Parry v. Allstate Insurance

HARRELL, Judge. Maryland Code, Insurance Art. § 19-513(e) provides that uninsured/underinsured motorist (“UM/UIM”) benefits are to be reduced to the extent the recipient recovers related benefits under workers’ compensation laws for which the provider of the workers’ compensation benefits has not been reimbursed. Md.Code, Ins. § 19-513(e) (2006 Repl.Vol. & Supp. 2008). The issue presented in this case is whether, under Ins. § 19-513(e), the un-reimbursed medical expenses paid on behalf of an employee by his/her employer, pursuant to workers’ compensation requirements, may be deducted by the employee’s private insurance carrier from his UM/UIM policy coverage benefits if the employee never filed or pursued independently a formal workers’ compensation claim.

The Circuit Court for Baltimore County, ruling on Respondent Allstate Insurance Co.’s (“Allstate”) petition for declaratory judgment, concluded that the un-reimbursed medical expenses paid on ¹³³ behalf of County Police Officer Mark Parry by his employer, Baltimore County (or its insurer), pursuant to workers’ compensation law, reduced to zero the UM/UIM policy liability of Allstate to Petitioner Lynne Parry (wife of Officer Parry, and personal representative of his estate) (the “Parrys”), even though the Parrys later elected the statutory remedy of bringing an action in tort against the tortfeasor, rather than filing a workers’ compensation claim. In an unreported opinion, the Court of Special Appeals affirmed. We issued a writ of certiorari upon the Parrys’ petition. Parry v. Allstate, 406 Md. 112 , 956 A.2d 201 (2008).

For the reasons that follow, we shall make the responses of the judicial system unanimous. I. FACTUAL BACKGROUND On 27 December 2001, Officer Mark Parry’s police vehicle (with him at the wheel) was struck by a vehicle driven by Cesar Humberto Meza. Parry was on duty with the Baltimore County Police Department at the time. As a result of the accident, Officer Parry was transported to University of Maryland Medical Center in Baltimore, where he received medical care for his injuries suffered in the collision.

He succumbed to those injuries on 21 January 2002. During this period of medical care, Officer Parry incurred medical expenses totaling $168,169.87. On its initiative, Baltimore County, as Officer Parry’s employer, responded quickly to his and his family’s predicament. It initiated the necessary steps to pay the expenses of Parry’s medical care.

On 28 December 2001, a claims adjuster in the County’s Workers’ Compensation Claims Management Unit (“CMU”) assigned a case manager to prepare the requisite paperwork for handling the expenses as workers’ compensation benefits, contacted the Medical Center on behalf of the County, and identified and obtained information regarding Meza’s third-party insurance policy coverage from Meza’s insurer, GETCO. Three days later (and four days after the accident), the CMU, through an intermediary, presented to ¹³⁴ Lynne Parry, Officer Parry’s wife, an Authorization for Release of Medical Information form, 1 which permitted the CMU to provide benefits to cover the cost of all medical bills incurred by Officer Parry as a result of the accident. She signed and returned the form. 2 On 11 January 2002, based on its internal handling of the situation, the CMU notified the, Baltimore County Police Department that it was accepting Officer Parry’s claim and authorizing the payment of the expenses for his medical care. All of Officer Parry’s $168,169.87 medical expenses subsequently were paid by the County (or its insurer).

GEICO’s insurance policy for Meza’s vehicle contained third-party liability coverage of $20,000/$40,000. Under their ' private insurance policy with Allstate, the Parrys had UM7 UIM coverage of $100,000. The Parrys’ policy included a provision, however, reducing the amount of UM/UIM benefits ¹³⁵ payable to the extent of amounts paid by certain other sources. That provision provided: Damages payable will be reduced by 1. all amounts paid by the owner or operator of the uninsured auto or anyone else responsible.

This includes all sums paid under the bodily injury liability coverage or property damage liability coverage of this or any other auto policy. 2. all amounts payable under any workers compensation law, disability benefits law, or similar law, Automobile Medical Payments, or any similar automobile medical payments coverage. The limits payable will be reduced by all amounts paid by the owner or operator of the underinsured auto. The Parrys settled their claim against Meza for the $20,000 limit under his GEICO policy. On behalf of her late husband’s estate, herself, and their three minor children, Mrs. Parry filed a claim for UM/UIM benefits with Allstate.

Mrs. Parry demanded $80,000 from Allstate under her family’s UM/UIM coverage, representing the limit of the policy coverage minus the payment received from GEICO. In response, Allstate filed in the Circuit Court for Baltimore County a declaratory judgment action under Md.Code, Cts. & Jud. Proc. Art. § 3-406 (2006 Repl.Yol. & Supp.2008) seeking a declaration that Allstate’s liability for UM/UIM benefits under the Parrys’ policy should be reduced by the benefits paid for Officer Parry’s medical expenses by the County (or its insurer).

