No. 45	                      July 14, 2016	1

             IN THE SUPREME COURT OF THE
                   STATE OF OREGON

                 Roman KIRYUTA,
               Respondent on Review,
                          v.
   COUNTRY PREFERRED INSURANCE COMPANY,
                Petitioner on Review.
      (CC 130101380; CA A156351; SC S063707)

   En Banc
   On review from the Court of Appeals.*
   Argued and submitted May 10, 2016.
   John R. Bachofner, Jordan Ramis PC, Vancouver,
Washington, argued the cause and filed the brief for peti-
tioner on review.
   Willard E. Merkel, Merkel and Associates, Portland,
argued the cause and filed the brief for respondent on review.
   WALTERS, J.
   The decision of the Court of Appeals is affirmed. The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for entry of judgment award-
ing reasonable attorney fees to plaintiff.




______________
	  *  Appeal from Multnomah County Circuit Court, Nan G. Waller, Judge. 273
Or App 469, 359 P3d 480 (2015).
2	                            Kiryuta v. Country Preferred Ins. Co.

     Case Summary: Held: Defendant insurance company is not entitled to the
protection of the attorney fee safe harbor provision that applies in uninsured/
underinsured motorist (UM/UIM) cases, ORS 742.061(3). The court explained that
defendant failed to meet the terms of the safe harbor provision, which require that
the insurer accept coverage and limit the issues for arbitration to the “liability of
the uninsured or underinsured motorist” and the “damages due the insured.” In
alleging, in an affirmative defense, that plaintiff’s underinsured motorist bene-
fits were subject to “all terms and conditions” of the policy of insurance, including
“other clauses” in addition to UIM/UM limits, defendant necessarily opened the
arbitration to issues beyond motorist liability and the damages due. Because the
plaintiff is otherwise entitled to an award of reasonable attorney fees, the trial
court erred in failing to award plaintiff those fees. The decision of the Court of
Appeals is affirmed. The judgment of the circuit court is reversed, and the case is
remanded to the circuit court for entry of judgment awarding reasonable attorney
fees to plaintiff.
Cite as 360 Or 1 (2016)	3

	          WALTERS, J.
	        Plaintiff was injured in an automobile accident
and filed a claim for underinsured motorist (UIM) benefits
with Country Preferred Insurance (defendant). Under ORS
742.061(1), a plaintiff seeking UIM benefits is entitled to
recover reasonable attorney fees if timely settlement is not
made and the plaintiff’s recovery exceeds the defendant’s
tender.1 However, ORS 742.061(3) provides a “safe har-
bor” from such an award when the insurer, in writing, has
accepted coverage; the only issues are “the liability of the
uninsured or underinsured motorist” and “the damages due
the insured;” and the insurer has consented to submit the
case to binding arbitration.
	        In this case, the insurer submitted a letter that
satisfied the attorney fee safe harbor requirements of ORS
742.061(3). The case was arbitrated, and plaintiff prevailed
and was awarded attorney fees. Defendant filed exceptions
to the fee award in the circuit court, and the court concluded
that defendant’s safe harbor letter precluded the award of
fees. Plaintiff appealed to the Court of Appeals, and that
court reversed, holding that defendant was ineligible for
the protection of the attorney fee safe harbor because, in
arbitration, in its answer to plaintiff’s complaint, defendant
had raised issues in addition to the liability of the underin-
sured motorist and the damages due to plaintiff. Kiryuta v.
Country Preferred Ins. Co., 273 Or App 469, 473, 359 P3d 480
	1
        ORS 742.061 provides, in part:
    	    “(1)  Except as otherwise provided in subsections (2) and (3) of this sec-
    tion, if settlement is not made within six months from the date proof of loss is
    filed with an insurer and an action is brought in any court of this state upon
    any policy of insurance of any kind or nature, and the plaintiff’s recovery
    exceeds the amount of any tender made by the defendant in such action, a
    reasonable amount to be fixed by the court as attorney fees shall be taxed as
    part of the costs of the action and any appeal thereon. * * *
    	    “* * * * *
    	 “(3) Subsection (1) of this section does not apply to actions to recover
    uninsured or underinsured motorist benefits if, in writing, not later than six
    months from the date proof of loss is filed with the insurer:
    	    “(a)  The insurer has accepted coverage and the only issues are the lia-
    bility of the uninsured or underinsured motorist and the damages due the
    insured; and
    	    “(b)  The insurer has consented to submit the case to binding arbitration.”
4	                           Kiryuta v. Country Preferred Ins. Co.

