Trial Practice and Procedure - C. Frederick Overby, Jason Crawford, and Teresa T. Abell

• Publication year: 1997

Trial Practice and Procedureby C. Frederick Overby^*, Jason Crawford^** and Teresa T. Abell^***

I. Introduction

The most interesting and significant developments in the area of trial practice and procedure during the survey period came not from Georgia's appellate courts but from the Georgia General Assembly. This Article will first analyze the significant legislation that came from beneath the gold dome in 1997. It will then review the most significant appellate cases.

II. Legislation

The 1997 session of the Georgia General Assembly produced significant new legislation that will affect trial practitioners across the state. The most notable enactments relate to health and medical insurance reimbursement,¹ punitive damages,² the professional negligence pleading requirement,³ a new medical narrative hearsay exception,⁴ long arm venue,⁵ appeal procedures under Official Code of Georgia Annotated ("O.C.G.A.") sections 5-6-34 and 5-6-35, the statutory limit on parental liability for willful and malicious acts of minor children,⁶ deposition subpoenas,⁷ and clarification of rules relating to a party's right to open and conclude in final argument.⁸

A. Health and Medical Insurance Reimbursement Law: A Play (Or, Better Yet, Repay) in Two Acts

For practitioners in tort law, the most practical piece of new legislation from this past session is O.C.G.A. section 33-24-56.1. This statute definitively delineates for the first time a health and medical benefit provider's right of reimbursement, the procedure to be followed in obtaining reimbursement, and the injured party's rights, including the right to be fully compensated for all economic and noneconomic injuries before a right of reimbursement can arise or be enforced.

Practitioners experienced the following dilemma in an increasing number of personal injury cases. The client has been grievously injured by a third-party tortfeasor. Long before the client recovers from the tortfeasor, an insurance company that accepted a premium in exchange for its agreement to pay medical bills in the event of a loss pays the client's extensive medical bills. During the litigation with the tortfeasor, the medical benefits provider seeks to assert a lien or claim reimbursement from any proceeds recovered from the tortfeasor or the liability insurer. This claim is typically asserted pursuant to some provision in the insuring agreement whereby the insurer claims that the contract requires reimbursement for benefits it paid if a recovery is made from a third party who caused the damages. The injured party obviously is inclined to resist reimbursing the medical benefits provider from the proceeds of the recovery. The typical victim confronted with a claim for reimbursement wonders whether he or she paid a premium for the medical benefits coverage or mistakenly took out a loan at a high rate of interest. Several incisive questions relating to fundamental fairness immediately spring to the mind of the injured party's lawyer. If the insurance company gets its consideration back (the benefits it paid in exchange for the premiums), does the client also get his or her consideration back (premium plus interest)? Does the client escape this reimbursement requirement if the client has not been fully compensated for all injuries by the tortfeasor because the recovery was necessarily the result of a compromise?⁹ Is the client entitled to an offset for a proportionate share of attorney fees and expenses to be paid out of the recovery from the tortfeasor?¹⁰ The insurance representative typically answers all of these questions with a confident "no." Thus, with the proliferation of these claims for reimbursement, it became increasingly difficult to finally resolve tort cases by settlement.

1. Act I. Until March 17, 1997, the answers to these questions in Georgia were completely up in the air. On that date, the Supreme Court of Georgia decided Duncan v. Integon General Insurance Corp.¹¹ Peggy Duncan was an injured person much like the hypothetical client above. Her own auto insurer, Integon, had paid five thousand dollars in medical payment benefits. Integon sought to recoup these benefits in full when Ms. Duncan received a fifteen thousand dollar policy limit settlement from the tortfeasor's insurance company. It was undisputed that Ms. Duncan had not been fully compensated by the fifteen thousand dollar settlement even when the Integon medical payments benefits of five thousand dollars were added to the amount recovered.¹² Ms. Duncan's medical bills alone exceeded these amounts, not including any general damages for pain and suffering or special damages for lost wages.¹³

