In this civil case, plaintiff, Providence Health Plan (Providence) filed suit against defendant Winchester, its insured,
I. FACTS AND PROCEDURAL HISTORY
The relevant facts are not in dispute. On September 26, 2006, defendant was struck by a motor vehicle while she was a pedestrian. Defendant sustained extensive injuries to her head and leg. In a declaration submitted with her motion for summary judgment, defendant asserted that her injures caused her to incur a total of $116,219.73 in medical expenses and $422,000.00 in other economic damages. Pursuant to its policy with defendant,
The driver of the vehicle that struck defendant had an auto liability insurance policy with State Farm with a policy limit of $25,000. Defendant had an auto insurance policy, also with State Farm, that provided $15,000 in personal injury protection (PIP) and $100,000 in UIM coverage.
In December 2006, Providence sent a letter to defendant indicating that, pursuant to the “Third Party Liability/Subrogation” provision of the policy, defendant should hold any recovery that she received from State Farm in trust for Providence. It enclosed a copy of its Subrogation Trust Agreement for that purpose. Defendant did not complete and return the Subrogation Trust Agreement, and she continued to negotiate with State Farm about payment under the driver’s liability policy and her own PIP and UIM policies.
As relevant here, the employer group contract that, according to Providence,
“8.1 THIRD-PARTY LIABILITY/SUBROGATION
«* * * * *
“8.1.2 Proceeds of Settlement or Recovery
“To the fullest extent permitted by law, We [(Providence)] are entitled to the proceeds of any settlement or any judgment that results in a recovery from a third party, whether or not responsibility is accepted or denied by the third-party for the condition. We are entitled up to the full value of the benefits provided by Us for the condition, calculated using Our providers’ usual charges for such Services, less the Member’s out of pocket expenses. Prior to accepting any settlement of Your claim against the third party, You must notify Us in writing of any terms or conditions offered in settlement and shall notify the third party of Our interest in the settlement established by this provision.
“You must cooperate fully with Us in recovering amounts paid by Providence Health Plan. If You seek damages against the third party for the condition and retain an attorney or other agent for representation in the matter, You must agree to require Your attorney or agent to reimburse Providence Health Plan directly from the settlement or recovery an amount equal to the total amount of benefits paid.
“You must execute the agreement by signing, and returning to Us, Our Subrogation Trust Agreement by which You and/or Your attorney or agent agrees to reimburse Us directly from the funds of the settlement or recovery. We will withhold benefits for Your condition until a signed copy of this agreement is delivered to Us. The agreement must remain in effect and We will withhold payment of benefits if, at any time, Your authorization or the agreement should be revoked. While this document is not necessary for Us to exercise Our rights to subrogation, it does serve as a good reminder and documents an understanding of Our rights to the parties involved.
“To the maximum extent permitted by law, We are subrogated to Your rights against any third party who is responsible for the condition, have the right to sue any such third party in Your name, and have a security interest in and lien upon any recovery to the extent of the amount of benefits paid by Us and for Our expenses in obtaining a recovery.
“8.1.3 Suspension Of Benefits And Reimbursement
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“We are entitled to reimbursement from any settlement or recovery from any third party even if the total amount of such settlement or recovery does not fully compensate You for other damages, particularly including lost wages or pain and suffering; any settlement arising out of an injury or illness covered by this Plan willbe deemed first to compensate You for Your medical expenses, regardless of any allocation of proceeds in any settlement document that We have not approved in advance. In no event shall the amount reimbursed to Providence Health Plan be less than the maximum permitted by law.”
(Italics, boldface, and underscoring in original.)
In early 2008, defendant reached a tentative settlement with State Farm for the policy limits of her policy and the driver’s policy. Under the agreement, defendant would recover the $25,000 from the driver’s policy, $75,000 from her UIM (her $100,000 limit minus her recovery from the driver’s policy), and the $15,000 limit from her PIP policy, for a total of $115,000. After defendant reached that agreement with State Farm, her attorney sent a letter to Providence, informing it of the proposed settlement and requesting Providence to clarify its position regarding reimbursement. Providence replied that it intended to “[follow] our contractual rights of third party liability/ subrogation as documented in our group service agreement.”
After receiving Providence’s letter, defendant settled with State Farm on the terms described above. Providence then filed this action, seeking a declaration that defendant “is obliged under the [policy] to repay Providence both out of the liability and underinsured portions of any settlement she has received” and damages for breach of contract in the amount that Providence paid toward defendant’s medical expenses minus a pro rata share of defendant’s legal expenses. Defendant counterclaimed, seeking declarations that, among other things, Providence was not entitled to recover under the contract and that ORS 742.538 controlled Providence’s right to reimbursement. The declarations that defendant requested mirrored her legal arguments, which are discussed in detail below. The parties filed cross-motions for summary judgment, and the trial court granted Providence’s motion and denied defendant’s.
