Opinion ID: 867565
Heading Depth: 2
Heading Rank: 1

Heading: The meaning of actually incurred

Text: ¶ 9 Allstate argues that Lisa did not actually incur the hospital and physician expenses that Partners eventually paid. The medical payments provision of Allstate's automobile policy reads in pertinent part: Allstate will pay to or on behalf of an insured person all reasonable expenses actually incurred by an insured person .... (Emphasis added.) ¶ 10 In Allstate's medical payments coverage provision, the phrase actually incurred is used in several ways. Medical expenses must have been incurred and thus cannot be speculative or anticipated future expenses; must have been incurred within one year of the accident; and must have been incurred by an insured person. However, Allstate's medical payments provision does not define the words actually incurred for these purposes or any other. ¶ 11 Although conceding that Coconino County v. Fund Administrators Ass'n, Inc., 149 Ariz. 427, 719 P.2d 693 (App.1986), established that Lisa need not have personally paid hospital or physician charges as a precondition to seeking payment under her medical payments coverage, Allstate contends that Coconino County does require that she be liable for such payments. It argues that under the provisions of A.R.S. § 20-1072(A) to (C), Lisa was not liable for medical expenses covered by Partners and thus could only have actually incurred those expenses not covered by Partners. ¶ 12 Coconino County involved a student who was eligible for county medical care pursuant to state and county regulations. The student was also covered under an interscholastic athletics association group insurance policy. The injured student was treated at Flagstaff Hospital and signed the hospital's standard admission agreement, assigning to the hospital the right of reimbursement from any applicable insurance policy. The administrator for the group policy refused reimbursement of the student's hospital expenses, arguing that the policy provided reimbursement only for expenses actually incurred. Because all charges were payable by Coconino County, the student had incurred no expenses. ¶ 13 The court of appeals rejected the administrator's argument, finding that  `[i]ncur' is generally accepted to mean `to become liable for,' not `to pay for.'  Id. at 430, 719 P.2d at 696. The court found that the hospital admission form signed by the student's legal guardian expressly provided that [they] were the ultimate guarantors of the treatment costs and held that [w]hether the possibility was remote or not, the private hospital could have proceeded against [the student], the guarantor, and sought payment. Thus, the student did actually incur expenses during his hospitalization. Id. ¶ 14 Allstate argues that under Coconino County, the claimant's legal obligation to pay is a sine qua non for its medical payments coverage to apply, given the actually incurred provision. However, both Coconino County and the court of appeals' decision in this case appear to fit within a line of cases addressing the question of whether claimants incurred expenses within the scope of medical payments provisions, notwithstanding that the expenses in question were paid by or even required by law to be paid by other sources. In American Indemnity Co. v. Olesijuk, for instance, the court found that an insured injured on active military duty, whose hospital expenses were paid by the United States Navy, as required by statute, incurred expenses for purposes of recovery under his automobile policy's medical payments provision. 353 S.W.2d 71, 72 (Tex.Civ. App.1961); see also Hollister v. Government Employees Ins. Co., 192 Neb. 687, 224 N.W.2d 164, 166-167 (1974), in which the court reached the same result. In both cases, the court noted that when the serviceman was treated in the hospital, an implied contract for payment was created, and later payment or reimbursement by the government did not relieve the insurer. Hollister, 224 N.W.2d at 166. ¶ 15 In Kopp v. Home Mutual Insurance Co., the court held that an insured whose hospital expenses were paid by a Blue Cross hospitalization plan incurred expenses and therefore was able to recover under his automobile policy's medical payments provision. 