Opinion ID: 6334689
Heading Depth: 2
Heading Rank: 1

Heading: The Meaning of “Incurred”

Text: Auto Club’s first assignment of error challenges the circuit court’s determination that it was required to pay the plaintiff’s physical therapy bill under the medical payments provision in her Auto Club insurance contract. 10 This Court has noted that the typical medical payments provision permits the insured to gain speedy reimbursement for medical expenses incurred as a result of a collision without regard to the insured’s fault. It also assures coverage when the insured is involved in an accident with an uninsured or underinsured driver. And in situations where both parties to an accident are insured by the same insurer, it sometimes eliminates the need for costly litigation to determine fault. Ferrell v. Nationwide Mut. Ins. Co., 217 W. Va. 243, 249, 617 S.E.2d 790, 796 (2005). See also, 11 Steven Plitt, et al., Couch on Insurance § 158:2 (3d ed. 2021) (“Recovery under the medical payments clause of an automobile liability policy is completely independent of liability on the part of the insured.”). The medical payments provision of the parties’ insurance contract provides that Auto Club “will pay reasonable medical expenses incurred for necessary medical and funeral services because of bodily injury[.]” (Emphasis added.) The parties’ positions in There can be no dispute that this case is, as are most declaratory judgment 10 actions regarding insurance policies, nothing more than a contract dispute. The “Automobile Insurance Policy” provided by Auto Club to the plaintiff clearly provides, on the first line of page 1, “THIS POLICY IS A LEGAL CONTRACT BETWEEN YOU AND US.” 11 this case boil down to a dispute as to the meaning of the term “incurred.” The term is not defined by Auto Club’s insurance contract nor are there any statutory requirements governing medical payments coverage. Accordingly, we must look to the language of the contract to determine if coverage is available. When a court interprets an insurance policy, the “[l]anguage in an insurance policy should be given its plain, ordinary meaning.” Syl. pt. 1, Soliva v. Shand, Morahan & Co., Inc., 176 W.Va. 430, 345 S.E.2d 33 (1986). “The words are to be taken in their ordinary and popular sense[.]” Flaherty v. Fleming, 58 W. Va. 669, 52 S.E. 857, 858 (1906). “We will not rewrite the terms of the policy; instead, we enforce it as written.” Payne v. Weston, 195 W. Va. 502, 507, 466 S.E.2d 161, 166 (1995). “Where the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended.” Syl., Keffer v. Prudential Ins. Co., 153 W.Va. 813, 172 S.E.2d 714 (1970). When the parties dispute the meaning of a word in an insurance contract, courts assess the meaning of the word by viewing the policy from the viewpoint of a reasonable consumer of average intelligence not trained in the law or insurance business. “An insurance contract should be given a construction which a reasonable person standing in the shoes of the insured would expect the language to mean.” Soliva, 176 W.Va. at 433, 345 S.E.2d at 3536; see also, Guerrier v. Mid-Century Ins. Co., 663 N.W.2d 131, 135 (Neb. 2003) (“Regarding words in an insurance policy, the language should be considered not in accordance with what the insurer intended the words to mean but according to what a 12 reasonable person in the position of the insured would have understood them to mean.”); Polan v. Travelers Ins. Co., 156 W. Va. 250, 255, 192 S.E.2d 481, 484 (1972) (“It is well established in the law that the terms of an insurance policy should be understood in their plain, ordinary and popular sense, not in a strained or philosophical sense.”); Thompson v. State Auto. Mut. Ins. Co., 122 W. Va. 551, 554, 11 S.E.2d 849, 850 (1940) (“In ascertaining the intention of the parties to an insurance contract, the test is what a reasonable person in insured’s position would have understood the words of the policy to mean.”). The plaintiff asserts, and the circuit court found, that the dictionary definition of “incurred” means “[t]o become liable or subject to.” Black’s Law Dictionary 768 (6th Ed. 1990). The Merriam-Webster Dictionary similarly defines “incur” as “to become liable or subject to,” while the Oxford English Dictionary defines the term as “become subject to . . . as a result of one’s own behavior or actions.” Auto Club does not dispute this basic definition. Rather, it argues that an insured person like the plaintiff could not incur and be liable for an expense that might eventually paid, in whole or part, on her behalf by the Medicaid program. The plaintiff counters that an injured plaintiff incurs and becomes liable for a medical bill at the time the services are rendered, regardless of how, or even whether, the plaintiff’s obligation to the medical provider is later discharged. Hence, it is the plaintiff’s position that the circuit court correctly found that a medical expense is “incurred” when the medical service is rendered. We find no error in the circuit court’s ruling because a reasonable, prudent person would consider the term “incurred” to be clear and unambiguous. The typical 13 consumer would understand that a medical expense is incurred at the time the services are rendered. Indeed, most medical providers state, before they perform a service, that a patient is responsible for any charges