-1- OCGA § 33-24-561 AND COMPLETE COMPENSATION IN GEORGIA Charles

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					                   OCGA § 33-24-56.1 AND C OMPLETE C OMPENSATION IN G EORGIA
                                               Charles M. Cork, III
                                                October 12, 2001
    This paper addresses the complete compensation rule in Georgia, both statutory and at
common law, which requires that the insured party be fully compensated for all injuries before
the insurer may seek reimbursement of its medical expenses. It looks at the history of the rule,
the scope of the rule currently, possible avenues for expanding it, and how it works and how to
use it advantageously.
                                                            I.
                        Histor y of the Complete Compensation Rule in Geor gia
    In my opinion, it is a pure accident of history that the complete compensation problem ever
arose. Until the mid 1980s, Georgia had a strong statutory policy that prohibited any assignment
of personal injury claims. OCGA § 44-12-24. This statute codified common law prohibitions
against barratry, champerty, and maintenance, i.e., against encouraging the victim to sue, buying
the victim’s right to sue, and financing the victim’s suit in order to take a share of the proceeds. 1
Accordingly, courts held invalid attempts of strangers to finance litigation in order to receive a
share,2 a defendant’s paying a sum to the plaintiff which was to be reimbursed from a recovery
against a joint tortfeasor,3 a plaintiff’s assignment of the proceeds of a lawsuit, 4 and most
pertinently, an insurance policy provision that granted an insurer the right to subrogate to the
plaintiff’s rights of recovery for medical expenses.5
    In the mid 1980s, however, insurers became more subtle. Instead of seeking an assignment
of or subrogation to the plaintiff/insured’s cause of action against the tortfeasor , newer clauses
sought assignment of, subrogation to, or reimbursement from, the insured’s recovery or right of
recovery. In 1983, the Court of Appeals first recognized a distinction between an assignment of



   1
    The source case is Central R. & B. Co. v. Brunswick & W. R. Co., 87 Ga. 386, 389, 13 S.E. 520 (1891). In
addition, maintenance and champerty are specific grounds for finding that a contract is void as against public policy.
OCGA § 13-8-2 (a) (2). Current criminal law lumps the three common law crimes under the heading “barratry.”
OCGA § 16-10-95.
   2
       Anderson v. Anderson, 12 Ga. App. 706, 712, 78 S.E. 271 (1913).
   3
    American Chain & Cable Co., Inc. v. Brunson, 157 Ga. App. 833, 834, 278 S.E.2d 719 (1981). This case
appears to be the closest that Georgia courts have come to determining the validity of “Mary Carter” agreements.
   4
       Fouché v. Morris, 112 Ga. 143, 37 S.E. 182 (1900).
   5
     Wrightsman v. Hardware Dealers Mut. Fire Ins. Co., 113 Ga. App. 306, 147 S.E.2d 860 (1966). Wrightsman
was followed on this point in Southern Guaranty Ins. Co. v. Robinson, 132 Ga. App. 121, 207 S.E.2d 599 (1974),
GEICO v. Hirsh, 211 Ga. App. 374, 439 S.E.2d 59 (1993), GEICO v. Hardman, 212 Ga. App. 367, 44 S.E.2d 165
(1994), and Southern General Ins. Co. v. Ezekiel, 213 Ga. App. 665, 445 S.E.2d 807 (1994). Robinson suggested
in dictum that the 1973 enactment of OCGA § 51-1-32 (allowing a plaintiff to split personal injury and property
damage claims) changed the result, supra at 124, but no case followed this suggestion and Hirsh, supra at 374,
rejected it.

