Posted by H. Lee Pruett
The Georgia Court of Appeals recently issued an important decision concerning automobile liability and uninsured motorist coverage. In Adams v. State Farm, Case. No. A08A2315 (Ga. Ct. App., Feb. 17 2009), the plaintiff was seriously injured in a car accident with the defendant who had $25,000 in liability coverage. Nationwide, the defendant’s insurer, paid a portion of the limits to Grady Hospital to satisfy a hospital lien. The balance was paid directly to the plaintiff in exchange for a limited release. The plaintiff then sought uninsured motorist (“UM”) coverage from his insurer, State Farm, which provided $100,000 in uninsured motorist coverage. State Farm sought to apply the full amount of the underlying liability coverage as a setoff. The plaintiff argued that State Farm should not be allowed to set off the portion paid to the hospital because payment of the lien reduced the amount of “available” liability coverage.
The plaintiff cited Thurman v. State Farm, 278 Ga. 162 (2004) and Toomer v. Allstate, 292 Ga. App. 60 (2008). In Thurman, the Georgia Supreme Court ruled that when a federal employee had to reimburse federal benefits, that amount reduces the underlying liability coverage and thereby increases the amount of available uninsured motorist coverage. The Court emphasized Georgia’s public policy of complete compensation and that the purpose of the reimbursement provision of the federal benefits policy is to minimize the cost of the federal programs, not to ensure that the injured person has been fully compensated. In Toomer, the Georgia Court of Appeals ruled that mandatory repayment of a federal Medicare lien also reduces the amount of underlying liability coverage. Thus, the resulting increase in UM coverage helped implement Georgia’s public policy of complete compensation.
In Adams, however, the Court of Appeals rejected the plaintiff’s argument, noting that “neither federal nor state law required payment to the benefits provider,” in this case, Grady Hospital. Despite the fact that a hospital may enforce a lien against the at-fault party or his insurer, the Court offered a rather strained distinction that Georgia’s hospital lien statute does not contain “mandatory payment language contained in the federal laws applicable in Thurman and Toomer.” Thus, the Court declined to extend Thurman and Toomer beyond those cases in which a plaintiff is required by statute to reimburse federal benefits.