One denied paragraph cost Farmers Insurance protection from a policyholder's legal bills - a reminder that in UIM disputes, pleadings can carry a price tag.
For any insurer defending an underinsured motorist claim, Oregon's fee "safe harbor" is a valuable thing to hold onto. It can spare a carrier from paying the policyholder's attorney fees, even after a loss. On June 24, 2026, the Oregon Court of Appeals showed just how easily that protection can slip away - and it came down to a single line in a pleading.
The dispute started with a car crash. The policyholder was injured, settled with the driver who hit her, then turned to her own insurer, Farmers Insurance Company of Oregon, for underinsured motorist (UIM) benefits - the coverage that fills the gap when the at-fault driver's policy is not enough. A jury found she had suffered about $350,000 in damages. The trial court signed a judgment on January 19, 2023.
She then went after her attorney fees under Oregon's UIM fee statute, ORS 742.061(1). Farmers had a ready answer: the "safe harbor" in ORS 742.061(3). That provision shields insurers from paying those fees if they send timely written notice accepting coverage, agreeing that "the only issues are the liability of the uninsured or underinsured motorist and the damages due the insured," and consenting to binding arbitration. Farmers had sent exactly that notice. On paper, it looked protected.
Here is where it unraveled. In her complaint, the policyholder alleged in paragraph nine that she had "in all things conformed to and observed and performed according to the policy and the conditions thereto annexed." Farmers denied it. To the court, that denial gave the game away - if Farmers was truly accepting coverage, it would have admitted she had met her policy obligations. Instead, it was still contesting them. That meant the fight was no longer just about liability and damages, which is all the safe harbor allows.
The court leaned on its own earlier ruling. The principle: once an insurer's pleadings put issues beyond liability and damages in play, the safe harbor is gone - and a late course correction will not bring it back. Farmers did not narrow its position to damages alone until a trial memorandum filed three days before trial. That, the court said, was far too late to matter.
There was a second lesson buried in the procedure. The trial court had denied the fee request through an "order" rather than a formal "supplemental judgment." Under Oregon law, that was the wrong vehicle - and it meant the ruling could not even be appealed properly. The mislabelling sent the whole fee question back to square one.
This was already the second time the case reached the Court of Appeals. The court reversed and sent it back, this time with a clear ruling that the safe harbor does not apply - leaving the trial court to work out the fees Farmers had hoped to avoid.
The ruling turns on the pleadings rather than what was argued at trial. Under the court's reasoning, an insurer's denial in its answer can put coverage in dispute even where the insurer later limits its case to liability and damages - and a narrowing that comes shortly before trial does not restore the safe harbor. The decision leaves the fee question for the trial court to resolve on remand.