                                                            -1-
a cause of action, which was invalid, and “subrogation” 6 to a right of recovery, which it deemed
valid without a review of prior cases,7 and this distinction served as the basis for a recovery by an
insurer against an insured for the first time in a 1988 case, 8 and the distinction between a transfer
of the right of action against the tortfeasor and of a right to recover proceeds from the insured
carried the day in several later cases.9
    This distinction should have been rejected, and the “complete compensation” issue should
never have arisen. Indeed, in one case the Court of Appeals rejected such distinctions as “no
more than flights of semantic fancy.”10 Review of cases under OCGA § 44-12-24 should have
disclosed that the Supreme Court had already rejected an attempt to assign “a plaintiff’s
recovery,” not just a cause of action.11 Following these cases would have left plaintiffs with both
the tort recovery provided by law and the insurance proceeds for which the insurer received
premiums. Unfortunately, the Court of Appeals ignored these cases and began enforcing
“subrogation” or reimbursement clauses. A crisis resulted in which victims had to forego
complete compensation for their injuries so that insurers, to whom victims paid premiums to
assume this risk, would be made whole. To resolve this crisis, the General Assembly enacted
OCGA § 33-24-56.1, although the statute has the effect of legitimizing the insurer’s right of
reimbursement that should have been foreclosed by OCGA § 44-12-24.
                                                          II.
                              The Scope of the Complete Compensation Rule
       The current status of the law is relatively easy to summarize:
    Hospital Liens. The rule of complete compensation does not apply to hospital liens. 12
Under OCGA § 44-14-470 et seq., the hospital has a lien on the cause of action against the
tortfeasor. The lien should be filed within 30 days after discharge, although failure to do so does


   6
     It was a misnomer to call this “subrogation,” which requires that the subrogee step into the shoes of the
subrogor, Maryland Cas. Ins. Co. v. Welchel, 257 Ga. 259, 262 (2), 356 S.E.2d 887 (1987), and an insurer who
pays a claim may not subrogate, directly or indirectly, against an insured. Castania v. Ticor Title Ins. Co. of
California, 200 Ga. App. 633 , 409 S.E.2d 286 (1991) (“by definition subrogation arises only with respect to the
rights of the insured against third persons to whom the insurer owes no duty.”). The courts should have referred to
this merely as a right of reimbursement, as they began to do in Integon Gen. Ins. Co. v. Thompson, 220 Ga. App.
631, 632 , 469 S.E.2d 346 (1996), rev’d. sub nom. Duncan v. Integon Gen. Ins. Co., 267 Ga. 646, 482 S.E.2d 325
(1997).
   7
       Liberty Mut. Ins. Co. v. Clark, 165 Ga. App. 31 (2), 299 S.E.2d 76 (1983).
   8
        Shook v. Pilot Life Ins. Co., 188 Ga. App. 714, 373 S.E.2d 813 (1988).
   9
     Integon Gen. Ins. Co. v. Thompson, supra n. 6; Southern Gen. Ins. Co. v. Watson, 221 Ga. App. 484, 471
S.E.2d 559 (1996); and Sheppard v. State Farm Fire & Cas. Co., 222 Ga. App. 619, 475 S.E.2d 675 (1996).
   10
        Southern General Ins. Co. v. Ezekiel, 213 Ga. App. 665, 666, 445 S.E.2d 807 (1994).
   11
      Fouché v. Morris, 112 Ga. 143, 37 S.E. 182 (1900). Cases holding that a plaintiff may “assign” a tort recovery
to a physician (e.g., Santiago v. Klosik, 199 Ga. App. 276, 404 S.E.2d 604 (1991)) are therefore of dubious validity.
   12
        Holland v. State Farm Mut. Auto. Ins. Co., 236 Ga. App. 832 (2), 513 S.E.2d 48 (1999).