(2015). On review, we agree with the Court of Appeals that
defendant is not entitled to the protection of ORS 742.061(3).
We affirm the decision of the Court of Appeals, reverse the
decision of the trial court, and remand for entry of judgment
awarding plaintiff reasonable attorney fees.
	        In this case, the parties do not dispute that defen-
dant issued a timely letter accepting coverage, agreeing to
limit the issues for arbitration to “the liability of the unin-
sured or underinsured motorist” and “the damages due the
insured,” and consenting to submit the claim to arbitration.2
ORS 742.061(3). What is disputed is whether, as pleaded,
the issues for arbitration actually were so limited.
	        In arbitration, defendant filed an answer to plain-
tiff’s complaint. In that answer, defendant admitted or
denied various allegations in plaintiff’s complaint and, in
addition, alleged two affirmative defenses. In its first affir-
mative defense, labeled “Offset,” defendant alleged:
     	 “To the extent that any UIM/UM benefits are found
     owing[,] the UIM/UM benefits are subject to offsets set
     forth in the policy of insurance and Oregon statutes,
     including offsets for all sums paid or payable for anyone
     who is legally responsible for plaintiff’s injuries, if any.
     [Defendant] is further entitled to offset the amount of any
     UIM/UM benefits for any amount of PIP payments made
     by [defendant].”
In its second affirmative defense, labeled “Contractual
Compliance,” defendant alleged:
     	 “To the extent any UIM/UM benefits are found ow[ing],
     the UIM/UM benefits are subject to all terms and condi-
     tions of the policy of insurance, including UIM/UM limits
     and ‘other clauses.’ ”
Plaintiff contends that, because defendant pleaded those
two affirmative defenses, the requirement that the issues be
	2
      The parties also do not dispute that plaintiff is entitled to attorney fees
if defendant failed to satisfy the requirements of ORS 742.061(3). Defendant
argued before the trial court that, because plaintiff ultimately recovered less
than what defendant had offered in an ORCP 54 E Offer to Allow Judgment,
plaintiff was not entitled to attorney fees. However, defendant did not renew that
argument in the Court of Appeals and does not raise it here, except to note its
trial court argument that ORCP 54 E provides a distinct basis for denial of fees.
We do not address that argument here.
Cite as 360 Or 1 (2016)	5

limited to motorist liability and damages, ORS 742.061(3)(c),
was not met.
	        In responding to that contention, defendant appears
to accept that a defendant-insurer that sends a letter invok-
ing the attorney fee safe harbor protection of ORS 742.061(3)
may lose that protection if it files an answer in arbitration
that is inconsistent with the terms of the letter and ORS
742.061(3). Defendant’s position is reasonable. When, as
framed by the pleadings, the “issues” for arbitration are not
limited to “the liability of the uninsured or underinsured
motorist” and “the damages due the insured,” the insurer
is not entitled to the protection of ORS 742.061(3). ORS
742.061(3)(a); see Cardenas v. Farmers Ins. Co., 230 Or App
403, 215 P3d 919 (2009) (defendant sent compliant safe
harbor letter but was ineligible for safe harbor because, at
arbitration, defendant also raised issue inconsistent with
requirements of ORS 742.061(3)).
	         What defendant argues instead is that its answer was
not inconsistent with the requirements of ORS 742.061(3).
Defendant contends that, in its answer, it did not dispute
plaintiff’s entitlement to UM/UIM coverage and that its
affirmative defenses related to only the amount of the dam-
ages, if any, to which plaintiff was entitled. The “offset”
defense, defendant argues, served to put the arbitrator on
notice that plaintiff’s ultimate recovery would be subject
to legislatively authorized offsets and reductions. And the
“contractual compliance” defense asserted only that plain-
tiff’s recovery could not exceed the UM/UIM limits in the
policy agreement.
	       Plaintiff responds that any defense that a defendant-
insurer raises that could result in plaintiff receiving no
recovery at all vitiates the protection of ORS 742.061(3). For
that argument, plaintiff cites this court’s decision in Grisby
v. Progressive Preferred Ins. Co., 343 Or 175, 166 P3d 519,
adh’d to as modified on recons, 343 Or 394, 171 P3d 352
(2007).
	In Grisby, this court considered a different safe har-
bor provision than that at issue here—the safe harbor provi-
sion applicable to claims for personal injury protection (PIP)
benefits, ORS 742.061(2). 343 Or at 179. That safe harbor
6	                            Kiryuta v. Country Preferred Ins. Co.

