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GEORGIA COURT OF APPEALS RECONSIDERS UNINSURED MOTORIST CASE AND RULES THAT PAYMENT OF A HOSPITAL LIEN REDUCES THE AMOUNT OF AVAILABLE LIABILITY COVERAGE

Posted by H. Lee Pruett

On reconsideration, the Georgia Court of Appeals reversed itself in Adams v. State Farm, Case. No. A08A2315 (Ga. Ct. App., April 14, 2009), and ruled that an automobile liability carrier’s payment to satisfy a hospital lien reduces the amount of available coverage so as to increase the amount of uninsured motorist coverage. In its initial decision of February 17, 2009, the Court held that such a payment did not reduce the amount of available liability coverage. (See Levy & Pruett Blog Post dated March 2, 2009.) That initial decision, however, became the minority position of the dissent following the Court’s reconsideration of the case.

In this case, the plaintiff was seriously injured in a car accident. The defendant 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, and the balance was paid directly to the plaintiff in exchange for a limited release. The plaintiff then sought uninsured motorist 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 of $25,000 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.

This time, the Court of Appeals agreed with the plaintiff and remanded the case with the direction that the trial court grant the plaintiff’s motion for summary judgment. The Court examined the language of O.C.G.A. ยง 33-7-11 which defines an “uninsured motor vehicle as one in which the tortfeasor has liability insurance but the ‘available coverages’ are ‘less than the limits of the uninsured motorist coverage.” “Available coverages” is defined as the liability limits, less any reduction “by reason of payment of other claims or otherwise.” The Court held that the liability insurer’s payment of the hospital lien — a lien mandated by Georgia law — was such a payment, and the liability limits were reduced accordingly. The Court found no real distinction between payment of the hospital lien and the payment of federal benefits in Thurman v. State Farm, 278 Ga. 162 (2004) and Toomer v. Allstate, 292 Ga. App. 60 (2008).