Opinion ID: 852749
Heading Depth: 2
Heading Rank: 2

Heading: Medical Payments as Advance Payments

Text: The plaintiffs contend that the trial court wrongly granted the Estate credit against the judgments for Allstate's medical payment benefits rather than requiring Allstate to seek subrogation rights, which would give the plaintiffs the benefit of the cost allocation provisions of the insurer subrogation statute. They calculate the difference to be $2,283.93. Resolution of this issue turns on the interplay between the provision of the policy and two statutory provisions. The Advance Payment statute, Indiana Code section 34-44-2-3, provides: If it is determined that the plaintiff is entitled to recover in an action described in section 1 of this chapter: (1) the defendant may introduce evidence of any advance payment made; and (2) the court shall reduce the award to the plaintiff to the extent that the award includes an amount paid by the advance payment. Advance payments are defined to include a payment made to the plaintiff by the defendant or the defendant's insurance company. I.C. § 34-6-2-3. In the typical case the injured plaintiff is in one vehicle and the tortfeasor is in another. The medical payments coverage is supplied by the insurer of the plaintiff's car and the relevant liability coverage is insured by the tortfeasor's insurer. In this situation, an advance payment is one advanced by the tortfeasor's insurer as, in effect, an interim payment or down payment of potential damages for which the tortfeasor may be liable. The purpose of the Advance Payment statute is to prevent double recovery if an advance payment has been made. See Monroe v. Strecker, 171 Ind.App. 100, 103, 355 N.E.2d 418, 420 (1976). The statute also has the effect of reducing the judgment against the defendant by the amount of the advance payment. See I.C. § 34-44-2-3. This eliminates exposure of the defendant against whom the judgment is entered (as opposed to his insurer) to the amount already paid by the insurer. The Subrogation Statute, Indiana Code section 34-53-1-2, provides that: An insurer claiming subrogation or reimbursement rights under this chapter shall pay, out of the amount received from the insured, the insurer's pro rata share of the reasonable and necessary costs and expenses of asserting the third party claim. These reasonable and necessary costs and expenses include and are not limited to the following: (1) The cost of depositions. (2) Witness fees. (3) Attorney's fees to the lesser of: (A) the amount contracted by the insured for the insured's portion of the claim; or (B) thirty-three and one-third percent (33 1/3%) of the amount of the settlement. This statute also is designed to address the normal situation where the plaintiff's insurer has medical payments coverage and the defendant's insurer has liability coverage. When the plaintiff recovers a judgment for both medical expenses and other damages, the plaintiff's insurer, who has already paid for medical expenses, is entitled to recover that amount as a subrogee, but also should bear its share of the cost of recovering those expenses from the defendant. I.C. § 34-53-1-2. The insurance policy on the car Crabtree was driving includes medical payments coverage for passengers injured without regard to fault. It also includes liability coverage for Crabtree (as a person operating with the owners' permission) against liability to third parties. The relevant provision in the insurance policy provides: Limit of Liability      There will be no duplication of payments made under the . . . Automobile Medical Payments coverage of this policy. All payments made to or on behalf of any person under this coverage will be considered as advance payments to that person. Any damages payable under the Bodily Injury Liability Insurance or Uninsured Motorists coverages of this policy will be reduced by that amount. The Court of Appeals concluded Allstate is not a party to this appeal and has not sought permission to intervene in the present action. . . . [and] the Estate did not pay the medical payments at issue. A.C. v. Estate of Crabtree, 809 N.E.2d at 442. Therefore, the Court of Appeals reasoned the Estate cannot claim an offset by reason of the contractual relationship between the plaintiffs and Allstate. The Court of Appeals also concluded that the contract provision conflicted with the Subrogation Statute, and therefore was ineffective. The contract provides that medical payments shall be considered to be an advance payment. The Estate contends that under this policy the medical payments made to the plaintiffs were advance payments made on Crabtree's behalf and therefore a credit against the judgment was appropriate pursuant to the Advance Payment statute. Specifically, if the payment is treated as an advance payment then Indiana Code section 34-44-2-3(2) would require the court to reduce the award to the plaintiff to the extent that the award includes an amount paid by the advance payment. Plaintiffs respond that the payments of their medical expenses were first party insurance benefits, to which they were entitled, not payments made by a defendant as the defendant's insurer. The plaintiffs reason that the Automobile Medical Payments coverage states that an `insured person(s)' means: . . . any other person who sustains bodily injury while in . . . your insured auto while being used as a vehicle by you . . . or any other person with your permission. Because Crabtree was driving with the permission of the owner, Alicia and Jacelyn claim they were insured persons under this Automobile Medical Payments coverage. They are correct that they were insured persons, but this does not make them parties to the insurance contract. Rather, the medical payments were paid because of a contract between Allstate and the owners. There is a debate whether injured passengers, such as the plaintiffs in this case, are third-party beneficiaries or otherwise entitled under a policy to contractual benefits from the defendant's insurer. See Donald v. Liberty Mut. Ins. Co., 18 F.3d 474, 482 (7th Cir.1994); Cain v. Griffin, 826 N.E.2d 41, 44 n. 1 (Ind.Ct.App.2005), trans. granted. Regardless of the resolution of this issue, it is clear that a person injured in a car owned and insured by someone else is not a party to the owner's policy. And even if they were parties or third-party beneficiaries to the contract, the terms of the contract would limit any claim. The policy provides that any amounts paid to or for a person under the medical payments coverage operate to reduce the limits of damages payable to that person under the liability coverage and are to be treated as advance payments. These payments are to be considered as advancements against any future liability for the plaintiffs' injuries that might be imposed upon the defendant or the defendant's liability insurance company. In this case medical expenses were plainly paid by the insurance policy covering the car that Crabtree was driving. The statute defining advance payments does not require that payment be made under any contractual obligation at all. The statute provides simply that payment by the defendant or his insurance company will be treated as advance payments thus reducing any judgment to the extent that the award includes an amount paid by the advance payment. We see no conflict between the policy provision and this statute. The plaintiffs also contend that the Estate cannot claim an offset by reason of the Subrogation Statute. Stated differently, the plaintiffs contend that only Allstate, as subrogee, can claim a right to the portion of the judgment that we assume includes reimbursement for medical expenses. Plaintiffs concede that Allstate's liability coverage will pay the judgment against Crabtree. Thus, the plaintiffs' contention boils down to a claim that Allstate must assert its subrogation rights under Indiana Code section 34-53-1-2 against itself as liability insurer. The Court of Appeals agreed, concluding that the contract could not override the statute. We do not agree that the Subrogation Statute applies here. Exercise of subrogation rights would trigger the obligation of Allstate, as subrogee, to pay a proportionate share of collecting the amount from itself that it had paid voluntarily. We do not believe the legislature intended the Subrogation Statute to compel an insurer to pay attorney's fees to recover the amount of its medical payments from itself. Rather, the Advance Payments statute applies in this case and resolves this problem. The Advance Payment statute reduces the amount of the jury award, and therefore takes the Subrogation Statute out of play. Once the judgment is reduced by the amount of the medical payments, there is no longer any claim as subrogee, and no conflict between the policy and the Subrogation Statute. In sum, we think that the terms of the policy control here. The Limit of Liability provision quoted above stated that any medical payments will be considered as advance payments and damages under the liability coverage of the Allstate policy will be reduced by that amount. We do not agree that this policy provision conflicts with any statute. As explained above, if the contract provision is honored and the medical payments are advance payments, the judgment is reduced by that amount, and there is no right to recover it a second time. There is therefore no subrogation right to recover that amount and the Subrogation Statute is not in play. The contract provision, in concert with the Advance Payments statute, merely provides for elimination of duplication to the extent medical payments duplicate amounts payable under the liability coverage. Under a policy permitting the insurer to offset payments under medical coverage against payments under liability coverage, the insurer has the burden of establishing that a liability judgment actually included the advanced medical expenses. No offset is allowed where it does not sustain this burden. See 12 Couch on Insurance (Third): Automobile Liability Insurance § 170:22 (West 1998). It is not clear on this record whether the jury intended a portion of its verdict to include the medical expenses that were previously paid under Allstate's medical payments coverage. The Estate's post-verdict motion and supporting documents established that medical payments coverage payments had been advanced on behalf of the plaintiffs and the amounts thereof, but make no reference to whether these amounts were included in the evidence before the jury. But by ordering the reduction, the trial court implicitly so found.