oregon. Thus, plaintiffs argue that despite the magnitude of the punitive damages recovery, the 11 percent allocation is reasonable. As to Farmers' objection to the inclusion of time spent on the declaratory judgment claim, plaintiffs respond that Farmers made no such argument below and that the trial court's attorney fee award included time spent on the declaratory judgment claim. Plaintiffs also assert that McGraw is inapposite.

We agree with plaintiffs that an allocation of 11 percent of plaintiffs' attorneys' time to the fraud claim and punitive damages recovery is reasonable. We also conclude that the declaratory judgment claim was related to the contractual claim and that the attorney time incurred regarding that claim was compensable under ORS 742.061. Our conclusion on the allocation issue results from the broad range of complex legal issues presented in the appeal related to the class action and the contractual claim and the relatively narrow legal issues presented with respect to the fraud claim and punitive damages recovery. The size of the respective claims does not drive the amount of legal effort necessary for their defense on appeal. Accordingly, we will allocate 11 percent of plaintiffs' appellate time—a value of $41,136—to plaintiffs' nonfee-shifting claims. Thus, plaintiffs are entitled to recover $332,830 in fees under ORS 742.061.

D. Fee Enhancement
Plaintiffs seek a fee enhancement for the services rendered by class counsel on appeal by a factor of 2.25. Plaintiffs argue that a substantial fee enhancement is reasonable given (1) the high risk and contingent nature of the case; (2) the time and effort involved; (3) the novelty and difficulty of the questions involved and the magnitude, complexity, and uniqueness of the litigation; and (4) the results achieved. They note that a factor of 2.25 was used by the trial court to enhance their award of attorney fees for services rendered at trial—an award we affirmed in Strawn II.

Farmers objects to the use of a multiplier and argues that, pursuant ORS 742.061(1), plaintiffs are entitled on appeal only to a "reasonable" fee and not the "astronomical" fees that they have requested. Farmers asserts that Oregon courts have rejected the federal lodestar and multiplier approach requested by plaintiffs. One of Farmers' experts recognizes, however, that Oregon law does support compensating counsel who take on contingent fee cases at rates exceeding their standard billing rates. Farmers' expert nonetheless contends that Oregon courts have not used that proposition as a springboard to apply a "multiplier." Despite that contention, Farmers' expert also notes that in Strunk v. PERB, 343 Or 226, 169 P3d 1242 (2007) (Strunk III), the court did apply a multiplier to calculate the fee award. Farmers' expert distinguishes Strunk III on the ground that that case involved the common fund doctrine and not a fee-9shifting statute as the basis for an award of appellate fees. Farmers' expert states that an enhancement of plaintiffs' fees is not appropriate because (1) the need to incentivize plaintiffs' counsel on appeal was less; (2) the complexity of the case was compensated by the staffing choices and hours spent by class counsel on the appeal; and (3) the risk that class counsel faced on appeal was less than the risk that they faced initially at trial. Farmers suggests that if an enhancement is allowed on the appellate fee award, it should be less than the enhancement allowed on the fees at trial.

In response, plaintiffs assert that the term "reasonable" in ORS 742.061 does not preclude the use of a multiplier or other fee enhancement. They argue that enhanced fees are available, whether reached by application of a lodestar and multiplier approach or through the increase of standard hourly rates to "reasonable rates" based on market rates and an enhancement for contingent risks. They assert that the approval of multipliers in Strunk III is not restricted to common fund cases and refer us to the award of fees, which included a multiplier, in Dockins II. Further, they argue that enhancement remains appropriate here because the case remained a" no offer" case throughout the pendency of the appeal, and, therefore, the risks remained the same on appeal.

In light of the issues framed by the parties, we first determine whether we are precluded from using a multiplier or other fee enhancement in determining plaintiffs' fee-shifting award for appellate work. If we are not so precluded, we must then determine whether application of a multiplier or enhancement is appropriate in this case. Lastly, if use of a multiplier or enhancement is appropriate, we must determine what that multiplier or enhancement should be. We begin by examining the cases relied on by the parties.

In Wattenbarger v. Boise Cascade Corp., 301 Or 12, 16, 717 P2d 1175 (1986), the claimant argued that the court should recognize that the contingent nature of attorney fees in all workers compensation claims justified a "multiplier" in representing claimants generally, regardless of the circumstances in an individual case. The court disagreed and held:

"The statute does not support a general `multiplier' for the statistical risk, but it does not foreclose a court from allowing a fee exceeding the attorney's usual hourly rate when the court finds that, in the specific case, success is sufficiently in doubt and the risk that the services will go uncompensated is so high that a higher attorney fee is reasonable."
Id.

In Griffin v. Tri-Met, 112 Or App 575, 584-85, 831 P2d 42 (1992), rev'd on other grounds, 318 Or 500, 870 P2d 808 (1994), the trial court had awarded plaintiff attorney fees at twice counsel's standard rate. Tri-Met, the defendant, argued that that award was in error and relied on federal cases where use of a "multiplier" was at issue. On appeal, we stated: "Most of that reported litigation is unhelpful and the formulas used are unduly cumbersome. Instead, we continue to review the reasonableness of attorney fee awards by using the [traditional] factors * * *." We then examined the circumstances of the case: (1) there were a limited number of attorneys willing and able to take on complex, controversial, and high risk employment cases like the one at issue; (2) the evidence showed that the plaintiffs had experienced difficulty in obtaining qualified counsel; and (3) the evidence also showed that counsel who successfully undertook such cases for a contingency fee were generally compensated at rates greatly exceeding standard billing rates for general legal services. Thus, we concluded "that there was substantial evidence supporting the attorney fees award and [held] that, under the circumstances of [the] case, the court did not abuse its discretion in awarding fees at twice counsel's standard rate." Id.

In Dockins II, the petitioners requested an attorney fee award for appellate work done in Dockins v. State Farm Ins. Co., 329 Or 20, 985 P2d 796 (1999) (Dockins I). They explained that request as follows:

"For each lawyer and legal assistant who worked on petitioners' appeal, petitioners have multiplied the number of hours they billed by a `reasonable hourly rate,' which is based on the respective lawyer's or assistant's standard rate for the work at issue. When the total fees for each lawyer and legal assistant are added, the result is the amount requested."
330 Or at 4 (footnote omitted). The "reasonable hourly rate" represented the petitioners' attorneys' standard rates multiplied by a factor that they stated represented the increased risk inherent in taking a case on a contingent fee basis. Id. at 4 n 3. The use of that factor was not objected to by the respondent, although the respondent did object to the reasonableness of the petitioners' underlying standard rates. Id. at 8, 8 n 10. The court was not persuaded by the respondent's objection and the awarded the petitioners the fees as they had been requested. Id. at 8-9.

