The Oregon Supreme Court has overturned a $26.3 million class-action judgment against Farmers Insurance Co. of Oregon, finding the company did not violate state law in how it informed auto policyholders of their repair shop options.
The case involved Oregon’s “choice-of-shop” statute, which bars insurers from requiring policyholders to use specific repair shops as a condition of claim settlement. The law also outlines what insurers must disclose about a policyholder’s rights during the claims process. Lower courts found that Farmers’ notices failed to include all elements of the statute, leading to the award.
The Supreme Court ruled, however, that Farmers met its legal obligations by using notice language approved by the state’s Department of Consumer and Business Services (DCBS). The court said insurers that adopt agency-approved wording are not liable for omitting portions of the statute, affirming that the legislature intended for such approval to serve as compliance.
The decision noted that there is no record of DCBS-approved language between 1977 and 1993. A bulletin issued in 1993 provided specific wording for use in choice-of-shop notices and stated that further approval was not required if insurers used the suggested language. Farmers adopted that language in 1994 and has continued to use it since. Although lawmakers amended the statute in 2007, they did not revise the notice requirements, and no further guidance has been issued by DCBS.
Separately, a 2022 market conduct examination by the Oregon Division of Financial Regulation found that Farmers had not obtained required approvals for certain policy forms related to emergency declarations. The report also said the company had not provided adequate notice to policyholders about added benefits under Oregon law. Farmers disagreed with the findings but stated that policyholders received the extended benefits as part of regular claims handling. The insurer also confirmed it obtained the necessary form approvals in December 2022.
Farmers Insurance Co. of Oregon holds AM Best’s Financial Strength Rating of A (Excellent). The company did not respond to requests for comment.
In 2023, the five largest auto insurers in Oregon by direct premiums written were State Farm Group (21.7%), Progressive Insurance Group (17.85%), Berkshire Hathaway Insurance Group (10.56%), Allstate Insurance Group (8.53%), and Liberty Mutual Insurance Cos. (7.7%), according to BestLink.