                                                          -2-
not defeat the hospital’s lien rights against parties with notice of the lien. 13 Thus a plaintiff may
be required to forego some or all compensation for other injuries in order to compensate the
hospital first. Liens for attorney’s fees have priority over hospital liens, however.14
     Payments under Medicaid. The rule of complete compensation does not apply to payments
under Medicaid.15 Under OCGA § 49-4-148, the Department is subrogated to the plaintiff’s
rights of recovery and, under OCGA § 49-4-149, may impose a lien on the plaintiff’s claims.
There is a one-year limitation on the filing of the lien, OCGA § 49-4-149(b), and once filed, there
is a one-year limitation on foreclosing upon the lien.16 Thus a plaintiff may be required to forego
some or all compensation for other injuries in order to reimburse the Department of Community
Health (formerly Department of Medical Assistance). Liens for attorney’s fees have priority over
medicaid liens, however.17
    Payments under Medicar e. Likewise, the rule of complete compensation does not apply to
payments under Medicare. Medicare may proceed to recover its payments from the insured, the
tortfeasor, the liability insurer, the no-fault or med pay insurer, and from plaintiff’s counsel. 42
C.F.R. §§ 411.24-411.26.
    Payments under ERISA Plans. If payments are made under an ERISA, state law is
preempted and the outcome depends on whether there is a specific provision in the plan requiring
the reimbursement to the ERISA plan even though the employee/insured has not been completely
compensated.18 If there is such a clause, the employee may be required to reimburse the provider
from the first dollar. Otherwise, the complete compensation rule applies, and the employee will
reimburse the provider only after being completely compensated.
    Uninsur ed Motor ist Cover age. In the uninsured motorist context, an uninsured motorist
carrier is subrogated to the rights of the insured/victim against the tortfeasor. OCGA § 33-7-
11(f). While the statute provides only for an offset for the uninsured motorist carrier’s
proportional share of attorney’s fees and expenses of litigation, case law has interpreted the
statute to impose a complete compensation limit on the right of subrogation.19 The General
Assembly has often revisited the statute without changing this judicial construction, thereby
adopting the judicial construction.


   13
        Thomas v. McClure, 236 Ga. Ap. 622, 513 S.E.2d 43 (1999).
   14
        Holland, supra n. 12, at 334 (3).
   15
        Holland, supra n. 12, at 832 (2).
   16
        Dept. of Medical Assistance v. Hallman, 203 Ga. App. 615, 417 S.E.2d 218 (1992).
   17
        Holland, supra n. 12, at 334 (3).
   18
      Cagle v. Bruner, 112 F.3d 1510 (11th Cir. 1997) (“Make-whole” is the default rule absent specific contract
provisions otherwise).
   19
     Johnson v. State Farm Mut. Auto. Ins. Co., 216 Ga. App. 541, 544, 455 S.E.2d 91 (1995); Mullenberg v. K. J.
Saxon Constr. Co., 192 Ga. App. 281, 282, 384 S.E.2d 418 (1989); Cherokee Ins. Co. v. Lewis, 187 Ga. App. 628,
371 S.E.2d 103 (1988), rev’d on other grounds, 258 Ga. 839, 375 S.E.2d 850 (1989).

                                                        -3-
     Wor ker ’s Compensation. In the field of Workers’ Compensation, the General Assembly
has also provided for the complete compensation rule. OCGA § 34-9-11.1(b) allows
employer/insurers to subrogate to the employee’s claims against third parties starting in 1992, but
it provides that the employee must first be “fully and completely compensated ... for all economic
and noneconomic losses incurred as a result of the injury.”20 The amount of the subrogation lien
is limited by amounts actually paid.21
    Other Cases. Apart from a few narrow statutorily controlled fields of law, in all other cases
the rule of complete compensation applies, as follows:
    Health and Disability Reimbur sement Claims after J uly 1, 1997: OCGA § 33-24-56.1.
OCGA § 33-24-56.1 controls cases occurring on or after July 1, 1997. Under this statute,
“benefit providers”22 may seek reimbursement from an insured upon a tort recovery, but only if
the insured is completely compensated. OCGA § 33-24-56.1 (b)(1), (c). 23 The statute prevents
an end-run by prohibiting the insurer from reducing the amounts for which it is liable as a setoff
to enforce reimbursement. Id. at (f).
         All Other Claims: Common Law. These are controlled by Davis v. Kaiser


