Oregon Court Finds That Insurer Bad Faith Is Not Elder Abuse

On Behalf of | Oct 31, 2018 | Bad Faith

The Oregon Supreme Court, answering a certified question by the 9th Circuit Court of Appeals, held that bad faith delay or denial of payment of an insurance claim did not state a claim under Oregon’s Financial Elder Abuse Statute. In Bates v. Bankers Life and Casualty Co., 362 Or. 337, 408 P.3d 1081 (Or. 2018), the Oregon Supreme Court held that an insurance company’s alleged bad faith did not simultaneously constitute a violation of Oregon’s elder abuse statute. In this case, the plaintiffs were senior citizens who had purchased long-term healthcare insurance policies issued by Bankers Life. The seniors sued Bankers, alleging that Bankers had developed onerous procedures to delay and deny insurance claims that were submitted by seniors. The seniors brought an elder abuse claim against Bankers under ORS §124.110. However, the Federal District Court dismissed the claim, finding that the Elder Abuse Statute only applied in “bailment or trust scenarios expressly referenced in the statutory language.” The dismissal was appealed to the 9th Circuit Court of Appeals. In turn, the 9th Circuit certified a question to the Oregon Supreme Court on the issue.

The Oregon Supreme Court found that the Oregon Elder Abuse Statute applied to situations where a vulnerable person entrusted money or property to another and later requested its return, but the other person refused to return it in bad faith. Focusing on the elder abuse statute, an essential element of the cause of action required that the ownership or control of the money in question had to be acquired in whole or in part by the other person or someone acting in concert with the other person from the vulnerable person. The seniors had not established this first part of the statute because Bankers did not acquire the contractual right to receive insurance benefits under the policies. The seniors paid insurance premiums to Bankers in exchange for the policies. The money or property that the seniors transferred to Bankers when they paid their premiums was factually and legally different from the insurance policy benefits that they claimed Bankers withheld. Alternatively, the seniors argued that Bankers had in fact “acquired” the money or property that belonged to the seniors at the time Bankers failed to pay, and thus continued to hold the insurance benefits that were due to the seniors. The court rejected this argument, noting that the statute specifically stated that the money or property was “acquired” from a vulnerable person, which suggested a change in possession that was missing from plaintiff’s novel theory. The statute did not apply to wrongful failure to pay money owed to a vulnerable person, but only money that the other person held or controlled that belonged to the vulnerable person.