II. ARGUMENTS AND ANALYSIS
Defendant appeals, assigning error to the trial court’s denial of her motion for summary judgment and its grant of Providence’s motion for summary judgment. Defendant argues, as she did before the trial court, that three statutory provisions, ORS 742.534, ORS 742.536, and ORS 742.538, provide methods for insurers to seek reimbursement of their expenditures and that those provisions preempt any language in defendant’s policy with Providence that purports to give Providence another method of recovery. Furthermore, defendant contends, Providence did not seek reimbursement under the first two of those provisions — ORS 742.534 and ORS 742.536 — and, accordingly, it may obtain reimbursement in this action, if at all, only through the third, ORS 742.538. As to ORS 742.538, defendant asserts that Providence has not met two of that statute’s prerequisites to reimbursement.
Providence responds that it can obtain reimbursement under the terms of the contract because the contract provides a remedy that is additional to, but not inconsistent with, the one provided in ORS 742.538. But, Providence contends, even if its remedies are limited by ORS 742.538, this action meets the statute’s prerequisites.
As explained below, we conclude that the policy provision under which Providence seeks reimbursement in this case is superseded by ORS 742.538 to the extent that it differs from that statute. The contract section under which Providence seeks to recover from defendant is entitled “Third Party Liability/Subrogation,” and, in its correspondence with defendant, Providence asserted that it intended to achieve reimbursement through “Third Party Liability/Subrogation” and sought to have defendant sign a document entitled “Subrogation Trust Agreement.” ORS 742.538 contains the procedural requirements that a PIP or health insurer
Here, Providence failed to satisfy at least one prerequisite to reimbursement under ORS 742.538. An insurer may not obtain reimbursement through ORS 742.538 unless “the interinsurer reimbursement benefit of ORS 742.534 is not available under the terms of that section.” ORS 742.538. We conclude that interinsurer reimbursement under ORS 742.534 was available to Providence when it asserted its right to subrogation. As a result, Providence is not entitled to reimbursement.
A. PIP and Health Insurance Reimbursement Scheme
As explained immediately above, this case presents two questions of statutory interpretation: First, may Providence obtain reimbursement from defendant based on language in its policy alone, or does ORS 742.538 require compliance with the prerequisites of that section? And, second, is ORS 742.534 “not available” to Providence as required by ORS 742.538?
When interpreting a statute, our task is to discern the intent of the legislature. State v. Gaines,
The basic premise underlying PIP and, in this context, health insurance, is that, when an insured is injured in an accident involving an automobile, the insured’s PIP and health insurance are immediately available to cover medical expenses, regardless of fault. Perez v. State Farm Mutual Ins. Co.,
We begin by summarizing the basic features of all three provisions as relevant to
The second route to reimbursement, ORS 742.536, requires an insured who has received PIP or health benefits to notify his or her PIP or health insurer when the insured “makes claim, or institutes legal action, for damages for such injuries against any person.” ORS 742.536(1). Then, the insurer may elect reimbursement “out of any recovery under such claim or legal action” and has “a lien against such cause of action” for the amount it has paid out less its share of the insured’s cost of recovery (costs, expenses, and attorney fees). ORS 742.536(3)(a). In order to avail itself of reimbursement under ORS 742.536, the insurer must (1) not have been a party to “an interinsurer reimbursement proceeding” under ORS 742.534, (2) be “entitled by the terms of its policy to the benefit” of ORS 742.536, and (3) provide written notice of its election to seek reimbursement through ORS 742.536 to the claimant and the person against whom the claim is made within 30 days of “the receipt of notice or knowledge of such claim or legal action.” ORS 742.536(2). Thus, ORS 742.536 permits a PIP or health insurer to be reimbursed out of a recovery by its insured from another person, provided that it promptly notifies its insured and the other party of its election.
The third route to reimbursement, ORS 742.538, permits reimbursement in two ways. First, ORS 742.538(1) provides that, up to the amount of benefits that it has paid less its share of the cost of recovery (costs, expenses, and attorney fees), a PIP or health insurer “is entitled to the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery of the injured person against any person legally responsible for the accident.” Second, ORS 742.538(4) provides that an insurer may compel its insured to “take * * * such action as may be necessary or appropriate to recover such benefits furnished as damages from such responsible person.”
In order for a PIP or health insurer to obtain reimbursement through ORS 742.538, three requirements must be satisfied: (1) “the interinsurer reimbursement benefit of ORS 742.534 [must] not [be] available under the terms of that section,” (2) the insurer must not have elected “recovery by lien as provided in ORS 742.536,” and (3) the insurer must be “entitled by the terms of its policy to the benefit” of the section. ORS 742.538.
