Posted by H. Lee Pruett
In State Farm v. Adams, Case No. S09G1710 (Ga. S. Ct., Nov. 30, 2010), the Georgia Supreme Court reversed the Court of Appeals’ decision in Adams v. State Farm, 298 Ga. App. 249 (2009), in which the Court of Appeals held that a liability insurance carrier’s payment of the plaintiff’s hospital lien reduced the amount of liability coverage available, so the plaintiff’s uninsured motorist coverage carrier was not entitled to set off the amount of the lien. (See Levy & Pruett’s April 27, 2009 blog post.) Looking to the language and purposes of the uninsured motorist statute and the hospital lien statute, the Georgia Supreme Court held that payment of the hospital lien does not increase the amount of uninsured motorist coverage, that the UM carrier is entitled to the setoff.
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. After reconsideration, the Georgia Court of Appeals agreed. The Georgia Supreme Court reversed.
The purpose of the UM statute, the Court’s majority stated, ” is to place the injured insured in the same position as if the offending uninsured motorist were covered with liability insurance” and “to protect the insured as to his actual loss.” (Citations and punctuation omitted.) “It is this underlying purpose, not Georgia’s full compensation rule, which must guide this case.” Furthermore, the Court said, the remedial purpose of the statute is not offended because “there is nothing to be remedied.” (Emphasis in the original.) The hospital lien statute simply “allows the hospital to step into the shoes of the insured for purposes of receiving payment from the tortfeasor’s insurance company for economic damages represented by the hospital bill.” Such a payment is not a payment of “other claims or otherwise” which would reduce the amount of available liability coverage under the UM statute.
Thus, the Court distinguished its holding in Thurman v. State Farm, 278 Ga. 162 (2004), in which it held that payment of a federal lien-because reimbursement is mandatory-reduces the amount of available liability coverage and thereby increases the amount of UM coverage. The Court refused to extend Thurman to include hospital liens, which would create a “potential windfall” to the insured plaintiff by paying the plaintiff’s medical bills, for which the plaintiff is responsible, while increasing the UM carrier’s exposure.