UM insurer may set off coverage by amount of hospital lien paid by tortfeasor's liability insurer

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December 28, 2010

UM insurer may set off coverage by amount of hospital lien paid by tortfeasor's liability insurer 

In an automobile accident in which an injured motorist incurred medical bills resulting in a hospital lien, the motorist’s uninsured motorist (UM) carrier was entitled to a credit for the amount the tortfeasor’s liability carrier paid the hospital to satisfy the lien, the Georgia Supreme Court held.

Randolph Adams was injured in an automobile accident and sued another motorist, who had a $25,000 policy with Nationwide. The parties negotiated a settlement in which Nationwide paid about $15,800 to Adams and the remaining $9,200 to a hospital to satisfy its lien for unpaid services rendered to Adams.

Because his damages exceeded $25,000, Adams filed a claim under his $100,000 UM policy with State Farm. The insurer paid $75,000, arguing that it was entitled to a credit for the insurance proceeds paid by Nationwide. Adams filed suit, arguing that State Farm was not entitled to a credit for Nationwide’s payment of the lien. The trial court granted State Farm summary judgment, but an appellate court reversed, concluding that the insurer was not entitled to a credit for the lien amount paid.

Reversing, the state high court noted that under Georgia’s UM benefits statute, benefits are based on whether the injured party’s UM coverage exceeds the tortfeasor’s full liability coverage minus payments of “other claims or otherwise.” The purpose of the statute is to place insureds in the same position they would have been in had the uninsured motorist had liability coverage—to protect them as to their actual losses within the limits of the policies of which they are beneficiaries. The court said this underlying purpose must guide the case because a hospital lien does not involve an insurer’s subrogation rights.

The court noted that the state’s hospital lien statute recognizes that a hospital is entitled to bill a patient directly for its services and to rely solely on the patient to pay for those services. To ensure that the hospital receives payment, the statute grants it a lien against the patient’s recovery from the tortfeasor, permitting it to step into the insured’s shoes for purposes of receiving payment from the tortfeasor’s insurer. Because the tortfeasor in this case carried a $25,000 policy that was payable to Adams, the lien attached to this payment, and Nationwide was required to pay the hospital—which stepped into Adams’s shoes—the amount necessary to satisfy the bill for which he was responsible.

Under these circumstances, the court reasoned, the payment to the hospital was not a payment of “other claims or otherwise” under the UM statute because satisfaction of the bill inured directly to Adams’s benefit. As such, the court concluded, payment of the lien should not be subtracted from the tortfeasor’s total liability coverage for purposes of determining Adams’s UM coverage.

Citation: State Farm Mut. Auto. Ins. Co. v. Adams, 2010 WL 5060240 (Ga. Nov. 30, 2010).

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