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PIP Coverage and Disputes

September 23, 2011 Oregon State Bar CLE

Thomas D’Amore Billy SimeD’Amore Law Group, P.C. Parks Bauer Sime Winkler & Fernety4230 Galewood Street, Suite 200 570 Liberty Street SE, Suite 200Lake Oswego, OR 97035 Salem, OR 97301503-222-6333 503-371-3502tom@damorelaw.com bsime@pbswlaw.com

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Who is Covered?

• ORS 742.520(1) – Personal Injury Protection • Private passenger motor vehicles– Insured, members of insured’s family living in

same household, children living in insured’s household

– Passengers occupying insured vehicle– Pedestrians hit by insured vehicle

• PIP is a no-fault benefit

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What is Covered?

• ORS 742.520(2)(a) – Applicability of PIP benefits• Applies to injury or death resulting from the “use,

occupancy, or maintenance of any motor vehicle”• Cases interpreting– Individual ejected from a car and struck by another car –

Mackie v. Unigard Insurance Co., 90 Or App 500 (1988)– Individual forced from car and then shot – Carrigan v.

State Farm Mutual Auto. Ins. Co., 326 Or 97 (1997)

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What is Covered? (Contin.)

• ORS 742.524(1) – Contents of PIP Benefits– Medical Payments - $15,000 per person, up to one

year– Wage Loss – 70% of income, up to $3,000/month• How to calculate wage loss if self-employed• Possibility of stacking

– Essential Services – up to $30/day– Funeral Expenses – up to $5,000– Child Care – up to $25/day

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Interpreting PIP Benefits/Limitations

• Limits on medical charges (ORS 742.525) – WC schedule

• Exclusions – ORS 742.530 – intentional self-injury, racing or speed contests, or willful concealment or misrepresentation

• Nature of benefits– Primary for anyone in insured vehicle– Secondary for insured injured in another vehicle– Health insurance after PIP exhausted

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Interpreting PIP Benefits/Limitations (Contin.)

• Pedestrians and Bicyclists - Priority– Individual PIP policy– PIP policy of family members in household– Health insurance– Motor vehicle policy of vehicle that struck

individual• Workers’ Compensation – primary if injured

on the job– PIP is secondary

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Stacking

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PIP Stacking

• Multiple PIP policies may be available– Example: A person is a passenger in another

person’s vehicle• Vehicle’s PIP coverage is primary • PIP coverage under the passenger’s own policy is

secondary• If the damages exceed the limits of PIP coverage under

the first policy, the policies stack

• Stacking of PIP medical coverage• Stacking of PIP wage loss coverage

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Stacking coverage

No stacking of PIP benefits when the insured owns multiple vehicles insured under one or more policies issued by the same company.

See ORS 742.520 (2)(a)(A)

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Burden of Proof

• Medical expenses – Presumed reasonable and necessary unless insurer gives

notice of denial of the charges to the provider not more than 60 calendar days after the insurer receives notices of the claim for services from the provider. ORS 742.524(1)(a).

• During first 50 calendar days after insurer receives notice of claim, provider shall, within 10 business days, answer in writing questions from insurer regarding the claim. Id. – 60 day period tolled if provider does not supply written

answers to insurer within 10 days. Id.

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Burden of Proof

• What is notice of the “claim for services”?• What is notice of “denial of the charges”?• If the insurer fails to give timely notice of

denial of charges, insurer has the burden of proving that the expenses were not reasonable and necessary.

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Duties of Insurer• Public policy – guarantee prompt medical attention• Compliance with PIP and related statutes• Compliance with Unfair Claims Settlement Practices

Act – ORS 746.230– Reasonable Investigation– Avoid Delay– Prompt Notice of Denial– Reasonable Settlement– Duty of Good Faith & Fair Dealing

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Bad Faith Insurance Practices• Bad faith or extra-contractual damages– Insurer does not comply with statutory or common

law requirements

• McKenzie v. Pacific Health & Life Ins. Co., 118 Or App 377, rev allowed, 317 Or 271 (1993)

• Eggiman v. Mid-Century Ins. Co., 134 Or App 381 (1995) – good faith requirement extends to PIP

• Anderson v. Farmers Ins., 188 Or App 179 (2003)

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Bad Faith Insurance Practices

• Strawn v. Farmers Ins. Co. of Oregon, 350 Or 336 (2011) – insurance fraud and punitive damages

• Ivanov v. Farmers Ins. Co. of Oregon, 344 Or 421 (2008) – reasonable investigation

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Duties of Insured• Production of supporting documentation

(medical and wage loss)• Recorded Statement• Examination Under Oath• Medical Examination

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Attorney Fees – ORS 742.061 (PIP and UM/UIM)

• Attorney fees are permitted 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.”