   20
     The legislative history of OCGA § 34-9-11.1(b) documents the legislature’s policy that the victim be
completely compensated before the right of subrogation and reimbursement obtains. The statute was enacted after a
twenty-year period during which a prior right of subrogation (Ga. Code Ann. §114-403) had been repealed. 1972
Ga. Laws 3, 4. Contemporaneous cases show that the right of subrogation was inhibiting settlements and producing
wasteful collateral litigation. Feild & Wisenbaker, Workmen’s Compensation, 23 Mercer L. Rev. 321, 333-36
(1972). Furthermore, the workers’ compensation providers were getting a free ride on attorney’s fees that the
employee incurred in recovering from the tortfeasor. Commercial Union Ins. Co. v. Scott, 116 Ga. App. 633, 158
S.E.2d 295 (1967). Repeal was sought and obtained because:
    It was incongruous for an insurer to make himself whole by obtaining a return of compensation, and that
    any notion that such restitution is equitable overlooks not only the “paid-for” role of the insurer but the fact
    that both damages and compensation may be inadequate, and finally, the failure to use funds obtained by
    subrogation as a factor in rate-making makes any monies received by subrogation a windfall. If, as
    between insurer and employee, equitable principles support a windfall, the insurer is not the person to
    receive it.
Feild & Wisenbaker, supra, 23 Mercer L. Rev. at 324.
   21
     Wausau Ins. Co. v. McLeroy, 266 Ga. 794, 471 S.E.2d 504 (1996); Georgia Star Plumbing, Inc. v. Bowen,
225 Ga. App. 379, 484 S.E.2d 26 (1997).
   22
     OCGA § 33-24-56.1 (a)(1) defines “Benefit provider” as “any insurer, health maintenance organization, health
benefit plan, preferred provider organization, employee benefit plan, or other entity which provides for payment or
reimbursement of health care expenses, health care services, disability payments, lost wage payments, or any other
benefits under a policy of insurance or contract with an individual or group.”
   23
      OCGA § 33-24-56.1 does not apply to Medicaid liens (subsection (l)), and it does not yet apply to an exclusion
(as opposed a claim for reimbursement) in med pay policies where the plaintiff has already been paid by the
tortfeasor more money than the sum of reasonable medical expenses. State Farm Mut. Auto. Ins. Co. v. Walker,
234 Ga. App. 101, 505 S.E.2d 828 (1998). The case of Yates v. Dean, 244 Ga. App. 333, 535 S.E.2d 335 (2000),
was decided on this basis, but it contains an unfortunate assertion that OCGA § 33-24-56.1 does not apply to cases
that have been litigated, id., at 334, citing subsection (c), which applies only to settlements, and ignoring subsection
(b)(1), which applies to cases litigated to judgment.

                                                          -4-
Foundation,24 which addressed the conflict between freedom of contract and the policy of
complete compensation. Although there was no pre-1997 statute establishing a policy of
complete compensation, and though the common law power to declare contractual terms void
“should be exercised with great caution and only in cases free from substantial doubt,” the
Supreme Court found that this was a suitable case for exercising that power because
    [A rule of complete compensation] better reflects the purpose for which one purchases
    insurance. The very heart of the bargain when the insured purchases insurance is that if
    there is a loss he or she will be made whole.25
As a result, a complete compensation rule applies across the board in Georgia insurance contracts
before and after 1997. Attempts to modify this rule by contract are invalid.
    The common law principle of complete compensation will probably control statutory grants
of subrogation or reimbursement rights, at least where such grants do not explicitly require a
contrary construction.26 Statutory rights of subrogation will not be broadly construed.27
    Another aspect of this common law principle of complete compensation occurs when a
plaintiff is insured under two policies covering the same loss, and both policies contain clauses
stating that they are excess over other insurance, which is equivalent to requiring a
reimbursement of payments up to the limits of other insurance. In one case,28 the Court of
Appeals held that the clauses cancel each other out. The court recognized that this approach
violated both insurers’ freedom to contract because “the intent of each insurer as to how the loss

