Criterion Insurance v. Starkes

Finan, J., delivered the opinion of the Court. The narrow question to be decided in this appeal is whether, under the following facts, the appellee-insured “incurred” a ⁶⁹⁵ medical expense, for which he is entitled to be indemnified by the appellant-insurer, under the “medical payments” provision of its automobile insurance policy. On January 1, 1966, the appellee, an Army veteran, was involved in an automobile collision with Louis Henry Hammer. The appellee was taken to St. Agnes Hospital in Baltimore, and later was treated at the United States Public Health Service Hospital in Baltimore.

The services rendered the appellee between January 1 and June 1, 1966 at the Public Health Service Plospital represented a reasonable value of $2,362. On January 14, 1966, the appellee agreed to assign to the United States any claim, demand or cause of action against a third party tortfeasor resulting from the accident. This agreement to an assignment was pursuant to 42 U.S.C. § 2651 , which permits the United States to recover from such a third party the reasonable value of services rendered to the injured party, either as a subrogee or as an assignee of the injured person. However, the agreement to assign specifically stated that it was not to be construed as an assignment.

This instrument further provided that: “If I assert a personal injury claim in my own behalf and make a recovery therein, whether by judgment, compromise settlement, or otherwise, I agree to hold in trust for the United States out of the proceeds thereof the full amount of its claim for the reasonable value of the medical care and treatment furnished to me by or at the expense of the United States and to pay over such amount as directed by the United States.” The appellee later made claim upon Louis Henry Hammer, and the United States also filed its notice of claim accompanied by vouchers totalling $2,362. These claims were settled by Hammer’s insurer in the amount of $22,100, with a release in that amount being executed solely by the appellee. On March 21, 1967, the tortfeasor’s insurance company paid the claim by two checks, one of which was in the amount of $2,362 and was payable jointly to the appellee, the United States Army and the ⁶⁹⁶ Department of Health, Education and Welfare. The appellee endorsed this check over to the government.

Thereafter, the instant suit was instituted against the appellant-insurance company, the appellee claiming indemnification of the medical expenses up to the $2,000 limit of the automobile insurance policy. The relevant terms of coverage are: “Coverage C — Automobile Medical Payments To pay all reasonable expenses incurred within one year from the date of accident for necessary medical, surgical and dental services, including prosthetic devices, and necessary ambulance, hospital, professional nursing and funeral services: Division 1. To or for each person who sustains bodily injury, sickness or disease, caused by accident, while in or upon or while entering into or alighting from the automobile, provided the automobile is being used by the named insured or his spouse if a resident of the same household, or with the permission of either; or Division 2. To or for each insured who sustains bodily injury, sickness or disease, caused by accident, while in or upon, or while entering into or alighting from, or through being struck by, an automobile.” After a hearing, the lower court granted the appellee’s motion for summary judgment and entered judgment in the amount of $2,000 in favor of the appellee.

Basically, the appellant argues that because the insured was an Army veteran, the medical and hospital expenses were provided without charge by the Public Health Service, and therefore the appellee did not in fact “incur” those expenses. Its argument focuses on Title 38 of the United States Code, governing benefits to veterans. At the time the appellee was admitted to the Public Health Service hospital Section 610 stated, in relevant part: “(a) The Administrator, within the limits of Veterans’ Administration facilities, may furnish hospital care which he determines is needed to— ⁶⁹⁷ (1) a veteran of any war for a service-connected disability incurred or aggravated during a period of war, or for any other disability if such veteran is unable to defray the expenses of necessary hospital care; sj< $ » According to §622 of the same title: “For the purposes of section 610 (a) (1), * * * of this title, the statement under oath of an applicant in such form as may be prescribed by the Administrator shall be accepted as sufficient evidence of inability to defray necessary expenses.” The authorities presented before this Court are in general agreement that a recipient of benefits under §§ 610 and 622 does not “incur” an indemnifiable expense. See United States v. St. Paul Mercury Indemnity Co., 238 F. 2d 594 (8 Cir. 1956) ; Drearr v. Connecticut General Life Ins.