Most recently, in Strunk v. PERB, 341 Or 175, 179, 139 P3d 956 (2006) (Strunk II), attorneys for public employees who had successfully challenged various statutory enactments revising the terms of the employees' pension plans petitioned the Oregon Supreme Court for attorney fees and costs related to the litigation that had culminated in Strunk v. PERB, 338 Or 145, 108 P3d 1058 (2005) (Strunk I). Strunk I was before the Oregon Supreme Court on six original jurisdiction petitions; it was not a case that had come to the court on appeal. 338 Or at 150. The court in Strunk II held that the petitioners' attorneys were entitled to" an award of reasonable fees" under the equitable common fund doctrine and referred the matter to a special master for findings and recommendations with respect to the fees to be awarded. 341 Or at 184-85.

In Strunk III, the court reviewed the findings and recommendations of the special master, considered the objections and responses made by the parties, and ultimately determined the "reasonable attorney fees and costs" that should be awarded. 343 Or at 247. One of the issues considered by the court in Strunk III was the respondents' assertion that "the special master erred in awarding the fee multipliers requested by petitioners' lawyers in this case." Id. at 245. The petitioners' attorneys had requested respective multipliers of 1.5 and 2.0. Id. at 233. The respondents argued that, under the common fund doctrine, "such multipliers are generally appropriate only in the face of `exceptional success.'" Id. at 245. They contended that, because the petitioners failed to prevail on all of their claims in Strunk I, they had failed to achieve "exceptional success." Id.

The court disagreed and recognized that, in common fund cases, the preserved fund itself was a primary measure of success—the preserved fund at issue in the case exceeded $1 billion. In addition, the court noted that other factors—such as the difficulty and complexity in the case, the value of the interests at stake, and the skill and professional standing of the lawyers involved—also supported an enhancement of fees. The court therefore allowed the fee awards to be enhanced by applying the respective multipliers requested by the petitioners' lawyers. Id. at 246.

Based on the above case law, it is apparent that an award of "reasonable" attorney fees does not preclude the use of a multiplier or other fee enhancement for (1) work done at trial (Griffin); (2) work done before an appellate court sitting pursuant to its original jurisdiction (Strunk III); or (3) work done on appeal (Dockins II). Such an enhancement may be applied at the beginning of the calculation process by increasing counsel's standard or basic hourly rate to a "reasonable hourly rate" for the work done given the nature of the case, as occurred in Dockins II, or the enhancement may be applied later in the calculation process by increasing a lodestar amount of fees, as occurred in Strunk III.

Regardless of the arithmetic used, what remains constant are the factors that a court will consider in determining whether a fee enhancement should be applied in calculating a reasonable fee award. Those criteria are set out ORS 20.075(2). The factors relevant to this case are: (1) the novelty and difficulty of the questions involved in the proceeding and the skill needed to properly perform the legal service; (2) the amount involved in the controversy and the results obtained; (3) the experience, reputation, and ability of the attorney performing the service; and (4) whether the fee of the attorney is contingent. We construe the last of those circumstances to include consideration of the risks undertaken by the attorney in litigating the case.

Several circumstances support an enhanced award for plaintiffs' fee-shifting claims in this case. First, and primarily, because this case remained a "no offer" case throughout the pendency of the appeal—i.e., a case where Farmers did not attempt to settle the dispute and made no tender to the class—class counsel continued to face a very significant risk that they would be left uncompensated given the contingent nature of their right to attorney fees. Second, this case presented novel and difficult questions in the context of a complex and large class action litigation. That factor is of less importance in the enhanced fee analysis because the complexity of the case is already accounted for in the number of hours spent in defending the appeal. Third, class counsel on appeal preserved in whole plaintiffs' award of compensatory damages and interest. Thus, we hold that plaintiffs are entitled to an enhanced fee award on their fee-shifting claims.

We next determine what that enhanced fee award should be. Plaintiffs have argued that we should apply a multiplier of 2.25 because that multiplier was used to enhance their fees for work done at trial. Farmers, on the other hand, urges us to evaluate the overall reasonableness of the award and asserts that the use of the multiplier requested results in astronomically unreasonable fees.

We do not agree with plaintiffs that a multiplier of 2.25 is appropriate simply because that multiplier was used by the trial court in awarding fees for the work done at trial. Appellate work is not identical to trial work. As the prevailing party at trial and the respondent on appeal, plaintiffs were entitled to certain favorable standards of review. The prosecution of the case at trial was more risky than the defense of the judgments on appeal. In addition, plaintiffs' efforts in arguing from a closed record on appeal cannot be equated with their efforts in creating that record at trial.

In Strunk III, the court approved the use of multipliers of 1.5 and 2.0 for work done in the Strunk I litigation. 343 Or at 233, 246. As noted above, those enhancements resulted from consideration of the result achieved, the difficulty and complexity of the issues involved, the value of the interests at stake, and the skill and professional standing of the lawyers involved. Id. at 246. Because some of those same factors support an enhancement in this case, we conclude that a similar enhancement factor is appropriate. In choosing an enhancement factor, we are sensitive to the declarations of class counsel regarding their standard billing rates as compared to the rates of their peers. Plaintiffs' lead attorney notes that class counsel's standard billing rates in this case are below the rates of many attorneys of similar training, experience, and skill. Specifically, the rates for plaintiffs' attorneys range from $200 to $400 per hour. Plaintiffs' lead attorney notes that standard billing rates of his peers can range from $450 to $590 per hour.

The ORS 20.075(2) factors in this case, however, suggest a lower multiplier than the one allowed in Strunk III. Strunk III involved the recovery of a substantially greater sum of money for the plaintiffs, the creation of a new record before the special master, and issues that were somewhat more complex than this case. For those reasons, we hold that an enhancement factor of 1.6 is appropriate for the appellate work done in this case. Thus, plaintiffs' enhanced lodestar amounts to $532,528 in fees.