provision is applicable when “the only issue is the amount of
benefits due the insured.”3 ORS 742.061(2)(a). In Grisby, the
insurer had disputed not only the amount of benefits due,
but also whether the insured could recover benefits for cer-
tain chiropractic treatment. 343 Or at 182. The court con-
cluded that the insurer was not entitled to the safe harbor
protection of the statute because a dispute about a claim for
particular benefits was not a dispute about the “amount of
benefits.” Id. at 183.
	        Plaintiff argues that the reasoning in Grisby prop-
erly extends to the safe harbor provision applicable in UM/
UIM cases. Plaintiff reasons that, like the word “amount”
in ORS 742.061(2)(a), the word “due” in ORS 742.061(3)(a)
evinces a legislative intent to deny safe harbor to insurers
that do not limit the issues in arbitration to the amount of
the damages that an insured should receive, but instead
contest whether they owe the insured any damages at all.
Plaintiff concedes that an insurer does not expose itself to
attorney fees by contesting the liability of an uninsured or
underinsured motorist, but contends that the insurer may
be required to pay attorney fees if it raises an affirmative
defense that, for some other reason, could result in a deter-
mination that the insurer owes no damages at all to the
insured.
	       Defendant disagrees that this court’s ruling in Grisby
may be extended to UM/UIM proceedings. Defendant con-
tends that the Court of Appeals erroneously has equated the
phrase “the damages due the insured” in ORS 742.061(3)(a)
with the phrase “the amount of benefits due the insured” in
ORS 742.061(2)(a). See Cardenas, 230 Or App at 412 (hold-
ing defendant insurance company ineligible for safe harbor
in UM case, because defendant asserted that release agree-
ment barred further recovery by plaintiff). PIP benefits,
	3
       The attorney fee safe harbor provision that applies in the context of PIP
benefits, ORS 742.061(2), provides:
   	 “Subsection (1) of this section does not apply to actions to recover per-
   sonal injury protection benefits if, in writing, not later than six months from
   the date proof of loss is filed with the insurer:
   	     “(a)  The insurer has accepted coverage and the only issue is the amount
   of benefits due the insured; and
   	     “(b)  The insurer has consented to submit the case to binding arbitration.”
Cite as 360 Or 1 (2016)	7

defendant asserts, are different in nature from UM/UIM
benefits.
	        Defendant argues that, in calculating PIP benefits,
the only questions are the reasonableness of the charges
and whether they are related to the accident. In contrast,
defendant contends, the purpose of UM/UIM insurance is
to “put the person injured by an uninsured [or underin-
sured] motorist in the same position he would be in had
he been injured by an insured motorist.” Vega v. Farmers
Ins. Co., 323 Or 291, 306 n 13, 918 P2d 95 (1996) (internal
quotation marks omitted). Consequently, defendant contin-
ues, the insurance statutes in ORS chapter 742 require the
insurer to pay all sums that the insured is legally entitled to
recover from the uninsured or underinsured motorist. ORS
742.504(1)(a). Those sums include the amount of damages
that “[a] claimant could have recovered in a civil action from
the owner or operator at the time of the injury after deter-
mination of fault or comparative fault and resolution of any
applicable defenses,” and which “[a]re no larger than benefits
payable under the terms of the policy.” ORS 742.504(2)(j).
Therefore, defendant asserts, defendant-insurers must be
permitted to raise affirmative defenses in UM/UIM cases,
including defenses that may result in no recovery by the
insured.
	        The parties are correct that this court’s decision in
Grisby concerned ORS 742.061(2), the attorney fee safe har-
bor provision applicable to PIP benefits, and that we have not
decided whether an insurer remains eligible for safe harbor
protection in UM/UIM cases, under ORS 742.061(3), when
the insurer raises a defense that could result in no recov-
ery by the insured. Given the circumstances presented here,
however, that is an issue for another day. The only ques-
tion that we need to resolve to decide this case is whether
one or more of defendant’s affirmative defenses raised an
issue beyond “the liability of the uninsured or underin-
sured motorist” and “the damages due the insured.” ORS
742.061(3)(a).
	         We conclude that, in alleging, in its “contractual
compliance” defense, that plaintiff’s UIM benefits were sub-
ject to “all terms and conditions” of the policy of insurance,
8	                             Kiryuta v. Country Preferred Ins. Co.