   24
        Davis v. Kaiser Foundation Health Plan of Georgia, Inc., 271 Ga. 508, 521 S.E.2d 815 (1999).
   25
     Id., 511, citing the Alabama Supreme Court case, Powell v. Blue Cross Blue Shield of Alabama, 581 So.2d
772 (Ala. 1990).
   26
      In the field of No-Fault (PIP) insurance before its repeal, the statute provided rights of subrogation to the no-
fault insurer under certain circumstances. The question arose as to whether the insurer or the insured had priority.
In 1976, the General Assembly resolved the question by amending the statute to add, in two places, that the right of
subrogation would apply ”only in the event that the [insured] has been completely compensated for all economic
and noneconomic losses.” 1976 Ga. Laws, 1078-79. That left unresolved the meaning of the statute before 1976,
and in Blaylock v. Georgia Mut. Ins. Co., 239 Ga. 462, 465, 238 S.E.2d 105 (1977), the Supreme Court observed
that having statutory subrogation rights “does not necessarily establish priorities where the assets of the tortfeasor
are inadequate to pay his liabilities.” It resolved the priority question by reasoning that (1) a no-fault provider is not
authorized to stop paying benefits simply because other coverages are available (as is true of most med pay
coverages); (2) the no-fault carrier would be entitled to stop payment if it had priority over the insured; and (3)
therefore, the insured’s claims must have priority over the insurer’s. Smith v. Employers’ Fire Ins. Co., 255 Ga.
596, 340 S.E.2d 606 (1986), reaffirmed this construction, noted that the General Assembly amended the act in 1978
to language similar to its pre-1976 status, and found that because the General Assembly is charged with knowledge
of the Supreme Court’s decisions, the General Assembly adopted the construction that requires complete
compensation before subrogation.
   27
      Stewart v. Auto-Owners Ins. Co., 230 Ga. App. 265, 495 S.E.2d 882 (1998) (Uninsured motorist benefits are
not subject to the workers’ compensation insurer’s lien under OCGA § 34-9-11.1 because that statute does not
specifically address such benefits).
   28
     Southern Home Ins. v. Willoughby, 124 Ga. App. 162, 182 S.E.2d 910 (1971). See also State Farm Fire &
Cas. Co. v. Holton, 131 Ga. App. 247, 248, 205 S.E.2d 872 (1974), and Georgia Farm Bureau Mut. Ins. Co. v. State
Farm Mut. Auto. Ins. Co., 173 Ga. App. 844, 845-846, 328 S.E.2d 737 (1985), which follow Willoughby.

                                                           -5-
should be distributed is disregarded by this solution,” 29 but noted that the general intent of the
policies was to indemnify the insured for the loss, while not being liable for the entire loss when
there is double coverage.30 Freedom of contract was held important, but subordinate to the need
to provide insurance under the terms of the contract as the first principle.
                                                        III.
                           Extending the Concept of Complete Compensation?
    Davis v. Kaiser Foundation31 contains language that has the potential to make a difference in
other disputes, but whether this potential will actualize depends on the scope that subsequent
cases give to this decision. Viewed narrowly, Davis may be limited to the context of allocating
available insurance funds when they are insufficient to reimburse all parties. Broadly viewed,
Davis is a case authorizing courts to invalidate any insurance contract provisions, including
exclusions, which conflict with the essence or “heart” of an insurance contract to provide
complete compensation. Med pay policies that deny coverage when the insured has recovered
from the tortfeasor32 and “other vehicle” restrictions on stacking33 come to mind.
   In my opinion, the best chance for extending Davis to such situations will occur when:
    a. The insurer has defined the risk that it accepts to include the situation of the insured
claimant;
   b. The insured has paid a premium for that coverage;
   c. The insured would be covered and paid but for the exclusion;
   d. The exclusion applies solely because there is other insurance, not because of increased
hazard risks.
    Attempting to extend Davis will certainly be an uphill fight, as it would involve revisiting
several issues that the courts believe are “settled.” The writer would not recommend that the
attempt be made except in a truly compelling case with a severely undercompensated client.
With the right facts, however, it may be possible to change some unfavorable law and give
insured the benefits that they bargained for and expect.
                                                        IV.
                             How the Complete Compensation Rule Wor ks
    There are few reported cases from Georgia courts that give guidance on when a plaintiff has
been completely compensated and to what extent the insurer is entitled to reimbursement. It is
theoretically possible that different procedures and rules for determining this issue could develop


  29
       Willoughby, supra n. 28, at 166.
  30
       Id.
  31
       See n. 24, supra.
  32
       State Farm Mut. Auto. Ins. Co. v. Walker, 234 Ga. App. 101, 505 S.E.2d 828 (1998).
  33
       McCombs v. State Farm Mut. Auto. Ins. Co., 200 Ga. App. 28, 406 S.E.2d 549 (1991).

