Medpay coverage limited to expenses insured was legally obligated to pay

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An insured may recover only medical expenses she was legally obligated to pay under a Medpay provision covering “expenses incurred,” the South Carolina Supreme Court has ruled.

The plaintiff, a Medicaid recipient, was injured in an automobile accident and received medical treatment with billed charges exceeding $27,000. Her medical providers, however, accepted about $1,323 through Medicaid as full satisfaction of the debt. The plaintiff then sought the full $10,000 Medpay policy limit, arguing she had incurred the higher billed charges when the services were provided.

The court disagreed, reversing the lower court rulings. Interpreting the insurance policy according to its plain meaning, the court held that an expense is incurred only when the insured becomes legally obligated to pay it. Because Medicaid agreements extinguished any responsibility for the balance beyond the amount paid, the plaintiff never incurred the full billed charges within the meaning of the policy.

The court also rejected the argument that the insurer was seeking an improper setoff. Instead, the issue was the scope of coverage in the first instance. Because the plaintiff’s liability never exceeded the Medicaid-paid amount, the insurer satisfied its contractual duty by paying that amount. Allowing recovery of the written-off charges, the court reasoned, would provide compensation beyond the plaintiff’s actual financial exposure.

The decision reinforces a liability-based interpretation of Medpay coverage and aligns South Carolina with jurisdictions that do not permit recovery of medical charges that providers have accepted as satisfied through Medicaid adjustments.

The 7 page opinion is Jones v. Progressive Northern Insurance Company, Lawyers Weekly No. 010-011-26.