E. Costs and Expenses
Plaintiffs request additional costs and expenses that are not included in their hourly rates. Included in their cost and expense request were unpaid invoices for class action administration services since November 23, 2005, in the amount of $23,526.50, as well as future expenses for class administration services in the amount of $62,836. In Willamette Prod. Credit v. Borg-Warner Acceptance, 75 Or App 154, 159, 706 P2d 577 (1985), rev den, 300 Or 477 (1986), we stated:

"In setting a reasonable attorney fee for the prevailing party, it is appropriate for the court to take into consideration the actual billing practices of the party's attorney. Traditionally, courts simply have determined fees based on the hourly charge for the attorney working on the case with the assumption that the hourly rate was set to recoup overhead and realize a profit. Modern electric accounting methods allow a more specialized billing for attorney fees. Courts should recognize the reality of modern legal business practices and include expenses specially billed to the client in the attorney fees award when they are properly documented and are reasonable."
We therefore will partially allow plaintiffs' request for costs and expenses as part of their attorney fees award in the amount of $9,941. We deny plaintiffs' requested costs and expenses in the amount of $86,362, the extent to which they relate to class administration. As with the hours related to class administration, the class must seek a supplemental judgment in the trial court for those expenses.

II. COMMON FUND AWARD
Plaintiffs also request an increase in the amount of the allocation to class counsel from the punitive damages recovery under the equitable common fund doctrine. They assert that this common fund award would compensate class counsel for their efforts in defending on appeal the award on plaintiffs' fraud claim and the punitive damages recovery. Plaintiffs request that we enhance such a common fund award by a factor of 2.25, for the same reasons that support enhancement of their fee-shifting award.

Farmers objects to plaintiffs' request for a common fund award. Farmers argues that it should be denied because class counsel's effort on appeal did not preserve the punitive damages recovery in its entirety. Rather, the recovery was reduced on appeal by more than half.

Plaintiffs respond that they clearly "preserved" a common fund on appeal. They note that Farmers sought to eliminate the fund entirely or, in the alternative, to reduce the fund to an amount equal to the compensatory damages recovery. Instead, both challenges were rejected in Strawn II and a fund four times the amount of the compensatory damages was preserved.

Whether plaintiffs here are entitled to attorney fees on appeal under the equitable common fund doctrine where their class counsel partially preserved a fund after its creation at trial is a question of first impression. The common fund doctrine under Oregon law was discussed in State Farm Mut. Auto. Ins. v. Clinton, 267 Or 653, 657, 518 P2d 645 (1974), where the court recognized:" It is * * * a well-established rule in Oregon that an attorney whose efforts result in the recovery of a fund payable to various persons is entitled to payment of reasonable attorney fees from that fund." More recently, in Strunk II, the court concisely summarized the principles supporting the common fund doctrine. The court stated:

"Under the common fund doctrine, plaintiffs whose legal efforts create, discover, increase, or preserve a fund of money to which others also have a claim, may recover the costs of litigation, including their attorney fees, from the created or preserved fund. As commentators have noted, the doctrine is primarily `employed to realize the broadly defined purpose of recapturing unjust enrichment.' In other words, the doctrine is used to spread litigation expenses among all beneficiaries of a preserved fund so that litigant-beneficiaries are not required to bear the entire financial burden of the litigation while inactive beneficiaries receive the benefits at no cost."
341 Or at 181 (citation omitted).

Although Oregon courts have not spoken on the issue of when a party is entitled to attorney fees on appeal under the common fund doctrine where the fund is created below and preserved on appeal, other courts have addressed the issue. The Washington Supreme Court in Bowles v. Wash. Dept. of Ret. Systems, 121 Wash 2d 52, 75, 847 P2d 440 (1993), declined to award such fees. In that case, a class action, the plaintiffs' attorneys requested attorney fees for their work on appeal under the common fund doctrine. The court stated:

"Under the percentage of recovery approach, the attorneys are to be compensated according to the size of the judgment recovered, not the actual hours expended. The plaintiffs have not increased the size of their recovery on appeal, thus we have no basis to increase their fees."
Id. Similarly, in Okeson v. City of Seattle, 130 Wash App 814, 828, 125 P3d 172 (2005), the plaintiff asked for attorney fees on appeal under the common fund doctrine. There too, the court denied the request and relied on the reasoning in Bowles. The court declined to award additional fees from the common fund because the trial court had awarded attorney fees on a "percentage of recovery" basis and the plaintiff had not increased the size of the recovery on appeal. Id. We find that reasoning helpful, and it informs our analysis below.

At this point, it is worth noting that, in the context of fee awards made under the common fund doctrine, concerns arise that (1) class counsel may be acting in conflict with the interests of the class in requesting an award from the recovered or preserved fund and (2) the parties may lack adversity where the prevailing party's award comes from a fixed fund and is not separately taxed on the opposing party. The Alaska Supreme Court most recently recognized these dual concerns in State Dept. of Health v. Okuley, 214 P3d 247 (Alaska 2009). There, the court stated:

"We have recognized the `potential lack of adversity when class counsel asks the trial court to impose fees on the benefitted class members under the common fund doctrine.' Because of this potential lack of adversity, as well as the potential for conflicts of interest between the class and class counsel, we have explained that `[c]ourts should * * * closely scrutinize applications for attorney's fees from a fixed fund.'"
Id. at 252 (footnotes omitted). Because those same dual concerns are present here, we likewise closely scrutinize plaintiffs' request for additional fees from the punitive damages recovery.

We begin our scrutiny of plaintiffs' request by examining the award of attorney fees below. The initial opinion and order of the trial court regarding attorney fees indicates that the court initially awarded class counsel attorney fees for work done at trial on a percentage of recovery basis. Specifically, the court awarded class counsel 20 percent of the $8 million punitive damages recovery, amounting to $1.6 million, and 38 percent of the nonpunitive damages recovery, amounting to $1.575 million. The trial court, in explaining the total award of $3.175 million, also stated: "Viewed from another perspective, this award is essentially equivalent to the attorneys receiving the entire Fee-Shifting Award of $2,670,000 plus another $505,000 from the common fund for a total of $3,175,000."

Subsequently, the trial court entered an order regarding the reallocation of punitive damages. That subsequent order, in part, modified the initial opinion and order regarding attorney fees. First, the trial court vacated the last two pages of its initial opinion that had determined the specific percentages—20 percent and 38 percent—of the punitive damages and nonpunitive damages recoveries to be awarded as fees. Second, it ordered that class counsel was to receive the entire statutory fee award of $2,670,000. Third, it ordered that, from the $3,200,000 in punitive damages available to the prevailing party, class counsel was to receive $505,000 in addition to the statutory fee award.

