ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE,
Janelle Blickensderfer, D.O.
ANDREW W. HULL
ANGELA D. HIOTT EDWARD A. CHAPLEAU
Hoover Hull Baker & Heath, LLP South Bend, Indiana
ATTORNEYS FOR APPELLEE,
Alan H. Bierlein, M.D.
DANE L. TUBERGEN
MARK W. BAEVERSTAD
Hunt Suedhoff Kalamaros, LLP
Fort Wayne, Indiana
IN THE COURT OF APPEALS OF INDIANA
INDIANA INSURANCE GUARANTY ) ASSOCIATION, ) ) Appellant-Defendant, ) ) vs. ) No. 20A05-0110-CV-448 ) JANELLE BLICKENSDERFER, D.O., and ) ALAN H. BIERLEIN, M.D., ) ) Appellees-Plaintiffs. )
APPEAL FROM THE ELKHART CIRCUIT COURT
The Honorable Terry C. Shewmaker, Judge
Cause No. 20C01-0001-CP-29
November 13, 2002
OPINION - FOR PUBLICATION
13. . . . State courts which have interpreted insurance guaranty law
have held that non-duplication of recovery provisions, such as the one found at
Indiana Code § 27-6-8-11, do not apply to health insurance benefits. . .
. The non-duplication of recovery provision does not apply to health insurance
benefits paid to a claimant because health insurance benefits are forms of insurance
expressly excepted by the Model Guarantee [sic] Act. [Alabama Insurance Guaranty Assoc.,
514 So.2d 1000, 1002 (Ala. 1987).] Similarly, Indiana Code § 27-6-8-3 provides
that This chapter applies to all kinds of direct insurance except life, annuity,
health, or disability insurance.
14. . . . In a situation like the one presented in
this case, where a claimant receives health insurance benefits, which are expressly excepted,
and files a medical malpractice claim against an insured health care provider, the
claimant will not receive a windfall judgment or obtain double recovery. The
purpose of guaranty law is best fulfilled by excluding health care benefits from
the non-duplication of recovery provision of the statute. To ignore this exclusion
would defeat the entire purpose of guaranty law in that insured health care
providers would get no relief and would suffer extreme financial loss in the
event their insurers became insolvent.
Appendix pp. 17-18. IIGA now appeals.
I.C. § 27-6-8-2.
See footnote The Act attempts to achieve its stated purpose of
avoiding excessive financial loss to claimants and/or policyholders by creating an association of
See I.C. §§ 27-6-8-4(2), 27-6-8-4(6) & 27-6-8-5.
The essence of IIGAs argument is that because the health insurance companies of the claimants allegedly injured by the malpractice of the doctors had already paid more than $100,000 each for medical expenses, IIGA was not responsible for any further coverage under the Act. Resolution of this case turns on the interpretation of Indiana Code Section 27-6-8-11, which provides:
(a) Any person having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, shall be required to exhaust first the persons right under the policy. Any amount payable on a covered claim under this chapter shall be reduced by the amount of recovery under the insurance policy.
The express language of the statute and the rules of statutory construction apply.
See ISTA v. Board of School Commrs of Indianapolis, 693 N.E.2d 972,
974 (Ind. Ct. App. 1998). Where the language of the statute is
clear and unambiguous, there is nothing to construe. However, where the language
is susceptible to more than one reasonable construction, the statute must be construed
to give effect to the legislatures intent. Civil Rights Commn v. County
Line Park, Inc., 738 N.E.2d 1044, 1048 (Ind. 2000). The statute is
examined as a whole, and courts should avoid excessive reliance on a strict
literal meaning or the selective reading of individual words. Id. The
legislature is presumed to have intended the language used in the statute to
be applied logically and not to bring about an unjust or absurd result.
Id. Further, we are compelled to ascertain and execute legislative intent
in such a manner as to prevent absurdity and difficulty and prefer public
convenience. In so doing, we are required to keep in mind the
objects and purposes of the law as well as the effect and repercussions
of such a construction. Koppin v. Strode, 761 N.E.2d 455, 461 (Ind.
Ct. App. 2002) (quoting Spears v. Brennan, 745 N.E.2d 862, 869-70 (Ind. Ct.
App. 2001) (citation omitted)).