Co., 119 So. 2d 149 (La. 1960). Indeed, the holdings of these and other cases, in the context of the legislative history of the federal statute, compel the conclusion that a veteran entering a V. A. hospital under the provisions of Title 38, § 610 will never “incur” a medical expense within the normal terms of a medical payment provision in an insurance policy. In United States v. St. Paul Mercury Indemnity Co., supra, a veteran of World War II was insured by the defendant insurer against “expenses actually incurred” were he to be stricken by poliomyelitis. After contracting the disease, the insured was hospitalized at a Veterans’ Administration hospital and received treatment under the former statute, 38 U.S.C. § 706 , which stated: “The Administrator of Veterans’ Affairs is authorized under such limitations as he may prescribe, and within the limits of existing Veterans’ Administration facilities, to furnish to * * * veterans of any war * * * mecpcai and hospital treatment for diseases or injuries: Provided that any veteran of any war who was not dishonorably discharged, suffering from disability, disease or defect, who is in need of hospitaliza ⁶⁹⁸ tion or domiciliary care and is unable to defray the necessary expenses therefor * * *, shall be furnished necessary hospitalization or domiciliary care * * *.

The statement under oath of the applicant in such form as may be prescribed by the Administrator of Veterans’ Affairs shall be accepted as sufficient evidence of inability to defray necessary expenses.” (Emphasis supplied.) After paying the insured’s hospital bill, the Veterans’ Administration instituted suit against the insurance company under an assignment of claims executed by the insured. The Court of Appeals for the Eighth Circuit held, as a matter of first impression, that the insured was in the position of a charitable patient, and entitled to free medical services under the statute. As such, he did not incur a personal liability to the hospital for which the insurer would be held liable under its policy of indemnification. The circumstances in Drearr parallel those of St. Paul Mercury except that in Drearr the insured, rather than the Veterans’ Hospital, brought the action against the insurer.

There the Court held, on the authority of St. Paul Mercury, that the insured was entitled to gratuitous medical services by reason of his oath of inability to defray expenses, and therefore he did not incur a liability. In furtherance of its position the appellant has submitted to this Court copies of two Maryland nisi prius decisions, Rizzio v. Government Employees Insurance Co., Docket 11 PC, No. 062377, and Velasco v. State Farm Mutual Automobile Insurance Co., Docket 7 PC, No. 157-1959, both issuing out of the Baltimore City Court. In both cases, the insured was a serviceman on active duty at the time of his injury. The federal government is obligated to provide medical service and hospitalization to active members of the armed forces without liability to the injured person.

Cf. Plank v. Summers, 203 Md. 552 , 102 A. 2d 262 (1954). Therefore, it seems clear that by reason of the free medical services the injured party had not “incurred” an expense. See also Gordon v. Fidelity & Casualty Co. of New York, 120 S. E. 2d 509 (S. C. 1961). ⁶⁹⁹ On the basis oí these cases alone, we might be inclined to agree with the appellant that the appellee-insured received gratuitous medical and hospital benefits, and is not entitled to that part of the recovery obtained from his tortfeasor attributable to those expenses.

However, we believe that the appellant’s argument fails to recognize the fact that, 1) the appellee did not make an oath of his inability to pay medical expenses; and 2) it is not the provisions of Title 38 which govern the determination of this case, but those laws which at the time of the appellee’s admission to the Public Health Service hospital controlled the administration of the Public Health Service. That the appellee could not receive Title 38 benefits seems clear, not only from the language of the statute, which makes no reference at all to benefits in favor of financially capable veterans, but also from the statements in those cases which interpret the statute. In St. Paul Mercury, the Court of Appeals for the Eighth Circuit stated: “The language seems to us, as it did to the trial court, to mandate unequivocally that the Administrator of Veterans’ Affairs should thereafter, * * * furnish necessary hospitalization or domiciliary care to any veteran who had not been dishonorably discharged, when he was suffering from any disability, disease or defect and was in need of hospitalization or domiciliary care by reason thereof, and when he was financially unable to defray the expenses therefor.” 238 F. 2d at 596 . (Emphasis supplied.) In Drearr , the Court articulated the obvious corollary to the statement in St. Paul Mercury: “A most cursory reading of the statute is sufficient to convince anyone that as a veteran plaintiff, upon admission to the hospital, was entitled to free care and treatment for his ailment if he made the required statement under oath on the form prescribed by the Administrator setting forth his inability to defray necessary expenses.

If his financial status was such that he could not subscribe to that oath, then the plaintiff veteran ⁷⁰⁰ does not possess eligibility for admission in the first place. (Emphasis supplied.) 119 So. 2d at 151 . Furthermore, within the framework of the facts set before this Court, we would be unable to reach a decision based on the