On March 23, 2015, Oregon Governor Kate Brown signed into law Senate Bill 411, making substantial changes to Oregon’s Personal Injury Protection (“PIP”) and uninsured/underinsured (“UM/UIM”) statutes. The Bill amends several Oregon statutes and doubles the PIP medical benefit period from one year to two years. It also changes Oregon UM policies from a “difference in limits” form of UM coverage to an “excess” form of coverage. In addition, the Bill makes a dramatic change to PIP subrogation in Oregon, eliminating the “Make Half” Rule which has been in place for decades, and replacing it with the more familiar anti-subrogation Made Whole Rule.
Oregon provides subrogated PIP carriers with three methods to recover PIP payments or health insurance payments made on behalf of an injured person. There are three statutes which serve as the sources of authorization for PIP reimbursement:
- O.R.S. § 742.534 is the “inter-insurer reimbursement statute.” It allows a PIP carrier to seek reimbursement of PIP payments via arbitration directly from the third-party liability carrier when the PIP carrier has asked the liability carrier for reimbursement, has not elected a PIP lien, and has reimbursement language in its policy.
- O.R.S. § 742.536 is the “lien statute.” It allows for the establishment of a lien by the PIP carrier when the insurer is entitled to subrogation by the terms of its policy, the insurer has not elected to recover through inter-insurer arbitration, above, and the PIP lien is elected in writing by the PIP carrier within 30 days of the receipt of notice or knowledge of the claim through personal service or registered or certified mail.
- O.R.S. § 742.538 is the “subrogation statute.” This traditional right of recovery by subrogation is available only if the auto policy contains the necessary subrogation language, the insurer has not elected to recover by lien under § 742.536, above, and the inter-insurer reimbursement is not available under O.R.S. § 742.538.
Notwithstanding the method of recovery or reimbursement selected, for decades, Oregon law had limited reimbursement of PIP benefits so that it was permitted “only to the extent that the total amount of benefits paid exceeds the ‘economic damages’ as defined in O.R.S. § 31.710.” This meant that a property and casualty carrier can be reimbursed for PIP benefits paid only if the third-party recovery exceeds “economic” damages. After the amendment, O.R.S. § 742.544 now provides:
O.R.S. §742.544. Reimbursement for payment of personal injury protection benefits. (1) A provider of personal injury protection benefits shall be reimbursed for personal injury protection payments made on behalf of any person only to the extent that the total amount of benefits paid exceeds the damages suffered by that person. As used in this section, “total amount of benefits” means the amount of money recovered by a person from:
(a) Applicable underinsured motorist benefits described in O.R.S. § 742.502 (2);
(b) Liability insurance coverage available to the person receiving the personal injury protection benefits from other parties to the accident;
(c) Personal injury protection payments; and
(d) Any other payments by or on behalf of the party whose fault caused the damages.
(2) Nothing in this section requires a person to repay more than the amount of personal injury protection benefits actually received. (Emphasis added).
The phrase “total amount of benefits” is defined as including UIM benefits, liability insurance, PIP payments, and any other payments by or on behalf of the party whose fault caused the damages. Prior to the amendment, PIP subrogation involved a slightly different concept than the traditional Made Whole Doctrine. It was known as a “Make Half Rule” because until the passage of Senate Bill 411 (amending O.R.S. § 742.544), only economic damages were taken into consideration, not non-economic damages. A made whole requirement, on the other hand, ensures that the insurance company providing benefits would not be reimbursed unless the injured person was fully compensated for his loss, including economic damages and non-economic damages. Under the Make Half Rule, the injured person was assured of recovering only his economic damages before the subrogation or reimbursement right of the PIP carrier comes into play.
The Make Half Rule was specifically enacted by the legislature in 1993 because lawmakers intended that PIP insurers be reimbursed after an insured recovers his/her economic damages, but before that insured recovers his/her non-economic damages. The legislative intent was to help keep PIP coverage affordable. PIP subrogation works to reduce the PIP carrier’s net claim costs, and correspondingly, their resulting rate needs. The result was reduced auto insurance premiums.
The new law is lawyer-friendly and consumer-unfriendly. For years, trial lawyers have been trying to amend the PIP subrogation statutes in order to apply the full-blown Made Whole Doctrine. On March 23, 2015, they succeeded. The new statute becomes effective on January 1, 2016. The amendment will be applauded by trial lawyers because it makes PIP subrogation more difficult and increases their fees, but will increase the average “per policy” cost by more than $10 per year for hard-working Oregonians, according to State Farm Insurance Company actuaries. For help with your auto insurance subrogation needs (UM/UIM, PIP, Med Pay, Collision, etc.) in Oregon or anywhere else within North America, please contact Gary Wickert at [email protected].