                                                        -6-
in each of the separate fields (OCGA § 33-24-56.1, common law, worker’s compensation,
uninsured motorist, etc.). The author believes this to be unlikely because the courts have found a
policy of complete compensation in one field of law by relying upon decisions from other fields
or on decisions from other states,34 thus indicating that there is a single general policy of
complete compensation that runs through these distinct fields. If the policy of complete
compensation did not exist across the board, as a pervasive policy, those citations of authority
would have been irrelevant. Hence, the following discussion is presented on the assumption that
courts will tend to apply the same rules in each applicable field of law to the maximum extent
possible.
    a. Bur den of Pr oof. It appears that the burden of proof rests on the insurer to prove its
entitlement to and the amount of reimbursement.35 Thus, if a dispute arises between the insurer
and the tort victim over what damages were caused by the injury, so that the insurer could assert
that the victim has been completely compensated for all of the elements that are not in dispute,
the insurer bears the burden of showing that elements of damage claimed by the victim were not
caused by the injury; if it fails to sustain this burden, the plaintiff must be fully compensated for
those elements before the insurer may get the first penny of reimbursement. 36
    b. Pr ocedur e Wher e Under lying Case is Tr ied.
        1. Special Ver dict For m. In cases governed by OCGA § 33-24-56.1, an allocation in a
special verdict is “conclusively presumed [to be] reasonable.” Id. at (d).37 Several cases strongly
recommend the use of a special verdict form for allocating the plaintiff’s damages into categories
over which reimbursement may, and may not, be sought. 38 In addressing a workers’
compensation subrogation lien, one case suggested that in the absence of a special verdict form, a


   34
     Davis v. Kaiser Foundation Health Plan of Georgia, Inc., 271 Ga. 508, 521 S.E.2d 815 (1999) (relying on
common law decisions from other jurisdictions and OCGA § 33-24-56.1); Duncan v. Integon Gen. Ins. Corp., 267
Ga. 646, 482 S.E.2d 325 (1997) (relying on common law decisions from other jurisdictions and Georgia uninsured
motorist cases in a medical payment’s reimbursement setting); Bartow County Bd. of Educ. v. Ray, 229 Ga. App.
333, 494 S.E.2d 29 (1997) (referencing Duncan in a workers’ compensation setting); Cherokee Ins. Co. v. Lewis,
187 Ga. App. 628, 371 S.E.2d 103 (1988), rev’d on other grounds, 258 Ga. 839, 375 S.E.2d 850 (1989) (relying on
law from other jurisdictions and a Georgia no-fault case in an uninsured motorist setting).
   35
       Anthem Cas. Ins. Co. v. Murray, 246 Ga. App. 778, 779-80, 542 S.E.2d 171 (2000); Liberty Mut. Ins. Co. v.
Johnson, 244 Ga. App. 338 (3), 535 S.E.2d 511 (2000); Bartow County Bd. of Educ. v. Ray, 229 Ga. App. 333, 494
S.E.2d 29 (1997) (no presumption of complete compensation even though tort settlement exceeds workers’
compensation benefits); Allstate Ins. Co. v. Austin, 120 Ga. App. 430 (2), 170 S.E.2d 840 (1969), cert. dismissed,
226 Ga. 93, 172 S.E.2d 602 (1970) (burden on insurer to show by evidence whether verdict compensated plaintiff
for item covered by policy as opposed to other items of damage).
   36
        Johnson, supra n. 35.
   37
     The author is skeptical of the constitutionality of an arrangement which recognizes a legal right of
reimbursement without an opportunity to be heard on matters affecting its amount.
   38
     Allstate Ins. Co. v. Austin, 120 Ga. App. 430 (2), 170 S.E.2d 840 (1969), cert. dismissed, 226 Ga. 93, 172
S.E.2d 602 (1970); Dept. of Admin. Services v. Brown, 219 Ga. App. 27, 464 S.E.2d 7 (1995); Bartow County Bd.
of Educ. v. Ray, 229 Ga. App. 333, 335, 494 S.E.2d 29 (1997); North Bros. Co. v. Thomas, 236 Ga. App. 839, 841,
518 S.E.2d 251 (1999).

