Westfield Ins. Co. v. Gilliam

477 Md. 346

269 A.3d 1047

WESTFIELD INSURANCE COMPANY

v.Michael GILLIAM

Misc. No. 4, Sept. Term, 2021

Court of Appeals of Maryland.

February 8, 2022

Argued by David A. Skomba (Ellen R. Stewart, Franklin & Prokopik, PC, Baltimore, MD), on brief, for Appellant.

Argued by Peter J. Basile (Daniel S. Baurer, Ferguson, Schetelich & Ballew, P.A., Baltimore, MD), on brief, for Appellee.

John B. Bratt, Esq., Law Office of John B. Bratt, LLC, Towson, MD, for Amicus Curiae on behalf the Maryland Association for Justice.

Getty, C.J., McDonald, Watts, Hotten, Booth, Biran, Gould, JJ.

McDonald, J. The United States District Court for the District of Maryland has certified to this Court, pursuant to statute and rule,¹ a question of law regarding the calculation of the damages payable to an injured person under the underinsured motorist provision of a motor vehicle insurance policy ("auto policy") when a workers’ compensation insurer has paid the injured person's medical expenses at rates set by the State Workers’ Compensation Commission. Maryland law permits the auto policy insurer to reduce its payment of benefits under the underinsured motorist coverage to the extent that the injured person has "recovered benefits under the workers’ compensation laws ... for which the provider of the workers’ compensation benefits has not been reimbursed."²

The case before the federal district court arose after Michael Gilliam was injured in an automobile accident while driving in the course of his employment. He received payments from his employer's workers’ compensation insurer and the other driver's liability insurer, and now seeks to recover, from the insurance policy covering the vehicle he was driving (issued by Westfield Insurance Co.), the amounts by which the other driver was underinsured. The health care providers who treated his injuries had generated bills in face amounts greater than the amounts set by the Workers’ Compensation Commission, but (as required by Maryland law) accepted payments at those lower amounts in full satisfaction for their services. The question asked of this Court is whether the difference between the amount of those bills – or perhaps more precisely, the fair and reasonable value of those providers’ services – and the payments made by the workers’ compensation insurer constitutes a "benefit" that the injured person has "recovered" under the Workers’ Compensation Act that is to be offset against any recovery the person would obtain from the underinsured motorist coverage of the auto policy.

For the reasons set forth in this opinion, we hold that only the amount that the workers’ compensation insurer actually paid for medical expenses is part of the statutory offset against underinsured motorist benefits. Thus, a difference between a higher face amount billed by a health care provider and the amount actually paid by the workers’ compensation insurer is not part of that offset.

ILegal Landscape

The question of law certified by the federal district court arises from litigation over insurance coverage for a motor vehicle tort. It concerns damages related to the plaintiff's resulting medical treatment and involves the interplay between the State workers’ compensation law and motor vehicle insurance law as they provide compensation for the victim of an automobile accident. It thus arises against the backdrop of tort and contract law. To set the stage for that question – and our answer – we first review its legal context.

A. Damages for Health Care Treatment Occasioned by a Tort

An individual who is the victim of a tort may recover compensatory damages from the person responsible for that tort – commonly referred to as the tortfeasor. Anne Arundel County v. Reeves, 474 Md. 46, 66, 252 A.3d 921 (2021) ; Restatement (Second) of Torts § 903. Such damages include, among other things, compensation for medical treatment that the victim obtained – or will obtain – as a result of the tort. Restatement (Second) of Torts § 924(c) & comment f . As a general rule, it does not matter if those health care services were initially financed by someone other than the victim – for example, the victim's health care insurance, other insurance, or a relative. Plank v. Summers , 203 Md. 552, 562, 102 A.2d 262 (1954). The tortfeasor remains responsible for paying the victim the "fair and reasonable" value of the health care services that the victim needed as a result of the tort. Shpigel v. White , 357 Md. 117, 128-29, 741 A.2d 1205 (1999).

1. The Fair and Reasonable Value of Health Care Services

Determining the fair and reasonable value of health care services is not easy. There are often two readily available benchmarks: (1) the amount billed by health care providers and (2) the amount actually paid – whether by the patient or by some other payor.³ But those two benchmarks seldom align. And neither figure alone may represent the actual value of the services. Higgs v. Costa Crociere S.P.A. Co. , 969 F.3d 1295, 1311-14 (11th Cir. 2020). The fair and reasonable value of health care services can be quite distinct from the amounts billed by health care providers or the amounts actually paid to the providers by the tort victim or other payor. Shpigel , 357 Md. at 128-29, 741 A.2d 1205.

