The Advance Payment Trap
By: Laura Althouse
Introduction
In Medean v. Moeller, ___ Or. App. ___ (December 7, 2011), available at: http://www.publications.ojd.state.or.us/appeals.htm#dec11, the Oregon Court of Appeals clarified that ORS 31.555 is the only way a defendant may seek a partial satisfaction of judgment for payment of personal injury protection (“PIP”) benefits. This means that a defendant must request partial satisfaction within 14 days of entry of judgment. Not only does this case present a trap for the unwary in cases involving PIP, but the statutory interpretation applied by the court likely extends to other advance payments. The ruling also likely applies to advance medical payments.
The Medean Ruling
Plaintiff was injured in car accident with defendant. Plaintiff received $8,413.15 in personal injury protection (PIP) benefits from plaintiff’s insurer, Travelers. Defendant’s insurer, Allstate, reimbursed Travelers for the PIP payment, pursuant to ORS 742.534, prior to entry of judgment. Later, a jury awarded plaintiff $19,839. Allstate paid plaintiff $11,425.85, the award amount minus the previous PIP payment of $8,413.15. More than a year after entry of judgment, defendant filed an ORS 18.235 motion for an order declaring that the judgment had been satisfied. Defendant argued that under ORS 31.555, the court was required to reduce the money award by the amount of Allstate’s prejudgment PIP reimbursement to Travelers. Plaintiff countered that defendant had failed to fulfill the statute’s requirement that a reimbursement request be filed within 14 days of entry of the judgment. The trial court granted defendant’s motion.
On appeal, plaintiff sought the full amount of the award and defendant argued that the procedure outlined in ORS 31.555(3)(b) was not the exclusive manner in which a defendant can receive an offset for a prejudgment PIP payment because of the use of the term “may” in that subsection. The Court of Appeals agreed with plaintiff, stating that the procedure in ORS 31.555(3)(b) which incorporates ORCP 68 C(4), “is the exclusive means by which the insurer may offset its PIP reimbursement payment against the money award.” ORCP 68C(4) contains the 14 day timeline requirement and is more well known as the civil rule governing recovery of attorney fees, costs and disbursements. The appellate court found that because ORS 31.555(2) provided that a judgment “shall” be reduced for such payments in the manner outlined in ORS 31.555(3), following that procedure was mandatory. The use of the word “may” in ORS 31.555(3)(b) merely acknowledged that there may be circumstances where an insurer does not seek a reduction for prepayment of PIP benefits. Accordingly, defendant was not entitled to a partial satisfaction for pre-judgment PIP reimbursement because its request had not been filed within 14 days of entry of judgment. This ruling resulted in a “double recovery” for the plaintiff.
The Broader Implications and Strategic Considerations
Other provisions of ORS 31.555 apply the same procedure used for PIP reimbursement to advance payments for property damage, death and personal injury – in any type of case. “Advance payment” is defined as “compensation for the injury or death of a person or the injury or destruction of property prior to the determination of legal liability therefore.” ORS 31.550. ORS 31.555(1) provides as follows:
If judgment is entered against a party on whose behalf an advance payment referred to in ORS 31.560 or 31.565 (advance payments for death or personal injury and property damaged) has been made and in favor of a party for whose benefit any such advance payment has been received, the amount of the judgment shall be reduced by the amount of any such payments in the manner provided in subsection (3) of this section. However, nothing in ORS 12.155, 31.560 and 31.565 and this section authorizes the person making such payments to recover such advance payment if no damages are awarded or to recover any amount by which the advance payment exceeds the award of damages.
ORS 31.555(3)(a) provides:
The amount of any advance payment referred to in subsection (1) of this section may be submitted by the party making the payment, in the manner provided in ORCP 68C(4) for the submission of disbursements.
The statutory structure is identical for PIP reimbursements and advance payments for property damage, death or personal injury. The first part of the statute provides that the judgment shall be reduced for such payments in the manner provided in subsection (3) and both parts of subsection (3) require that such reductions may be sought through the procedure outlined in ORCP 68C(4). Therefore, the appellate court’s reasoning in Medean likely applies to all advance payments contemplated under ORS 31.555.
One less obvious extension of the ruling is to advance medical payments made pursuant to a premises liability-type policy or a general commercial liability policy. Since such payments qualify as “advance payments,” they are subject to ORS 31.555(1) and (3)(a). The application of ORS 31.555(1) and (3)(a) is not limited to automobile cases, and therefore the statute also applies in premises liability and other types of cases.
Thus, the implications of the appellate court’s recent ruling extend beyond PIP and beyond automobile cases. Insurers and their defense counsel must be aware of the 14 day deadline for filing requests for partial satisfaction of judgment due to advance payments in a variety of cases. In any case where advance payments are made to a subsequent plaintiff, the question of the 14 day deadline should be on a mental checklist.
As a final related note on deadlines, pursuant to ORS 12.555, a person who makes an advance payment for property damage, death, or personal injury as referred to in ORS 31.560 and 31.565 must give each person entitled to recover damages for the death, injury or destruction, written notice of the expiration date of expiration to commence an action for damages not later than 30 days after the date of the first of such advance payments. If notice is not provided in this manner, the limitation period may be tolled between the date of the first advance payment and the date the required notice is actually given. The Oregon Supreme Court recently clarified that “person entitled to recover damages” refers to every person with a “legal right to bring an action to recovery damages for its injury or destruction,” and does not require that such person have filed a claim that led to the advance payment. Snyder v. Espino-Brown, 350 Or. 141, 252 P.3d 318 (2011). ORS 12.555 only applies to payments that are dependant on fault – and therefore does not include PIP payments or any other payments that are required regardless of fault. See Meoli v. Brown, 200 Or. App. 44, 114 P.3d 507 (2005).