Opinion ID: 6215893
Heading Depth: 3
Heading Rank: 3

Heading: Consequences of Alternative Constructions

Text: To compare the alternative interpretations proposed by Westfield and Mr. Gilliam, we consider three simplified scenarios in which a person injured in an automobile accident in the course of the person’s employment seeks compensation for those injuries. For that purpose, a little math is helpful. To make the computations easier, we use round numbers. For each scenario, we assume that the injured person’s total damages equal $1,000,000. The WC insurer pays $150,000 under the Fee Guide to compensate health care providers for services provided to the injured person. Consistent with the assumption we are making to answer the certified question, we assume that the “fair and reasonable value” of those health care services is something greater than $150,000 – i.e., $150,000 + x. The WC insurer pays $600,000 to the injured person for other benefits. The WC insurer thus pays a total of $750,000 in benefits for which it has a statutory lien as to any liability recovery from the tortfeasor.31 The three scenarios are: (1) an accident involving a fully insured tortfeasor against whom the injured person obtains a judgment of $1,000,000 (i.e., no UIM claim); (2) an accident involving an underinsured tortfeasor whose insurance covers only $100,000 of the injured person’s damages. The injured person makes a UIM claim against 31 For purposes of these scenarios, we disregard allowances for attorney’s fees and costs. 29 a policy with a $1,000,000 policy limit. In this scenario, the offset under IN §19-513(e) includes the difference between the fair and reasonable value of the medical services and what the WC insurer paid the providers – i.e., the offset includes x (Westfield’s position); (3) the same facts as scenario 2, except that, in this scenario, the offset under IN §19-513(e) does not include x (Mr. Gilliam’s position). (1) WC claim and fully insured tortfeasor (no UIM claim). The injured person obtains a judgment against the tortfeasor for $1,000,000. The WC insurer has a statutory lien against that judgment in the amount of $750,000. Assuming the WC insurer obtains the full amount of its lien, the injured person nets $250,000 from the judgment against the tortfeasor. This can be represented as follows: Net Recovery From Fully Insured Tortfeasor (no UIM Claim) Damages Award $1,000,000 WC Insurer Statutory Lien ($750,000) Net Recovery $250,000 (2) WC claim and UIM claim; x part of offset (Westfield’s position). The injured person recovers $100,000 from the tortfeasor’s liability insurer. The injured person also makes a claim against the applicable UIM coverage. Pursuant to IN §19-509(g), the UIM policy limits are reduced by the $100,000 recovered from the tortfeasor’s insurer. The WC insurer also recovers its statutory lien in that amount. Assuming that x is considered an unreimbursed workers’ compensation benefit recovered by the injured person (as Westfield argues), the UIM insurer offsets $150,000 + x with respect to workers’ compensation medical benefits and $600,000 with respect to other 30 workers’ compensation benefits, for a total offset of $750,000 + x. Because the WC insurer has been reimbursed, via the statutory lien, for $100,000 of its payments, the offset is reduced by that amount and therefore equals $650,000 + x. The injured person nets $250,000 - x from the liability judgment and the claim against the UIM coverage. This can be represented as follows: Net Recovery From Tortfeasor and UIM Claim After WC Offset Tortfeasor Liability Coverage $100,000 UIM Policy Limits $1,000,000 Reduction of UIM Limits by Liability Recovery ($100,000) WC Insurer’s Statutory Lien ($100,000) Offset for WC Benefits: ($650,000 + x) WC Non-Medical Payments ($600,000) WC Medical Payments and Discount ($150,000 + x) Reimbursed WC Benefits (Lien) $100,000 Net Recovery $250,000 – x (3) WC claim and UIM claim; x not part of offset (Mr. Gilliam’s position). The injured person recovers $100,000 from the tortfeasor’s liability insurer. The injured person also makes a claim against the applicable UIM coverage. Pursuant to IN §19-509(g), the UIM policy limits are reduced by the $100,000 recovered from the tortfeasor’s insurer. The WC insurer also recovers its statutory lien in that amount. Assuming that the offset for workers’ compensation medical benefits is limited to the $150,000 actually paid by the WC insurer (as Mr. Gilliam argues), the UIM insurer is to offset $150,000 with respect to workers’ compensation medical benefits and $600,000 with respect to other workers’ compensation benefits, for a total offset of $750,000. Because 31 the WC insurer has been reimbursed, via the statutory lien, for $100,000 of its payments, the offset amount equals $650,000. The injured person nets $250,000 from the liability judgment and the claim against UIM coverage. This can be represented as follows: Net Recovery From Tortfeasor and UIM Claim After WC Offset Tortfeasor Liability Coverage $100,000 UIM Policy Limits $1,000,000 Reduction of UIM Limits by Liability Recovery ($100,000) WC Insurer’s Statutory Lien ($100,000) Offset for WC Benefits: ($650,000) WC Non-Medical Payments ($600,000) WC Medical Payments ($150,000) Reimbursed WC Benefits (Lien) $100,000 Net Recovery $250,000 These examples illustrate that, in the situation where the responsible tortfeasor is fully insured (scenario 1), the injured person obtains a net recovery of $250,000, after application of the WC insurer’s statutory lien. If the tortfeasor was underinsured and the incremental value of the health care services above what was paid by the WC insurer (i.e., x) is part of the offset of UIM benefits (scenario 2 – Westfield’s position), the injured person has a net recovery from UIM coverage of $250,000 - x after application of the offset. On the other hand, if the offset does not include x (scenario 3 – Mr. Gilliam’s position), then the injured person’s net recovery from UIM coverage after application of the offset is the same as when the tortfeasor is similarly insured. As explained above, the goal of the UM/UIM coverage is to place the injured person in the same position as if the person had been injured by a tortfeasor with liability insurance 32 equivalent to the UIM coverage. Including x as part of the offset under IN §19-513(e) is not consistent with that purpose.32 This analysis confirms our construction of the text of the statute and is consistent with the legislative history.