IIGA argues that the operative words of the statute are: Any person having a claim against an insurer under any provision in an insurance policy . . . shall be required to exhaust first the persons right under the policy. Appellants Br. p. 13 (quoting Indiana Code Section 27-6-8-11(a)) (original emphasis). IIGA then argues that the benefits paid by the claimants health insurance carriers are just such claims as identified by the first sentence of Section 27-6-8-11(a) and that under the second sentence of the section, any amounts that it may owe to the claimants should be reduced by the amount paid as health care benefits by the claimants health insurance carriers. Because the claimants health insurance carriers have paid in excess of $100,000 on each claim and because the maximum amount that IIGA would owe on each claim is $100,000, IIGA contends that it has no further obligation to the claimants or to the doctors.
The doctors respond by asserting that IIGAs interpretation of Section 27-6-8-11(a) would lead to an absurd result. Under IIGAs interpretation, the claimants must exhaust any claim they would have under any policy. The doctors posit that in a scenario where a claimant had a separate insurance claim pending for an unrelated loss such as automobile property damage, IIGAs interpretation would require the claimant to exhaust that claim and credit IIGA those unrelated insurance proceeds against any amounts payable by IIGA to the claimants. The doctors claim IIGA has pointed to no language of the statute that would permit a different outcome based on IIGAs interpretation.
IIGA maintains that under the so-called last antecedent rule, the phrase which is also a covered claim modifies other than a policy of an insolvent insurer. Reply Br. p. 10. The doctors assert that IIGAs interpretation defies the laws of statutory interpretation and common grammar. Appellants Br. p. 6. They argue that the phrase which is also a covered claim modifies, Any person having a claim against an insurer under any provision in an insurance policy. Appellees Br. p. 9. It cannot possibly modify the phrase, Other than an policy of an insolvent insurer, because that phrase refers to an insurance policy and the modifier phrase refers to a claim. Id. Put another way, they assert, the proceeds of an insurance policy which must be exhausted by a claimant holding a covered claim against an insolvent insurer are the proceeds of a policy which collaterally insures the covered claim. Appellees Br. p. 11 (citing Devane v. Kennedy, 205 W.Va. 519, 519 S.E.2d 622, 623 (1999)). The doctors cite numerous cases supporting this interpretation, including Sands v. Pennsylvania Ins. Guar. Assn, 283 Pa. Super. 217, 423 A.2d 1224 (1980); Bullock v. Pariser, 311 Pa. Super. 487, 457 A.2d 1287 (1983); See footnote Devane v. Kennedy, 205 W. Va. 519, 519 S.E.2d 622 (1999); Rhode Island Insurers Insolvency Fund v. Benoit, 723 A.2d 303 (R.I. 1999); Zhou v. Jennifer Mall Rest., Inc., 699 A.2d 348 (D.C. 1997); Washington Ins. Guar. Assn v. McKinstry Co., 56 Wash. App. 545, 784 P.2d 190 (1990); Alabama Ins. Guar. Assn v. Stephenson, 514 So. 2d 1000 (Ala. 1987); Harris v. Lee, 387 So. 2d 1145 (La. 1980); McMichael v. Robertson, 77 Md. App. 208, 549 A.2d 1157 (1988).
The Indiana legislature surely did not intend that the statute would require a claimant to exhaust a claimants rights under any conceivable insurance policy for any conceivable claim that may then be pending, even if such a claim or such a policy had nothing to do with the claim against the insolvent insurer. Such an interpretation would indeed produce an absurd result. The only provision in the statute that limits the requirement to exhaust other insurance coverage to insurance coverage relating somehow to the covered claim is the phrase which is also a covered claim. IIGAs interpretation of the statute would effectively render that phrase meaningless. We cannot ignore the phrase given its presence in the statute. The phrase clearly modifies the clause, Any person having a claim against an insurer under any provision in an insurance policy. It cannot modify the clause Other than a policy of an insolvent insurer because that phrase refers to an insurance policy and the modifier phrase refers to a claim. The statute refers to any person having a claim against the insurer under any provision in an insurance policy . . . which is also a covered claim, making an exception other than a policy of an insolvent insurer. The string of cases cited above reached the same interpretation of the language, and IIGA points us to no case that interprets the statute as it proposes.
When the requirement to exhaust claims against other insurance policies is limited to claims that are also covered claims, the claims for direct health insurance benefits in this case cannot fall within the requirements of the statute because those claims are not covered claims under the definition provided by Section 27-6-8-4(4), which defines a covered claim as:
As used in this chapter, unless otherwise provided:
Rather, we conclude that there must be some relationship between the claim against
PIGA and the claim under other insurance that must be offset. The only
reasonable reading of the offset provision is to require that the claim to
be offset must be for the same loss as the claim asserted against
PIC. In other words, the claim must be under insurance that sought
to protect the insured against the same risk as was covered by the
now insolvent insurer for whom PIGA is providing coverage.
