Maryland High Court: Insurer Can’t Add Medical Bill ‘Write Down’ to WC Offset
Maryland’s highest court on Tuesday issued instructions on how the cost of workers’ compensation benefits should be deducted from another insurance recovery when accident victims are owed coverage under more than one policy.
Chesapeake Employers’ Insurance Co. filed a $618,685.56 workers’ compensation lien to recover workers’ compensation benefits it paid on behalf of Michael Gilliam, who was permanently disabled when another driver crashed into the rear of his work vehicle.
But Westfield Insurance Co. argued that it is entitled to a $743,715.74 offset from any award it may be forced to pay for an an underinsured motorist claim against a policy it issued to Gilliam’s employer. The insurer argued that the medical providers who treated Gilliam had reduced their fees by $125,030.18 because of the fee guide mandated by the Maryland Workers’ Compensation Act, which amounted to a “benefit” that it is allowed to recoup under the state’s insurance code.
The Maryland Court of Appeals rejected the insurer’s arithmetic on Tuesday. In briefings, Gilliam’s attorneys described Westfield’s arguments as “unreasonable, illogical and inconsistent with common sense.”
“If the defense had won this argument he would have not received any of the million dollars that his employer purchased to protect its employees while driving company vehicles,” Gilliam’s lead attorney, Matt Paavola, said in an email. “How fair would that have been?”
Paavola said Gilliam suffered a broken neck, a shoulder impingement and thoracic outlet syndrome because of the January 2017 rear-end collision. His employer EcoMize USA, a heating and air conditioning contractor, had workers’ compensation insurance through Chesapeake. In addition to medical bills, the carrier paid more than $500,000 in temporary and total disability benefits.
EcoMize also had uninsured/underinsured motorist coverage through Westfield with a $1 million limit. After the insurer for the motorist who caused the accident paid its $30,000 policy limit, Gilliam filed a claim against the Westfield policy hoping to tap into a much larger pocket. He filed a lawsuit in the Baltimore City Circuit Court after failing to reach an agreement with the insurer.
Westfield removed the lawsuit to federal court and filed a motion for summary judgment on the question of whether it is entitled to an offset that reflects the medical provider’s “write down” of their fees to comply with Maryland’s fee guides. U.S. District JudgeStephanie A. Gallagher reached no decision, deciding instead to send a certified question to the Court of Appeals.
Specifically, Gallagher asked if Insurance Code Section 19-513(e) requires the court to treat the difference between medical bills submitted by a workers’ compensation claimant’s health care providers and the amount actually paid by the insurer as “recovered benefits” that are subject to an offset against damages paid by another insurer.
In a unanimous decision, the Court of Appeals ruled that only the amount that the workers’ compensation insurer actually paid for medical expenses is part of that statutory offset. The court said in its opinion that the purpose of the statute is to avoid double recoveries for workers’ compensation claimants, not to create a windfall for insurers that also owe coverage.
“To the extent possible, an injured employee covered by both workers’ compensation insurance and UM/UIM coverage is to be in the same place at the end of the day as an employee who could recover compensation from a tortfeasor covered by liability insurance with similar limits,” the court said.
The court in its opinion calculated the impact to claimants using the policy that Westfield suggested to show that the result would be uneven recoveries. If the tortfeasor that caused the accident had full coverage, the claimant would receive more money that a workers’ compensation claimant who was injured by a tortfeasor who was underinsured.
The court said “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 equivalent to the UIM coverage.”