Were we to construe the award of attorney fees made by the trial court as a fee award made on a percentage of recovery basis, we would decline to award plaintiffs an additional award from the punitive damages recovery because plaintiffs have not increased their punitive damages recovery on appeal. However, given the procedural history of the trial court's attorney fee award, we conclude that the trial court's award was not based on a percentage of the recovered punitive damages. We conclude that plaintiffs are entitled to attorney fees for preserving a significant portion of the punitive damages common fund. The amount of fees incurred, 11 percent of the fees calculated earlier for the fee-shifting award, is $41,136. Given the reduction in the amount of allowed punitive damages as a result of the appeal, and the lack of complexity of the legal issues involved, we decline to enhance those fees under ORS 20.075(2)(a) and (d).

III. INCENTIVE AWARD
Plaintiffs have also requested that an incentive award of $5,000 be made to the class representative, Strawn. Plaintiffs argue that an incentive award of this type is usually viewed as an extension of the common fund doctrine and has been described as a litigation expense.Plaintiffs propose that the award be made from the interest accrued on the compensatory damages portion of the underlying judgment. Plaintiffs argue that Strawn should receive such an incentive award because he (1) participated in numerous status conferences, meetings, and strategy sessions regarding the appeal over the four years the case has been pending on appeal; (2) attended the oral arguments on behalf of the class members; (3) was directly involved in making significant decisions affecting the interests of class members; and (4) remained exposed to substantial personal financial risk for Farmers' appellate costs and disbursements if the class had not prevailed on the appeal. Plaintiffs also contend that, although Strawn did not agree to serve as class representative for the purpose of receiving an incentive award, he is nonetheless entitled to such an award for his time, effort, and personal risk.

Farmers objects to plaintiffs' request for an incentive award on the ground that there is no authority in Oregon for providing Strawn with such an award. Further, Farmers argues that, even if there were a basis for such an award in the abstract, plaintiffs have failed to present sufficient evidence, such as a record of the amount of time that Strawn spent on the appeal, to support allowing an award in this case. Farmers contends that inferences drawn from class counsel's billing records show that class counsel communicated with Strawn only briefly about the appeal process and that there is no evidence that his participation was at all necessary to the appeal.

Plaintiffs respond that an incentive award was allowed at trial and that Farmers did not challenge that award in Strawn II. Plaintiffs state that incentive awards have been made in numerous class actions and that the lack of Oregon case law authorizing such awards is explained by the fact that no other class actions have been fully litigated in Oregon state court. Lastly, plaintiffs contend that Farmers "speciously denigrates risk of a judgment against * * * Strawn personally for Farmers' appellate costs, as well as Farmers' trial costs, had the judgment been reversed."

It is correct that Oregon case law has not addressed the circumstances in which an incentive award may be granted to a class representative. And, the issue presented here—whether an incentive award may be granted to the class representative following an appeal in which the class prevails, as opposed to following a trial or settlement in which the class prevails—is specifically an unanswered question. For helpful guidance on those issues, we turn to how other courts have addressed incentive awards.

The Ninth Circuit, in Rodriguez v. West Publishing Corp., 563 F3d 948, 958-59 (9th Cir 2009) (emphasis omitted), summed up the circumstances in support of granting an incentive award as follows:

"Incentive awards are fairly typical in class action cases. See 4 William B. Rubenstein et al., Newberg on Class Actions § 11:38 (4th ed. 2008); Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 U.C.L.A. L. Rev. 1303 (2006) (finding twenty-eight percent of settled class actions between 1993 and 2002 included an incentive award to class representatives). Such awards are discretionary, see In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir. 2000), and are intended to compensate class representatives for work done on behalf of the class, to make up for financial or reputational risk undertaken in bringing the action, and, sometimes, to recognize their willingness to act as a private attorney general. Awards are generally sought after a settlement or verdict has been achieved."
In addition, the Seventh Circuit, in matter of Continental Illinois Securities Litigation, 962 F2d 566, 571 (7th Cir 1992), addressed the rationale behind incentive awards by stating that, "[s]ince without a named plaintiff there can be no class action, such compensation as may be necessary to induce him to participate in the suit could be thought the equivalent of the lawyers' nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable."

Bearing in mind that understanding of the purposes of incentive awards, we now decline to grant such an incentive award to class representative Strawn in this case. First, as noted by the Ninth Circuit in Rodriguez, incentive awards are generally sought—and thus awarded—after a settlement or verdict has been achieved in the class's favor. We therefore question the propriety of granting plaintiffs' request for an incentive award following an appellate judgment in the class's favor. Second, even if we were to assume that the common fund doctrine would authorize such an incentive award in the abstract following an appellate judgment, we agree with Farmers that plaintiffs have failed to present sufficient evidence to support their requested award in this case. Besides the bare assertions in the fee petition regarding Strawn's participation in the appeal, class counsel's billing records indicate that, at most, only 23.8 hours of their efforts may have involved consultation with Strawn and his attendance at oral argument. Furthermore, it is far from evident that any degree of participation by Strawn was necessary to the appeal, unlike the responsibilities of the class representative during the trial phase of the litigation. For those reasons, we decline to award Strawn the requested incentive award.

IV. SUPPLEMENTAL FEES AWARD
Lastly, plaintiffs have submitted a supplemental petition for an additional award of $32,597.48, itemized as $32,332.50 in fees and $264.98 in costs and expenses. Plaintiffs contend that they are entitled to fees for the time and effort that they have spent litigating their initial fee petition—so called "fees on fees"—and they cite Crandon Capital Partners v. Shelk, 219 Or App 16, 42-43, 181 P3d 773, rev den, 345 Or 158 (2008), and Emerald PUD v. Pacificorp, 104 Or App 504, 507, 801 P2d 141 (1990), rev den, 311 Or 222 (1991) as precedent for such an award. Plaintiffs argue that they have amassed a combined lodestar amount of $14,370 in fees as part of the fee application and litigation process, $2,590.50 of which represents additional class administration time. Plaintiffs have requested that we enhance their supplemental fees by a factor of 2.25.

Farmers objects to the supplemental petition and argues that plaintiffs are not entitled to a multiplier of 2.25 for the reasons expressed in its objections to the fee-shifting award. Lastly, Farmers suggests that, when ruling on the supplemental petition, we should consider "the overstatement and duplication of fees" in plaintiffs' initial petition.

