Horlacher v. Mid-Century Insurance

ARMSTRONG, J.

Plaintiff was injured in a single-vehicle accident. The car was driven by her husband. After the accident, plaintiff received personal injury protection (PIP) benefits from defendant, husband’s insurer, in the amount of $14,521.20.¹ She subsequently filed a claim against husband alleging negligence. She settled that claim with defendant for an amount equal to the liability limit of her husband’s insurance policy.

Defendant contended that it could offset from the settlement the amount of the previously paid PIP benefits. Defendant paid plaintiff that amount. Plaintiff argued that ORS 742.544 applied and prevented defendant from offsetting PIP payments made to her after the effective date of the statute. Plaintiff therefore filed this declaratory judgment action to determine whether defendant was entitled to the offset. The trial court concluded that defendant was not and entered judgment for plaintiff for $8,833.08. Defendant appeals and we reverse.

ORS 742.544 took effect on.November 1, 1993, and applies to “losses that occur on or after” that date. See Or Laws 1993, ch 709, §§ 9, 13 and 14. It provides:

“(1) A provider of personal injury protection benefits shall be reimbursed for personal injury protection payments made on behalf of any person only to the extent that the total amount of benefits paid exceeds the economic damages as defined in ORS 18.560 suffered by that person. As used in this section, ‘total amount of benefits’ means the amount of money recovered by a person from:

“(a) Applicable underinsured motorist benefits described in ORS 742.502(2);

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

“(c) Personal injury protection payments; and

“(d) Any other payments by or on behalf of the party whose fault caused the damages.

“(2) Nothing in this section requires a person to repay more than the amount of personal injury protection benefits actually received.”

To begin with, we note that the parties and the trial court seem to have operated under a misunderstanding about the statute. The parties focused on whether the statute applies to cases in which the accident causing the loss occurred before the effective date of the act. They also argued about whether the statute applies when there is a single insurer involved in the case. The parties failed to determine as an initial matter, however, whether the total amount of benefits paid to plaintiff exceeded her total economic damages as defined in ORS 18.560.²

Plaintiff alleged in her complaint that “[t]he total amount of PIP benefits paid by defendant did not exceed the economic damages suffered by plaintiff as a result of the accident as the term ‘economic damages’ is defined in ORS 18.560.” That is not the proper comparison. The parties should have determined whether the total amount that plaintiff received, including the settlement that she received from defendant, exceeded her economic damages and, if so, by what amount. Only then could the court determine whether ORS 742.544 could affect defendant’s right to be reimbursed for the PIP benefits that it had paid to plaintiff, based on the issues framed by the parties.

Nevertheless, the parties’ only argument below and on appeal is whether ORS 742.544, which applies only to “losses” occurring on or after November 1,1993, requires that the incident causing the injury or damage occur on or after November 1, 1993, or whether it applies to damages that accrue on or after November 1, 1993, for incidents that occurred before that date. Plaintiff argues that losses occur when costs are incurred, and not at the moment that an accident occurs. Defendant argues that a “loss” occurs when the event that causes injury occurs. We agree with defendant.

Typically, when an injury-causing event occurs that is covered by an insurance policy, an insured must report the “loss” and subsequently file a “proof of loss” that identifies the damages for which the insured seeks compensation. In that system, the loss occurs at the time of the accident. Nothing in the text or context of ORS 742.544 suggests that the legislature intended to draw a distinction between damages occurring before and after the effective date of the act, as opposed to incidents occurring before and after that date. The phrase that makes the statute applicable to ‘losses that occur on or after” November 1, 1993, must be understood to require the cause of the injury or damage to have occurred on or after November 1,1993, for the statute to apply.

The dissent disagrees, arguing that each additional day misséd from work as a result of an accident, or each additional visit to a doctor, constitutes a new loss. The dissent is wrong. A loss occurs when an injury-causing event occurs, even if the full measure of damages caused by that event is not then known or knowable. Each additional increment of damage arising from the original injury is not a new loss.

In addition, the dissent mistakenly assumes that the parties agreed that plaintiffs economic damages exceeded $37,600 and that she had received only $25,000 of those damages. 143 Or App at 572. The record does not support that assumption.

The dissent also asserts that our decision fails to give effect to the policy embodied in ORS 742.544, because our decision allows defendant to obtain a reimbursement of PIP benefits from plaintiff when plaintiffs economic damages have not been paid. Id. at 572. As noted, the record does not support that conclusion about the extent of plaintiffs economic damages. Moreover, the dissent is confused about the import of our decision. There is no dispute between the majority and the dissent over how ORS 742.544 works. The dispute is over the timing of the policy change made by the statute. A dispute over the timing of the policy change is not a dispute over the policy itself.³

Finally, the dissent argues that the legislature would have used a phrase other than losses occurring on or after November 1, 1993, if it had intended ORS 742.544 to take effect in the manner in which we conclude that it did. It suggests, for example, that the legislature would have made the statute apply to claims or causes of action accruing on that date if it had sought to achieve the result that we say that it did. Id. at 572-73. Here again, the dissent is wrong.

The statute addresses the reimbursement rights of insurance companies against their insureds. Those rights arise from claims or causes of action that insureds have against other people, not against their insurance carriers. Consequently, it would not make sense to speak of claims or causes of action as the triggering event for coverage of the new law, because that language generally is used to control the operative date of laws that address the rights of parties who have claims or causes of action against each other. Given the subject of ORS 742.544, the reference to ‘losses” occurring on or after a certain date serves the same purpose as a reference to claims or causes of action does in statutes that address the rights of people who are on opposite sides of the relevant claims or causes of action. Hence, ORS 742.544 applies to injury-causing events that occur on or after November 1, 1993.⁴ The accident in this case took place before November 1,1993. Thus, the trial court erred in holding that ORS 742.544 applied to this case.

Reversed.

1 Under the insurance policy issued to husband by defendant, plaintiff was an individual covered by the policy and was, therefore, entitled to recover PIP benefits under it.

2 ORS 18.560 provides in relevant part:

“(2) As used in this section:

“(a) ‘Economic damages’ means objectively verifiable monetary losses including but not limited to reasonable charges necessarily incurred for medical, hospital, nursing and rehabilitative services and other health care services, burial and memorial expenses, loss of income and past and future impairment of earning capacity, reasonable and necessary expenses incurred for substitute domestic services, recurring loss to an estate, damage to reputation that is economically verifiable, reasonable and necessarily incurred costs due to loss of use of property and reasonable costs incurred for repair or for replacement of damaged property, whichever is less.”

3 Of course, if our decision delays the implementation of the new policy beyond the time that the legislature intended it to apply, then our decision conflicts with the statute. That, however, is not the argument that the dissent makes.

4 Viewed that way, the reference to losses as the triggering event for application of the new statute is not different from a reference to claims in statutes in which claims create the setting in which the statutes apply. A loss occurs on a given date, but the amount of the loss may not then be known or knowable. Similarly, a claim arises on a given date, but the amount of the claim may not then be known or knowable. Later accrual of damages does not create a new loss any more than it creates a new claim.