INSURANCE-RELATED COURT CASES

Digested from case reports published online

COURT DECISIONS

Rear-end collision woes

Jessica Moser was insured under an automobile policy issued by Auto Club Property Casualty Insurance Company. The policy provided up to $5,000 in medical payments. The medical payments provision stipulated that Auto Club would pay the reasonable medical expenses “incurred” by an insured person for bodily injuries sustained in a collision while occupying a motor vehicle. The parties disputed what it meant for a medical expense to be “incurred” under the policy.

On October 17, 2017, Moser was driving a motor vehicle insured by Auto Club. She was injured when her vehicle was struck by another vehicle in a rear-end collision. The driver of the other vehicle was determined to be at fault. Moser was taken by ambulance to a hospital for examination. She was soon released and over the following months visited several medical providers for follow-up treatment. Moser received charges from those providers, all related to the collision, totaling $19,522.56. Those expenses were resolved by Moser’s health insurer, the West Virginia Medicaid program.

State law provides that when a third party is legally liable for a plaintiff’s past medical expenses that were paid by the Medicaid program, the program automatically receives a “subrogation lien” to recover those expenses. The plaintiff’s lawyer is required to notify the Medicaid program when the lawyer initiates a claim or lawsuit for those past medical expenses. If the claim or lawsuit against the third party concludes with a settlement, then the plaintiff’s lawyer is required to notify the Medicaid program of “the amount of the settlement being allocated for past medical expenses paid for by the Medicaid program.” The Medicaid program may “obtain reimbursement for medical expenses paid from only that portion of the settlement, compromise, judgment, or award obtained by a recipient of Medicaid assistance that constitutes damages for past medical expenses.”

Within 30 days of receiving the settlement notice, the Medicaid program must either consent to or reject the plaintiff’s proposed allocation of the settlement toward past medical expenses. The Medicaid program may negotiate with the plaintiff’s lawyer and choose to accept an amount that is less than the subrogation lien, or it may seek judicial intervention, in which case the Medicaid program bears the burden of proving that the allocation of past medical expenses offered by the plaintiff is improper. If the plaintiff obtains a total settlement less than $20,000, however, then state law dictates that the Medicaid program collects nothing. It is the plaintiff’s responsibility, and not any third party’s, to work with the Medicaid program and make any payments toward the subrogation lien.

After her October 2017 rear-end collision, and during the months-long course of her medical treatment, Moser hired a lawyer. The lawyer began pursuing a claim against the automobile insurer of the individual who caused the collision. The lawyer notified the Medicaid program that Moser was asserting a claim against a third party who was allegedly liable to pay some or all of Moser’s past medical expenses.

Additionally, on April 27, 2018, Moser’s lawyer sent a medical bill to her automobile insurer, Auto Club, seeking reimbursement under the policy’s medical payments provision. The bill from a physical therapy clinic listed a series of visits by Moser for medical services related to the collision. The total cost of the services from the clinic was $2,165, and Moser demanded that Auto Club pay her this amount.

Auto Club refused to pay Moser the amount of the physical therapy clinic’s bill. Among its reasons for denying the reimbursement, Auto Club noted that Moser had health insurance through the Medicaid program. Auto Club declared that Moser was not entitled to medical payments coverage because “no medical expenses have been incurred … as the bills submitted were paid by Medicaid.”

Apparently unbeknownst to Moser’s lawyer, and contemporaneous with Auto Club’s rejection of Moser’s demand for medical payments coverage, the Medicaid program sent a letter to Auto Club. The letter noted that the Medicaid program had so far “paid medical benefits on behalf of JESSICA A MOSER in the sum of $1,437.61” to three providers (including the physical therapy clinic) and that the program was asserting a subrogation lien in that amount. The Medicaid program concluded that payment to the program should be remitted “[a]t the conclusion of this matter[.]” At some later date—the record is unclear when—and despite the fact that Moser’s claim against the at-fault driver had not been concluded, Auto Club paid $1,437.61 to the Medicaid program.

On October 23, 2019, Moser settled for $60,000 with the driver who caused the rear-end collision. The same day, Moser’s lawyer notified the Medicaid program of the settlement. The Medicaid program asserted that Moser owed a balance of $1,547.29 toward the subrogation lien for past medical expenditures by the program. After negotiations with Moser’s lawyer, the Medicaid program agreed to accept $1,078.69 as full payment.

The plaintiff filed the instant case against Auto Club seeking, among other things, a declaratory judgment interpreting the medical payments provision in the Auto Club payments coverage for the $2,165.00 in medical expenses that she “incurred” for physical therapy. On March 13, 2020, the plaintiff filed a motion for partial summary judgment, asserting that the medical payments provision should be interpreted in her favor. Auto Club countered with its own motion for summary judgment.

