ATTORNEYS FOR APPELLANT
Steve Carter
Attorney General of Indiana
Christopher L. LaFuse
Deputy Attorney General
Indianapolis, Indiana
ATTORNEYS FOR APPELLEES
Charles R. Vaughan
Linda H. Havel
Lafayette, Indiana
__________________________________________________________________
IN THE
SUPREME COURT OF INDIANA
__________________________________________________________________
FAMILY AND SOCIAL SERVICES )
ADMINISTRATION, )
)
Appellant (Intervenor Below), ) Indiana Supreme Court
) Cause No. 91S02-0111-CV-594
v. )
) Indiana Court of Appeals
WAYNE SCHLUTTENHOFER, ) Cause No. 91A02-0010-CV-638
CHANTEL SCHLUTTENHOFER, )
)
Appellees (Plaintiffs Below). )
__________________________________________________________________
APPEAL FROM THE WHITE SUPERIOR COURT
The Honorable Robert W. Thacker, Judge
Cause No. 91C01-9801-CF-1
__________________________________________________________________
ON PETITION TO TRANSFER
__________________________________________________________________
May 23, 2002
BOEHM, Justice.
This case addresses the meaning of the word “claim,” as it is used in
Indiana’s lien reduction statute. We hold that each claim to which a lien
holder asserts subrogation rights must be evaluated independently of others
that might arise from an injury. That was not done here. Therefore, we
grant transfer and remand with instructions to reduce FSSA’s lien to
$15,324.52.
Factual and Procedural Background
On September 11, 1997, Wayne Schluttenhofer stopped his employer’s
pickup truck to assist Terry Snodgrass, whose truck had been disabled after
striking a deer on State Road 18 in White County. A car driven by James
Budreau then collided with Schluttenhofer’s vehicle, and pinned
Schluttenhofer against a guardrail. Schluttenhofer suffered severe
injuries that resulted in an amputation above his right knee.
Schluttenhofer filed suit against Snodgrass, Budreau, and three other
defendants associated with Budreau. In the meantime, Schluttenhofer
received $63,245.24 in Medicaid payments from the Indiana Family and Social
Services Administration (“FSSA”). FSSA filed a Medicaid lien in that
amount pursuant to Indiana Code sections 12-15-8-1 and -2.[1]
Schluttenhofer also received $10,000 from State Farm Mutual Insurance
Company for medical payments under the policy covering his employer’s
vehicle. The only issue is the treatment of this last $10,000 under the
lien reduction statute.
Before trial, Schluttenhofer settled with all of the defendants for a
total of $325,000.[2] Schluttenhofer then filed a petition for reduction
of the FSSA lien. Schluttenhofer contended, and FSSA does not dispute,
that he settled his case for ten percent of his damages. Because his
recovery was diminished by ninety percent, Schluttenhofer contended that
the lien reduction statute required that FSSA’s Medicaid lien be reduced by
ninety percent as well. Initially, FSSA did not respond and the trial
court granted Schluttenhofer’s motion without a hearing. FSSA then filed a
motion to set aside the trial court’s order, which was granted. The trial
court ruled, after a hearing on the merits, that a ninety percent reduction
of the FSSA lien was warranted. The Court of Appeals affirmed. FSSA v.
Schluttenhofer, 750 N.E.2d 429 (Ind. Ct. App. 2001).
Application of the Lien Reduction Statute
FSSA agrees with Schluttenhofer that, as to the medical expenses
included in the $325,000 settlement with the defendants, its lien should be
reduced by ninety percent, in effect prorating the shortfall of actual
recovery versus total damages between FSSA and Schluttenhofer. However,
FSSA contends that there should be no reduction of the $10,000 paid by
State Farm. The lien reduction statute states:
If a subrogation claim or other lien or claim that arose out of the
payment of medical expenses or other benefits exists in respect to a
claim for personal injuries or death and the claimant’s recovery is
diminished:
(1) by comparative fault; or
(2) by reason of the uncollectibility of the full value of the
claim for personal injuries or death resulting from limited liability
insurance or from any other cause;
the lien or claim shall be diminished in the same proportion as the
claimant’s recovery is diminished. The party holding the lien or
claim shall bear a pro rata share of the claimant’s attorney’s fees
and litigation expenses.
Ind. Code § 34-51-2-19 (1998). FSSA contends that the State Farm payment
must be considered independently of the settlement payments for purposes of
determining whether that amount was diminished by comparative fault or by
reason of uncollectibility. FSSA reasons that the medical payments claim
under Schluttenhofer’s employer’s policy, viewed separately, was not
diminished by either comparative fault or uncollectibility, and no lien
reduction should apply. Schluttenhofer responds that the statute refers to
a claimant’s recovery from all sources. He contends that the $10,000 from
State Farm is to be aggregated with the $325,000 recovered from the
defendants, resulting in a diminished total “claimant’s recovery” of
$335,000, and a proportional reduction of the lien. The Court of Appeals
agreed with Schluttenhofer. We do not.
