On November 30, 2010, the Supreme Court of Georgia issued its decisions in State Farm Mut. Auto. Ins. Co. v. Adams and American Int’l South Ins. Co. v. Floyd, two cases in which the Court of Appeals had held that the payment of a hospital/medical provider lien reduced the liability coverage available to the insured such that a UIM carrier could not take a set off credit for the liability carrier’s payment to the extent of the lien amount. In Adams, the liability carrier paid Grady Hospital to satisfy the hospital’s lien and paid the remainder of its policy limits to the injured party. State Farm claimed a set off in the full amount of the liability policy limit against its UIM exposure. In Floyd, the liability carrier paid its full limit to the claimant and a hospital lien remained unsatisfied. Although Floyd’s UIM limits were equal to the liability limits, Floyd contended the existence of the hospital lien reduced the available liability coverage and the UIM carrier should be required to pay.

The Court of Appeals held in both cases that the issue was controlled by the Supreme Court’s decision in Thurman v. State Farm Mut. Auto Ins. Co., 278 Ga. 162 (2004), in which the Court held that the existence of a subrogation right and/or lien created by federal law did reduce the tortfeasor’s policy limits “by reason of payment of other claims or otherwise” as provided in the UM statutory definition of an uninsured motor vehicle, O.C.G.A. § 33-7-11 (b). In Adams and Floyd, however, the Supreme Court distinguished Thurman and reversed the Court of Appeals, holding the existence or payment of a healthcare lien created under state law does not reduce the liability coverage available to pay a claim because the lien represents economic damages which are part of the injured person’s claim and satisfaction of the lien is a direct benefit to the injured insured. The Court recognized that a contrary ruling, as urged by two dissenting Justices, could result in double recovery by the insured, a result which “completely undermines the purposes of the uninsured motorist statute.”

If you wish to further discuss either case, please contact a Swift, Currie, McGhee & Hiers, LLP, attorney at 404.874.8800 or via our website, www.swiftcurrie.com.

The foregoing is not intended to be a comprehensive analysis of the full effect of these changes. Nothing in this notice should be construed as legal advice. This document is intended only to notify our clients and other interested parties about important recent developments. Every effort has been made to ascertain the accuracy of the information contained within this notice.