As an initial matter, we note that the cases cited by plaintiffs in support of their supplemental petition themselves rely on ORCP 68 as the authority for "fees on fees." In those cases, we reasoned that the process of recovering fees was properly considered part of the "prosecution of an action" for purposes of a fee petition under ORCP 68. Crandon Capital Partners, 219 Or App at 42-43 (quoting Johnson v. Jeppe, 77 Or App 685, 688, 713 P2d 1090 (1986)); Emerald PUD, 104 Or App at 507 (also quoting Johnson). Thus, the precedent cited by plaintiffs, which addresses "fees on fees" at the trial level, is not directly applicable in determining their supplemental fee request on appeal. Authority for such fees must be found elsewhere.

Here, plaintiffs' supplemental fee request is based on ORS 742.061(1), which provides that "a reasonable amount * * * as attorney fees shall be taxed as part of the costs of the action and any appeal thereon." The question we are therefore presented with is whether the process of recovering fees for appellate work may properly be considered part of the "appeal" for purpose of a fee petition authorized by ORS 742.061(1). We now hold that such "fees on fees" are available because the process of litigating the fee petition for appellate work is properly considered part of the appeal.

We therefore allow plaintiffs' supplemental petition for fees in part, in the amount of $11,777. We deny the request for fees attributable to class administration time; plaintiffs must instead seek a supplemental judgment in the trial court for that time. We also decline to enhance plaintiffs' fees for the relatively routine work of litigating a fee petition. Lastly, we allow plaintiffs' supplemental request for costs and expenses not included in their hourly rates in the amount of $265.

Petitions for attorney fees allowed in amount of $595,647.

Source: leagle.com

Has Farmers Insurance lost its integrity and ethics in claims handling and treatment of employees?

A now-former Farmers insurance adjuster who became increasingly agitated over a company mandate to specify aftermarket parts and require discounted body shop pricing in his estimates – eventually taking allegations of wrongdoing to the state’s insurance department – has been denied whistleblower status by a California appeals court, which ruled that his dismissal was justified and he is now liable for Farmers’ legal expenses.

After losing a wrongful termination lawsuit at the trial court level, Beau Yeakel argued his contentions before a Second Appellant District panel.

Testimony in the case centered around a series of escalating verbal confrontations that Yeakel had with his supervisors, culminating in a sexually graphic telephone message left on a manager’s voice mail. Yeakel said he made the remark thinking that his attempted call had been disconnected. It had not been, and the offending language was recorded and shared up the chain of command.

Farmers’ executives testified that Yeakel had been repeatedly “counseled” about his behavior, yet objectionable incidents continued.

Working in Ventura and Santa Barbara counties, Yeakel’s supervisors were Gabe Snyder Barbara Mann.

According to case transcripts, Yeakel objected to Farmers’ practices that he said involved using alternative or aftermarket parts in the repairs where possible, to include a discounted price for the use of original equipment manufacturer parts, and to include a discounted labor rate that was less than the prevailing rate charged by the local repair shops.

Neither Yeakel nor his lawyer was available for comment. A phone listing for Yeakel rings into a fax machine; his lawyer did not respond to repeated messages.

At various times between 2003 and 2005, according to the court documents, Yeakel complained to Snyder and Mann that none of the shops in his assigned territory would agree to the parts and labor discounts sought by Farmers. Yeakel believed that the inclusion of such discounts in his estimates eroded his credibility with the repair shops and created additional work for him when he had to rewrite the estimates to eliminate the discounts.

In his complaints to his supervisors, Yeakel also expressed frustration that Farmers’ discount practices were adversely affecting his performance evaluations. As described by Yeakel, the discounts were considered in Farmers’ “key performance indicators,” which was a compilation of the criteria against which a claims representative’s performance was measured and upon which performance reviews and pay raises were based.

Yeakel had several heated discussions with Snyder about his performance reviews because Yeakel felt that he was being unfairly rated based on discounts that no repair shop would accept. Yeakel also voiced his opinion that aftermarket parts did not fit properly in the repaired vehicles and that Farmers’ parts discount was “unethical.”

In response to Yeakel’s complaints, Snyder advised him that these were the company’s orders and that Yeakel was required to comply with them.

In late 2004 or early 2005, Yeakel also complained to Rosanna Ortiz, Farmers’ human resources operations specialist, about the parts and labor discounts as they related to his performance ratings. Among other issues, Yeakel indicated that the parts discount was making his workload insurmountable. In response, Ortiz told Yeakel that Farmers reserved the right to do business in any way it decided.

Yeakel raised additional concerns about Farmers’ business practices when he was counseled by his supervisors for various performance and behavioral issues, according to the court’s documentation.

For example, in July of 2004 Snyder issued a written warning to Yeakel for his poor performance in failing to timely process claims and his inappropriate behavior during a discussion with Snyder about performance concerns. Upon receiving the written warning, Yeakel remarked to Snyder that Farmers had “lost its integrity and ethics in claims handling and treatment of employees.”

In January of 2005, Mann held a unit meeting in the Ventura office during which she asked employees in attendance to provide referrals for an open position at Farmers. Yeakel replied that he would not refer anyone to the company because he had too much integrity and did not feel the workload was manageable.

Mann later met privately with Yeakel and counseled him that his comment at the meeting was not appropriate. Yeakel in turn voiced his frustration with Farmers, telling Mann “when you start affecting people’s performance reviews because they can’t get parts discounts in an area where they can’t get discounts offered, how can you improve on that?”

In addition to his internal complaints to management, Yeakel also contacted the Department of Insurance about Farmers’ business practices. Specifically, in 2001, Yeakel called the Department of Insurance to inquire about the process involved in investigating Farmers’ parts and labor discounts. During that call, Yeakel communicated his belief that Farmers was using an improper parts discount and a labor rate that was less than the prevailing rate.

However, Yeakel decided not to file a formal complaint with the agency because an agency representative advised him that his complaint could not be kept anonymous. Yeakel never told anyone at Farmers that he had contacted the Department of Insurance, and he has no knowledge that anyone at Farmers was aware of his call, according to testimony in the case.

Things came to head in February of 2005, when Yeakel left the ill-fated accidental voice mail message after attempting to reach Snyder three times. ABRN will not publish the content of the voice mail; suffice to say it was rude and crude.

