The answer to this proof of loss question by most adjusters will probably be “no.” But, not so fast my claims handling friends. While I used to say Louisiana was the most liberal state in the Union concerning the requirements of a policyholder to submit a proof of loss, the Supreme Court of Oregon has made a move farther than most experienced adjusters would venture to claim as facts satisfying the post loss requirements for a proof of loss.
Here is the holding in Parks v. Farmers Ins. Co., 347 Ore. 374, 388 (Or. 2009):
We hold that plaintiffs’ telephone calls to Farmers’ agent, and particularly, Mr. Parks’s May 19, 2003, call reciting the amounts that he had paid and expected to pay to clean up the contamination caused by the methamphetamine lab, conveyed sufficient information to allow Farmers to ascertain its obligations vis-a-vis a possible claim for methamphetamine damage, taking into account Farmers’ duty to investigate and clarify uncertain claims. That telephone call qualified as "proof of loss" for purposes of such a claim.
Here are the relevant facts:
…Eric and Yolanda Parks owned a rental property — a house — that was insured…by defendant Farmers Insurance Company… Plaintiffs received notice that police had discovered a methamphetamine lab in the house, had seized the house and placed it under quarantine. Ms. Parks hired a decontamination contractor to evaluate…and deal with any damage to the house.
The contractor told Ms. Parks that insurance companies sometimes help with losses in such cases. On April 14, 2003, Ms. Parks called a Farmers agent, Pascone..and asked if Farmers could "help [her] with [her] loss."…It is undisputed that Ms. Parks told Pascone about the seizure of the methamphetamine lab and subsequent quarantine of the house, and that she provided Pascone with the address of the house and the name and telephone number of the decontamination contractor. Depending on whose testimony is credited, either Ms. Parks or Pascone suggested that there might not be coverage in the policy for methamphetamine lab contamination. It is undisputed, however, that Pascone told Ms. Parks that "other things * * * might be covered," and that Ms. Parks should call her if she got any more information. Ms. Parks did not call Pascone again.
However, Mr. Parks called Pascone about a month later, on May 19, 2003. Mr. Parks told Pascone that a methamphetamine lab had been "busted"…that his wife already had called Pascone about the matter, and that, to date, he had paid $ 6,710 for cleaning up the property and…quoted a figure of $ 2,000 to $ 3,000 to get the property in shape to rent. Mr. Parks testified that he asked Pascone to "reconsider the denial of the claim," and that Pascone told him that there was no coverage for the cleanup because the policy contained an exclusion for "pollution." Although Mr. Parks initially testified at deposition that he told Pascone that some of the damage to the property had been caused by vandalism, he later acknowledged that "all [he] told * * * Pascone about damage to the rental was the methamphetamine contamination."
Pascone’s memory of the conversation with Mr. Parks was somewhat different. According to her, Mr. Parks told her that he and his wife did not want to file a claim because they felt that there was no coverage for the methamphetamine contamination and that the cost of repairing the other damage that he had described to her — two broken windows — would be less than the insurance policy’s deductible. In any event, Pascone did not send any paperwork to Mr. Parks, did not refer him to Farmers’ claims hotline, and did not otherwise tell him how to file a claim. Plaintiffs had no further contact with Farmers or its agents until June 11, 2003. On that date, plaintiffs brought an action against Farmers for, among other things, breach of Farmers’ duties to them under the insurance policy. Id. at 376-77.
Please note that these were calls to the soliciting company agent rather than to the claims department. While not addressed, it must have been developed that this was a Farmer’s agent for all purposes and the Court specifically noted that this agent did not refer the policyholders to the claims hotline nor indicate how to file the otherwise formal claims documents. The decision might come out far different if the matter were referred to the claims department and other instructions were promptly provided.
The Court did note the position of the parties regarding the proof of loss issue:
Plaintiffs’ theory was that, for purposes of the statute, they had filed "proof of loss" by their April 14, 2003, and May 19, 2003, telephone calls to Pascone, and that Farmers had failed to tender its settlement offer within six months of those calls. Farmers denied that the telephone calls qualified as proof of loss and argued that, at best, plaintiffs had triggered the six-month period provided in ORS 742.061 when they filed their complaint on June 11, 2003. The trial court ultimately concluded that the Parks’s telephone calls to Pascone and, particularly, Mr. Parks’s May 19, 2003, call, constituted a sufficient proof of loss…In explaining its decision, the court explicitly rejected Farmers’ contention that, because those telephone calls pertained to methamphetamine contamination, they could not serve as "proof of loss" with respect to the losses that were at the heart of plaintiffs’ action (and which Farmers characterized as vandalism losses)…
Farmers appealed, arguing that plaintiffs’ telephone calls to Pascone were not "proof of loss" within the meaning of ORS 742.061 for two reasons: (1) a "proof of loss" must be in writing; and (2) a "proof of loss" must allow an insurer to ascertain its liabilities, and plaintiffs’ conversations with Pascone about methamphetamine contamination did not provide Farmers with any information that would have allowed it to ascertain its liabilities with respect to the only potentially covered loss that plaintiffs could claim — a claim for vandalism.
As part of its analysis, the Oregon Supreme Court clearly disagreed with the Farmers’ position citing other Oregon case authority which is similar to Louisiana caselaw:
This is not the first time that this court has considered what ORS 742.061 requires by way of a "proof of loss." In Dockins v. State Farm Ins. Co., 329 Ore. 20, 985 P2d 796 (1999), this court examined the statute and concluded that, when the legislature used that term, it intended something more than the particular form or submission an insurance policy might specify… Based on prior cases dealing with the term, this court held that, in the context of ORS 742.061, "proof of loss" has a functional meaning — that is, it pertains to any "event or submission" that accomplishes the purpose of a proof of loss. That purpose, the court concluded, is "to afford the insurer an adequate opportunity for investigation, to prevent fraud and imposition upon it, and to enable it to form an intelligent estimate of its rights and liabilities before it is obliged to pay.’… We further concluded (again, based on prior case law), that insurers operate under a duty of inquiry and that, "even if a submission is insufficient to allow the insurer to estimate its obligations, it will be deemed sufficient if the insurer could accomplish that purpose through reasonable investigation." Synthesizing those ideas into a single definition, this court announced that "[a]ny event or submission that would permit an insurer to estimate its obligations (taking into account the insurer’s obligation to investigate and clarify uncertain claims) qualifies as ‘proof of loss’ for purposes of [ORS 742.061]…"
The lesson is that some Courts and policyholders will try to avoid forfeiture of insurance policy benefits based on post loss proof of loss obligations when an insurer has been supplied sufficient information to make an investigation about a claim. That makes sense to most policyholders. From an insurer’s perspective, I would try to make certain that your company agents refer claims to the claims department or you may find that phone calls will be deemed sufficient proof of loss in some states.