Insurer liable only for amount paid to satisfy medical bills, Supreme Court says

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The term “expenses incurred” in an insured’s automobile insurance policy required an insurer to pay the amount paid to providers to satisfy her medical bills – not the full limits of her Medpay coverage, the unanimous South Carolina Supreme Court has ruled.

After she was injured in an automobile accident, the insured received treatment from several medical providers. The charges for her treatment totaled $27,786.17.

However, as a recipient of South Carolina Medicaid, only $1,323.60 was paid to providers to completely satisfy the insured’s obligation.

The insurance policy at issue had a $10,000 Medpay coverage limit that provided “If you pay the premium for this coverage, we will pay the reasonable expenses incurred for necessary medical services received within three years from the date of a motor vehicle accident because of bodily injury … .”

Based on the original charges for her medical bills, the insured demanded the full $10,000 in Medpay coverage.

When the insurer refused to pay it, she sued, seeking $8,676.40, the balance of her Medpay coverage.

The insurer argued it was liable for only the $1,323.60 in medical expenses that the insured “actually insured” because any other amounts initially billed by her medical providers were reduced to that amount.

Following a bench trial, the circuit court sided with the insured on her breach of contract claim.

The insurer appealed.

Justice George C. James, Jr. reversed in Jones v. Progressive Northern Insurance Company.

An amount for which there is no obligation to pay is not an “expense incurred,” the court explained.

The court relied upon Gordon v. Fidelity & Cas. Co. of N.Y., a 1961 decision where a soldier in the U.S. Army received free medical care at a military hospital and the court held that he therefore had not “incurred” any expenses for his treatment and was not entitled to the reasonable cost of his hospitalization under the medical coverage provisions of his motor vehicle liability insurance policy.

While the insured attempted to point to the bill she received with the cost of her care itemized, the court was not persuaded.

“Here, [the insured] incurred no expense higher than the sum Medicaid paid, because she had no obligation to pay for the treatment she received,” the court wrote. “The itemized lists [the insured] received from the medical providers reflecting the full cost of her care do not distinguish this case from Gordon – the lists merely reflected the unadjusted cost of [her] care, not a payment obligation. The unadjusted cost is inconsequential; neither [the insured] nor Medicaid paid the full amount, and [the insured] has not incurred and will not incur expenses in excess of the amount Medicaid paid. [The insurer] is not required to pay [the insured] any more than the amount her medical providers agreed to accept as payment in full from Medicaid.”

Courts must give insurance policy language its plain, ordinary and popular meaning, the court said, citing Black’s Law Dictionary’s definition of “incur” as “to become liable or subject to.”

“The court of appeals applied the Black’s Law Dictionary definition and held [the insured] became liable for or subject to the costs of care once she was treated,” the court said. “This was error, as even at the time of treatment, [the insured] was not liable for the full cost of care she received. Therefore, [the insurer] is obligated to reimburse [her] only the $1,323.60 Medicaid paid to fully satisfy the charges.”

South Carolina Code section 38-77-144, which provides that personal injury protection, medical payment coverage or economic loss coverage shall not be assigned or subrogated and is not subject to a setoff, did not apply in the case, the court added, as the insurer was not asking for setoff and did not contest its obligation to pay the insured the $1,323.60 Medicaid paid to her medical providers.

“The meaning of ‘expenses incurred’ in the [insurer’s] policy is unambiguous,” the court concluded. “[The insured] never had, and will never have, an obligation to pay more than $1,323.60. We therefore reversed the court of appeals on this issue and remand for entry of judgment in favor of [the insurer].”

John R. Murphy of Murphy & Grantland in Columbia, who represented the insurer, did not respond to a request for comment.

Neither did Columbia attorney John S. Nichols of Bluestein Thompson Sullivan, who represented the insured. •