• Plaintiff’s recovery must exceed the amount of any tender made by defendant

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Proof of Loss • “Any event or submission that would permit

an insurer to estimate its obligations.” Scott v. State Farm Mutual Ins. Co., 345 Or 146, 155 (2008) (citing Dockins v. State Farm Ins. Co., 329 Or 20 (1999)).

• Phone call was sufficient. Parks v. Farmers Ins. Co. of Oregon, 347 Or 374 (2009)

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Attorney Fees

• Coverage Dispute– Grisby v. Progressive Preferred Ins. Co., 343 Or

175, modified and adhered to on reconsideration, 343 Or 394 (2007); see also Badrick v. Farmers Ins. Co. of Or., 238 Or App 320 (2010)

– Any denial of PIP benefits is a denial of coverage?

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Attorney Fees (Contin.)

• Example – Benefits v. Coverage:– $50 physical therapy visit– $40 reasonable and necessary v. $0 reasonable

and necessary

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Attorney Fees and ORCP 54E

• ORCP 54E—Cutoff?– Example - $10,000 demand; $8,000 ORCP 54E offer;

jury verdict of $5,000 (Plaintiff gets all fees if entitled under ORS 742.061)

• Attorney fees must be awarded in full under ORS 742.061 even if an insurer makes an ORCP 54E offer before trial and it is not exceeded - Wilson v. Tri-County Metropolitan Transportation District of Oregon, 234 Or App 615 (2010)

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PIP Medical Exams

• Ground Rules (“conditions”) for Examination Set in Advance– Attendance by Representative or Attorney– Audio/video recording– Licensed Oregon physician– Limitation on “body parts” examined

• Medical Examinations Not Provided for in PIP Statutes– 3rd Party Claims– Workers’ Compensation– UM/UIM Claims

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Arbitration v. Trial

• Arbitration – governed by local court rules• Factors to consider:– Binding, attorney fees, costs, amount in

controversy• Consider including with third-party claim

and/or UM/UIM claim

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Formal Institution of Arbitration Bonds v. Farmers Ins. Co. of Oregon,

349 Or 152 (2010)

• Insured or insurer must “expressly communicate to the other party that the initiating party is beginning the process of arbitrating a dispute” – Bonds v. Farmers Ins. Co. of Oregon, 349 Or at 154

• Letter from insurer consenting – Not Sufficient

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PIP Issues in the Trial of a Bodily Injury Case

• Determine what is at issue – medical expenses, wage loss, coverage issues

• Selection of venue• Including a PIP claim in a Third Party Case– Possibility it will be severed– Venue

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Preventing PIP from Sinking Third Party or UIM Claim

• Medical examination• Ensuring ongoing medical treatment• Return to work too soon• Pleading and proving medical expenses and

wage loss paid by PIP in the Third Party Case

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Additional PIP Issues in the Trial of a Bodily Injury Case (Contin.)

• Discovery of PIP file• Deposition of PIP adjuster• Recovering medical expenses in excess of

workers’ compensation schedule– White v. Jubitz, 347 Or 212 (2009)

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PIP Reimbursement and Subrogation

• Interinsurer Arbitration – ORS 742.534• Lien – ORS 742.536• Subrogation – ORS 742.538• Limitations on reimbursement – ORS 742.544

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Interinsurer ReimbursementORS 742.534

The liability insurer shall reimburse the PIP insurer if the following conditions are met:

1. The liability and the PIP insurer are both authorized motor vehicle liability insurers.

2. The PIP insurer has requested PIP reimbursement from the liability insurer.

3. The PIP insurer has not given notice that it elects recovery by lien under ORS 742.536.

4. The PIP insurer is entitled to reimbursement under ORS 742.534 by the terms of its policy.

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Interinsurer ReimbursementORS 742.534 (1)

“Reimbursement under this subsection, together with the amount paid to injured persons by the liability insurer, shall not

exceed the limits of the policy issued by the insurer.”