                                                         -7-
right of reimbursement may be unenforceable and that, therefore, the insurer must intervene and
request a special verdict.39 Obviously, it behooves plaintiff’s counsel to itemize as many special
damages that are not covered by the insurer’s benefits as possible.
       2. Non-standar d Tr ials. Georgia courts have not decided the effect on a benefit
provider’s reimbursement rights of (a) quick bench “trials” which result in the entry of judgment
on an uncontested allocation of damages, or (b) trials of all damages issues other than those for
which reimbursement can be sought.
    c. Pr ocedur e Wher e Under lying Case is Settled.
        1. Declar ator y J udgment and Other Vehicles for Resolving the Issue. The insurer is
authorized to file a declaratory judgment action to determine the amount of reimbursement.
OCGA § 33-24-56.1 (c). It follows that the allocation of damages in a settlement agreement is
not binding on the benefit provider. It also follows that a settlement between the insured and the
tortfeasor does not preclude a finding that the insured has been completely compensated. Where
the benefit provider has intervened in a lawsuit prior to settlement, the case may proceed between
the insured and the provider to determine the extent of the plaintiff’s damages. 40 If the insurer
has not intervened at the time the case has been settled, the money may be paid into the registry
of the court and the insurer joined as a party plaintiff to seek the funds. Complete compensation
issues can also be resolved in probate court, if it has jurisdiction over a minor or ward.
         2. Confidentiality Pr ovisions Invalid. Confidentiality provisions in a settlement agree-
ment are invalid when an insurer has a right to terms of the settlement in order to assert its rights.
Id. at (k).
       3. Use of Infor mation Demand to Limit Reimbur sement. A demand for itemization
from the insurer can be used to limit its right of reimbursement, as explained below. Id. at (g-i).
    d. Calculating the Amount of Reimbur sement.
       1. Policy Pr ovisions and Unilater al Asser tions of Value. Policy provisions are clearly
not controlling on the amount of reimbursement due to the insurer.41 Likewise, the plaintiff’s ad
damnum in a tort action is not controlling.42
       2. Non-Reimbur sable Categor ies of Damages. One way to think of the limits on
reimbursement is to limit reimbursement to special verdict awards in the category in which the
provider paid them. An insurer could not obtain reimbursement of its benefit payments unless



   39
      North Bros., supra n. 38, at 841. The author doubts the suggestion, particularly outside the context of
workers’ compensation where the insurer has a right to intervene. Instead, a general verdict would probably result
in a declaratory judgment action, at best, as authorized by OCGA § 33-24-56.1 (c).
   40
        Home Builders Assoc. of Georgia v. Morris, 238 Ga. App. 194, 518 S.E.2d 194 (1999).
   41
      Jefferson-Pilot Life Ins. Co. v. Fraker, 234 Ga. App. 430, 507 S.E.2d 188 (1998) (rejecting insurer’s
contention that policy term requiring the insured to reimburse one-third of any recovery was a proper method of
liquidating the amount of reimbursement).
   42
        Bartow County Bd. of Educ. v. Ray, 229 Ga. App. 333, 494 S.E.2d 29 (1997).

                                                        -8-
and until the victim had been fully compensated for pain and suffering.43 OCGA § 33-24-56.1
(b)(1) formalizes this rule by stating that reimbursement is permitted only if “the amount of the
recovery exceeds the sum of all economic and noneconomic losses incurred as a result of the
injury, exclusive of losses for which reimbursement may be sought under this Code section.”
These rules reject the distinction recognized by some courts between economic and noneconomic
damages so that the complete compensation rule applies only to economic losses and that benefit
providers may be reimbursed out of recoveries for noneconomic injuries.
         3. Under -Indemnified Expenses. Where the benefit provider has paid less than all of
the insured’s compensable losses in a category, the insured has not been completely compensated
until the insured recovers the difference. For example, where the benefit provider pays only a
percentage of plaintiff’s lost wages less than 100%, the provider may be reimbursed only after
the plaintiff has recovered the difference between the two rates.44 Deductibles, co-pays, and
liabilities for medical expenses in excess of the “prevailing rates” for which the insurer pays also
come to mind.
        4. Limit to the Benefits Alr eady Paid. The right of reimbursement is limited to the
amounts actually paid, and the insurer may not recover simply because it is liable to pay benefits
not yet paid.45 Under OCGA § 33-24-56.1, these are limited to medical expenses and disability
benefits.
        5. Limit to the Amount Claimed. OCGA § 33-24-56.1 (g-i) give the insured a
procedural means to limit the recovery. The insured may46 send a notice, at least ten days before
the consummation of a settlement, requesting from the benefits provider a detailed itemization of
all amounts that the provider has paid and for which it seeks reimbursement. If so, the insurer
may not later seek reimbursement for a sum greater than the amount that it claims by written
reply before the consummation of the settlement. Id. at (h). Apparently, this provision may be
used to maximum advantage by striking a settlement agreement to be consummated on the
eleventh day after the demand for itemization.
       6. Plaintiff’s Compar ative Fault. The plaintiff’s contributory fault cannot be used to
suggest that he has been completely compensated by an award that is lower than the amount of
damages the plaintiff would have received if he had been faultless. 47
        7. Low Tor t Ver dict in Reimbur sable Categor y Not Binding Against Plaintiff. The
situation may arise in which the insurer has paid far more than the amount of the verdict for

