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In 1987, the Oregon Supreme Court decided the case of Fazzolari v. Portland School Dist., 303 Or 1 (1987).  In this case, the court chronicled the state’s history of evaluating negligence cases, juxtaposing the concepts of “duty” and “foreseeability.”  What followed was a relative sea change for litigators in the approach to negligence cases.  In most cases, the court determined the legal duty owed from one person to another would no longer provide the framework for liability; instead, the more amorphous concept of foreseeability would govern.  Thus the question became whether or not a party’s conduct “unreasonably created a foreseeable risk to a protected interest of the kind of harm that befell the plaintiff.”  The court acknowledged foreseeability is typically a question for a jury, except for alleged conduct existing “at the outer margins.”  Id. at 12.

Of course, as the Fazollari court also held, the concept of “duty” remains where a special relationship exists between parties, such as doctor-patient, business owner-invitee, teacher-student, and others.  One of the more interesting intersections of duty and foreseeability lies in a business owner’s duty to protect its customers from the criminal conduct of third-parties.  Even though a special relationship exists between the parties, Oregon’s courts have held that the business owner’s duty is to protect the customer from “reasonably foreseeable” criminal conduct.  Therefore, despite the existence of a duty, these cases are still defined by the concept of foreseeability.

In theory, the requirement of foreseeability eliminates the problem of business owner from insuring the world against all possible criminal conduct.  However, as the specific duty is tied to foreseeability, many tenuous theories of liability have survived motion practice and proceeded to a jury.  After Fazollari, a common lament among defense attorneys is that courts are willing to accept any theory of foreseeability, demonstrating an extreme reluctance to provide defined boundaries.  Very few cases fall within the “outer margins” of foreseeability.

One example of business owner liability for criminal conduct is found in the matter of McPherson v. State, 210 Or App 602 (2007).  In this case, plaintiff sued defendant, an operator of an apartment complex.  Plaintiff, a tenant, was utilizing the apartment’s stand-alone laundry facility when an escaped state prisoner entered facility and sexually assaulted plaintiff.  The defendant moved for summary judgment, arguing the criminal conduct of the third-party was not reasonably foreseeable.  While the trial court granted summary judgment, the Court of Appeals reversed, noting, in particular, a history of crime in the area.  In reversing summary judgment, the court acknowledged precedent in this area involved a case-by-case “ad hoc” determination, resulting in “vague and impressionistic precepts.”  Id. at 617.

Despite the foregoing, courts have provided some limits of liability for a third-party’s criminal actions.  In Buchler v. Oregon Corrections Div., 316 Or 499 (1993), the court determined the State of Oregon would not be liable for criminal acts committed by a state prisoner who escaped from a work crew by stealing a van in which the supervisor left the keys.  Two days after escaping in the van, the prisoner shot two people, killing one of them.  The court determined that the act of leaving keys in the van did not amount to an unreasonable risk of harm. While this is a valuable case for defendants, it does not address what specific facts are necessary to otherwise render criminal conduct foreseeable to defendants.  In other words, it may have been foreseeable that a prisoner would escape, but the state did not act unreasonably in creating that risk.

In the more recent case of Stewart v. Kids Inc., 245 Or App 267 (2011), the Oregon Court of Appeals examined a scenario where a teenage girl was sexually assaulted by a third-party adult in defendant Dairy Queen’s bathroom.  The girl was present at Dairy Queen to work for a charity car wash sponsored by the other defendant, Kids, Inc.  The particularly tragic circumstance existed in this case where the adult met and “groomed” the girl online for months prior to the assault.  Upon learning the minor would be present at Dairy Queen for the car wash, the adult traveled there, lured the girl into the bathroom and assaulted her.