B. Analysis
1. Statutory Requirements and Contractual Rights
We turn to the parties’ arguments. As explained above, defendant argues that ORS 742.534 to 742.538 govern reimbursement, and that those provisions “preempt any provisions in a health insurance policy that are inconsistent with the statute” for two reasons: First, defendant relies on ORS 742.538(7), arguing that it prohibits Providence from bringing a claim related to subrogation under terms different from those stated in ORS 742.538. Defendant also asserts that ORS 742.021 applies to Providence and requires that “insurance policies must contain such standard or uniform provisions as are required by the Oregon Insurance Code. An insurer may not bring a nonstatutory breach of contract claim that conflicts with the [ijnsurance [c]ode.”
In response to defendant’s first argument, Providence contends that its contractual right to reimbursement “is entirely consistent with” ORS 742.538 and, as a result, is not preempted under ORS 742.538(7). As to defendant’s second argument, Providence asserts that, unlike insurance policies, the plans of health care service contractors like Providence are permitted to include provisions less favorable to plan subscribers than the standard provisions of the insurance code. That is so, it argues, because, under ORS 750.055(1)(e), only specified provisions of ORS chapter 742 apply to health care services contractors, and ORS 742.021 is not specified.
We do not address whether, as Providence asserts, its contracts need not comport with the standard terms of the insurance code, like ORS 742.534 to 742.538, that apply to it through ORS 750.055(1)(e). That is so because we agree with defendant’s first argument — namely, that ORS 742.538(7) prevents Providence from seeking reimbursement through a provision of its contract relating to subrogation unless the prerequisites of ORS 742.538 are satisfied.
ORS 742.583(7) provides that “[a]ny provisions in a *** health insurance policy giving rights to the insurer relating to subrogation or the subject matter of this section shall be construed and applied in accordance with the provisions of this section.” Providence does not dispute that, in this case, it seeks to enforce a provision of its health insurance policy that gives it a right “relating to subrogation.” See State Farm Mutual Automobile Ins. Co. v. Hale,
Under ORS 742.538(7), we construe and apply the policy “in accordance with the provisions of” ORS 742.538. Under that construction, Providence cannot escape the prerequisites to reimbursement under the statute by relying on language in the policy. Cf. Gaucin v. Farmers Ins. Co.,
2. Prerequisites to Reimbursement Under ORS 742.538
Thus, in order to obtain reimbursement under the “Third Party Liability/Subrogation” provision of the policy, Providence must comply with the procedural requirements of ORS 742.538. As mentioned, those requirements are as follows:
“[(1) T]he interinsurer reimbursement benefit of ORS 742.534 is not available under the terms of that section, [(2)] the insurer has not elected recovery by lien as provided in ORS 742.536, and [(3) the insurer] is entitled by the terms of its policy to the benefit of this section [.]”
ORS 742.538. The parties agree that, here, the second requirement is met, but they disagree about whether the first and third requirements
ORS 742.534 provides:
“(1) Except as provided in ORS 742.544, every authorized motor vehicle liability insurer whose insured is or would be held legally liable for damages for injuries sustained in a motor vehicle accident by a person for whom personal injury protection benefits have been furnished by another such insurer, or for whom benefits have been furnished by an authorized health insurer, shall reimburse such other insurer for the benefits it has so furnished if it has requested such reimbursement, has not given notice as provided in ORS 742.536 that it elects recovery by lien in accordance with that section and is entitled to reimbursement under this section by the terms of its policy. Reimbursement under this subsection, together with the amount paid to injured persons by the liability insurer, shall not exceed the limits of the policy issued by the insurer.
“(2) In calculating such reimbursement, the amount of benefits so furnished shall be diminished in proportion to the amount of negligence attributable to the person for whom benefits have been so furnished, and the reimbursement shall not exceed the amount of damages legally recoverable by the person.
“(3) Disputes between insurers as to such issues of liability and the amount of reimbursement required by this section shall be decided by arbitration.
“(4) Findings and awards made in such an arbitration proceeding are not admissible in any action at law or suit in equity.
“(5) If an insurer does not request reimbursement under this section for recovery of personal injury protection payments, then the insurer may only recover personal injury protection payments under the provisions of ORS 742.536 or 742.538.”
Relying on the last sentence of ORS 742.534(1), Providence argues that ORS 742.534 was not available to it “because State Farm had paid its policy limits and could not be required to pay any more.”
We have addressed, and rejected, the same argument under similar circumstances. In Hale,
Then State Farm informed the defendant that it would only approve the settlement on the condition that the defendant reimburse State Farm from the settlement proceeds. Id. at 23. The defendant asserted that that was not a legitimate basis on which to disapprove the settlement, and, eventually, State Farm filed suit, arguing that it was entitled to subrogation pursuant to ORS 742.538.