incurred regardless of whether insurance or some other party ultimately pays. When a patient’s health insurer eventually resolves those medical charges, the health insurer is merely relieving the patient of a liability the patient has previously assumed. At no point does the health insurer become liable to the medical provider directly; instead, if the health insurer fails to pay any part of the claim, the medical provider will pursue the patient for recompense. Importantly, the contract question presented by Auto Club is not a novel one. Since insurance companies began incorporating medical payments provisions into their policies in the late-1940s, they have repeatedly made the same arguments Auto Club 11 11 An American Law Reports summary from 1955 noted that Comparatively recently, many liability insurers have included in their policies, at a small extra premium, provisions under the terms of which the insurer undertakes to pay for medical or funeral expenses, within specified limits, incurred by persons injured or killed as a result of the condition or use of the property in connection with which the liability insurance is written. W.E. Shipley, Coverage, construction, and effect of medical payments and funeral expense clauses of liability policy, 42 A.L.R.2d 983 § 2 (1955). The medical payments provision displaced “first-aid” clauses, “under which the person insured against liability is authorized to provide limited medical care in order to mitigate damages.” Id. § 1; see, e.g., Gilbert v. Am. Cas. Co., 126 W. Va. 142, 27 S.E.2d 431, 434 (1943) (examining a policy provision where “the company shall . . . pay . . . expenses incurred by the Insured, in the event of bodily injury, for such immediate medical and surgical relief to others as shall be imperative at the time of accident.”); Chitwood v. Farm Bureau Mut. Auto. Ins. Co., 117 Continued . . . 14 offers in this case. Jurisdictions considering those arguments have weighed language identical to that used by Auto Club, and they have consistently ruled against the insurers and found that the term “incurred” is clear. These jurisdictions have found that a person has “incurred” a medical expense at the time medical services are rendered and that an insurer is liable to the insured for the entire expense under the medical payments provision, regardless of whether or how the medical expense was ultimately paid. For instance, in Samsel v. Allstate Insurance Co., 59 P.3d 281, 286 (Ariz. 2002), the Supreme Court of Arizona found that even though the insured’s medical expenses resulting from an automobile accident were subsequently resolved by her HMO, her automobile medical payments insurer was contractually liable to pay her the full value of the medical expenses. The Samsel court, reviewing cases interpreting medical payments provisions back to the 1950s, explained: 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.” Id. (quoting Hollister v. Gov’t Emps. Ins. Co., 224 N.W.2d 164, 166 (Neb. 1974)). Critically, the Samsel court concluded with the following interpretation of the medical payments provision: W. Va. 797, 188 S.E. 493, 493-94 (1936) (same). A “first-aid” clause permitted an insured to incur the costs of “immediate medical and surgical aid ‘to others,’” so as to “minimize the damages for which the company may be liable for personal injuries to others under the public liability coverage of its policy[.]” Id. 15 The undefined phrase “actually incurred by the insured” is interpreted to mean actually incurred for treatment of the insured rather than actually incurred for treatment for which the insured is directly legally liable. 59 P.3d at 291. Numerous other courts have examined the word “incurred” in insurance policies and reached the same conclusion. See, e.g., Dutta v. State Farm Ins. Co., 769 A.2d 948, 961 (Md. 2001) (although insured’s medical expense was resolved by his HMO, automobile insurer was contractually liable because “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.”); Shanafelt v. Allstate Ins. Co., 552 N.W.2d 671, 676 (Mich. Ct. App. 1996) (“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.”); Curts v. Atl. Mut. Ins. Co., 587 A.2d 1283, 1287 (N.J. Super. Ct. App. Div. 1991) (holding that an automobile accident victim who received medical care as part of a prepaid nursing home plan “incurred” medical expenses payable under automobile insurance policy); Holmes v. Cal. State Auto. Assn., 185 Cal. Rptr. 521, 524 (Cal. Ct. App. 1982) (insured whose hospital costs were covered by Medicare benefits still incurred medical expenses “upon the rendition of services” triggering automobile insurance medical payments provision); Heis v. Allstate Ins. Co., 436 P.2d 550, 552 (Or. 1968) (insured, whose hospital expenses were paid by a group health plan, was “entitled to recover under her [medical payments] policy 16 with defendant without deducting the amount paid by the [group health plan] for her medical services.”); Collins v. Farmers Ins. Exch., 135 N.W.2d 503, 507 (Minn. 1965) (after sustaining injuries in automobile accident, negotiations by plaintiff’s counsel resulted in plaintiff paying medical providers less than the amount billed; nevertheless, the court required the automobile insurer to compensate plaintiff for the full amount of the medical bills “incurred.” “The definition of incur is ‘to become liable for,’ as distinguished from actually ‘pay for.’ This definition has been well fixed and delineated in the case law, and we are compelled to conclude that the insurer, when it used that language, intended to bind itself to pay the amount the insured became liable for, not the amount he paid as a result of a collateral transaction.”); Syl. pt. 2, Masaki v. Columbia Cas. Co., 395 P.2d 927, 927 (Haw. 1964) (“Where insured’s automobile policy provided for payment of reasonable expenses incurred for necessary medical and hospital services for treatment of injuries . . . insured who received injuries in an automobile accident was entitled to the reasonable cost of the medical and hospital services furnished him through his membership in a pre-paying health plan.”); Feit v. St. Paul Fire & Marine Ins. Co., 27 Cal. Rptr. 870 (Cal. Ct. App. 1962) (insured could recover the entirety of medical expenses under medical payments clause in automobile insurance policy, despite expenses being initially paid under insured’s membership in a pre-paid health plan); Am. Indem. Co. v. Olesijuk, 353 S.W.2d 71, 73 (Tex. Civ. App. 1961) (passenger “incurred” medical charges for treatment that automobile insurer was required to compensate, notwithstanding that the United States Navy paid the charges. “The fact that the insured has other arrangements for the reimbursement of his expenses does not operate to relieve [the insurance company] of its obligation as expressed 17 in its contract in plain, certain and unambiguous language.”); 12 Kopp v. Home Mut. Ins. Co., 94 N.W.2d 224, 226 (Wis. 1959) (insured submitted hospital bill to his automobile insurer that indicated on its face the bill was paid by Blue Cross and insured owed nothing; still, the court found the hospital bill was “incurred” and insured was entitled to reimbursement for the full amount of the bill under automobile insurance’s medical payments provision); see also Hollister, 224 N.W.2d at 165 (interpreting an insurance policy for hospital and medical services; active-duty solder sought payment of medical expenses charged by a private hospital but paid by the United States Army; court concluded the soldier had “incurred” the expenses because, “[o]rdinarily the term ‘incurred’ is construed to mean that one has become obligated or liable for the expense involved.”). 12 But see Lefebvre v. Gov’t Emp. Ins. Co., 259 A.2d 133, 135 (N.H. 1969) (military serviceman’s wife was injured in an accident, treated at a U.S. Naval Hospital and, “[e]xcept for $31.50 she was, as the wife of a serviceman, entitled to receive these services without charge;” court found that because the wife “never became liable to pay more than $31.50 for the medical services provided . . . by the Government,” she was “entitled to no more than this amount” under her medical payments provision); Irby v. Gov’t Emp. Ins. Co., 175 So. 2d 9, 11-12 (La. Ct. App. 1965) (active duty member of the Coast Guard, injured in an automobile accident, was treated in “a local United States Public Health Service Hospital” at no cost; court found that because the servicemember “never has been under any obligation to pay the government for the medical and hospital services he received,” he had not “incurred” a medical expense payable by under his medical payments insurance provider); Gordon v. Fid. & Cas. Co. of N. Y., 120 S.E.2d 509, 513 (S.C. 1961) (career soldier, who was struck by an automobile and treated at a military hospital, stipulated his medical care was free; court found that because there was “no obligation on the part of the respondent to pay for the hospitalization he received at Fort Jackson hospital, he ‘incurred’ no expense within the meaning of” his medical payments provision). 18 Relevant to the instant case, the Supreme Court of Minnesota, in Stout v. AMCO Ins. Co., 645 N.W.2d 108 (Minn. 2002), specifically found that an individual whose medical expenses from an auto accident were paid by the state Medicaid program had still “incurred” a medical expense equal to the full amount charged by the provider. The court found “that the medical expense incurred by Stout is the full amount reflected on his medical bills, and not the amount that was paid in satisfaction of those bills as the result of collateral transactions involving Stout’s health insurer.” Id., 645 N.W.2d at 113. 13 13 Auto Club cites as authority three cases on the meaning of “incurred” that are inapposite. The facts and policy language in each of these cases are easily distinguishable from the instant case. First, Auto Club cites to Newbury v. State Farm Fire & Casualty Insurance Company of Bloomington, Ill., 184 P.3d 1021 (Mont. 2008), for the proposition that it is not “objectively reasonable” under its policy for the plaintiff to expect coverage for her medical expenses because her expenses were eventually paid by the Medicaid program. In Newbury, the insured’s expenses were paid by a workers’ compensation carrier. Auto Club fails to note, however, that the Newbury court found the insured had no objectively reasonable expectation of medical payments coverage because the insurance policy at issue expressly stated there was “no coverage ‘to the extent workers’ compensation benefits are required to be payable.’” Id. at 1023. In the instant case, the Auto Club medical payments provision contains no such limiting