Plaintiff alleged that Dairy Queen and Kids, Inc. were liable for the criminal conduct of the adult.  In particular, plaintiff alleged that the defendants, in holding a carwash and restaurant open to the public where teenage girls would be present, should have anticipated that sexual predators may have met the girls online, and traveled to the restaurant with criminal intentions.  Plaintiff’s complaint specifically stated that “it was reasonably foreseeable to defendants, and each of them, that sexual predators might have made contact with the underage females via the internet who were attending the car wash and frequenting the Dairy Queen.”

This particular case presented an extremely tenuous theory of liability.  Both defendants moved to dismiss plaintiff’s complaint, seeking a ruling that the alleged criminal conduct was unforeseeable as a matter of law.  The court agreed, noting that plaintiff’s theory of liability was equivalent to stating that all crime is foreseeable, therefore defendants should be liable for facilitating the opportunity for crime to occur.  The crucial missing component in the complaint was plaintiff’s failure to allege any facts demonstrating precisely why defendants should have anticipated the particular criminal conduct. Simply alleging that crime occurred and the defendant should have known about it was inadequate.

This case is extraordinarily valuable on several levels.  First, it confirms the basic premise that a business owner is not required to insure its customers against all possible criminal conduct.  Instead, there must be specific facts pled showing why a business owner should have anticipated the particular criminal conduct that occurred and how the business acted unreasonably in failing to protect its customers.  Second, it provides a factual scenario, similar to the Buchler case, that assists in determining the “outer margins” of legally foreseeable conduct.  Some factual allegations attempting to establish foreseeability are simply insufficient.

Finally, the Stewart case illustrates the value of moving to dismiss a complaint at the outset of a case. Defense attorneys are often presented with the vexing question of whether or not to move for dismissal based upon a plaintiff’s complaint alone.  In moving too early, defendants can provide plaintiff with an opportunity to fix the complaint and shore up their theory of liability.  If this occurs, defendants may have missed a later opportunity for either summary judgment or judgment on the pleadings.  However, in this line of cases, it is paramount that the facts necessary to establish foreseeability are properly pled.  The nexus between the crime that occurred and a business owner’s ability to anticipate that crime is often dubious and provides one of the more successful avenues to defending these cases.  Fortunately, the Court of Appeals has added another boundary to the outer limits of foreseeability.

Settlements involving Medicare beneficiaries may have become a little easier.  A new procedure implemented in February 2012 allows a beneficiary to obtain a conditional payment amount from Medicare before settlement is reached in certain circumstances.  Additionally, satisfying Medicare’s right to recover in low value settlements has been simplified. If the settlement is $300 or less and meets certain other conditions, Medicare will not seek to recover its lien, or if the settlement is $5,000 or with less, also with some conditions, Medicare’s reimbursement can be satisfied by paying 25% of the recovery.

Obtaining Conditional Payment Amount Before Settlement

As of February 12, 2012, the Centers for Medicare & Medicaid Services initiated a new procedure where Medicare beneficiaries can self-calculate a conditional payment amount from Medicare before settlement in certain situations.  Hopefully, this will reduce the unknowns that have plagued settlements involving Medicare beneficiaries.

The Medicare Secondary Payer Act, 42 U.S.C. §1395y requires reimbursement of all Medicare benefits paid relating to a personal injury.  While reimbursement of the benefits is mandatory and carries significant penalties if Medicare’s reimbursement rules are not strictly followed, historically, Medicare would only provide a final pay-off amount after the parties reached settlement.  A Medicare beneficiary could obtain an approximation for Medicare’s lien but that amount was subject to change in the final demand letter.  Now, under certain circumstances, beneficiaries can obtain the final demand amount from Medicare up to 60 days before settlement.

The following conditions must be met for Medicare to provide the final demand amount before a settlement is reached:

• The claim and settlement must be for an injury caused by physical trauma.  The settlement cannot involve or relate to injuries caused by exposure, ingestion or medical implant.
• The beneficiary’s medical treatment for the injury must be completed with no further treatment expected. Treatment must have been completed at least 90 days before the beneficiary submits the proposed conditional payment amount to Medicare.  These requirements are proven to Medicare by providing either a physician’s written confirmation or, if the beneficiary did not seek medical treatment for the injury, a written certification by the beneficiary.
• The total settlement, judgment, award or other payment cannot exceed $25,000.
• The date of the incident must have occurred at least six months before the beneficiary submits the self-calculated final conditional payment amount to Medicare.