The defendant asserted that State Farm was not entitled to subrogation because interinsurer reimbursement “was *** available” under ORS 742.534. ORS 742.538. State Farm contended that interinsurer reimbursement had ceased to be available when Farmers had offered the defendant a settlement for the limits of Knotts’s policy, because, under ORS 742.534, Farmers could not be required to pay more than those limits. According to State Farm, when Farmers offered the defendant a settlement for the policy limits, ORS 742.534 was rendered unavailable in the sense that State Farm was no longer able to recover anything through interinsurer reimbursement. The trial court agreed with State Farm. Hale,
The
Here, Providence argues — as the PIP insurer did in Hale — that interinsurer reimbursement was not available because, having paid its policy limits to defendant, “State Farm could not be required to pay any more pursuant to the terms of ORS 742.534.” Providence first asserted its right to “third-party liability/subrogation” — which, as explained above, is only cognizable through ORS 742.538 — in December 2006, more than a year before defendant settled with State Farm for the policy limits. Thus, as in Hale, here, Providence “did not properly assert its subrogation rights under ORS 742.538, because at the time it attempted to do so, no settlement had occurred, and, thus, interinsurer reimbursement remained ‘available’ pursuant to ORS 742.534.”
In summary, in order to obtain reimbursement through the “Third-Party Liability/Subrogation” provision of the policy, Providence had to comply with the requirements of ORS 742.538. A prerequisite to reimbursement under that statute is that “the interinsurer reimbursement benefit of ORS 742.534 *** not [be] available.” When Providence asserted its right to reimbursement through the “Third-Party Liability/Subrogation” provision, however, interinsurer reimbursement through ORS 742.534 was available. Consequently, Providence is not entitled to reimbursement.
Reversed and remanded for entry of judgment for defendant consistent with this opinion.
Notes
Plaintiff Providence Health Plan is a health care service contractor under ORS 750.005(4). Thus, technically, Providence is a plan to which defendant subscribes, not an insurer that insures defendant. See ORS 750.005(4)(a). Nevertheless, for purposes of the statutes at issue in this opinion, Providence is deemed an insurer. ORS 750.055(1)(e), (2). Thus, for ease of understanding, we refer to defendant Winchester as Providence’s insured, to benefits furnished by Providence as health insurance benefits, and to the plan as an insurance policy.
Defendant also asserts that the trial court should have awarded her attorney fees pursuant to ORS 742.061. We do not address that assignment because, as a result of its conclusion that Providence was entitled to summary judgment, the trial court did not consider defendant’s argument regarding attorney fees. We leave that issue for the trial court’s consideration in the first instance.
One of defendant’s alternative arguments is that the terms of the policy are those set out in a member handbook that she received rather than those presented in the employer group contract, which she did not receive. Our disposition of defendant’s other arguments obviates the need to discuss that issue.
Defendant also argues, alternatively, that, even if ORS 742.538 permits Providence to recover the proceeds of her settlement of the driver’s policy, it does not permit recovery of the proceeds of the settlement under her own UIM policy. Because we conclude that the prerequisites to reimbursement under ORS 742.538 are not met, and that conclusion applies equally to both policies, we do not address that question.
In 1993, the legislature modified that policy judgment with respect to PIP benefits, but not with respect to health insurance benefits. Or Laws 1993, ch 709, § 9 (enacting ORS 742.544). Under ORS 742.544, a PIP insurer cannot be reimbursed if the total recovery available to its injured insured is less than the insured’s economic damages. However, because ORS 742.544 does not include health insurers, their reimbursement claims take precedence over their injured insureds’ recovery of their economic damages. ORS 742.544; see also Joel DeVore, An Insurance Repair Act? Why Oregon Insurance Law Needs Repair, 57 Or St B Bull 17, 18 (1997) (“Under ORS 742.544, an injured person is guaranteed a right to keep insurance money from various sources to pay her economic damages first. Any reimbursement to the PIP insurer of past PIP benefits occurs only to the extent that total insurance exceeds economic damages. The Legislature forgot, however, to make health insurers subject to the same calculation limitation as PIP insurers, although both insurers are payors of medical bills and although the reimbursement fights of health and PIP insurers arise under the same statutes. As a result, an injured person’s economic damage recoveries are not consistently protected.”).
ORS 742.021(1) provides:
“Insurance policies shall contain such standard or uniform provisions as are required by the applicable provisions of the Insurance Code. However, the insurer may at its option substitute for one or more of such provisions corresponding provisions of different wording approved by the Director of the Department of Consumer and Business Services which are in each instance not less favorable in any respect to the insured or the beneficiary”
(Emphasis added.)
Our conclusion that ORS 742.534 was available when State Farm asserted its rights under ORS 742.538 was determinative. Consequently, in Hale, we did not reach the defendant’s broader argument that ORS 742.534 remains available after the payor insurance company has paid its policy limits.