When Snyder retrieved his messages, he heard Yeakel’s recorded insult. Snyder then shared the recording with Mann, who was offended by Yeakel’s words and believed them to have a sexual meaning.

A few days later, Mann met privately with Yeakel and played the voice mail message for him. Yeakel was shocked to discover that his statement had been recorded. He admitted to Mann that he inadvertently had left the message on Snyder’s voice mail system and apologized for doing so. He also offered to resign rather than have the matter written up in his file.

Mann, however, told Yeakel that resignation was not necessary. She indicated that she would have to report the matter to Farmers, but said to Yeakel, “‘give me some time, and I’ll see what we can do about it.’” Yeakel later apologized to Snyder for his actions in leaving the message. Snyder assured him that he was not offended.

Due to the nature of the voice mail message, Mann referred the matter to Farmers’ human resources department. Mann also directed Snyder to prepare a memo documenting Yeakel’s various performance and behavioral problems since 2004.

The subsequent memo from Snyder in March of 2005 included a reference to the written warning issued to Yeakel in July of 2004, and to Yeakel’s oral statement in response to that warning that the company had “lost its integrity and ethics in claims handling and treatment of employees.”

After reviewing a draft of Snyder’s memo, Mann approved it for distribution to the human resources department, where it was determined that the message had a sexual meaning in violation of the company’s harassment policy and code of business ethics.

The wheels of dismissal were thus set in motion.

In March of 2006, Yeakel filed the wrongful termination lawsuit. In an amended complaint, Yeakel alleged that Farmers had policies that prohibited him from disclosing perceived unlawful conduct by the company to government agencies. He also alleged that Farmers wrongfully terminated his employment in retaliation for his refusal to participate in Farmers’ estimating practices because he reasonably believed that such practices violated state law.

The trail court judge granted a summary judgment in favor of Farmers and against Yeakel, who appealed the ruling.

The appellate panel denied his claims. “We conclude that the trial court properly granted summary judgment because Yeakel could not identify any policy of Farmers that prohibited disclosures of perceived unlawful activity to government agencies, nor could Yeakel demonstrate that he had a reasonable belief that Farmers’ business practices were unlawful.”

Source abrn.search-autoparts.com

Farmers Insurance Fined $10,000

Farmers Insurance fined for rerating policies using credit scores
By Brent Hunsberger, The Oregonian
December 03, 2009, 1:51PM
The Oregon Insurance Division has fined Farmers Insurance Co. of Oregon $10,000 for altering consumers' insurance premiums based on their credit scores.

The penalty, handed down late last month, stems from Farmers' three-year practice of using a consumer's credit history to re-rate their auto and homeowners' insurance policies when they renewed. In more than 1,000 cases, the re-ratings resulted in higher premiums, the state's final order says.

Oregon law allows insurers to use credit scores as part of its criteria for refusing initial coverage or determine your rate. But it bars insurers from using credit history or an insurance score at renewal to re-rate a personal insurance policy, unless the consumer asks.

Farmers' spokesman Jerry Davies said via e-mail that a programming change in early 2006 "caused an undetected system issue. Unfortunately, the system issue caused our
mechanical system to stop working correctly.

The case stems from a consumer complaint the division received in July 2008 about poor service. In the process of investigating, state officials discovered Farmers' practice, said Ron Fredrickson, manager of the division's consumer advocacy team.

The improper reratings took place between January 2006 and Feb. 13, 2009 on 8,385 instances, state officials said. In 1,050 of those cases, the re-rating resulted in an increase in premiums.

Farmers has refunded consumers a total of $64,840, division spokeswoman Cheryl Martinis said. Customers with policies still in force were issued credits, Davies said. Farmers also is making changes to its computer system, state officials say.

To see other actions taken this year against insurers in Oregon, visit the insurance division's Web site.

-- Brent Hunsberger

Farmers Insurance Company of Oregon Final Order

Source: oregonlive.com

Farmers Insurance to Slash 754 Jobs

Another blow to the San Fernando Valley economy: Jobs will be slashed at the Woodland Hills office of low-cost auto insurer 21st Century as the company’s operations are consolidated with its new parent, L.A.-based Farmers Insurance Group.

Farmers says it expects to cut 554 of 979 jobs at the Woodland Hills location by the end of this year, and 200 more by the end of 2010, my colleague Marc Lifsher reports.

Full story at latimes.com

Farmers Insurance "Not Evaluating My Daughter's Claim Appropriately"

Let me begin by saying that I have been an insurance adjuster for over 12 years. I know how to evaluate an injury claim.

My 17 year old daughter was a passenger in my car that was being driven by her boyfriend when he crashed head on into a tree totalling my car and injuring my daughter. The Farmers adjuster has been responsive to me but is not evaluating my daughter's claim appropriately. I have tried and tried to talk to him about it but he is not moving in his negotiations! I sent a letter to the WA Insurance Commissioner (copy is attached) and they responded that although they do not agree with Farmers' evaluation of my claim, they can not do anything to help me.

I met Rob Dietz while traveling last week (a little miracle). As you may recall, he played a crutial role in the lawsuit against Farmers for using Colossus bodily injury evaluation program. He told me that he had just found out that Farmers is using another evaluation program called "Claims Management." This needs to be made known to the public and I'm not sure how to do it. I can not believe that Farmers lost a law suit for using Colossus and had to pay over $60 million and now they are using ANOTHER evaluation program. This is unethical at best!

I feel like I am being forced to hire an attorney to represent my daughter against MY OWN INSURANCE POLICY!!!

Help!!

Yvette Baldwin
Parent of Jacqueline Trevino

Farmers Insurance broke the law by failing to disclose a $5 service charge

Court: Farmers Insurance broke law, can keep money
The Associated Press 12:58 p.m. December 11, 2008
SANTA ANA, Calif. — A California appeals court says Farmers Insurance broke the law by failing to disclose a $5 service charge – but the company won't have to pay back more than $115 million it collected.
The 4th District Court of Appeal in Santa Ana ruled Tuesday that Farmers did violate a state code by failing to disclose the $5 it adds to monthly premiums to cover billing costs. The fee isn't charged to customers who pay the premium in a lump sum.
A class-action lawsuit accused Farmers of unfair competition and a lower court in San Diego ordered it to repay policyholders about $115.6 million.
But the appellate court threw out the award, saying the plaintiff lacked standing to sue because he didn't show he would have rejected the policy because of the fee.

