The Oregon Court of Appeals recently issued an opinion in Miller v. American Family Mut. Ins. Co., 262 Or App 730, — P3d — (2014), addressing issue preclusion in a lawsuit involving an insured’s claim for personal injury protection (PIP) and uninsured motorist (UIM) benefits. The insurance company made an offer of judgment on the PIP claim, which was accepted by the insured. The insured then argued that issue preclusion barred the insurance company from challenging medical bills under the UIM claim because the the offer of judgment amounted to an admission that the treatment was necessary. The Court of Appeals reversed the trial court, finding that the offer of judgment did not have preclusive effect and that the insurance company was still able to challenge the necessity of treatment as part of the UIM action.
The case involved an insured that was injured in a motor vehicle accident with an uninsured driver. The insured filed suit against the insurance company seeking PIP and UIM benefits. The applicable insurance policy included $15,000 in PIP benefits and $50,000 in UIM coverage. The insured claimed $90,000 in medical damages as a result of the accident, about $80,000 of which related to a spinal surgery the insured attributed to the accident. The insurance company paid approximately $7,000 of the insured’s non-surgical medical expenses, but refused to pay any of the surgery-related expenses because it contended it was not necessary. In the lawsuit, the insured sought the balance of the PIP coverage limits and the full UIM coverage limits, plus attorney fees and costs.
Prior to trial, the insurance company filed an offer of judgment pursuant to ORCP 54 E for the remaining PIP policy limits. The offer of judgment expressly indicated that it did not apply to the insured’s claim for UIM benefits. The insured accepted the insurance company’s offer. The insured then filed a motion the day before the trial seeking to prevent the insurance company from contesting the necessity of the surgery. In support, the insured argued that the insurance company effectively admitted the necessity of the surgical expenses when it offered to allow judgment with respect to at least some of the surgical expenses under the PIP claim. The basis of the argument was that only about $10,000 of the medical expenses were not related to the surgery, which meant that when the insurance company offered to pay the full $15,000 PIP policy, at least a portion of the surgical expenses were included in that offer. According to the insured, the acceptance of the offer created a judgment, which resolved any issues with respect to the necessity surgery and precluded the insurance company from contesting the issue. The trial court agreed with the insured, finding that issue preclusion applied. Given the trial court’s ruling, the insurance company conceded there were no issues remaining for trial and agreed to a general judgment for the full UIM policy limits. The insurance company appealed.
The Court of Appeals reversed the trial court. Initially, it determined that the offer of judgment was to be interpreted as a contract between the parties—not a confession of judgment as argued by the insured—and that the terms of the offer controlled. Given the offer’s express statement that it did not apply to the insured’s UIM claim, the Court of Appeals found that it did not have the same effect as a judgment under Oregon law. The court also found that the offer did not act as an admission on the issues or elements underlying the PIP claim. The Court of Appeals also rejected the trial court’s application of issue preclusion, which the court noted applies in a subsequent proceeding when an issue of ultimate fact has been determined by a valid and final determination in a prior action. In this case, the insured’s PIP and UIM claims were brought in a single action so the offer of judgment could not have preclusive effect because there was not a subsequent action. Accordingly, issue preclusion did not bar re-litigation of an issue common to the PIP and UIM claims, including whether the insured’s surgery was necessary.
The attorneys at Maloney Lauersdorf Reiner regularly litigate issues regarding personal injury protection (PIP) and uninsured/underinsured motorist (UIM) coverage. Please contact us with any questions about this case, or any other matter you see addressed on the Insurance Coverage Blog.