Personal Injury Protection Benefits

Grand Prairie insurance lawyers will deal with auto policies from time to time and when doing so will also deal with the portion of the policy dealing with Personal Injury Protection (PIP). The Beaumont Court of Appeals issued an opinion in 2000, dealing with how PIP benefits are paid. The style of the case is, Texas Farmers Insurance Company v. Carabell Fruge. Here are some of the relevant information on the case.
This case raises questions related to PIP provided in an automobile liability insurance policy as required by Texas Insurance Code, Section 1952.151 through 1952.161. The underlying issue in this case is whether or not an insurance company breached its contract by placing the names of medical providers and Medicare as co-payees on checks paying PIP benefits to Carabell Fruge. The Court held that the company did breach its contract but that it was entitled to name Medicare as a co-payee to part of the PIP benefits.
Jackie Ryan had purchased an automobile liability insurance policy from Texas Farmers Insurance Company that provided her with $2,500 in PIP coverage. Fruge was a passenger in Ryan’s vehicle and was injured in a car wreck. After her injury, Fruge’s attorney filed on her behalf a PIP claim with Farmers supported by documents reflecting medical expenses of $3,490. Some of the supporting documents contained some reference to Medicare. At least one document was stamped “Benefits Assigned.” Farmers responded to Fruge’s claim by mailing her six checks totaling $2,500.30. Four of the checks, totaling $1,854.30, named medical providers, Medicare, or both as co-payees with Fruge. All six checks named the law firm representing Fruge as a co-payee. Fruge’s attorney returned all six checks with a letter advising Farmers that “some or all” of the medical bills related to the checks naming co-payees had been paid, complaining that it would take six months to get all of the necessary endorsements, and demanding payment naming Fruge as the sole payee.
Fruge brought an action in contract under the PIP statutes against Farmers to recover $2,500.00 in benefits, as well as penalty and attorneys fees. The trial court found that Farmers had wrongfully put the names of health care providers on the checks and granted an instructed verdict submitting only the question of attorneys fees to the jury. Farmers complains of the instructed verdict, asserting that it was obligated to honor assignments to providers and that Medicare had a primary subrogation interest.
The Court rejected Farmers’ assertion that it was obligated to honor assignments to Fruge’s medical providers because the Court concluded that according to the terms of the policy the stamped notations “Benefits Assigned” was not an assignment. According to the terms of its policy, Farmers would honor assignments for medical expenses if it received a written assignment signed by the covered person to whom such benefits were payable. And Farmers offers no authority to support any obligation on its part to go beyond the terms of its policy. Absent a valid assignment conforming to the language of Farmers’ policy, Fruge was right to expect that PIP benefits would be made payable to her alone.
Naming Medicare as a co-payee is another matter. Federal law provides that any payment of medical costs by Medicare for which private insurance is the primary payer is conditioned upon reimbursement from the insurer. 42 U.S.C. § 1395y(2)(B)(i). Medicare is a secondary payer for services covered under no-fault insurance. 42 U.S.C. § 1395y(2)(A)(B)(ii); 42 C.F.R. § 411.50(c). And “no-fault insurance” includes “personal injury protection” coverage. 42 C.F.R. § 411.50(b). This is an instance where federal law preempts state law. To avoid the risk of making the same payment twice, Farmers may have been correct in not making an unconditional payment to Fruge reimbursing her for expenses it should have known had already been paid by Medicare.
While Farmers is correct in its assertion that federal statutes and rules preempted state law, it cannot, on the face of the record, claim that it had reason to suspect that Medicare was entitled to the sum represented by the checks that named Medicare as co-payee. Though the record speaks of six checks and Farmers appears to have named Medicare as payee on checks totaling $1,352, the record only shows a Medicare payment of $168.56. Accordingly, it appears that Farmers wrongfully named Medicare as a co-payee to part of PIP benefits.
The Court concluded that Farmers breached its contract and that Fruge was entitled to recover benefits, penalty and attorneys’ fees under the PIP statute. This Court affirmed the judgment, but reformed the judgment to allow Farmers to show Medicare as co-payee on $168.56 of the proceeds of the judgment. The judgment was reformed to decree that the Carabell Fruge have and recover of and from the Texas Farmers Insurance Company the sum of $2,331.44 to be paid directly to her and the sum of $168.56 to be paid to Carabell Fruge and Medicare as co-payees.
These subrogation interests and State and Federal laws regarding them can be very confusing and are reasons why experienced Insurance Law Attorneys need to be involved in these matters.