In many instances the nominal list price generated by a health care provider billing service may be a less meaningful indicator of market value than the MSRP⁴ sticker on a new car in an auto showroom.⁵ See George A. Nation III, The Valuation of Medical Expense Damages in Tort: Debunking the Myth That Chargemaster-Based "Billed Charges" Are Relevant to Determining the Reasonable Value of Medical Care , 95 Tul. L. Rev. 937 (2021). That is because, among other things, health care billing involves nominal prices seldom actually paid, alternative charges negotiated between providers and insurers, and rates set by government entities. "The complexities of health care pricing structures make it difficult to determine whether the amount paid, the amount billed, or an amount in between represents the reasonable value of medical services." Stanley v. Walker , 906 N.E.2d 852, 857 (Ind. 2009). And, "[b]ecause this market structure may obscure the real value of medical services, courts have struggled to square tort law with the realities of modern healthcare finance." Higgs , 969 F.3d at 1309.

Under Maryland law, the amount of a bill or an actual payment is inadmissible without evidence to prove that the bills or payments actually reflect the "fair and reasonable" value of the services. See Shpigel , 357 Md. at 128, 741 A.2d 1205 ; see also Brethren Mut. Ins. Co. v. Suchoza , 212 Md. App. 43, 57, 66 A.3d 1073 (2013) (holding that trial court properly excluded evidence of actual payments when record contained no expert or other evidence that they reflected the fair and reasonable value of providers’ services).

2. Collateral Source Rule

As a general rule, whatever value can be determined for health care treatment required as a result of a tort, "a plaintiff is entitled to but one compensation" for the loss, regardless of whether there are multiple causes of action or multiple tortfeasors. That principle is sometimes called the "one recovery rule." Beall v. Holloway-Johnson , 446 Md. 48, 70, 130 A.3d 406 (2016) ; Reeves , 474 Md. at 67, 252 A.3d 921.⁶ And, generally, under a sometimes countervailing principle known as the "collateral source rule," the tortfeasor should be responsible for that recovery, regardless of whether the victim has another source of compensation. Haischer v. CSX Transp., Inc. , 381 Md. 119, 132, 848 A.2d 620 (2004).⁷

The label "collateral source rule" actually denotes two related common law "rules": one is a substantive principle of damages; the other is an evidentiary rule. The substantive principle of damages provides that an injured person is ordinarily entitled to full compensation from the tortfeasor, regardless of any compensation the person has received from sources unrelated to the tortfeasor with respect to the same injury. Haischer , 381 Md. at 132, 848 A.2d 620. Such collateral benefits may include insurance payments, negotiated lower rates, statutory benefits, or simply an affluent family member's goodwill. See Restatement (Second) of Torts § 920A, comment c (providing examples of collateral benefits not subtracted from the plaintiff's recovery from the tortfeasor).

The primary purpose of the collateral source rule, as substantive law, is to ensure that a tortfeasor does not escape liability by enjoying a benefit accruing to the injured party. Haischer , 381 Md. at 132, 848 A.2d 620 ; see also Restatement (Second) of Torts § 920A, comment b. Thus, a plaintiff may recover damages for a harm for which the plaintiff has already been compensated and, as a result, in some instances be made "more than whole." Higgs , 969 F.3d at 1310. Given a choice between a windfall for the tortfeasor and a windfall for the tort victim, the law favors the victim. In addition, to the extent that the collateral source is an insurance policy, the rule favors the maintenance of insurance. Haischer , 381 Md. at 132, 848 A.2d 620. In that sense, the rule ensures that a plaintiff is not penalized for prudence.

In support of that substantive principle of damages, the evidentiary aspect of the collateral source rule ordinarily renders inadmissible evidence that a plaintiff received compensation from a third party. See Eastern Shore Title Co. v. Ochse , 453 Md. 303, 341-43, 160 A.3d 1238 (2017) (discussing application of collateral source rule and exceptions to the rule).

The matter becomes more complicated when the tort is an automobile accident to which motor vehicle insurance applies – particularly when the tortfeasor's liability coverage is inadequate and the tort victim must look to the underinsured motorist coverage under the policy applicable to the victim's vehicle. The matter becomes yet more complicated if the accident occurs in the course of the victim's...