After a bench trial, the Circuit Court agreed with Allstate. The trial court explained that the County’s payment of medical expenses qualified as “benefits ... paid ... under the workers’ compensation laws.” Because the $168,169.87 paid by the County exceeded the $80,000 in remaining coverage under the UM/UIM portion of Allstate’s policy, the Parrys were not entitled to recover any benefits or damages from their carrier. As noted earlier, the Court of Special Appeals agreed with this judgment. ¹³⁶ II. DISCUSSION Md.Code, Lab. & Empl.

Art. § 9-901 (2008 Repl.Vol.) grants persons injured on the job a choice of remedies when their injury is caused by a third party who is not their employer. That section provides When a person other than an employer is liable for the injury or death of a covered employee for which compensation is payable under this title, the covered employee or, in case of death, the personal representative or dependents of the covered employee may: (1) file a claim for compensation against the employer under this title; or (2) bring an action for damages against the person liable for the injury or death or, in case of joint tort feasors, against each joint tort feasor. Md.Code, Lab. & Empl. § 9-901. In those situations in which the person injured on the job brings an action against and recovers damages from the third-party tortfeasor, following a workers’ compensation award or payment of compensation, § 9-902 prevents the person from receiving a windfall recovery from both sources for the same damages.

Section 9-902(e) provides (e) Distribution of damages. If the covered employee or the dependents of the covered employee recover damages, the covered employee or dependents: (1) first, may deduct the costs and expenses of the covered employee or dependents for the action; (2) next, shall reimburse the self-insured employer, insurer, Subsequent Injury Fund, or Uninsured Employers’ Fund for: (i) the compensation already paid or awarded; and (ii) any amounts paid for medical services, funeral expenses, or any other purpose under Subtitle 6 of this title; and ¹³⁷ (3) finally, may keep the balance of the damages recovered. Md.Code, Lab. & Empl. § 9-902. When the injured employee elects to bring a third party tortfeasor action, but cannot be made whole because the third party tortfeasor is either uninsured or underinsured, the employee may invoke the UM/UIM benefits provided in his or her insurance policy to attempt to cover the difference (subject, of course, to policy limits).

See Revis v. Md. Auto. Ins. Fund, 322 Md. 683, 688 , 589 A.2d 483, 485 (1991) (“Where the workers’ compensation recovered by the insured is less than the total of the amounts due the insured under the PIP [Personal Injury Protection] and UM coverages, the insured is entitled to the difference.”). Under Md.Code, Ins. § 19-513, however, the amount of benefits payable under UM/UIM policy coverage to employees in such situations is to be reduced to the extent of funds paid in workers’ compensation benefits that are not reimbursed otherwise.

Ins. § 19-513(e) provides specifically: (e) Reduction due to workers’ compensation benefits. Benefits payable under the coverages described in § § 19-505 and 19-509 [the section providing for UM coverage] of this subtitle shall be reduced to the extent that the recipient has recovered benefits under the workers’ compensation laws of a state or the federal government for which the provider of the workers’ compensation benefits has not been reimbursed. Thus, as we opined in State Farm Mut. Auto.

Ins. Co. v. Ins. Comm’r, 283 Md. 663 , 392 A.2d 1114 (1978), 3 the intent of § 19-513(e) (as interpreted under the predecessor to Ins. § 19-513(e), Md.Code, Art. 48A § 543(d) (1957, 1972 Repl.Vol., 1978 Cum.Supp.)) is to “restrict the duplication of insurance benefits in several respects, one of which in subsection (d) is the reduction of PIP[/UM] benefits to the extent that the ¹³⁸ claimant recovered workmen’s compensation benefits.” State Farm, 283 Md. at 675 , 392 A.2d at 1120 . The Parrys’ main argument before this Court is that the Circuit Court’s holding, which found that the expenses paid on behalf of Officer Parry by the County (or its insurer) are to be deducted from the UM/UIM coverage as “benefits ... paid ... under the workers’ compensation laws,” undermines the grant to the Parrys to make a statutory election, under Lab. & Empl. § 9-901, either to bring a workers’ compensation claim or an action for damages against the tortfeasor.

The Parrys, in their brief, charge: No workers’ compensation claim was filed on behalf of Officer Parry and therefore, no workers’ compensation benefits under the workers’ compensation law of Maryland have been “recovered” by. [the Parrys].... [T]he plain and unambiguous meaning of “has recovered” dictates that [Allstate] cannot be permitted a reduction of the Parrys’ uninsured motorists benefits because no workers’ compensation benefits have been received by them through initiation of a workers’ compensation claim. An injured worker’s election to pursue the tort-feasor and not file a workers’ compensation claim has substantial consequences in that such an election bars any future workers’ compensation claim by the injured worker.... In the present matter, [the Parrys’] election of remedies invoked this consequence. Stephen Pohl, senior claims adjuster for Baltimore County, specifically testified at the declaratory judgment hearing that Petitioners had no future right to pursue any workers’ compensation benefits against Baltimore County because of Mrs. Parry’s election of remedies.

