by:David B. Allen, Attorney
In this first of a two-part article regarding litigation issues involving the Indiana Insurance Guaranty Association (IIGA) and damages in medical negligence actions, I will provide background regarding the Guaranty Statute and issues with the IIGA’s interpretation of the statute. A future article will address this matter further and provide some solutions to remedy the conflicts.
For Plaintiffs with pending medical negligence actions, it is a long, hard road to success and to recovery of damages for their losses. In recent years, that road has become even more difficult as a result of several medical negligence liability carriers becoming insolvent.
The Guaranty Statute
When an insurance company becomes insolvent, the defense of pending claims (and liability for payment of Plaintiff’s damages) is assumed by the Indiana Insurance Guaranty Association (IIGA) which was created by statute in 1971. The statute which created the IIGA and defines its obligations vis-à-vis claimants and policyholders can be found at Indiana Code (I.C.) §27-6-8-1 et. seq.
The stated purpose for enacting the Guaranty law is, “to provide a mechanism for the payment of claims under certain insurance policies to avoid excessive delay in payment and to avoid excessive financial loss to claimants or policyholders because of the insolvency of an insurer…” I.C. §27-6-8-2. Unfortunately for claimants and policyholders, the IIGA (the statutory entity created by the Act to carry out its stated purposes) has acted in a fashion, in successive cases of medical negligence, which has caused excessive delay and potentially excessive financial loss to both classes the Act was created to protect.
The Guaranty Association’s liability for a Plaintiff’s damages is capped at
$100,000.00, or policy limits, whichever is less. I.C. §27-6-8-7(i). The Guaranty statute provides in part:
In the case of claims arising from bodily injury, sickness, or disease, including death resulting therefrom…the amount for which the association shall be obligated shall not exceed the claimant’s reasonable expenses incurred for necessary ambulance, hospital, professional nursing, and funeral services, and any amounts actually lost by
reason of the claimant’s inability to work, or earn wages or salary or their equivalent that would otherwise have been earned in the normal course of such injured claimant’s employment, to which may be added at the discretion of the association a sum not to exceed One Thousand ($1,000.00) Dollars for all other costs and expenses incurred by the claimant prior to the insolvency…
I.C. §27-6-8-7(i)(I). According to the plain, unequivocal language of the statute, a claimant may recover (and the IIGA is responsible for paying on behalf of a policyholder of an insolvent insurer) reasonable medical expenses, and also lost wages incurred during the relevant period. However, the IIGA has used some creative principles of statutory interpretation in an effort to avoid paying damages as described under the statute.
Despite at least two appellate opinions adverse to the IIGA’s interpretation of the statute, IIGA continues to argue that it is entitled to a set-off for any medical and/or related bills which have been paid by health insurance. IIGA relies upon two arguments:
1) Because the bills have been paid by health insurance, the IIGA is entitled to a set-off under the non-duplication of recovery section of the statute found at I.C. §27-6-8-11; and
2) Because the bills were paid by health insurance, the Plaintiff’s claim against the tortfeasor is not a “covered claim” under the Act as defined at I.C. §27-6-8-4(4). Because of IIGA’s persistence in creative statutory interpretation and its continued efforts to avoid paying damages for which it is responsible, the expressly stated purposes of the Act (avoidance of excessive delay in the payment of claims and excessive financial loss to claimants and policyholders) have been and continue to be frustrated.*
Unfortunately, IIGA continues to make the same tortured arguments which have failed on appeal to support its refusal to pay the damages contemplated by the Act. IIGA
first argued the set-off was available to it under the non-duplication of recovery provision of the Act in Indiana Insurance Guaranty Association v. Davis, 768 N.E. 2d 902 (Ind. Ct. App. 2002), and the Indiana Court of Appeal rejected this argument. The Davis Court held Plaintiff’s claim against her health insurer was not a “covered claim,” and that the amount payable by IIGA under the Act should not be reduced by payments made by the health insurer.
In Indiana Insurance Guaranty Association v. Blickensderfer, 778 N.E. 2d 439 (Ind. Ct. App. 2002), and its companion case, Bierlein, IIGA refused to defend or indemnify the physicians. It contended that the patients’ claims were not “covered claims” because its liability was extinguished once the patients’ health insurers paid
$100,000.00 or more in medical and related expenses.
Again, the Indiana Court of Appeals held that the patients’ claims against their health insurers were not “covered claims.” The court further clarified its holding that the patients’ tort claims against the qualified healthcare providers were “covered claims” because they were “unpaid” in the context of the tort claim against the physicians, which included claims for reimbursement of medical expenses incurred as a result of the alleged medical malpractice. As “covered claims,” for which IIGA was not entitled to a set-off, the medical specials were covered by the Act.
Despite these holdings, IIGA continues in its efforts to avoid paying the damages it was created to pay to claimants when an insurer becomes insolvent. There are many medical negligence cases which are being significantly, and unnecessarily, protracted by IIGA’s persistent unreasonableness in trying to avoid paying damages on behalf of policyholders, and for which it charges an annual surcharge to liability carriers to sell insurance in Indiana. The only people benefitting from the IIGA’s untenable position regarding payment of medical specials are the IIGA and the lawyers it hires to defend its position.
* One example of IIGA’s creativity in interpreting the statute is when it argued, in either a Summary Judgment or Declaratory Judgment action brought by a healthcare provider seeking the protection of the statute, that there was not a viable claim for lost wages in a wrongful death claim. IIGA reasoned, and argued to the trial court, that because the Plaintiff’s decedent was dead, he could not work; and, if the decedent could not work, there was not, therefore, a claim for lost wages.