Heiling Dwyer and Associates

Credit for the ideas in this article go to Medford attorney Mike Brian and his application of Federated Services Insurance Company v. Granados, 133 Or App 5, 889 P.2d 1312 (1995).

 In PIP claims, insurance companies often attempt to compel the insured person to attend an “insurance medical examination” (IME). All too often we see PIP insurers set up an examination with a doctor who is predisposed to come to the aid of the company by concluding that the insured person does not need any more medical care. This has often been a catch-22. If the insured person attends the examination, the company’s selected doctor will conclude that no further benefits are necessary, and the PIP claim will be cut off. If the insured person does not attend the examination, the company will declare a forfeiture, and the PIP benefits will be cut off. It has become commonplace for insurance companies to use this “heads I win tails you lose” technique.

There are some very well qualified personal injury attorneys who advise their clients in all cases never to attend a PIP IME because it will clutter the record with a disingenuous medical report disputing the client’s claim. One thing is certain: a courtroom could be flooded with lawyers and past claimants who could testify to the lack of objectivity, even entering into the realm of dishonesty, in so many IMEs.

Federated Services Insurance Company v. Granados, 133 Or App 5, 889 P.2d 1312 (1995) can be extremely helpful in cases where an insurance company denies PIP benefits for failure to attend an IME.

Evadio Granados and his wife were injured in a motor vehicle collision. Mr. Granados settled his claim against the negligent driver and then made a claim against his insurance company, Federated, for underinsured motorist (UIM) benefits. Federated argued that there Granados forfeited his UIM coverage because he did not get Federated’s consent before settling the liability claim. The Court of Appeals ruled in favor of Granados and held that he could pursue his UIM claim even though he had not complied with the policy requirement that he get Federated’s consent before settling his liability claim.

The court distinguished between “exclusion” of coverage and “forfeiture” of coverage. “Exclusion” relates to the scope of coverage in the first place. “Forfeiture” exists if coverage that is otherwise valid is nullified by an act of the insured. The court held that two elements must be satisfied in order for an insurance company to invoke a forfeiture of a policy. First, the insurance company must show that it was prejudiced by the violation of the policy. Second, if prejudice can be shown, the insurance company must prove that the insured acted unreasonably in violating the terms of the policy. If both elements are not proven, there is no forfeiture and the insurance company has to pay benefits.

“The first inquiry is whether the insurer was prejudiced by the claimant’s conduct. If so, the second inquiry is whether the claimant nevertheless acted reasonably in breaching the contsent-to-settle provision.” 133 Or App at 9.

Terminating PIP benefits for failure to attend an IME is a declaration of “forfeiture.“ It could be argued that the insurance company is not truly “prejudiced” by the failure of an insured person to attend an IME by a doctor with a long history of favoring insurance companies. But it can certainly be argued that the insured person was reasonable in fearing that the scheduled IME was nothing more than a ploy by the carrier to terminate PIP benefits one way or the other. And, the burden of proof is on the insurance company to show that the insured was not acting reasonably.

Under the rule announced in Federated Services Insurance Company v. Granados, a PIP insurer should be hesitant to declare a forfeiture of PIP benefits for failure to attend an IME. When the insurance company wants to schedule an IME, the attorney should insist that the company disclose the name of the doctor and the reasons for and parameters of the examination. The claimant’s attorney should insist that the doctor not be someone with a tendency to favor insurance companies. Tell the adjuster in advance that your client will not attend an IME by a doctor who has a reputation of being less than objective and that you will fight the claim all the way if the company attempts to terminate PIP benefits. Tell the adjuster about the rule in Federated Services Insurance Company v. Granados. It’s good law, and they will not be able to get around it unless you let them.