In a frequently encountered situation, the medical payments insurer
is the party asserting the lien, which is prorated down if the injured
party’s liability claim against a third party is not fully paid. Here,
however, the lien is against the payment from the medical payments insurer.
Medicaid is a taxpayer supported program designed to fund medical expenses
for those who cannot afford care. As a part of that program, the lien
statute is designed to provide for the recovery of any payments that may
later be reimbursed from another source. The net effect of
Schluttenhofer’s contention is to divert some of those funds from
reimbursement of medical expenses to compensation for personal injuries.
We do not believe the statute contemplates that result, and its provision
that a “claim” must be reduced in order for a lien to be reduced supports
the view that the Medicaid lien on the medical benefits reimbursement is
not reduced because Schluttenhofer’s claim under that policy was paid in
full.
Schluttenhofer argues that the lien reduction statute’s use of the
terms “comparative fault” and “uncollectibility” refer to the plaintiff’s
inability to recover “the full value of his case.” The statute speaks in
terms of the value of a “claim,” not “case.” A “claim” is an “assertion of
an existing right.” Black’s Law Dictionary 240 (7th ed. 1999). As a
result of his injuries, Schluttenhofer acquired rights to compensation that
differed as to different parties, i.e., his “case” contained several
“claims,” as the term is used in the statute. Schluttenhofer expresses his
settlement with the defendants as one for $325,000. In actuality, there
were five settlements: he settled his claim against Budreau for $100,000,
his claim against Snodgrass for $75,000, and his claims against the three
remaining defendants for a combined sum of $150,000. There is no basis to
conclude that any of these claims was reduced to a greater or lesser extent
than any others, so each is reduced in the same proportion, i.e. by ninety
percent, representing the shortfall of the total of the five to his total
damages.
Schluttenhofer also cites Dep’t of Pub. Welfare v. Couch, 605 N.E.2d
165 (Ind. 1992) for the proposition that the phrase “claimant’s recovery,”
as used in the lien reduction statute, means amounts received by the
plaintiff from whatever source. From that, he contends that the statute
requires a reduction from the sum of all monies received as a result of his
injuries. We do not read Couch as Schluttenhofer suggests. Couch held
that the lien reduction statute applied to the proceeds of settlement, as
well as judgment. That opinion’s discussion of the source of recovery
referred to the means by which a plaintiff might receive money—settlement
or judgment. It did not suggest that all “claims” are to be aggregated.
In Couch, the settlement compensated the plaintiff’s negligence claim less
than fully. Here, on the other hand, Schluttenhofer had multiple “claims,”
one of which—his claim for $10,000 under the medical payments provision of
the State Farm policy—was not reduced. That claim existed as a matter of
contract law independent of his claims against the other parties, without
regard to the negligence liability of any party, and was paid in full.
Section 34-51-2-19 comes into play only when the recovery on a “claim” is
diminished by comparative fault or uncollectibility of the claim’s full
value. It does not apply to the State Farm medical benefit because that
claim was not diminished.
At the hearing on Schluttenhofer’s petition, FSSA conceded the
remainder of its lien should be reduced by ninety percent. Thus that
amount of the FSSA lien—$53,245.24—is reduced by ninety percent to
$5,324.52. The net result is FSSA’s lien is for $15,324.52. The Court of
Appeals stated that it “cannot find that it was the intent of our
legislature to dissect a claimant’s settlement, finding that certain monies
should be applied while others are not.” Schluttenhofer, 750 N.E.2d at
432. We agree that it is improper to attempt to allocate a portion of the
funds paid to settle any or all of the liability claims to medical
expenses, as opposed to pain and suffering or other items. But the statute
requires that each claim be evaluated. To the extent any claim was
diminished by comparative fault or uncollectibility, reduction of the lien
is proper. Because there was no reduction of the State Farm claim, FSSA’s
lien is valued to the full amount of the claim against State Farm.
Conclusion
We grant transfer and remand with instructions to reduce FSSA’s lien
from $63,245.24 to $15,324.52.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
-----------------------
[1] Indiana Code section 12-15-8-1 provides:
Whenever:
(1) the office pays medical expenses for or on behalf of a
person who has been injured or has suffered an illness or a disease as
a result of the negligence or act of another person; and
(2) the injured or diseased person asserts a claim against the
other person for damages resulting from the injury, illness or
disease;
on any recovery under the claim, whether by judgment, compromise, or
settlement, the office has a lien against the other person in the
amount paid by the office to the extent of the other person’s
liability for the medical expenses.
Section 12-15-8-2 states:
Whenever:
(1) the office pays for medical expenses or renders medical
services on behalf of a person who has been injured or has suffered an
illness or a disease; and
(2) the person asserts a claim against an insurer as a result of
that person’s injury, illness, or disease;
the office has a lien against the insurer, to the extent of the amount
paid by the office, on any recovery from the insurer.
[2] Snodgrass and his employer paid $75,000, Budreau paid $100,000, and the
remaining defendants contributed $150,000.