Car Accidents- Why Do I Pay Back PIP (or Health Insurance)?

This is a frequent question.  Most people believe since they have car insurance paying for medical bills (through Personal Injury Protection “PIP”) or health insurance paying for accident related medical bills- that the insurance company will just go away and any settlement, verdict or award will go straight to the injured person.

Not so!  In Oregon, whenever a health insurer or PIP pays anything for an injured person, and there is another insurance company paying out for its at-fault driver, PIP and health insurance want its money back.  It’s called subrogation and it’s big business.

Take Oregon PIP policies for example.  Under Oregon law (ORS 742.534, ORS 742.736, and ORS 742.538) when PIP has paid anything, the attorney for the injured person asks PIP- “how do you want your money back?”  There is a procedure to do this- but basically PIP can 1) get it back itself via intercompany arbitration 2) get it back by putting a lien on the injured person’s recovery or 3) sue the at-fault driver in the name of the injured person.

For most companies doing business in Oregon, intercompany arbitration is the choice and those companies ask that the attorney not do anything to prejudice its rights to recovery.  In those circumstances, any settlement discussions are for “x amount not inclusive of PIP reimbursement.”

Some companies do put PIP liens on their insured’s recovery and the attorney in Oregon, so long as the lien was properly perfected, has to respect that lien.  That lien gets paid out of the settlement or award or verdict.  Because the attorney knows about the lien, any settlement demand or prayer in a Complaint needs to be enough to cover the lien.

For recovering this money for PIP the attorney for the plaintiff is entitled to a fee from the insurance company.  The injured client does not pay this fee.

In Washington, all PIP recoveries are done through the injured person’s case and through the attorney.  Washington does not have the three options available to Oregon PIP companies.

Health insurance companies in Oregon have similar statutes allowing for subrogation of what they have paid out in the case of an accident.  For example, Kaiser hospitals and Kaiser health insurance use HealthCare Recoveries to get its money back.  Other subrogation companies including Rawlings or Clinton Simpson for the Oregon Health Plan.  In those cases it depends on the policy how much the attorney is entitled to in fees.

Keep in mind this is a simplistic explanation to a very complicated area of law.  Do not try to handle your own car collision case.