Insurance Liens Take a Back Seat to Victim Compensation–Oregon Senate Bill 421

Serious injury in a car crash almost always raises the same problem – there’s not enough insurance to cover the victim’s damages. Medical expenses, rehabilitation costs, lost wages and pain and suffering in most cases exceed the insurance coverage of the at-fault driver, which Oregon law requires to be only $25,000. Even with additional “underinsured motorist” coverage, which Oregon law also requires, a serious injury, with any kind of hospital stay, quickly exceeds the available insurance policy limits. Unless the at-fault driver was driving for a company with commercial liability insurance at the time of the crash, full compensation for injury is hard to come by.

One important reason for this has been “subrogation,” which is a motor vehicle or health insurer’s right to claim a victim’s damages against the at fault driver. Most auto insurance policies and health insurance plans have provided that, where the insurer pays medical expenses or wage loss after a crash, that insurer gets to recover those payments before the injured victim gets compensated. A good personal injury lawyer could negotiate with the insurer to try to reduce that insurance lien, but the basic rule was “pay the insurer first; the client gets what’s left over.”

The 2019 Oregon Legislature changed that, thanks to tireless research and advocacy by Michelle DuBarry, a Mom who lost her son when he and his father were hit by a car in a North Portland crosswalk. Michelle worked with technical and political help from the Oregon Trial Lawyers’ Association. Because of those efforts, under insurance policies issued or renewed after January 1, 2020, insurers will get reimbursed for accident-related expenses only after the injured party “receives full compensation.” Here’s what Senate Bill 421 says:

“An insurer may not receive a reimbursement or subrogation for personal injury protection benefits or health benefits the insurer provided to a person injured in a motor      vehicle accident from any recovery the injured person obtains in an action for damages except to the extent that : (A) the injured person first receives full compensation for     the injured person’s injuries.”

That means an insurer that provided payment while an injury case was pending – usually the PIP (personal injury protection) or private medical insurer – will have to wait to get paid back until the injured person is fully compensated for her injuries.

The new law also includes some “rebuttable presumptions,” which are facts presumed to be true unless they are disproved. The important ones for an injured person to know are:

If an injury victim goes to court to recover damages for her injury, the amount of the judgment in her favor is full compensation for her injury. That means the PIP or medical insurer is not entitled to any of the judgment amount.

If the injured person settles her claims against the at fault driver and her own underinsured motorist policy, the amounts she receives are “full compensation.” Again, that means the PIP or medical insurer is not entitled to any of that recovery.

If the injured person recovers the policy limits of the at fault driver’s insurance and the limits of her own underinsured coverage, she has not received full compensation. Again, that means the PIP or medical insurer is not entitled to any of that recovery.”

The new law also prohibits an insurer from delaying, denying or refusing to pay PIP or medical insurance benefits because the injured person has a claim against an at fault driver. And, if the insurer does receive reimbursement after the injured person is fully compensated, the insurer must credit that amount against any lifetime benefit limitation that may be part of its insurance agreement with the injured person.

The new statute does not apply to property damage benefits, and it doesn’t keep the injured person’s underinsured motorist insurer from going after the at fault driver if there is available coverage after the injured person has been fully compensated.