The Oregon Supreme Court has long held the legislature did not create a private right of action under the Unfair Claims Settlement Practices Act (ORS 746.230). Policyholders could bring a tort claim against their insurance company only if the insurer was subject to a standard of care independent of the insurance policy.[i]  But the Court’s mood changed last month in Moody v. Oregon Community Credit Union, 371 Or 772 (2023).

Moody’s facts are not complex.  Plaintiff Christine Moody’s husband, Troy, was accidentally shot and killed by a friend during a camping trip. Christine sought life insurance benefits, and the insurer denied Christine’s claim based on a policy exclusion for deaths caused by or resulting from the insured being “under the influence of any narcotic or other controlled substance.”  Troy evidently had marijuana in his system when he died.

Christine sued the insurer, alleging claims for breach of contract, breach of an implied contractual covenant of good faith and fair dealing, and negligence. She sought both economic damages and emotional distress damages. In her negligence claim, Christine alleged the Unfair Claims Settlement Practices Act provided an independent standard of care outside the terms of the insurance contract.  She asserted the insurer violated several claims handling practices, such as failing “to pay the insurance benefits without conducting a reasonable investigation based on all available information” and “[n]ot attempting, in good faith, to promptly and equitably settle a claim in which the insurer’s liability has become reasonably clear.”  Christine further alleged that the insurer “knew, or in the exercise of reasonable care as a corporation engaged in the business of marketing and selling insurance, should have known, that one or more of its foregoing acts or omissions would create an unreasonable risk of harm to the beneficiaries of its insured, including [Christine].” Finally, because of the insurer’s negligence, she had suffered “the noneconomic loss of increased emotional distress and anxiety caused by having fewer financial resources to navigate the loss of a bread-winning spouse.”

At trial, the insurer moved to dismiss Christine’s claims for negligence and breach of the implied covenant of good faith and fair dealing and to strike the allegations seeking damages for emotional distress, arguing that Christine’s only remedy under Oregon law was contractual. The trial court granted those motions and entered a limited judgment dismissing all but the breach of contract claim.

Christine appealed from the limited judgment, challenging the dismissal of her negligence claim and striking of her allegations of emotional distress damages. The Court of Appeals reversed, holding that Christine could bring a claim for “negligence per se” and seek emotional distress damages based on the insurer’s violations of ORS 746.230(1).  Of note, it rejected the insurer’s arguments that (1) Farris v. United States Fidelity & Guaranty Co., 284 Or 453 (1978), foreclosed any negligence per se claim based on a violation of ORS 746.230; (2) a plaintiff must have a common-law negligence claim for a negligence per se claim to be viable; and (3) the emotional injury that Christine alleged was not of a type that ORS 746.230 was enacted to prevent.

The Supreme Court affirmed the Court of Appeals on other grounds, noting “[a]lthough our reasoning differs, we concur in the decision of the Court of Appeals, and we hold that plaintiff has pleaded facts sufficient to give rise to a legally cognizable common-law negligence claim for emotional distress damages.”

The Court began by answering an important issue of first impression, ruling: to make out a claim of negligence per se and take advantage of a presumption of negligence arising from a statutory violation, a plaintiff must show not only that the statute sets out an applicable standard of care, but also that the plaintiff has an existing negligence claim.”  Next, it ruled that, to have a viable common-law negligence claim, a plaintiff must establish that they have a “legally protected interest” sufficient to subject a defendant to liability for purely emotional damages. The Court examined several factors it had previously recognized before answering whether Christine had alleged a legally protected interest sufficient to subject her insurer to liability for emotional damages. It ultimately concluded, on balance, that Christinealleged a sufficient legally protected interest.

It reasoned Christine’s negligence per se claim for emotional distress damages aligned with ORS 746.230’s purpose of prohibiting an insurer from engaging in unfair claims settlement practices.  The act provided warning of the specific conduct that is prohibited. In terms of the adequacy of existing remedies and the extent to which a common-law negligence action would aid, supplement, or interfere with existing claims and remedies and other means of enforcement, the Court reasoned a common-law negligence claim would aid and supplement ORS 746.230 rather than interfere with it. It emphasized permitting tort actions in this context could potentially improve compliance with the law by deterring insurance companies from unreasonably engaging in prohibited conduct, thus advancing the statute’s purpose.  It then grappled with the legislature’s decision not to create a statutory private right of action, determining that permitting recovery of emotional distress damages in this context is consistent with the same recovery in other common-law actions and would not place an undue burden on insurers.  Finally, it held the harm Christine alleged—emotional distress stemming from the unfair denial of life insurance benefits—is of sufficient importance as a matter of public policy to merit protection.

