Westfield Insurance Company v. Michael Gilliam

On February 8, 2022, the Maryland Court of Appeals considered whether the difference between an injured person’s fair and reasonable value of medical provider bills and the payment of those bills made by a workers’ compensation insurer constitutes a “benefit” that the injured person has “recovered” under the Maryland Workers’ Compensation Act. At issue was whether this amount should be offset against any recovery that injured person would obtain from the underinsured motorist coverage of the automobile insurance policy. Finding that only the amount that the workers’ compensation insurer actually paid for medical expenses is part of the statutory offset against underinsured motorist benefits, the Court of Appeals held that the 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.

The facts of the case center on an automobile collision that occurred on January 6, 2017. On that date, Michael Gilliam was involved in a rear-end collision while he was driving his employer’s automobile. The tortfeasor had an automobile insurance coverage policy with $30,000.00 limits. Gilliam was covered by his employer’s automobile insurance coverage that had uninsured and underinsured motorist benefits with $1,000,000.00 policy limits. Gilliam’s employer also carried workers’ compensation insurance coverage.

Gilliam filed a workers’ compensation claim with his employer’s workers’ compensation insurer. His medical bills totaled $243,399.33 for his medical treatment related to the rear-end collision. In accordance with the Fee Guide of the Workers’ Compensation Commission, the workers’ compensation insurer paid $118,369.15 to Gilliam’s medical providers for the treatment of his collision-related injuries. The workers’ compensation insurer also paid Gilliam $510,316.47 in other benefits related to the accident. In sum, the workers’ compensation insurer paid a total of $628,685.62 in benefits ($118,369.15 for medical payments and $510,316.47 in other benefits). Consequently, the workers’ compensation insurer asserted a statutory lien under the workers’ compensation law in that amount against any compensation related to the rear-end collision that Gilliam might recover from a third-party tortfeasor.

Gilliam obtained a settlement award of $30,000.00 (policy limits) from the tortfeasor’s automobile insurer. The workers’ compensation insurer accepted 1/3 of that settlement amount ($10,000.00) in satisfaction of its statutory lien.

Subsequently, Gilliam made an underinsured motorist claim against his employer’s automobile insurance policy. Unable to resolve his underinsured motorist claim with his employer’s automobile insurance company, Gilliam subsequently filed suit for breach of contract in Baltimore City Circuit Court. The employer’s automobile insurance company removed the case to the United States District Court for Maryland. In federal court, the parties filed cross-motions for partial summary judgment concerning the statutory offset based on Gilliam’s workers’ compensation benefits. The dispute at the center of the parties’ respective cross-motions was whether Maryland’s workers’ compensation statute permits the employer’s automobile insurer to deduct the difference between the face amount of the medical bills submitted by Gilliam’s medical providers and the amount paid by the workers’ compensation insurer ($118,369.15) to the medical providers – $125,030.18. The employer’s automobile insurer argued that the difference in amounts is a “recovered” benefit under §19-513(e) of the Maryland Code, Insurance Article and, thus, is deductible from the underinsured motorist benefits. Conversely, Gilliam argued that the difference is not a “recovered benefit” and is therefore not deductible.

§19-513(e) of the Maryland Code, Insurance Article mandates that underinsured motorist benefits “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.”

Because the dispute was a question of law concerning the interpretation of §19-513(e) for purposes of determining what constitutes “workers’ compensation benefits”, the federal court certified the question of, and the Maryland Court of Appeals addressed, the issue concerning the statute’s interpretation.

In examining §19-513(e), the Maryland Court of Appeals indicated that a “write-down”—the difference between a medical bill and the amount paid under a workers’ compensation law—does not necessarily have any standing as a benefit under law. The Court of Appeals determined that the statutory offset is against “benefits payable” under the underinsured motorist coverage and, thus, the workers’ compensation benefit that comprises the offset must be expressible as a monetary amount for the offset to make sense.

The Court of Appeals acknowledged that §19-513(e) clarified the meaning of “workers’ compensation benefit” in two ways. First, the Court stated that the offset applied to the extent that the injured person has recovered benefits. The Court acknowledged that the qualifying language supports a more tangible understanding of the word “benefit”—one that denotes the amount of money already paid on behalf or directly to an injured employee rather than an amount never owed by anyone. Second, the Court stated that §19-513(e) refers to benefits for which the provider of the workers’ compensation benefits has not been reimbursed. The Court explained that the language indicates that the workers’ compensation benefits received by the claimant are capable of being reimbursed; reimbursement is accomplished by repayment of a sum previously received.

Moreover, the Court of Appeals acknowledged that there is no reference in the workers’ compensation law to “write-downs” or discounts of medical bills—much less any characterization of such a thing as a “benefit” under that law. Furthermore, the Court conceded that it is impossible for Gilliam to “reimburse” the workers’ compensation insurer for an amount it never paid—i.e., the $125,030.18 difference between what the medical providers billed and what they accepted as full payment for their services. The Court emphasized that the fact that a “reimbursement” cannot occur—even if Mr. Gilliam decided to make a voluntary payment to the workers’ compensation insurer—indicates that it is not a “workers’ compensation benefit” for purposes of §19-513(e).

The Court determined that the employer’s automobile insurer’s interpretation of “workers’ compensation benefit” to include a discounted portion of a medical provider’s fee does not comport with §19-513(e)’s statutory scheme.

In examining the legislative history of §19-513(e), the Maryland Court of Appeals confirmed that the purpose of underinsured motorist benefits was to help ensure both that an injured person is compensated for injuries suffered in an automobile accident and that such benefits would not result in a windfall to that party or to the underinsured motorist insurer. The Court did not find anything that indicates that a “write-down” or discount of some sort was an element of the benefits that were being coordinated by §19-513(e). As such, the Court determined that including the “write-down” as part of the statutory offset is not consistent with §19-513(e)’s purpose. Accordingly, the Maryland Court of Appeals concluded that the difference between the amount nominally billed for Gilliam’s medical treatment and the amount the workers’ compensation insurer actually paid is not a “recovered benefit” under §19-513(e).

The case clarifies this undecided question of Maryland insurance law and will be controlling precedent on this issue.

Semmes, Bowen & Semmes maintains an active practice in matters of Maryland insurance law, and represents insurance carriers on defense and coverage matters in all Maryland State and Federal Courts.