Id. at 202-03. The court reasoned:
[t]he medical malpractice insurance provided by the now insolvent insurer was casualty insurance, which is generally defined as: That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to the property of others.
Id. (citing Blacks Law Dictionary, 721 (5th ed. 1979)). By contrast, the court noted, the risk contemplated by life insurance is the death of a particular person. Id. (citing Blacks 723.) The two types of insurance are, therefore, fundamentally different, most notably because they insure against different risks and protect against different types of loss . . . [I]t is not duplicative to recover twice when each recovery is for a different loss. Id.
In Clark Equip. Co. v. Arizona Prop. & Cas. Ins. Guar. Fund, 943 P.2d 793 (Ariz. Ct. App. 1997), the Court of Appeals of Arizona addressed whether the states property and casualty insurance guaranty fund (the Fund) was entitled to an offset of damages for workers compensation benefits paid to a plaintiff injured by a forklift manufactured by Clark Equipment, whose excess liability insurer had been liquidated. Section 20-673(A), Arizonas non-duplication of recovery provision, provides as follows:
Any person having a claim against an insurer under any provision in an insurance policy which is also a covered claim shall be required to exhaust first all rights under such policy. Any amount payable on a covered claim pursuant to this article shall be reduced by the amount of such recovery under the claimants insurance policy.
Id. at 802, n.11. Like Indianas version of the Act, Arizonas contained a section providing that the article creating the Fund all apply to all kinds of insurance except certain listed types, including workers compensation. Id. at 803 (citing A.R.S. § 20-680). The Clark court disagreed with the Funds argument that this section only exempted such insurance from the administration of insolvencies, and not from the offset provisions of the Act. Id. The court noted:
[T]he insurers who provide the types of insurance excluded by A.R.S. section 20-680 are excluded from providing assessments to the Fund as member insurers. A.R.S. §§ 20-661(6), - 666(A). The Fund pays its costs, expenses and liabilities from the assessments of the member insurers. See A.R.S. §§ 20-662, -666(A). If workers compensation proceeds were allowed as an offset to Fund obligations, then, effectively, nonmember, exempt insurers would be financing those obligations.
Accordingly, we hold that A.R.S. section 20-673 requires an offset to Fund liability
only when the other applicable insurance has not been excluded by A.R.S. section
20-680. Workers compensation payments may not provide an offset.
Id. In Indiana, although workers compensation insurance is not excepted as it
is in Arizona, the relevant type of insurance, health, is excepted pursuant to
Indiana Code Section 27-6-8-3(1).
In Stephenson, 514 So. 2d at 1000, Stephenson, injured in an automobile accident, was enrolled in a self-funded employee health benefit plan administrated by Blue Cross-Blue Shield of Alabama. The defendant had a liability insurance policy with a company that was at the time of the litigation in receivership and under limited operation by The Alabama Insurance Guaranty Association. Blue Cross paid over $5000 in medical benefits on Stephensons behalf, and, as here, the Association sought to deduct those benefits from its obligation under the Act. Alabamas non-duplication of recovery provision provided as follows:
Any person having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, shall be required to exhaust first his rights under the policy. Any amount payable on a covered claim under this chapter shall be reduced by the amount of any recovery under such insurance policy.
Ala. Code of 1975, § 27-42-12. The court held that the Blue
Cross health insurance is a kind of direct insurance excepted by the provisions
of § 27-42-3 and therefore did not fall under the non-duplication provision.
Stephenson, 514 So. 2d at 1002. In reaching this conclusion, the court
cited Harris v. Lee, 387 So. 2d 1145 (La. 1980) and Bullock, 311
Pa. Super. at 487, 457 A.2d at 1287, and agreed with the Bullock
courts reasoning that the result was consonant with the purpose of the Act
as well as with the purpose of the non-duplication of recovery provision, i.e.,
to avoid double recovery or a windfall.
