Apr 12th, 2017

Best Practices in PIP Reimbursement — Oregon

Heather Beasley

Heather Beasley

Unlike in Washington, a Personal Injury Protection (PIP) insurer in Oregon has authority for recovery above and beyond a standard subrogation claim.  Oregon PIP recovery is governed by three separate statutory provisions, each giving the PIP insurer a different avenue of recovery.  However, the Oregon courts have held that a PIP insurer must select an avenue of recovery and pursue that avenue, such that it cannot switch to a different avenue of recovery once it has made an election on which procedure it will pursue.  Each method is discussed below.  However, an important statutory change occurred in 2016 affecting whether a PIP insurer has a right to recover PIP.

2016 Statutory Change in PIP Recovery “Formula”

Effective in 2016, the Oregon legislature changed the metrics for determining if PIP recovery is available.  Prior to January 1, 2016, a PIP insurer had the right to recover PIP payments made if its insured received benefits in an amount that exceeded the insured’s economic damages.[1]  The determination of how much money was available to recover was made by comparing the insured’s economic damages to the amounts the insured recovered from various sources.  Thus, if an insured had $25,000 in economic damages, but received $10,000 in PIP benefits and $50,000 from the at-fault party in settlement, the amount available out of which to recover PIP was $35,000 ($60,000 received – $25,000 economic damages).  In that situation, the PIP insurer could recover its full $10,000.

With the legislative change of 2016, the new formula allows a PIP insurer to recover its payments to the extent the insured receives benefits that exceed the insured’s total damages, both economic and noneconomic.  To use the scenario above, if the insured had $25,000 in economic damages, and more than $35,000 in noneconomic damages, there would be no funds available out of which the PIP insurer could recover because the insured’s total damages either equal or exceed the amount the insured recovered.  Therefore, a key issue for a PIP insurer to determine is whether there is any PIP recovery available.

Regardless of the ultimate ability to recover PIP, however, a PIP insurer should take timely steps to preserve its right of recovery.  As noted above, there are three different statutory rights of recovery.

Intercompany Arbitration – ORS 742.534

Under Oregon Revised Statute (ORS) 742.534, a PIP insurer has a direct right of recovery against the at-fault party’s insurer for reimbursement of PIP paid, regardless of whether its insured pursues a bodily injury claim.  This method, commonly known as “intercompany arbitration,” is the method the courts have stated is preferred.[2]  In order to pursue recovery under ORS 742.534, the demand for arbitration must be made within two years from the date of the accident.  If litigation is pending between the at-fault party and the insured, the intercompany arbitration can be postponed pending resolution of the case between the at-fault party and the insured.  When a PIP insurer pursues recovery of PIP paid under this provision, the PIP insurer does not have to pay any attorney fees to the insured’s attorney.  The PIP insurer also can pursue intercompany arbitration regardless of whether its insured is pursuing recovery against the at-fault driver, although oftentimes the arbitration is stayed pending resolution of the insured’s action against the at-fault party.  However, if the at-fault party’s liability insurer exhausts its policy limits in payment of a judgment or settlement to the insured, the PIP insurer cannot recover its PIP payments, because the liability insurer has no obligation to reimburse PIP once its liability limits are exhausted.

Filing Lien on Insured’s Claim – ORS 742.536

The second course of PIP recovery is under ORS 742.536, which authorizes a PIP insurer to file a lien on the insured’s claim against the at-fault party.  This provision requires the insured to notify the PIP insurer that the insured is making a claim, or has filed suit, against the at-fault party.  Within 30 days from receiving notice, the PIP insurer must send, in writing to the insured and to the party against whom the claim or suit is made, notice of its intent to place a lien on any recovery.  This notice must be either personally served, or sent by registered or certified mail.  The insurer must then file proof of service of its notice of lien with the court if a lawsuit was filed by its insured.[3]  When pursuing this course of recovery, the PIP insurer is required to pay attorney fees to its insured’s attorney for the recovery of PIP payments.

Subrogation – ORS 742.538

The third course of PIP recovery is under ORS 742.538, or what the Oregon courts have termed the “insurer’s last resort.”[4]  This provision authorizes a standard subrogation action against the at-fault party.  ORS 742.538’s opening salvo states that it is only to be exercised when intercompany arbitration under ORS 742.534 is not available, and the PIP insurer has not elected recovery by lien under ORS 742.536.  The courts have held that a PIP insurer’s failure to pursue an otherwise-available recovery under ORS 742.534 does not render intercompany arbitration “unavailable.”  Rather, intercompany arbitration must not have been a viable course of action in the first place.  In addition, in order to pursue subrogation under ORS 742.538, the PIP insurer must not have sent a lien notice under ORS 742.536.  Finally, ORS 742.538 is not available when the insured pursued a lawsuit against the at-fault party and the PIP insurer either failed to, or decided not to, pursue a lien under ORS 742.536.  In this latter situation, if the insured sued the at-fault party, a separate subrogation lawsuit is considered “claim splitting,” which is barred by the Oregon courts.[5]  If the PIP insurer missed its opportunity to exercise its lien rights under ORS 742.536, it cannot try to salvage its recovery by pursuing a separate subrogation action.

To successfully pursue PIP recovery in Oregon, it is important first to identify the courses of action available for recovery.  If intercompany arbitration is available, the PIP insurer should initiate that process.  If the insurer prefers to pursue its lien rights, ensure the statutory requirements for perfecting the lien are followed.  As a last resort, subrogation may be a viable option, but the insurer must make sure it does not have the intercompany arbitration option available, and has not initiated lien proceedings.  Finally, with the legislative change to determining how much money is available to a PIP insurer for recovery, there may be a significantly reduced ability to recover PIP payments because of Oregon’s shift to a comparison of the insured’s total damages to the amount of benefits the insured receives.


[1] The “total amount of benefits received” is defined in ORS 742.544 to include:

(a)  underinsured motorist benefits;

(b)  liability insurance coverage available to the person receiving the personal injury protection benefits        from other parties to the accident;

(c)  PIP payments; and

(d)  any other payments by or on behalf of the at-fault party.

[2] State Farm Mut. Auto. Ins. Co. v. Hale, 215 Or. App. 19, 29, 168 P.3d 285, 291 (2007)

[3] In my 21 years of practicing in Oregon, I rarely have seen an insurer file the proof of service.  Where the statutory requirements are not followed, the issue of whether the right to PIP recovery was properly preserved becomes a battle between the plaintiff and his or her PIP insurer.  Since it is in the insured’s best interest to have a defective election of recovery by the PIP insurer, it is up to the PIP adjuster to ensure compliance with the statute.

[4] Providence Health Plan v. Charriere, 666 F. Supp. 2d 1169, 1179 (D. Or. 2009).

[5] Wynia v. Fick, 162 Or. App. 365, 369, 986 P.2d 625 (1999); Wanjala v. United States, No. 10-486-AC, 2011 U.S. Dist. LEXIS 115953, at *10 (D. Or. July 22, 2011).