Oregon Senate Bill 814 Regarding Environmental Claims Handling Regulations Signed into Law

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On June 10, 2013, the governor of Oregon signed into law Senate Bill 814, creating sweeping reforms on environmental claims-handling regulations and available remedies for insureds facing liability for cleanup of contaminated property located in the state. The legislation is effective immediately.

The legislation amends the existing Oregon Environmental Cleanup Assistance Act (OECAA), under ORS 465.479 and ORS 465.465, to impose stricter claims handling regulations, create a statutory cause of action for violation of the regulations, and allow the award of punitive damages if the court finds the insurer acted unreasonably. Because the OECAA provides that “Oregon law shall be applied in all cases where the contaminated property to which the action related is located within the State of Oregon,"1 the legislation has the potential to impact insurers even if the insured is located outside the state.

Cozen O’Connor previously provided a summary of the pertinent provisions of the proposed legislation, which can be located here. The text of the legislation enacted is identical to that originally proposed in March 2013.

It remains to be seen how the legislation will be enforced, especially to the extent it purports to be retroactive. There are also questions surrounding how insurers can comply with certain provisions. For example, under the legislation, the attorney general is directed to appoint a mediation service provider to operate a mediation program related to environmental claims. Insurers are required to provide the insured with information concerning a nonbinding environmental claim mediation program upon request, but to date, it does not appear the attorney general has appointed a mediation service provider.

To protect themselves from potential liability under the legislation, insurers may want to consider offering to mediate significant coverage disputes. Insurers should take care to strictly comply with all claims handling regulations in the state of Oregon, and be prepared to issue payments on claims immediately when due, regardless of whether other insurers may also have an obligation to contribute. Specifically, payment to the insured cannot be delayed while the insurers are engaged in cost share negotiations.

Cozen O’Connor will continue to monitor the enforcement of the legislation and provide further updates as needed.

1 ORS 465.480(2)(a).