In McMichael, 549 A.2d at 1157, after an automobile accident, the plaintiffs were awarded a judgment of $275,000 against McMichael and Charter Line Bus Company, whose casualty insurance provider had been declared insolvent. The Maryland Property and Casualty Insurance Guaranty Corporation (PCIGC) did provide a defense and pay part of the judgment; however, the plaintiffs sued the PCIGC when it did not pay the entire judgment. The PCIGC then claimed entitlement to a setoff for any amount received by the plaintiffs from any source that paid the plaintiffs for any loss related to their injuries . . . , including uninsured motorist insurance, personal injury protection (PIP), Blue Cross-Blue Shield, and union sick leave benefits. Id. at 1158.
The McMichael court examined the purpose of the Maryland version of the Act: to provide a mechanism for the prompt payment of covered claims under certain insurance policies and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer. . . . Id. at 1160. It determined that uninsured motorist (UM) benefits were properly deducted as a setoff because UM coverage is considered a covered claim within the meaning of the Act. When defendants insurance company became insolvent, PCIGC stepped into its shoes and was obligated to continue UM protection, consequently UM coverage is a covered claim of the insured because it was an obligation of the insolvent insurance company. Id. The court determined that PIP benefits, too, fell within the category of covered claims. However, the court determined that the plaintiffs health insurance and union payments were not covered claims within the meaning of the Act because a covered claim means the obligation of an insolvent insurer. Id. at 1161. The McMichael court, as had the Alabama Supreme Court in Stephenson, cited Bullock, 311 Pa. Super. at 487, 457 A.2d at 1287. In reaching its conclusion that health and union benefits were not to be setoff as against liability insurance payments, the court noted:
[Blue Cross/Blue Shield] benefits were paid by the health care insurer for medical bills, hospitalization, etc., regardless of the fault of the tortfeasor or whether a judgment was entered against the tortfeasor. Likewise, the Union benefits were paid regardless of any liability of a judgment against the tortfeasor. . . . Thus, neither payment arose out of the obligation of the insolvent insurer. Therefore, [Robertsons] recovery . . . cannot be considered a covered claim and will not be set off. . . .
Id. at 218-19.
The result we reach today is also consistent with the holding in a recent case by another panel of this court in Indiana Insurance Guaranty Association v. Kenneth D. Davis, M.D., 768 N.E.2d 902 (Ind. Ct. App. 2002), trans. pending. In that case, Kimberly Murray sued Kenneth Davis, M.D., for medical malpractice. During part of the time Dr. Davis treated Murray, he carried medical malpractice insurance through P-I-E, which subsequently became insolvent. IIGA assumed Dr. Daviss defense, but later advised him that it only had an obligation to pay approximately $6000 in the event he was found to have committed malpractice. IIGA maintained that because it was only obligated for amounts up to $100,000 by statute and Blue Cross-Blue Shield had already paid over $93,000 of Murrays medical expenses, it was only liable for the difference. Dr. Davis filed a third-party complaint for declaratory judgment against IIGA.
The trial court entered judgment in favor of Dr. Davis, finding that IIGA was obligated to pay $93,052.11 in the event that a judgment was entered in favor of Murray. Id. at 903. The trial courts rationale was that Murrays medical expenses, lost wages, and miscellaneous out-of-pocket expenses totaled $186,710.59, and that amount constituted the amount payable for purposes of Indiana Code Section 27-6-8-11. Id. at 903-04. The trial court then reduced that amount by the amount of medical bills paid by Blue Cross. Id. at 904.
On appeal, IIGA argued that the trial court incorrectly defined amount payable but correctly reduced the amount by the total of the paid medical expenses. Dr. Davis and Murray argued that the trial court correctly defined amount payable but that any deduction for the payments made by Blue Cross-Blue Shield should be taken from that total amount of damages. After analyzing the paid medical expenses in relation to the Act, the panel held that the claimants recovery from Blue Cross-Blue Shield was not a covered claim because the Act does not apply to health insurance. Id. at 908. The panel also held that IIGAs liability was not to be reduced by the amount of payments Blue Cross-Blue Shield made on Murrays behalf. Id. at 909.
In sum, these cases offer ample support for the trial courts interpretation of the set off provision. More importantly, the language of the statute is clear. We agree that IIGA was not entitled to a set off and, therefore, hold that the judgment entered in favor of the doctors was not erroneous.
Nor does our decision frustrate the policy underlying the guaranty law. The
legislature created the Association and the fund it administers in order to protect
the public from losses arising from the insolvency of insurers doing business within
the state. The Association is intended to provide a cushion for insureds
and claimants when the insolvent insurer is unable to pay claims pursuant to
the policies it has issued. The Association does not completely step into
the shoes of the insolvent insurer, however.