Loan Receipt Subrogation In Oregon

The Oregon Supreme Court has long recognized that an insurer who makes payments to its insured and receives a loan receipt in return does not become subrogated to its insured's claims. Waterway Terminals v. P.S. Lord, 242 Ore. 1, 7-8, 406 P.2d 556 (1965); Furrer v. Yew Creek Logging Co., 206 Ore. 382, 389-90, 292 P.2d 499 (1956). The Supreme Court held in Waterway Terminals that a later executed loan receipt is controlling even though the insurer has previously issued its insured drafts "purporting on their face to be in full payment of the loss." 242 Ore. at 8. The Court made the same point more explicitly in Northern Ins. Co. v. Conn Organ, 40 Ore. App. 785, 796-97, 596 P.2d 605 (1979): "The existence of evidence that the transaction was not intended from the outset to be a loan or was not consistently treated as such is not conclusive. In Waterway Terminals there was such evidence, but the court held as a matter of law the loan receipt was controlling. We do not think this case can be meaningfully distinguished. Once the Supreme Court was persuaded to accept the form of a loan receipt as being the substance of the transaction, it had entered upon a course of logic that led inevitably to the Waterway Terminals conclusion".