Of UIM, a Coots Advance, Subrogation, and Identification of the Parties (Psihountakis vs. Courtney Moore and Auto-Owners Insurance Company COA, Not To Be Published, 6/21/2013)
Posted: 10 Oct 2013 07:25 PM PDT
The following not to be published decision by the Court of Appeals is a good read for two reasons. First, it contains a succinct summary of the law on identification of the parties in a motor vehicle collision case in which the underinsured motorist carrier (Auto Owners) protected its subrogation rights by advancing the liability limits tendered on behalf of the at-fault driver; and second, it reveals some of the practical issues involved when trying such a case, from addressing the parties in the style of the case, motions in limine regarding what can be said and used in the trial, etc.
Another interesting point is the twist of party identification that occurred. Typically, the UIM carrier advances to protect its subrogation rights which keeps the defendant driver in as a party as well as the UIM carrier which after Earle v. Cobb was a major shift toward common sense pleading and practice and a rejection of the fiction and an embrace of honesty. No more games since a juror knows about mandatory insurance law presumably would not be shocked to discover insurance was an issue in the trial. However, the Plaintiff did not want the the tort feasor in the mix. This approach is the flip side and is/was obviously rejected. To have done otherwise would have been unfair to tortfeasor who had the right to be in the trial, protect his interests, and defend him/herself against the plaintiff’s direct claim for damages AND the subrogation claim of the UIM carrier.
This was not the Wonderful World of Oz, and the jury was entitled to see behind the curtain.
Psihountakis vs. Courtney Moore and Auto-Owners Insurance Company
COA, Not To Be Published, 6/21/2013
Boone Cir. Ct., Judge James R. Schrand, II
THOMPSON, JUDGE: The issue in this appeal concerns whether an underinsured motorists (UIM) carrier was sufficiently identified at trial and whether the participation of the UIM carrier and the alleged tortfeasor at trial was so prejudicial that a new trial is required. We affirm.
The liability insurance carrier for Moore tendered its liability limits in settlement of the remaining claims against her. On March 16, 2010, Auto-Owners substituted those liability limits pursuant to Kentucky Revised Statutes (KRS) 304.39-320 and preserved its subrogation rights against Moore.
Prior to trial, the trial court restyled the case caption as “George and Linda Psihountakis, Plaintiffs v. Auto-Owners Insurance Company, the underinsured motorist carrier of George and Linda Psihountakis and Courtney Moore, Defendants.” However, except for general voir dire questions regarding insurance, the Court ruled that evidence or argument pertaining to UIM coverage would not be permitted. A jury trial was commenced and the court identified Auto-Owners as the UIM carrier and as a defendant. Further, in voir dire, the Psihountakis’ counsel informed the jury that damages where sought against Auto-Owners when he stated: This is going to be a lawsuit in which George is suing his own insurance company, Auto-Owners. Do any of you for any reason have some feeling one way or the other about whether or not somebody should be able to collect on their insurance policies?
Despite the trial court’s ruling, in opening statement, the Psihountakis’ counsel, stated: We believe that when you have heard all the evidence, we believe you’ll believe as we do that the Defendant Auto-Owners is simply trying to deny George the compensation he deserves.1 In addition to the above references to Auto-Owners, Auto-Owners’s attorney stated in voir dire and opening statement that he represented Auto-Owners and he actively participated in the trial.
The Psihountakis contend that Moore should not have been permitted to participate in the trial because the participation of Moore and Auto-Owners unfairly denied them a fair trial. This argument strikes this Court as disingenuous in light of the Psihountakis’ withdrawal of their motion to dismiss Moore as a party. Moreover, we can find no authority that would preclude Moore, a defendant and responsible to pay Auto-Owners in subrogation if the jury found against her, from participating in the trial.
SOME BLACK LETTER LAW
The settlement of the Psihountakis’ claim against Moore and her insurance carrier was entered into using a procedure set forth in Coots v. Allstate Ins. Co., 853 S.W.2d 895 (Ky. 1993), and later codified by KRS 304.39-320. “When an injured party intends to settle with a tortfeasor and the tortfeasor’s liability insurance carrier, the Coots procedure allows the UIM carrier to preserve its subrogation rights against the tortfeasor by paying the injured party the policy amount.” Mattingly v. Stinson, 281 S.W.3d 796, 798 (Ky. 2009).
In Earle v. Cobb, 156 S.W.3d 257 (Ky. 2004), the Court considered whether a UIM carrier that used the Coots procedure must be identified at trial. Although the Court recognized the rule that evidence of liability insurance to show culpability is inadmissible, it concluded that when a direct action is pursued against a UIM carrier and the alleged tortfeasor, the UIM carrier must be identified to the jury. Id. at 262. When the Coots procedure is used, the tortfeasor is released from liability to the plaintiff and only remains liable to the UIM carrier and, therefore, the UIM carrier becomes the only real party with potential liability to the plaintiff. Id. In those circumstances, it is “improper to maintain the legal fiction of permitting the UIM carrier to either participate or sit idly by and allow the tortfeasor to defend at trial, thereby hiding the identity of a bona fide party.” Id. at 261.