When these conditions are met, a beneficiary can submit the self-calculated conditional payment amount to Medicare (via the Medicare Secondary Payer Recovery Contractor (MSPRC)) for approval.  The request must include: Medicare’s Payment Summary Form (received with the Conditional Payment Letter) with notations as to whether each claim on the Summary Form relates to the case being settled, a list of additional claims not included on the Summary Form, an explanation for disputed claims, the beneficiary’s self-calculated conditional payment amount, the settlement amount, a description of the injury, certification that the beneficiary met the above eligibility requirements, the physician’s confirmation or beneficiary’s certification relating to the need for future medical treatment described above, and the signatures of the beneficiary and the attorney or representative.  The MSPRC provides model language for the request at http://www.msprc.info/forms/Self-Calculated%20Conditional%20Payment%20Amount%20Model%20Language.pdf.

Within 60 days of the submitting the request, the MSPRC will send a letter to the beneficiary with its response.  If the self-calculated conditional payment amount is approved, the settlement must occur with 60 days of the date of the letter and the beneficiary must send proof of the settlement to the MSPRC.

For more information about this procedure, see the MSPRC website at http://www.msprc.info/forms/SelfCalculatedFinalCP.pdf.

Paying a Fixed Percentage For Settlement of $5,000 or Less

In an effort to streamline Medicare’s reimbursement rights, Medicare adopted an option for beneficiaries to elect to pay 25% of their recovery as full satisfaction of Medicare’s right to reimbursement in limited situations.

A beneficiary may take advantage of this Fixed Percentage Option when all of the following circumstances apply:

• The settlement, judgment, award, or other payment is from liability insurance or self-insurance.  This option is not available to workers’ compensation or no-fault settlements.
• The settlement, judgment, award, or other payment must be for an injury caused by physical trauma and not related to exposure, ingestion or medical implant.
• The total settlement amount does not exceed $5,000.
• The beneficiary chooses this option within the required timeframe and before Medicare issued a final demand letter or made any requests for reimbursement.
• The beneficiary has not received and does not expect to receive any other settlements, judgments, awards or other payments related to the incident.

If the above conditions are met, a beneficiary can avoid the traditional, and longer, reimbursement process with Medicare and can satisfy Medicare’s reimbursement claim by paying Medicare 25% of the total liability insurance settlement.  However, a beneficiary’s right to appeal the fixed payment amount or request a waiver of the amount is waived once the option is elected.  There are other advantages and disadvantages to selecting this option that should be considered.  To learn more about the Fixed Percentage Option, see the MSPRC website at http://www.msprc.info/forms/Fixed%20Percentage%20Option%20Information.pdf.

The Repayment Threshold

If the settlement of a liability insurance claim, including self-insurance claims, is $300 or less, the MSPRC will not seek recovery against the settlement, judgment, award or  other payment.  But, there’s a catch – this threshold applies only if the following conditions are met:

• The settlement, judgment, award or other payment must be related to a physical trauma-based incident.  The threshold does not apply to claims involving ingestion, implantation or exposure.
• Liability insurance or self-insurance must be involved in the settlement, judgment, award, or other payment.
• The total amount of the settlement, judgment, award, or other payment is $300 or less.
• The beneficiary has not received and does not expect to receive any other settlements, judgments, awards, or other payments related to the incident.
• Medicare has not issued a recovery demand letter.
• The insurer or self-insurer has not paid and is not continuing to directly pay the beneficiary’s medical bills.

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).

Bryana Sack married Patrick Blessinger on November 20 in Cabo, Mexico.  Congratulations to the couple on their new and exciting life together.  Bryana is now known as Bryana Blessinger.