6 Wis.2d 53, 94 N.W.2d 224 (Wis. 1959). This holding has been followed by many other courts. See, e.g., Feit v. St. Paul Fire & Marine Ins. Co., 209 Cal. App.2d Supp. 825, 27 Cal.Rptr. 870, 871 (1962) (medical payment clause in automobile policy obliging insurer to pay expenses incurred for medical services did not limit recovery to expenses incurred by insured himself and did not preclude insured's recovery of sum medical services would have cost him but for membership in prepaid health plan); Masaki v. Columbia Cas. Co., 48 Haw. 136, 395 P.2d 927, 931 (1964) (insured whose treatment was covered and paid by health plan had expenses incurred on his behalf for purposes of medical payments provision of his automobile policy); see also Heis v. Allstate Ins. Co., 248 Or. 636, 436 P.2d 550 (1968) (same). Similarly, in Shanafelt v. Allstate Insurance Co., the court found: The primary definition of the word incur is to become liable for.... Obviously, plaintiff became liable for her medical expenses when she accepted medical treatment. The fact that plaintiff had contracted with a health insurance company to compensate her for her medical expenses, or to pay directly the health care provider on her behalf, does not alter the fact that she was obligated to pay those expenses. 217 Mich.App. 625, 552 N.W.2d 671, 676 (1996) (citation omitted). ¶ 16 In Holmes v. California State Automobile Ass'n, the California Court of Appeal held that an insured whose hospital costs were covered by Medicare benefits assigned to the hospital incurred expenses for the purpose of recovering under her automobile policy's medical payments provision. 135 Cal.App.3d 635, 185 Cal.Rptr. 521, 524 (1982); see also Niles v. American Bankers Ins. Co., 229 So.2d 435, 439 (La.App.1969); Black v. American Bankers Ins. Co., 478 S.W.2d 434, 438 (Tex.1972). ¶ 17 In Dutta v. State Farm Insurance Co., an insured whose HMO paid her accident-related medical expenses was permitted to recover on her automobile policy's personal injury protection provision. 363 Md. 540, 769 A.2d 948 (App.2001). The court stated: Clearly, an expense was incurred on petitioner's behalf. We hold that in order to fall under the scope of ... State Farm's policy, the expense need merely be incurredregardless of whether it is the insured, the insured's health insurer, the insured's health maintenance organization, or any other collateral source of benefits, who ultimately pays the bill. Id. at 961. ¶ 18 In all of these cases, of course, the court noted that the insured had become legally liable for the treatments provided and that the expenses were therefore incurred. The concept of requiring the insured to become legally liable was (and is) an appropriate method by which to determine if the insured actually incurred expenses for medical treatment. But none of those cases involved situations in which the insured received services necessary for treatment and would have become legally liable but for a statutory immunity. The cited cases examine the issue in slightly different fashions. Some courts deemed the medical payments provision vague in its use of the word incurred. Feit, 27 Cal.Rptr. at 871-72. Others found the policy ambiguous in failing to specify who must incur the expenses. Id. at 872; Dutta, 769 A.2d at 960-61. Feit and Black noted the absence of other insurance or coordinated coverage provisions. Feit, 27 Cal.Rptr. at 872; Black, 478 S.W.2d at 435. The Kopp court found the insured's payment of hospitalization plan premiums evidence of costs or expenses incurred by the insured. 94 N.W.2d at 225. In Holmes, Shanafelt, and Black, the courts found the injured insured incurred a legal obligation to pay for hospital expenses at the time the services were rendered. Holmes, 185 Cal.Rptr. at 524; Shanafelt, 552 N.W.2d at 676; Black, 478 S.W.2d at 437. ¶ 19 The narrow rule to be extracted from all of these cases is that incurred or actually incurred language does not bar an insured who became liable for expenses from recovery simply because of the availability of collateral means of discharging his liability therefor so as to have relieved him of the need to pay the charges personally. Hollister, 224 N.W.2d at 166 (quoting Dillione v. Deborah Hospital, 113 N.J.Super. 548, 274 A.2d 597, 600 (1971)). But in the present case, we must go a step further and decide what none of these cases had to consider whether this rule also applies when the insured is immunized from legal liability by a statute that transfers liability for covered expenses to the collateral source of payment.