Hauck v. Ohio Casualty Group of Insurance

JOHNSON, Judge:

Once again, we are presented with a narrow issue under the Pennsylvania No-fault Motor Vehicle Insurance Act, (No-fault Act) Act of July 19, 1974, P.L. 489, No. 176, § 101 et seq. 40 P.S. § 1009.101 et seq., repealed by the Act of February 12, 1984, P.L. 26, No. 11, § 8(a), effective October 1, 1984.

On this appeal, we must determine whether a collateral insurer under the No-fault Act is obligated to reimburse an automobile accident victim for the difference between (1) the amounts accepted by the health care providers in full satisfaction of their bills and (2) the amounts shown as customary charges on bills provided to the victim for use in obtaining a double recovery. We conclude that the amount which a provider of goods and services accepts in exchange for the goods or services provided represents the best gauge of the reasonable charges actually incurred. Accordingly, we affirm the order denying recovery of unobligated customary charges.

In 1982, the victim, Lynn Hauck, was injured in an accident while a passenger in a motor vehicle. She was entitled to no-fault benefits under her father’s insurance policy with Ohio Casualty. She also enjoyed Blue Cross/Blue Shield (BC/BS) coverage under a separate medical benefits group policy held by her father. The father had not elected, under Section 203(b) of the No-fault Act (40 P.S. § 1009.203(b)), to make the BC/BS group insurance the primary insurer in the event of medical claims, a process which would have resulted in a lower premium on the Ohio Casualty policy.

A victim may twice recover the charges incurred for medical care, when, as here, the victim may have BC/BS or other similar coverage which is available to pay the same *373charges for which the no-fault insurer is liable. Steppling v. Pennsylvania Manufacturers Association Insurance Co., 328 Pa.Super. 419, 477 A.2d 515 (1984).

As a result of the injuries sustained, the victim received medical treatment and services resulting in total billings of $25,265.69. Blue Cross/Blue Shield paid $10,475 in accordance with reduced payment agreements it had with the health care providers. Pursuant to the agreements between BC/BS and the providers, the reduced payments were accepted by the providers as fully discharging all of the billings which occurred as a result of the care which had been rendered the victim.

The victim thereafter submitted written claims to the collateral insurer, Ohio Casualty, for $25,265.69. Ohio Casualty paid the victim $10,475, the same amount already paid by BC/BS to the providers in full satisfaction of all claims.

The victim instituted this class action against Ohio Casualty, seeking: (1) declaratory relief that she and other class members were entitled under the No-fault Act to the full amount billed by providers; (2) an injunction prohibiting Ohio Casualty from paying less than the full amount billed; (3) damages equal to the difference between amounts paid and the full amounts of the bills in each instance; (4) interest on those amounts; and (5) costs and reasonable attorney fees. Ohio Casualty responded with preliminary objections in the nature of a demurrer and a motion for a more specific pleading. The Honorable Silvestri Silvestri sustained the demurrer, denied the motion for a more specific pleading and dismissed Hauck’s complaint without leave to amend. This appeal followed.

We believe that this case must be determined by construing the language contained in Section 103 of the No-fault Act, which provides in pertinent part:

§ 103. Definitions

As used in this act:

“Allowable expense” means reasonable charges incurred for, or the reasonable value of (where no charges are *374incurred), reasonably needed and used products, services, and accommodations for:
(A) professional medical treatment and care;
(B) emergency health services;
(C) medical and vocational rehabilitation services;

Looking to this section, the victim argues on appeal that the measure of allowable expense must be the reasonable value of medical treatment and care. She would have us ignore the reasonable charges incurred, and focus on the “reasonable value” language; since BC/BS paid all of her medical bills, the dispute in this case should not involve any charges directly incurred by the victim. Her contention is that Ohio Casualty should not be permitted to limit its payable benefits simply because she did not incur any economic loss and did not pay the reasonable value of the service rendered to her. She also argues that the language of Ohio Casualty’s policy, which limits medical expense benefits to the reasonable charges incurred, is inconsistent with the No-fault Act.

Ohio Casualty does not dispute that the victim is entitled to receive basic loss benefits, nor does it dispute that she is entitled to the allowable expense. In fact, payment of $10,475 has already been made by the insurer. It does, however, disagree with the victim’s interpretation of the measure of reasonable value.

