Insurance - Bradley S. Wolff, Stephen L. Cotter, and Stephen M. Schatz

• Publication year: 2009

Insuranceby Bradley S. Wolff^* Stephen L. Cotter^** and Stephen M. Schatz^***

I. Introduction

In this survey period from June 1, 2008 to May 31, 2009,¹ the courts stepped in to help those injured in motor vehicle incidents collect additional sums from uninsured motorist carriers even when the available uninsured motorist (uM) coverage may be equal to or less than the tortfeasor's liability coverage. Another notable development is found in a string of cases involving victims of mortgage fraud. The victims prevailed in all three cases.

II. Automobile Insurance

Once again, uninsured motorist coverage provided the most significant developments in Georgia automobile insurance law during the survey period. The Georgia Supreme Court reversed a decision reported last year.² The Georgia Court of Appeals continued to modify UM practice with a pair ofdecisions concerning health care liens.³ A variety of other issues were addressed, but no cases in this survey period dealt with the application of last year's overhaul of the UM statute.⁴

A. Uninsured Motorist Coverage

1. Joint Release Redux. When a husband and wife both bring personal injury claims arising from a collision and accept a liability insurer's single "per person" limit for bodily injury and jointly execute a limited liability release, are they eligible for additional recovery from their UM carrier, or have they barred such recovery by each accepting less than the total available liability coverage? That was the question answered by the supreme court in Thompson v. Allstate Insurance Co.⁵

As reported in last year's survey article,⁶ "Richard and Laura Thompson . . . brought suit against Randall Bacon for physical injuries which they sustained as a result of a vehicular collision."⁷ The Thompsons "also served Allstate Insurance Company and Georgia Farm Bureau Casualty Insurance Company . . . in their capacities as underinsured motorist (UM) carriers."⁸ Bacon was covered by a liability insurance policy with bodily injury liability limits of $100,000 per person and $300,000 per accident.⁹ Pursuant to section 33-24-41.1 of the official Code of Georgia Annotated (o.C.G.A.)¹⁰ and in exchange for $100,000 paid by the liability carrier, the Thompsons "individually and as husband and wife executed a limited release of Bacon and the liability insurer."¹¹ The Thompsons then sought to further pursue their claims for Mr. Thompson's injuries against the UM carriers.¹²

Allstate and Georgia Farm Bureau "filed motions for summary judgment on the ground that the release established that neither [of the Thompsons] had exhausted the available liability coverage" because they jointly received only the amount available for bodily injury to one person.¹³ The Thompsons argued that all of the payment was for Mr. Thompson's bodily injury claim and that Mrs. Thompson's bodily injury claim was abandoned.¹⁴ "The trial court granted the motions for summary judgment as to Mrs. Thompson's claims . . . but denied the motions as to Mr. Thompson's claim."¹⁵ The court of appeals reversed, holding that the "release unambiguously showed that Mrs. Thompson necessarily received at least a portion of the consideration for the release, thereby establishing that Mr. Thompson did not exhaust the liability coverage."¹⁶ The supreme court reversed the judgment of the court of appeals.¹⁷

The supreme court reiterated that a party must exhaust available liability coverage (and execute a limited release in accordance with O.C.G.A. Sec. 33-24-41.1 when the limits are paid in settlement) to recover under a UM policy.¹⁸ The court held that the release was in compliance with the limited release statute and did not unambiguously show that Mr. Thompson settled for less than the bodily injury limit.¹⁹ The supreme court noted that because loss of consortium claims are part of the spouse's bodily injury claim for the "per person" limit, the liability insurer's total payment for the husband's bodily injury and the wife's loss of consortium claim added together could have accounted for the payment of the per person limit.²⁰ In addition, the court concluded that the joint release did not necessarily indicate that Mrs. Thompson received a portion of the proceeds for her own claims.²¹ "Instead, her promise to release all non-UM claims may have been in return for payment to her husband of the liability limits for his bodily injury claim . . . . Therefore, the release [was] ambiguous as to whether Mr. Thompson settled his bodily injury claim for less than the available liability coverage."²² The Thompsons' parol evidence was held to be admissible to show that the payment was in fact only for Mr. Thompson's claims, and therefore, the judgment of the court of appeals was reversed.²³

The court of appeals decision caused a bit of consternation about how to resolve claims with liability insurers that insisted upon a release from an uninjured spouse along with the injured spouse. The supreme court's decision, along with the use of careful wording in future release agreements, should alleviate further concerns in this practice area.