Earle stands only for the proposition that when the Coots procedure is used, the UIM carrier that participates at trial must be indentified to the jury. In this case, Auto-Owners’s identity was clearly revealed to the jury by the court and counsel for all parties. It was identified as the Psihountakis’ UIM carrier and as a defendant and the Psihountakis’ counsel was permitted to expressly inform the jury that this was a case against Auto-Owners. There was no legal fiction such as in Earle. The jury was not left to speculate as to the parties’ identities or the interest represented by counsel participating in the trial. Id. at 260.
Nevertheless, the Psihountakis assert that the mere identity of Auto-Owners was insufficient. Although not specific regarding what evidence or argument was improperly prohibited by the trial court’s ruling, they argue that references to insurance should have been permitted as well as an instruction to the jury that Moore’s liability was extinguished and only damages were to be decided. Not only does this assertion go beyond Earle’s holding, it is a misstatement of the law. The Psihountakis’ claim against Auto-Owners was based on contract. However, the issues at trial were Moore’s negligence and damages. This was precisely the holding in Kentucky National Insurance Co. v. Lester, 998 S.W.2d 499, 504 (Ky.App. 1999), where the Court expressly rejected the contention that a Coots settlement precluded the UIM carrier from contesting the issue of fault. The Court held that the liability of the tortfeasor and the amount of damages are elements that must be established before determining the UIM carrier’s obligation. Proof of fault is essential to be entitled to recover from a UIM carrier in a lawsuit against that carrier. Id. Here, the existence of UIM coverage was not in dispute and the only issues of fact were fault and damages. References to or evidence concerning Auto-Owners other than its identity as the Psihountakis’ UIM carrier and as a defendant would serve only to confuse and prejudice the jury.
No Fault: DOI Bulletin 2013-04, dtd 10/4/2013 Addresses PIP Carriers Who UNILATERALLY reduce Provider Bills
Posted: 10 Oct 2013 08:31 AM PDT
bullhornThe following bulletin from the Kentucky Department of Insurance addresses a recurring problem when a reparations obligor (aka PIP carrier) decides to reduce a doctor or medical provider’s statement of services without obtaining an agreement. Although negotiated reductions seem reasonable and is a normal practice in the medical/insurance arena, it needs to be done the correct way.
The underlying premise is that medical providers charge different amounts for the same service, depending on the patient or his/her insurance. For example, each health insurer had a payment schedule for approved amounts which affect the write-off, co-pay deductible, or prohibition against balance billing; other insurers or agencies have approved payment schedules, eg., Medicare, Medicaid, Passport, Workers Compensation, Federal Government Plans which are controlled by statute; and automobile insurance to name a few.
Unfortunately, the approved rate of payment for the service seems to follow the bargaining power of the person paying, with an uninsured patient at the bottom of the totem pole of payments, only (for some unexplained reason) the no fault car insurance not far behind. Large health insurers and government provided insurance rules the roost on their payment schedules.
The net result is the person least able to afford it (the uninsured) pays the most, and in effect subsidizes everyone else, to include other uninsureds who do not pay.
Now what about no-fault (PIP)? With mandatory PIP coverages, this means the ONLY insurance to pay medical bills for those with no health insurance who are hurt in a car accident is no fault. Thus, these individuals need to be good stewards of their limited insurance funds for medical and wage loss. If their no fault carrier permits the provider to charge more than it charges everyone else, then guess who gets screwed? Yes, the person at the bottom
I can only assume this is the reason behind the legislative change – provide some parity and muscle for those who need the help the most.
To that end, some no fault carriers do step up to the plate and are participants in groups which have reduced payments or actually request and obtain a negotiated reduction. This works fine.
Others take the next step and conduct peer reviews of the providers medical or chiropractic services and may then disallow the amount, in whole or in part, based upon reasonableness and necessity of the service provided. Now this raises a whole new area of concern about the propriety of the no fault carrier’s actions which I will address another day.
Personal injury lawyers can also help maximize their client’s no fault insurance benefits by reserving or designating payments among elements of loss or even attempting to restrict the PIP benefits to cover the client’s out of pocket medicals after using their health insurance to pay first and obtain the benefits of the reduced payments per the payment schedules will encounter the stiff arm of the health insurer who will refuse to coordinate the benefits and shift the loss to their insured. And, the personal injury lawyer’s attempts to protect their client then can come under the threat of a bar complaint when the provider has obtained an assignment against their patient’s personal injury settlement recovery.
It is hard to bargain from strength when the ethical rules for lawyers in Kentucky convert a legal professional representing the interests of their injured client into a “bill collector” for the provider based upon a piece of paper. In due time, I will address this issue too.
The purpose of the above is to first thank the Department of Insurance for their efforts to add some muscle behind the statute (KRS 304.39-245) on negotiated reductions, but also to share my concerns about the hazards, risks and unfairness of the system.
Based upon the statute and the DOI Bulletin, I would like anyone’s comments on the liability of a no fault insurer not complying with Section 245 or other provisions regarding the payment of medical bills since the no fault act prescribes the procedures for honoring a PIP claim?
With that said, thanks for the help, and I hope and expect the automobile insurers will not capitulate and ignore their opportunity to address the inequitable billing rates and thus pursue a rule of convenience and pay the stated amounts and close the file.
One avenue of attack for the health insurer would be to obtain the payment schedule from a government agency and based upon the CPT billing codes etc. seek a reduction accordingly. If the provider refuses, then coordinate with the Department of Insurance and the Attorney General’s Office to address the disparate billing rates using the insurance and consumer protection code as their slingshot and stone against Goliath