Specifically, Petitioners’ election of the tort remedy precluded their workers’ compensation dependency claims in this matter which would have been substantial for both Mrs. Parry and her children. The [lower courts’ decisions], however, disregard^ the substantial impact that [the Parrys’] election of remedy had to their potential claims, and effectively grants the insurer a loophole to avoid paying pursuant to the policy in the event ¹³⁹ that an employer acts to institute medical payments for any injured worker on its own initiative and without the worker’s election of a workers’ compensation remedy. This conclusion eliminates an injured worker’s right to elect a remedy pursuant to [Lab. & Empl.] § 9-901 and punishes the injured worker by leaving him without recourse for electing to pursue the tortfeasor when unbeknownst to the employee, payments are made by his employer which will be deemed to bar his recovery under circumstances as exist in this matter. Such a conclusion is contrary to both common sense and public policy, which should provide recourse for emergency personnel killed in the line of duty pursuant to their statutory right to elect a remedy in order to avoid a chilling effect on the willingness of such emergency responders to act.

(internal citations and footnote omitted) (emphasis in original). Allstate counters that, “[a]lthough the Petitioners did not file a formal claim for workers’ compensation benefits with the Commission, the burden is on Baltimore County to comply with the [workers’ compensation laws],” and under those laws, “the liability of the employer to make workers’ compensation payments for injuries to the worker is fixed at the time of the accident.” See Md.Code, Lab. & Empl. § 9-660 (“In addition to the compensation provided under this subtitle, if a covered employee has suffered an accidental personal injury ... the employer or its insurer promptly shall provide to the covered employee, as the Commission may require ... medical, surgical, or other attendance or treatment.... The employer or its insurer shall provide the medical services and treatment required under subsection (a) of this section for the period required by the nature of the accidental personal injury....”); COMAR 14.09.01.09(B) (2009) (“An employer or insurer may pay or contest charges for medical and other services under Labor and Employment Article, Title 9, Subtitle 6, Part IX or Part XIII, even if the employee does not file a claim, but shall pay uncontested charges promptly after receipt.”). The County reacted promptly to Officer Parry’s accident by reporting the compensable injury to the CMU and paying (or having its ¹⁴⁰ insurer pay) the medical expenses following receipt of the requisite Authorization for Release of Medical Information signed by Mrs. Parry.

Accordingly, Allstate argues that the fact that the employee did not file a claim does not change the fact that the benefits were payable under the [Workers’ Compensation] Act and benefits provided to Petitioners were recovered upon receipt and retention. Thus, as a matter of law, Petitioners have recovered benefits under the Act [Ins. § 19-513(e) ] for payment of the medical bills and disability compensation[ 4 ] resulting from compensable injuries suffered in the accident during the course of employment. We agree with the trial court’s declaratory judgment in favor of Allstate, and the intermediate appellate court’s affirmance of that judgment, concluding that Allstate has no liability under the UM/UIM coverage of the Parrys’ policy because the Parrys “recovered benefits under the workers’ compensation laws of [Maryland]” in excess of the UM/UIM policy limit. Md.Code, Ins. § 19-513(e).

The operative language of the predecessor section to Md. Code, Ins. § 19-513(e) (Md.Code, Art. 48A, § 543(d) (1957, 1972 Repl.Vol., 1978 Cum.Supp.) 5 ) was described by this Court as “plain and unambiguous.” State Farm, 283 Md. at 671 , 392 A.2d at 1118 . This view was reaffirmed in Smelser v. Criterion Insurance Co., where the Court interpreted § 543(d) as applicable to a claim for PIP benefits, despite the payment of benefits under the Workmen’s Compensation Act: ¹⁴¹ The statute here is as clear and unambiguous today as it was when it was before the Court in State Farm. The provision in § 544(a) for periodic payments in no way changes that view. The act states that benefits payable under § [543] “shall be reduced to the extent that the recipient has recovered benefits under workmen’s compensation laws of any state or the federal government.” The purpose of the act is to put a limited amount of money in the hands of an injured individual under certain circumstances without regal'd to whether another person is liable for the injuries which the claimant sustained.

Where a person is injured while covered under the Workmen’s Compensation Act, this purpose has already been achieved. Furthermore, contrary to appellant’s assertions, he is not entitled to PIP benefits as a matter of right on the basis that he should be made whole since he has suffered uncompensated wage losses. Manifestly, Smelser’s proposed