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InterInsurer ReimbursementORS 742.534

• Where two vehicles are separately insured by the same insurer the insurer that pays PIP benefits under one policy is entitled to PIP reimbursement from the other policy. State Farm v. Sommerholder, 65 Or App 449 (1983).

• In calculating PIP reimbursement, the amount of benefits by the PIP insurer shall be reduced by the percentage of negligence of the injured party. ORS 742.534 (2).

• The PIP insurer’s right to reimbursement shall not exceed the amount of damages legally recoverable by the injured party. Id.

• Disputes between the insurers are resolved by arbitration.

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Lien under ORS 742.536

The PIP insurer has a lien against injured party’s cause of action if the following conditions are met:

1. The PIP insurer is an authorized motor vehicle liability insurer;2. The PIP insurer has not been a party to an intercompany

reimbursement proceeding under ORS 742.5343. The PIP insurer is entitled by the terms of its policy to a lien under

ORS 742.536.4. The PIP insurer has given written notice to the injured party that the

PIP insurer has elected to PIP recovery by lien. 5. If the injured party has filed a legal action, the PIP insurer has filed a

return receipt with the court that it served the claimant and the defendant with notice that has elected to recover its PIP by lien.

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Lien under ORS 742.536

• If the PIP lien is perfected, it attaches to all the money the injured party actually collects by settlement or judgment from the at fault party, the liability insurer, or both

• Not reduced by injured party’s comparative fault

• Reduced by PIP insurer’s pro rata share of the costs and attorney fees

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Lien under ORS 742.536

• If the injured party makes a claim or files a legal action for bodily injuries, the injured party must give notice of such claim or legal action to the PIP insurer by personal service or by registered or certified mail. ORS 742.536 (1).

• Service of a copy of the summons and complaint shall be sufficient notice to the insurer. A return of service must be filed with the court. Id.

• A “claim” is a “written demand made or delivered for a specific amount of damages.” ORS 742.536 (4).

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Lien under ORS 742.536

• If the injured provides the PIP insurer with a notice of claim or legal action as required, and the PIP insurer fails to make an election to recover its PIP benefits by lien within 30 days, then the PIP insurer has lost its lien rights.

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Subrogation under ORS 742.538

A PIP insurer has the right to recover PIP payments by subrogation if the following conditions are met:1. The intercompany benefit under ORS 742.534 is

not available;2. The PIP insurer has not elected recovery by lien

as provided in ORS 742.536;3. The PIP insurer is entitled by the terms of its

policies to subrogation under ORS 742.538.

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Subrogation under ORS 742.538

• The PIP insurer does not need to be an authorized motor vehicle insurer to be entitled to subrogation

• The PIP insurer is entitled to proceeds of any settlement or judgment to the extent of PIP benefits paid, less the PIP insurer share of the costs and attorneys fees incurred in collection

• The PIP insurer can sue the at fault driver in its own name or it can sue in the name of the injured party. The injured party must cooperate

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Health Insurers

• An authorized health insurer which pays benefits to a person injured in a motor vehicle accident has the same statutory rights of recovery as a PIP insurer

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Limitations on PIP recoveryORS 742.544

• No reimbursement available if “total amount of benefits” paid exceeds the economic damages as defined in ORS 18.560

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PIP Reimbursement Calculation Table

Benefits Paid Economic Damages

Underinsured Motorist Benefits

Medical

Burial

Liability Insurance Received

Lost Income

Future Earnings

PIP Benefits Received

Domestic Services

Loss to Estate

Reputation

Any Other Payments Received

Loss/Use

Repairs

Other

Total Total

“Excess” (benefits minus economic damages)

PIP Reimbursement (lesser/PIP or “excess”)© 1994 Joel DeVore

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PIP Offset from Liability Limits Under the Same Policy

• Liability insurer may reduce liability limits by the amount of the PIP payments if the policy contains language allowing such a reduction. Edwards v. Bonneville Automobile Insurance Company, 299 Or 119 (1985).

• No reduction from liability limits if the policy does not specifically allow such a reduction. Staiger v. Burkhart, 299 Or 49 (1985).

• The limitation on PIP reimbursement under ORS 742.544 applies in this context. North Pacific vs. Hamilton, 153 Or App 332 (1998) affirmed in part and reversed in part in other grounds 332 Or 20 (2001).

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Questions??