2. Medical Care Creates UM Exposure Despite Equal Limits. In 2004 the supreme court held in Thurman v. State Farm Mutual Automobile Insurance Co.²⁴ that a tortfeasor's liability insurance coverage is "reduced," and federal agencies or insurers have claims for reimbursement, if the injured claimant was a federal employee.²⁵ This decision was unusual but seemingly limited to a fairly rare set of facts. We say "unusual" because the fact that a federal health or workers' compensation insurer is entitled to repayment for the cost of treating an injury does not in any literal or logical sense "reduce" the tortfeasor's liability coverage. And we say "rare" because there are not many cases involving federal employees as plaintiffs injured in motor vehicle accidents.

The court of appeals, however, does not think the Thurman rule is either unusual or rarely applicable. In two cases decided this survey period, the court expanded Thurman to apply when (1) the injured claimant is a Medicare beneficiary, and (2) treatment costs are not paid by anyone and a health care lien is filed.

In Toomer v. Allstate Insurance Co.,²⁶ the issue was whether Medicare's right to reimbursement "reduced" the available liability insurance limit such that the claimant's UM carrier could be called upon to pay.²⁷ According to the court,

Janie Toomer sued Edgar Rosenberry for injuries she suffered in an automobile collision that [she claimed] was his fault. She served her uninsured motorist . . . carrier, Allstate Insurance Company, with the complaint. Toomer later settled with Rosenberry's liability insurance carrier, [United States Automobile Association (USAA)], for the amount of his policy limit.²⁸

Allstate moved to dismiss, arguing that because Toomer's UM policy limit was equal to Rosenberry's liability policy limit, there was no issue of an uninsured or underinsured motorist. The trial court granted

Allstate's motion.²⁹ Toomer appealed, claiming that the trial court "erred because the proceeds of her settlement with USAA [would] be reduced by the amount of a Medicare lien."³⁰ The court of appeals agreed and reversed.³¹ Allstate argued that UM exposure is calculated by

subtracting] the total liability coverage available to the injured party from the total UM coverage. Because Toomer's UM policy limit was the same as Rosenberry's liability policy unit, Allstate argued that it had no UM exposure. Toomer responded that Medicare had paid approximately $8,600 of her collision-related medical bills and was now asserting a lien against her settlement with USAA to recover those payments.³²

The court of appeals relied upon the supreme court's decision in Thurman and held there was "no meaningful distinction" between Toomer's situation and the facts in Thurman?³³ In both cases, federal law required the injured party to repay the benefits provider, resulting in the injured party retaining an amount less than the party's UM policy limit.³⁴ Allstate argued that Thurman should not apply because there was no evidence that Toomer had repaid Medicare, but the court rejected this argument.³⁵ The court held that "[w]hether Medicare [had] been or [would] be repaid, and in what amount, [were] questions of fact that the trial court did not, and could not, resolve on a motion to dismiss."³⁶ The court held Toomer could take credit for the "reduction" in available liability limits by the amount of the Medicare lien and seek additional benefits from her UM insurer.³⁷

Thurman and Toomer were further expanded by the court of appeals in Adams v. State Farm Mutual Automobile Insurance Co.,³⁸ in which the court left the realm of federal reimbursement rights and held that a state-created lien for health care also "reduces" a tortfeasor's liability limits and creates or expands exposure to a UM policy.³⁹ In Adams the court considered whether a payment made by the tortfeasor's liability insurer to Grady Hospital to satisfy a lien for services provided to Adams constituted "payment of other claims" under O.C.G.A. Sec. 33-7-11(b)(1)(D)-(ii)⁴⁰ and, therefore, reduced the maximum amount payable under the limits of the liability coverage.⁴¹ The court held that the payment constituted the "payment of other claims" under the statute.⁴²

The court rejected State Farm's argument that a Georgia lien for health care is different from a lien created under federal statutes and, based on the prior decisions in this area, remanded the case to the trial court with instructions to grant Adams's motion for summary judg-ment.⁴³ Thus, the court allowed the liability carrier's payment in satisfaction of the lien to "reduce" the amount of liability coverage and increase the uninsured motorist coverage exposure pro rata.⁴⁴

Based on the cases already decided, the Authors expect to soon see decisions further expanding Thurman and its progeny to apply in cases when medical bills are...