Providence Health Plan v. Winchester

An insurer may not seek reimbursement out of the settlement its insured receives from settlements with 3rd parties until interinsurer reimbursement is no longer available, and it is available so long as no settlement has occurred. An insurer that begins to seek reimbursement before its insured and 3rd party insurers settle will be unable to recover expenses from its insured.

Winchester, a pedestrian injured in a car accident, received a settlement from 3rd party insurers. Providence claimed that, under the terms of its policy with Winchester, it must be reimbursed for the medical expenses it paid on her behalf. Providence prevailed at summary judgment and Winchester appealed, arguing that Oregon statutes govern how an insurer may seek reimbursement, rather than the contract between insurer and insured. Providence asserted that the contractual remedy is in addition to and not inconsistent with the statutory provisions. The Court of Appeals found that Providence failed to follow the statutory scheme for subrogating a claim, and was not entitled to recover from Winchester. The Court found Providence should have availed itself of interinsurer reimbursement per ORS 742.534, because there was no settlement between Winchester and the 3rd parties when Providence attempted to seek reimbursement for Winchester's medical expenses. Because of this, it failed to meet the requirements of ORS 742.538. Reversed and remanded.