Appeal from the Circuit Court of Madison County. No. 98-L-900 Honorable George J. Moran, Judge, presiding.
Justices: Honorable Richard P. Goldenhersh, J.
Honorable Terrence J. Hopkins, P.J., and
Honorable Clyde L. Kuehn, J.,
The opinion of the court was delivered by: Justice Goldenhersh
Rule 23 order filed November 19, 2002; Motion to publish granted January 3, 2003.
April D. Eddy (plaintiff) appeals from an order of the circuit court of Madison County ordering plaintiff to pay State Farm Insurance Company (State Farm) its entire subrogation lien less attorney fees of one-third for the payment of State Farm's medical-pay lien. The issue on appeal is whether the trial court erred in awarding State Farm its full subrogation lien, minus a reduction under the fund doctrine, for medical payments made by State Farm under its contract of insurance with plaintiff. We affirm and remand with directions.
Plaintiff and Floy E. Sybert (defendant), who takes no part in this appeal, were involved in an automobile accident on November 14, 1998. Both plaintiff and defendant were insured by State Farm. Defendant's policy with State Farm provided for maximum liability limits of $100,000 per person. Plaintiff's policy with State Farm provided medical-pay coverage in the amount of $25,000. The terms of the insurance policy issued by State Farm to plaintiff also contained a subrogation clause that allowed State Farm to obtain plaintiff's right to recover against a third party after State Farm paid plaintiff's medical bills. The subrogation provision provided in pertinent part as follows:
"b. Under medical payments coverage:
(1) we are subrogated to the extent of our payment to the right of recovery the injured person has against any party liable for the bodily injury.
(3) if the person to or for whom we make payment recovers from any party liable for the bodily injury, that person shall hold in trust for us the proceeds of the recovery and reimburse us to the extent of our payment." (Emphasis in original.)
Upon learning of the accident, State Farm sent plaintiff a letter dated November 18, 1998, in which it outlined the rights and obligations of both plaintiff and State Farm. In the letter, State Farm specifically advised plaintiff that her policy provided for reasonable expenses for necessary medical treatment caused by the accident up to a limit of $25,000 per person and that "[t]he expenses are covered for three years from the date of the accident for bodily injury, provided the injury is discovered and treated within one year of the accident date." State Farm also advised plaintiff, via the letter, of its subrogation rights and asserted, "We will not subrogate for the amount we have paid if your recovery from the responsible party plus our payments do not exceed your damages."
State Farm asked plaintiff to sign a medical authorization form to allow State Farm to obtain her medical records. Plaintiff declined to do so, opting instead to allow her attorney to obtain her medical records and bills and forward them to State Farm. State Farm made payments on behalf of plaintiff and sent letters informing plaintiff of the amounts of medical bills paid on her behalf. State Farm advised plaintiff that the medical payments made by State Farm on her behalf "are subject to [State Farm's] right to subrogation or reimbursement."
On December 15, 1998, plaintiff filed a lawsuit against defendant. On September 29, 1999, plaintiff's counsel made a settlement demand by letter for "payment in the range of $160,000." The parties ultimately agreed to settle for the policy limits of $100,000. On November 24, 1999, an order was entered, pursuant to a stipulation of the parties, dismissing the case with prejudice. The order also stated that the trial court retained jurisdiction to resolve lien issues.
The record shows that between December 1, 1998, and July 2, 1999, State Farm paid $19,079.82 of plaintiff's medical bills. State Farm issued two separate checks to fulfill its payment obligations under the settlement. One check was in the amount of $12,719.88, made payable to plaintiff, her attorneys, and State Farm. State Farm refused to endorse the check ...