Farmers Insurance PIP Claims - Frequently Asked Questions

INFORMATION ABOUT THE LAWSUIT

FREQUENTLY ASKED QUESTIONS

(1) What is the Lawsuit about?

(2) What is the "80th percentile"?

(3) What is a class action?

(4) What is personal injury protection ("PIP")?

(5) What will be done with the punitive damages award?

(6) How long will the appeals take?

(1) What is the Lawsuit about?

This lawsuit concerns the claims that Farmers Insurance Co. of Oregon ("Farmers"), Mid-Century Insurance Co. ("Mid-Century"), and Truck Insurance Exchange ("Truck") (together, the "insurance companies") wrongfully failed to reimburse their motor vehicle insurance policy holders ("Claimants") for a portion of their Personal Injury Protection ("PIP") medical expenses during the period from January 26, 1998 and July 31, 1999. The Second Amended Complaint alleged breach of insurance contract, breach of the covenant of good faith, and fraud, and sought a declaration that the insurers' alleged practice was unlawful. Essentially, plaintiff claimed - and the jury found -- that the insurance companies failed to pay all reasonable expenses for covered healthcare costs under PIP.

The jury verdict requires the insurance companies to pay the full reimbursements that should have been paid to the PIP Claimants and their assigns, such as medical providers, doctors, hospitals, and other caregivers, to the extent medical expense reimbursements were reduced. It jury also awarded punitive damages.

(2) What is the "80th percentile"?

The insurance companies ignored the terms of their own insurance policies and refused to pay the "usual and customary" expenses charged by medical providers. Instead, when a provider's charge for a particular procedure exceeded the 80th percentile of charges by other providers for the same procedure, the insurance companies reduced their medical reimbursement rates to the 80th percentile.

For example, assume that the rates charged by the doctors in Portland, Oregon for a particular procedure ranged from $50.00 to $100.00. Also assume that, in a given year, there were 100 of these procedures performed and that 80 of the 100 charges were $85.00 or less. The 80th percentile would be $85.00, because 80 percent of the total number of charges (that is, 80 out of the 100 total charges) were at $85.00 or less. When the insurance companies were asked to pay a claim for a charge of $86.00 for that procedure, they would "reduce" the reimbursement by $1.00 to $85.00. The insurance companies identified this type of reduction as "Reason Code 40," "RC-40" or "B2" in their records.

The action seeks to have the insurance companies pay the full reimbursements that should have been paid to the PIP Claimants and their assigns, such as medical providers, doctors, hospitals, and other caregivers, to the extent medical expense reimbursements were reduced. It may seek punitive damages.

(3) What is a class action?

A class action is a type of lawsuit in which one or a few named plaintiffs bring suit on behalf of all of the members of a similarly-situated group, to recover damages for all of the group, without the necessity of each member filing an individual lawsuit or appearing as an individual plaintiff. Class actions are used by the Courts where the claims raise basic issues of law or fact that are common to all the class members, making it fair to bind all class members by the Orders and the Judgment in the case, without the need for a trial on each individual claim. Use of the class action eliminates the necessity of filing multiple suits, and assures that all class members are bound by the results of the lawsuit.

(4) What is personal injury protection ("PIP")?

Personal Injury Protection, which is commonly known as "PIP," is a form of insurance coverage that is included by law in every motor vehicle insurance policy in Oregon. It provides compensation to the insured for the insured's medical expenses and wages loss, up to the limits of the coverage, for injuries sustained in a motor vehicle accident, without regard for whether the insured was at fault for causing the accident.

(5) What will be done with the punitive damages award?

If after all appeals the insurance companies must pay the punitive damages award, the State of Oregon will receive 60% of the award under Oregon law. The other 40% will be distributed pursuant to the order of the court, which will determine how the money is to be divided. Only class members, not healthcare providers, may share in any punitive damages distribution.

(6) How long will the appeals take?

The attorneys for the Class anticipate that the insurance companies will appeal. They have an appeal as a matter of right to the Oregon Court of Appeals. Beyond the Oregon Court of Appeals, they may have a discretionary right to appeal with the Oregon Supreme Court and possibly the United States Supreme Court.

The attorneys for the Class do not know how long it will take for the insurance companies to exhaust all of their appeals. Of course, they also do not know how the appeals will be decided.