language. Second, Auto Club cites Atkins v. Great American Insurance Company, 189 S.E.2d 501 (N.C. 1972) for the proposition that an insured cannot seek medical benefits coverage when no medical expense has been incurred. However, the policy at issue in Atkins required an insured to incur medical expenses within one year of an accident, and the Atkins plaintiff was not entitled to coverage because she never had medical services performed, never received a bill for services, and never paid for such services, within the one-year period. Finally, Auto Club relies upon State Farm Mutual Automobile Insurance Company v. Bowers, 500 S.E.2d 212 (Va. 1998). In Bowers, the insured submitted a claim against his auto policy’s medical payments provision for an entire medical bill totaling $1,586. The insurance company accidentally paid the insured $31,586, and when the company asked for a return of the $30,000 overpayment, the insured said “he had spent the Continued . . . 19 One of the leading treatises on insurance law, Couch on Insurance, also notes there is no ambiguity in a medical payments provision written like the one used by Auto Club in its contract. The treatise finds the law to be clear: when an insured “incurs” a medical expense because of an automobile accident, then the entire expense must be paid to the insured by the automobile’s insurer under a medical payments provision: The medical payments provision most commonly requires that the insured have “incurred” or “actually incurred” medical expenses. The clause contemplates a liability thrust upon the insured by act or operation of law. Stated otherwise, expenses are incurred within medical payments coverage only when a person has become obligated to pay for them. Additionally, the requirement that bills be “incurred” or “actually incurred” does not mean that the insured must have paid his or her bills in full. 11 Steven Plitt, et al., Couch on Insurance § 158:10. We are bound by the terms of Auto Club’s insurance contract with the plaintiff, and we can neither add to nor delete language from that contract at the insistence of a party. “It is not the right or province of a court to alter, pervert or destroy the clear meaning and intent of the parties as expressed in unambiguous language in their written entire overpayment and refused to repay the balance.” Id. at 213. Thereafter, the insurance company sued seeking both the overpayment as well as a declaration that it did not have to reimburse the insured amounts that were offset by the insured’s health-care providers under an agreement with the insured’s health insurance plan. The Virginia court relied upon a Virginia statute – one not found in our law – that defined when a medical bill is “incurred” and found the insured was never “‘legally obligated to pay’ the amounts written off by the providers.” Id. at 214 n.4. Hence, the Bowers court found the amounts the insured “‘incurred’ were the amounts that the health-care providers accepted as full payment for their services rendered to him.” Id. 20 contract or to make a new or different contract for them.” Syl. pt. 3, Cotiga Dev. Co. v. United Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962). “So long as an otherwise valid contract does not contravene some principle of law or public policy, it must stand and become operative as the deliberate act of the parties.” Id. at 493, 128 S.E.2d at 633. As written, the contract provision required Auto Club to pay any reasonable medical expense “incurred” by the plaintiff because of a bodily injury sustained in a collision. Clearly, when Auto Club drafted the medical payments provision, it intended to bind itself to pay the amount the plaintiff initially became liable to pay her medical providers, and not the amounts that were eventually paid in a collateral transaction on the plaintiff’s behalf. Under a common sense understanding of the plain language of the contract, the plaintiff “incurred” medical expenses at the time her physical therapy services were rendered, and those expenses were subject to payment under the medical payments provision. Auto Club does not dispute that the plaintiff suffered injuries or that her medical treatment was reasonable and necessary. Instead, it simply refused to pay the plaintiff’s physical therapy bill because the plaintiff was a recipient of medical insurance through the Medicaid program. Auto Club thereafter sought to excuse its nonpayment by paying a lesser amount to the Medicaid program. Auto Club elected to pay money toward the Medicaid subrogation lien without consulting the plaintiff and despite it being the plaintiff’s exclusive statutory duty to address the lien at the conclusion of her claim against the tortfeasor. See W. Va. Code § 9-5-11(d)(1). Importantly, Auto Club does not contend, nor do we find, that the medical payments provision contains any exclusionary or limiting 21 language permitting Auto Club to withhold payment, reduce the payment, or make payment to a stranger to the contract (like the Medicaid program). Auto Club drafted the language of the insurance contract, and the power lies with Auto Club to change that language – in the future – if it so chooses. Accordingly, we find no error in the circuit court’s decision to grant partial summary judgment to the plaintiff, and to deny Auto Club’s motion for summary judgment.