Although Moody could have far-reaching implications for recovery of extra-contractual damages, the Court expressly maintained its decision was “narrow,” cautioning its opinion “does not make every contracting party liable for negligent conduct that causes purely psychological damage, nor does it make every statutory violation the basis for a common-law negligence claim for emotional distress damages.”

Despite the Court’s closing remarks, Moody signals a coming sea-change in Oregon bad-faith insurance practice.  The Court expressly recognized the principle that insurance contracts are made for a policyholder’s economic and financial peace of mind and re-opened the door to bad-faith litigation in Oregon. Policyholders now have an important tool to assist them when seeking to recover their insurance assets, especially when an insurer runs afoul of the unfair claims settlement practices provided in ORS 746.230.

Please contact Cameron Zangenehzadeh, Lou Ferreira, or Seth Row at Stoel Rives if you need help with your insurance recovery efforts.


[1] An independent standard of care may arise out of a “special relationship” between the contracting parties but may also arise out of a statute or administrative rule. Courts have held a “special relationship” exists when an insurer agrees to defend its insured against a third-party suit, for example.

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Photo of Cameron Zangenehzadeh Cameron Zangenehzadeh
Cam Zangenehzadeh is an associate in the Environment, Land Use and Natural Resources group, focusing on insurance-related matters and all phases of litigation, including appeals. Cam also provides regulatory compliance counseling on various federal and state environmental statutes.  Before joining the firm, Cam
Cam Zangenehzadeh is an associate in the Environment, Land Use and Natural Resources group, focusing on insurance-related matters and all phases of litigation, including appeals. Cam also provides regulatory compliance counseling on various federal and state environmental statutes.  Before joining the firm, Cam served as a judicial law clerk in several courts—from the U.S. District Court to the Washington State Supreme Court and the Washington State Court of Appeals. While clerking he drafted over 50 opinions, as well as myriad orders, covering a wide range of substantive legal issues.

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Photo of Lou Ferreira Lou Ferreira

Lou Ferreira is a senior partner with more than 30 years of complex trial experience. His practice focuses on insurance coverage and environmental, safety & health issues.

Best Lawyers in America® has consistently recognized Lou as one of the leading attorneys in…

Lou Ferreira is a senior partner with more than 30 years of complex trial experience. His practice focuses on insurance coverage and environmental, safety & health issues.

Best Lawyers in America® has consistently recognized Lou as one of the leading attorneys in insurance law. He has recovered hundreds of millions of dollars from insurance companies for his clients. Lou is AV Peer Review Rated for Energy & Environmental, Martindale-Hubbell’s highest peer recognition for professional ability and ethical standards. He represents clients in an array of environmental contexts, including issues related to negotiation of consent decrees with governmental agencies, lawsuits between potentially liable parties to allocate the cost of environmental cleanups, suits against insurance companies to recover the costs associated with environmental liabilities, and Citizen Suits under the Clean Water Act. Lou has tried cases under both the Comprehensive Environmental Response, Compensation and Recovery Act (CERCLA), and Washington State’s Model Toxics Control Act.

Lou regularly advises companies on a wide range of risk management issues, including matters concerning the U.S. Consumer Products Safety Commission, product liability, regulatory compliance, and contractual allocation of risks, as well as advising clients with regard to the procurement of a wide range of insurance products necessary to deal with their unique issues.

Lou has represented clients in OSHA and other types of regulatory enforcement actions involving workplace fatalities and other catastrophes. Lou is experienced in managing multi-agency investigations, coordinating evidence preservation, and making sure clients have the right experts involved to protect their rights and to understand the root causes of such events.

Prior to joining Stoel Rives, Lou served as law clerk to the Honorable Stephen S. Trott, U.S. Court of Appeals for the Ninth Circuit (1989–1990) and as an honors intern in the U.S. Department of Justice’s Environmental and Occupational Disease Litigation Section (1987). He also served as a Special Forces medic in the U.S. Army.

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Photo of Seth Row Seth Row

Seth Row’s practice focuses on policyholder-side insurance recovery involving a mix of litigation and counseling and behind-the-scenes advocacy to clients in multiple industries. In more than 20 years of practice, Seth has helped clients recover millions of dollars under almost every variety of…

Seth Row’s practice focuses on policyholder-side insurance recovery involving a mix of litigation and counseling and behind-the-scenes advocacy to clients in multiple industries. In more than 20 years of practice, Seth has helped clients recover millions of dollars under almost every variety of commercial insurance policy including general liability, employment practices, property and business income loss, builder’s risk, Directors & Officers, representations & warranties, marine, and cyber-risk, among others.

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