In an order dated June 5, 2020, the circuit court granted Moser’s motion for partial summary judgment and denied Auto Club’s motion. The court found that the term “incurred” in Auto Club’s medical payments provision was clear and meant “‘to become liable or subject to.’ ‘Incurred’ does not mean ‘legally liable’ to pay.” As the Auto Club policy was written, the court concluded that an injured party “incurs” and becomes responsible for a medical expense “when the medical services are received, regardless of how, or even whether the injured person’s obligation [to] the medical providers [is] later discharged.” Additionally, the court determined that the Medicaid program was not a party to the Auto Club policy, and it found no language in the medical payments provision that permitted Auto Club to pay policy benefits to any entity other than the insured plaintiff. Further, it found that Auto Club should not have paid the Medicaid program because, under Moser’s Auto Club policy, the program did not incur any reasonable medical expenses because of bodily injuries sustained while occupying a motor vehicle.

The circuit court found no dispute that the medical expenses from Moser’s physical therapy clinic were reasonably incurred and were necessary because of Moser’s injuries suffered in the vehicle collision. The circuit court also noted that the Auto Club policy provided that the medical payments coverage was primary to any other insurance coverage if the plaintiff was driving a vehicle defined as “your car” under the policy—and the record indisputably showed that Moser’s met that vehicle definition. The circuit court found that Moser’s policy gave her a reasonable expectation that Auto Club would pay her the full amount of her physical therapy bill, regardless of whether that bill was paid by another entity. Nevertheless, the circuit court found that Auto Club was entitled to a credit for any amounts it paid to the Medicaid program for the physical therapy clinic expenses. Subsequently, Auto Club could only provide proof that it paid the Medicaid program $822.91 to satisfy Moser’s physical therapy bills. Hence, the circuit court ordered Auto Club to pay Moser the unpaid balance of the $2,165.00 physical therapy bill, or $1,342.09.

Moser then submitted a petition for attorney’s fees. In an order dated September 4, 2020, the circuit court granted the petition and awarded Moser fees and costs of $34,026.75. The court also certified that its orders were immediately appealable.

Auto Club appealed the circuit court’s orders granting partial summary judgment to Moser, denying Auto Club’s motion for summary judgment, and awarding Moser her attorney’s fees and costs.

Auto Club’s first assignment of error challenged the circuit court’s determination that it was required to pay Moser’s physical therapy bill under the medical payments provision in her Auto Club policy.

Auto Club argued that an insured person like Moser could not incur and be liable for an expense that might eventually be paid, in whole or part, on her behalf by the Medicaid program. Moser countered that an injured plaintiff incurs and becomes liable for a medical bill at the time the services to the medical provider is later discharged. Hence, it is Moser’s position that the circuit court correctly found that a medical expense is “incurred” when the medical service is rendered.

The Supreme Court of West Virginia found no error in the circuit court’s ruling because a reasonable, prudent person would consider the term “incurred” to be clear and unambiguous.

The court was bound by the terms of Auto Club’s insurance contract with Moser, and it could neither add to nor delete language from that contract at the insistence of a party.

As written, the policy provision required Auto Club to pay any reasonable medical expense “incurred” by the plaintiff because of a bodily injury sustained in a collision. Clearly, when Auto Club drafted the medical payments provision, it intended to bind itself to pay the amount the plaintiff initially became liable to pay her medical providers, and not the amounts that were eventually paid in a collateral transaction on the plaintiff’s behalf.

The Supreme Court of West Virginia found no error in the circuit court’s decision to grant partial summary judgment to Moser and to deny Auto Club’s motion for summary judgment.

Auto Club’s second assignment of error challenged the circuit court’s decision to award $34,026.75 in costs and attorney’s fees to Moser. The Supreme Court of West Virginia found no error in the circuit court’s decision to award fees and costs to Moser.

The record showed that the circuit court properly performed its fee analysis and concluded that Moser’s attorneys had conducted the litigation in an efficient manner. The circuit court acknowledged that Moser’s lawyers’ entries, such as for block billing, made it more difficult to assess whether the time spent on particular tasks was reasonable. The circuit court, however, ultimately determined that the fee request was similar to awards made in other cases and was “imminently reasonable.” On this record, the Supreme Court of West Virginia saw no abuse of discretion by the circuit court in the amount of costs and attorney’s fees it awarded.

The court affirmed the judgment of the circuit court.

Auto Club Property Casualty Insurance Company v. Jessica A. Moser—Supreme Court of Appeals of West Virginia—April 25, 2022—No. 20-0792.