We decline to analyze the issue before us on the basis of the meaning of “reasonable value” since the language of the statute is clear as to the proper criteria to be applied. Section 103 defines allowable expense as the reasonable charges incurred for medical treatment, care and services. It is only where no charges are incurred that we are permitted to consider the reasonable value of the services.

The victim would have us ignore the fact that charges were incurred and then paid by BC/BS to the providers. Her argument is that we should focus on the alternative statutory language, “the reasonable value of (where no *375charges are incurred)” rather than the clear mandate, “ ‘Allowable expense’ means reasonable charge incurred.”

As we pointed out in Fandray v. Nationwide Mutual Insurance Co., 313 Pa.Super. 186, 191 n. 2, 459 A.2d 801, 804 n. 2 (1983), in the course of interpreting the definition of “replacement services loss” in the No-fault Act, “it can be inferred that the word ‘incurred’ requires an actual expenditure or liability for service.” The victim does not disagree with this point. However, she asks us to hold that no expenditure was made and no liability arose in this case, such that the allowable expense can be measured by the reasonable value of services. Faced with the fact that the providers received $10,475 for their services, we refuse to find either a lack of liability on the part of the victim or lack of payment on her behalf. In the context of the case before us, we also define “incurred” as the actual expenditure made on the victim’s behalf.

Since we know that the charges incurred were $10,475, we have no difficulty in determining the allowable expense to which the victim is entitled under the No-fault Act.

The victim seeks to rely on Johnson v. State Farm Mutual Auto. Insurance Co., 339 Pa.Super. 112, 488 A.2d 335 (1985) as support for her contention that she is entitled to the difference between amounts actually expended on her behalf and the customary higher billings of the providers. We find that case to be inapposite. In Johnson, we were faced only with the net loss of the victim and the question of whether a no-fault insurer could escape payment of the full amount previously satisfied by BC/BS on a theory of joint obligors under Section 204(b) of the No-fault Act. We held that BC/BS was not an obligor under the Act and thus the motor vehicle insurer was not entitled to share the net cost of medical expenses with the health insurer. There is nothing in Johnson to suggest that an obligor under the Act may be required to pay more than the actual charges incurred in a case involving double recovery.

The victim also argues that since no election was made pursuant to Section 203(b) of the No-fault Act to make Ohio *376Casualty’s coverage secondary to BC/BS, she is entitled to receive full benefits under both policies. The short answer to this contention is that the extent of full benefits is controlled by the proper definition of “allowable expense” as set forth above. Where the statute provides a clear standard by which to measure full benefits, namely, the reasonable charges actually incurred, it is of no consequence that bills may be generated which exceed the amounts actually paid in full satisfaction of all claims.

Appellant did not allege in her complaint that she would have been liable for the face amount of the bills, and concedes that she is not required to pay the difference between the Blue Cross/Blue Shield payment and the face amount of the bills. As such, the “reasonable charges incurred” could not logically exceed the amount the providers accepted from Blue Cross/Blue Shield as payment in full to discharge appellant’s obligation to the health care providers.

We find no ambiguity or lack of clarity in Section 103 of the No-fault Act. Were it to be suggested that the Act should be interpreted otherwise than we now declare, we would submit that the conclusion reached by the distinguished trial judge in this case, the Honorable Silvestri Silvestri, is well founded. Judge Silvestri determined that the no-fault system was designed to promptly reimburse victims for the cost of services actually incurred, and to restore these victims to their pre-accident status. He reached this conclusion from reading the language of the No-fault Act in harmony with the Act’s goals of restoration, adequate compensation and reasonableness. We agree with the trial court that allowing the victim to recover the difference between the amount billed and the amount accepted as payment in full would contravene the notion of compensating and restoring motor vehicle accident victims, because the victim would thereby receive more than provided for under the Act.

Although double recovery allows a victim to receive compensation in excess of actual damages, this phenomenon *377exists because insurance law dictates that someone who has paid two separate premiums for separate policies covering the same potential liability is entitled to recover under each policy. The Ohio Casualty policy here under review tracks the language of the Act in requiring payment by the insurer for all reasonable charges incurred. We thus conclude that payment by the insurer of allowable expenses as fixed by the amounts accepted by the health care providers as payment in full discharge of the victim’s entire liability constitutes full compliance with the mandate of the No-fault Act.

Accordingly, we affirm the order which dismissed the individual and class action suit without leave to amend.

DEL SOLE, J., files a dissenting opinion.