Source: signonsandiego.com

Farmers Insurance Ranks Below Industry Average for Auto Claims Satisfaction

According to J.D. Power and Associates 2008 Auto Claims Satisfaction Study, Farmers Insurance ranked below the Industry Average in Customer Satisfaction.

The 2008 Auto Claims Satisfaction Study is based on 11,671 responses from auto insurance customers who filed a claim within the past 12 months. The study excludes customers who only had glass/windshield, theft/stolen vehicle, roadside assistance or bodily injury claims. The study was fielded from July to August 2008.

The study finds that implementing 10 specific service practices has a considerable impact on overall satisfaction
with the claims process. They are:
• Answering all customer questions
• Managing expectations regarding the settlement
• Expressing genuine concern
• Avoiding negotiated settlements
• Providing flexible appraisal appointments
• Returning phone calls
• Sharing information between representatives
• Providing proactive updates
• Ensuring customer is at ease with claims process
• Giving customers a time line and meeting it

For details see: J.D. Power and Associates 2008 Auto Claims Satisfaction Study

Insurance Industry Exposed - Tricks Of The Trade

In this, its fourth report on the multi-trillion dollar insurance industry, the American Association for Justice (AAJ), an association of trial attorneys, is making no friends with the insurance industry.

Entitled, "Tricks of the Trade: How Insurance Companies Deny, Delay, Confuse and Refuse," the new report describes some of the most egregious ways the insurance industry puts profits over people. This, despite the fact that the industry makes about $30 billion in profits a year and pays its CEO more than any other industry.

How is the consumer hurt?

AAJ researchers studied thousands of claims and news reports spanning a decade across the country.

Last July, “The Ten Worst Insurance Companies in America,” named Allstate Insurance at the top of a list of insurance companies that employ tactics to reduce payments to customers.

In both 2006 and 2007, “A Pattern of Greed” reports also criticize the insurance industry.

In “Tricks of the Trade” AAJ found a similar pattern including:

Denying Claims - While the big insurers such as State Farm, AIG and Allstate deny claims to consumers, they reward employees who deny the claims. Employees who do not agree are dismissed. AAJ says “When all else failed, [the companies] engaged in outright fraud to avoid paying claims.”
Example – 60-year-old Ethel Adams of Seattle had a $2 million policy with a subsidiary of Farmers. The company denied her auto accident claim, saying that the driver of the car who caused the accident was acting deliberately in a moment of “road rage”.

Delay Until Death – As many claimants are in ill health and are elderly, to delay is often to deny. AAJ says that insurance companies have locked paperwork up indefinitely. A claimant will either give up, or die.
Example – Some of the most “shameful” delays of coverage are in the area of long-term care, the report says. The case of 77-year old Mary Rose Derks from Montana is one example. Her family sold their small business after Conseco denied the claim for more than four years.

Employees at Conseco have testified deliberately mailing the wrong forms and then denying claims based on incorrect paperwork.


Discriminate by Credit Score - It’s not commonly known that insurance companies will use a credit score to determine if you should receive insurance at all. People with little credit, such as the poor and senior citizens, or people who pay with cash, are disproportionately discriminated against under this policy.
Example - When Kathryn Perry, a Wimberley, Texas nurse fell behind on her bills after her daughter was murdered, her credit score suffered. The insurance company raised her auto insurance rate nearly 500 percent. Her yearly premium went from $437 to $3,000. “They are victimizing the victims,” Perry told lawmakers before the Texas House of Representatives.”



Canceling on the Sick – Some policies have been canceled retroactively or rescinded when someone is sick and their condition makes treatment expensive. Often employees who meet the “cancellation goals” are offered bonuses.
Example - Patsy Bates, a 51-year old hair dresser from California was suddenly without insurance after Health Net, Inc rescinded it in the middle of breast cancer treatment. Health Net said her application information wasn’t correct. A sales rep had filled out the paperwork while she styled someone’s hair. Bates had to stop chemotherapy until she could find a charity to help pay for it.

Last February, Bates won a $9.4 million judgment against HealthNet after it canceled her policy during chemotherapy treatment.

Following the negative publicity that surrounded her case, California health insurers were told to reinstate the health policies of 26 people who were thrown off the roster for coverage after the insurer claimed they lied.

Canceling for a Call – Need to ask a question of your insurer? You might rethink that. AAJ finds that the insured can have their policies canceled if they even inquire about making a claim.
Some insurers consider inquiries the same as filing a claim and have dropped customers.

Earlier this year, the Consumer Federation of America (CFA) came to the very same conclusions about the insurance industry as AAJ. The group was joined by several state and national consumer organizations in issuing its report and finding that during a three-year period, from 2004 to 2007, the industry recorded profits at more than $253 billion.

The South Carolina State Supreme Court sums it up best. “Insurers generally are attempting to convince the customer when selling the policy that everything is covered and convince the court when a claim is made that nothing is covered.”

So What Can You Do?

Reading your policy carefully is a good start. Know what is covered and what is not.

Know how to appeal a denial from your insurer.

When filling out any insurance form, make sure all of the information is correct. An error might serve as a basis to cancel the policy.

If you get a check back after being canceled, do not cash it. That might send the message that you have accepted their offer.

Everything should be put in writing including the name of the company representative and what they told you. Keep records of all correspondence and bills.

Do not give up, AAJ recommends.

And when you hit a brick wall, contact your state insurance department. While they will not represent you in a private matter (only an attorney can, or you can represent yourself), they may still help you. #

Source: injuryboard.com

Paul Hopkins Named Chairman of Farmers Group, Inc.; Bob Woudstra Named Farmers Group, Inc. CEO