defendant necessarily opened the arbitration to issues
beyond motorist liability and damages due. Defendant’s
affirmative defense did not rest solely on the UIM/UM pol-
icy limits; it alleged that plaintiff’s UIM benefits were sub-
ject to “other clauses” of the policy as well. Thus, defendant’s
answer extended the boundaries of relevancy in the arbi-
tration proceeding to any “terms and conditions” of the pol-
icy that could defeat plaintiff’s claim for benefits, including
those that could potentially result in denial of coverage for
plaintiff’s losses.
	         At oral argument before this court, defendant con-
tended that, in the part of its answer in which it admitted or
denied plaintiff’s allegations, it had conceded coverage. It is
true that, in one paragraph of that part of its answer, defen-
dant admitted that plaintiff had conformed to all policy con-
ditions and requirements and had performed all precondi-
tions to the recovery of benefits.4 However, the admissions in
that paragraph do not address other provisions of the insur-
ance policy that potentially could preclude coverage of plain-
tiff’s losses and therefore do not demonstrate that defendant
accepted coverage. Moreover, defendant’s “contractual com-
pliance” affirmative defense is broadly worded and permits
defendant to invoke any of the “terms and conditions” of
the insurance policy to defeat plaintiff’s claim. As pleaded,5
the issues in the arbitration were not sufficiently limited to
entitle defendant to the protection of ORS 742.061(3). See
ORS 742.061(3)(a) (limiting safe harbor protection to cases
where insurer has accepted coverage and only issues are lia-
bility of uninsured or underinsured motorist and damages
due).
	4
        Paragraph six of defendant’s answer provides: “Country admits the allega-
tions in paragraph eight of plaintiff’s complaint.” In plaintiff’s paragraph eight,
plaintiff had alleged:
    	     “That Plaintiff has in all things conformed to and observed all of the arti-
    cles, stipulations and conditions which, on Plaintiff’s part, were required to
    be observed and performed according to the policy thereto annexed, includ-
    ing the requirements of the policy and ORS 742.504 et seq. Plaintiff has duly
    performed all preconditions to the recovery of benefits under the policy of
    insurance.”
	5
       Because defendant did not do so here, we do not address whether defen-
dant would have been eligible for the protection of the safe harbor provision had
defendant, before the arbitration proceeding began, timely amended its answer
to delete the problematic allegations.
Cite as 360 Or 1 (2016)	9

	        Having determined that defendant’s allegation that
plaintiff’s UIM benefits are subject to all “terms and con-
ditions” of its policy of insurance precludes defendant from
obtaining the protection of ORS 742.061(3), we need not
decide whether another aspect of defendant’s “contractual
compliance” defense (defendant’s allegation that plaintiff’s
UIM benefits are subject to UIM/UM limits) or its “offset”
affirmative defense also precludes defendant from relying
on that attorney fee safe harbor provision. In the circum-
stances presented here, we conclude that the trial court
erred in failing to award plaintiff reasonable attorney fees.
	       The decision of the Court of Appeals is affirmed.
The judgment of the circuit court is reversed, and the case is
remanded to the circuit court for entry of judgment award-
ing reasonable attorney fees to plaintiff.