The supreme court was forced to address the following fundamental question: Who receives first priority to compensatory funds from a tortfeasor for injuries caused by the tortfeasor—an insurance company that was paid a premium to assume the risk of payment of medical benefits or the injured person? Relying on "[t]he weight of authority,"¹⁴ the supreme court held that the injured person is entitled to first priority until he has been completely compensated for all compensable injuries unless a specific provision in the insurance policy negates the complete compensation rule.¹⁵ Although it indicated that "Georgia public policy strongly supports"¹⁶ the complete compensation rule, the court declined to decide whether express policy language negating the complete compensation rule would be enforced.¹⁷

Back to the hypothetical client. After reading Duncan, the lawyer reviews the client's insurance policy to see what it says about the issue of reimbursement. From the insured's perspective, the hope is that the policy will be silent. The attorney for the injured party is already mentally drafting a letter to the insurance representative and attaching a copy of Duncan when she sees that the policy specifically declares that reimbursement is to be made regardless of whether the injured client has been completely compensated.

2. Act II. Enter the Georgia General Assembly, which enacted O.C.GA. section 33-24-56.1, effective July 1, 1997. This statute makes complete compensation the rule no matter what the insurance policy states. The pertinent provisions of O.C.GA. section 33-24-56.1 state the following:

(b) In the event of recovery for personal injury from a third party by or on behalf of a person for whom any benefit provider has paid medical expenses or disability benefits, the benefit provider for the person injured may require reimbursement from the injured party of benefits it has paid on account of the injury, up to the amount allocated to those categories of damages in the settlement documents or judgment, if: (1) The amount of the recovery exceeds the sum of all economic and noneconomic losses incurred as a result of the injury, exclusive of losses for which reimbursement may be sought under this Code section; and (2) The amount of the reimbursement claim is reduced by the pro rata amount of the attorney's fees and expenses of litigation incurred by the injured party in bringing the claim.¹⁸

Significantly, these provisions make it clear that before a right of reimbursement ever arises, the injured person's recovery must exceed "complete compensation" for all losses incurred as a result of the injury. The obvious reason for this aspect of the statute is that if an injured person is completely compensated but no more than completely compensated, then a reimbursement requirement would make him or her less than compensated. This would be an absurd result for a remedial statute.

The language in subsection (b)(1) of O.C.G.A. section 33-24-56.1—"exclusive of losses for which reimbursement may be sought under this Code section"—makes it clear that even if the injured person is more than completely compensated, reimbursement can only be allowed to the extent of the overcompensation and no more. The intent of the statute is to give the injured person first priority of recovery from the tortfeasor until complete compensation has been achieved. Only additional funds that amount to a double recovery are to be returned to the insurance company as reimbursement.

Subsection (b) of O.C.G.A. section 33-24-56.1 also caps reimbursement at "the amount allocated to those categories of damages in the settlement documents or judgment." In other words, the parties to a settlement, or the finder of fact, can allocate an amount to medical expenses (or disability). In no event can the insurer be reimbursed for more than that amount.

The insurer has the right under subsection (c) of O.C.G.A. section 3324-56.1 to seek a declaratory judgment on its entitlement to reimbursement in the event compensation was paid to the injured person by way of settlement.¹⁹ Thus, the insurer has a remedy if it is believed that the parties to the tort action assigned categories of damages that would diminish fair reimbursement. However, if the trier of fact has allocated the damages, then the allocation is conclusively presumed to be reasonable.²⁰

Subsection (b)(2) of O.C.G.A. section 33-24-56.1 recognizes what has come to be called the "common-fund" doctrine.²¹ This doctrine requires all beneficiaries of a common fund, generated by the work of a lawyer who represents only one or some of the beneficiaries, to pay a proportionate share of the attorney fees and expenses incurred in obtaining the fund. To require the party who hired the lawyer to pay all the legal fees for obtaining the entire fund would unjustly enrich the other beneficiaries.²² Accordingly, an insurer that receives reimbursement must reduce the reimbursement to reflect a proportionate payment for attorney fees and litigation expenses.²³

In this remarkable piece of legislation, subrogation—when the insurer is not merely asking for repayment but instead is assigned the injured person's right to recovery—is expressly prohibited by subsection (e) of

O.C.G.A. section 33-24-56.1.²⁴ Also, this subsection prevents the...