LOS ANGELES, Nov 18, 2008 /PRNewswire via COMTEX/ -- Paul Hopkins, Chief Executive Officer (CEO) of Farmers Group, Inc., a Los Angeles-based subsidiary of Zurich Financial Services Group (Zurich), has been promoted to Chairman of the Board of Farmers Group, Inc. In addition, Mr. Hopkins will assume responsibilities overseeing Zurich's Latin America operations.
Bob Woudstra, who currently is President and Chief Operating Officer for Farmers Group, Inc., has been named to succeed Mr. Hopkins as Farmers Group, Inc. CEO.
Mr. Hopkins, who joined Farmers in 1978 as a Farmers agent and subsequently became a Farmers employee where he held positions of increasing responsibility in the sales and marketing areas, credited the company's success during his tenure as CEO to its agents, district managers and employees.
"Farmers' success has been a true team effort and I would like to thank members of our leadership team; our entire employee and agency force; and the men and women who have served on our Boards for their passion, enthusiasm and support," Mr. Hopkins added.
Mr. Hopkins was quick to praise Bob Woudstra, his successor as Farmers Group, Inc. CEO, for his leadership role in the company's recent growth and success.
"Bob Woudstra is an experienced and talented leader with 35 years of service to Farmers and to Foremost Insurance Co., making him uniquely qualified to take charge of this great organization. Bob has made crucial and substantial contributions to Farmers' strong performance. I am confident this is the beginning of even greater things for Farmers," Mr. Hopkins said. "Bob will continue the momentum and add his own visionary imprint as he leads Farmers into the future."
Farmers Group, Inc. is a wholly owned subsidiary of Zurich Financial Services, an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Farmers(R) is the nation's third- largest Personal Lines Property & Casualty insurance group. Property and casualty products are underwritten and issued by the Farmers Exchanges and their subsidiaries, which Farmers Group, Inc. manages but does not own. Headquartered in Los Angeles, Farmers provides homeowners, auto, business, specialty products, life insurance and financial services to more than 10 million households. For more information about Farmers, visit our Web site at http://www.farmers.com.
Paul N. Hopkins is a member of the Group Management Board of Zurich Financial Services (Zurich) and President U.S. Personal Business. He joined the Farmers organization in 1978 as an agent and subsequently became a Farmers employee, where he held positions of increasing responsibility in the sales and marketing area.
In 1992 he transferred to the Los Angeles Regional Office as Assistant Vice President, Regional Operations. He became Vice President, Agencies in 1995, and Senior Vice President, Agencies two years later. Hopkins was assigned as Senior Vice President and Chief Marketing Officer in 1998, a position he held until January 1, 2000, when he was appointed Senior Vice President of State Operations. His next assignment, as Senior Vice President of Strategic Alliances, became effective April 2001. In August 2002, he was promoted to Executive Vice President, Market Management, and two years later became President of Farmers Group, Inc.
Hopkins was appointed a member of Zurich's Group Management Board in December 2004. Since April 2005, he has been Chief Executive Officer (C.E.O.) of Farmers Group, Inc. and a member of Zurich's Group Executive Committee (GEC). He also serves on the Board of Farmers Group, Inc. and is Chairman of the Board of Farmers New World Life Insurance Company. In 2006, Hopkins was named Chairman of the Board of ZFUS Services, LLC, Zurich's North American shared services platform.
F. Robert (Bob) Woudstra joined Foremost Corporation of America in 1973 as Controller.
In his tenure with the corporation, Woudstra has held several positions. In February 1999 he was promoted to Chief Operating Officer of Foremost, which position he held at the time Foremost was acquired by Farmers in March 2000.
Effective March 2000, Woudstra was elected a Vice President of Farmers Group, Inc., and Chief Operating Officer of Farmers Specialty. Effective March 1, 2003, he was elevated to Senior Vice President of Farmers Group, Inc., and President of Farmers Specialty. In April 2005, Woudstra was promoted to Executive Vice President of Property and Casualty Operations and relocated to Los Angeles.
Effective May 1, 2007, he was appointed to the position of President and Chief Operating Officer.
SOURCE Farmers Group, Inc.

Victims of Road Rage becomes Victim of Insurance Company

Ethel Adams, a 60-year-old woman from Seattle, suffered a nightmare scenario in 2004. Her car was hit by a truck that managed to cross the centerline from the other direction. She sustained broken bones, collapsed lungs, and had to spend the following months in intensive care. Ethel thought that the $2 million policy that she purchased from a subsidiary of Farmers Insurance would cover her devastating injuries. However, the company denied her claim. The company informed her that she was the victim of road rage and not an accident, and thus She would be responsible for all of the medical costs arising from the horrifying event. Farmers Insurance had a history of denying claims in order to improve its bottom line. Farmers even ran an employee incentive program, "Quest for Gold," that offered various incentives.

This sort of practice is not limited to Farmers Insurance. Some of the other insurance company giants, such as Allstate, are known to aggressively fight claims in order to help their bottom lines. Allstate rewards employees who deny claims with items which include portable refrigerators..

Ethel Adams eventually received help paying her medical bills after Farmers’ denial of her claim sparked an outcry and the state insurance commissioner intervened. However, other victims of insurance companies have no such luck with their valid claims.


Source: injuryboard.com

Also see Farmers Insurance Victim Ethel Adams

Farmers Insurance Loses Oregon "Diminished Value" Class Action

Oregon's high court backs pickup owner over insurer
by ASHBEL S. GREEN

The Oregon Supreme Court on Thursday sided with an automobile policyholder who said his insurance company should pay not only for repairs, but also the loss in value his vehicle suffered as a result of an accident.

The class-action lawsuit could end up including most insurance-covered auto repairs in Oregon since 1993, said Dan Gatti, the lead plaintiff's attorney.

"It's huge," Gatti said.

The lawsuit is against Farmers Insurance, but Gatti said he has class-action cases pending against the three other big insurance companies -- Allstate, State Farm and Progressive.

Gatti said the damages against Farmers alone could top $30 million.

A Farmers representative couldn't be reached for comment.

The decision applies to insurance policies that do not explicitly exclude payment of what's called "diminished value." Gatti said no policies excluded diminished value until 2003, and most still do not.

The lead plaintiff is Jose Gonzales, whose insured pickup was involved in an accident in 1998. The repairs totaled $6,993. The insurance company paid Gonzales for the repairs minus the deductible.

Gonzales argued that the repairs did not restore his truck to its pre-accident value and said the insurance company should pay him the difference. Farmers refused. Gonzales and another motorist filed a class-action lawsuit in 1999.

A Multnomah County judge dismissed the case, agreeing with Farmers Insurance that it was not responsible for diminished value.

The Oregon Court of Appeals reinstated the lawsuit. The Supreme Court agreed, saying it was not enough simply to pay for the repairs if Gonzales' pickup was worth less as a result of the accident.

"He remains entitled to either a genuine repair of the vehicle, as we have discussed, or compensation for the diminished value of the un-repaired vehicle," the court said.

Source: oregonlive.com

Court Entry Form

Court of Appeals Decision