   43
     North Bros., supra n. 38, at 841; Murray, supra n. 35, at 780; Hammond v. Lee, 244 Ga. App. 865 (3), 536
S.E.2d 231 (2000).
   44
        Id., at 841-42.
   45
        Wausau Ins. Co. v. McLeroy, 266 Ga. 794, 471 S.E.2d 504 (1996).
   46
      Subsection (g) says that the insured “must” send the notice, but according to subsection (i), the only penalty
for failure to do so is the loss of the right to limit the benefit provider’s claim for reimbursement under subsection
(h).
   47
    Home Builders Assoc. of Georgia v. Morris, 238 Ga. App. 194, 518 S.E.2d 194 (1999) (workers’
compensation subrogation case).

                                                          -9-
special damages, due to comparative fault, causation questions, or for other reasons. If that
finding were binding on the plaintiff, an argument could be made that the plaintiff has been
completely compensated, although the tort and contract standards are different. OCGA § 33-24-
56.1(b)(1) avoids this difficulty by defining the level of compensation as the excess of the
recovery over all economic and noneconomic damages, “exclusive of losses for which
reimbursement may be sought under this Code section.” Cases not covered by OCGA § 33-24-
56.1 reach the same result by protecting the plaintiff’s recovery of other economic and non-
economic losses from being used to fund a reimbursement of the plaintiff’s insurer’s
“overpayment” or by treating the contract payments rather than the tort finding as definitive. 48
         8. Attor ney’s Fees and Expenses of Litigation. In cases governed by OCGA § 33-24-
56.1, the insurer’s recovery must be reduced by the “pro rata amount of the attorney’s fees and
expenses of litigation incurred by the party in bringing the claim.” Id. at (b)(2). In other cases, it
is clear that the attorney has a lien on the recovery that comes even before Medicaid and hospital
liens,49 but it is undecided whether the attorney’s fees reduce the benefit provider’s claim for
reimbursement pro rata.


    Two spreadsheets are attached illustrating some of these points. The first spreadsheet applies
“make whole” principles; the second uses the calculation stated in OCGA § 33-24-56.1. Both
reach the same results via different means.


                                                   Appendix


33-24-56.1 Reimbur sement of medical expense or disability benefit pr ovider s in per sonal
injur y cases; subr ogation pr ohibited; notice.
   (a) As used in this Code section, the term:
    (1) "Benefit provider" means any insurer, health maintenance organization, health benefit
plan, preferred provider organization, employee benefit plan, or other entity which provides for
payment or reimbursement of health care expenses, health care services, disability payments, lost
wage payments, or any other benefits under a policy of insurance or contract with an individual
or group.
    (2) "Injured party" means a person who alleges that he or she has been injured by the acts or
omissions of a third party and who has received benefits from a benefit provider. This term also
includes the personal representative of the estate of such person.
    (b) In the event of recovery for personal injury from a third party by or on behalf of a person
for whom any benefit provider has paid medical expenses or disability benefits, the benefit
provider for the person injured may require reimbursement from the injured party of benefits it
has paid on account of the injury, up to the amount allocated to those categories of damages in


  48
       North Bros., supra n. 38; Hammond, supra n. 43.
  49
       Holland v. State Farm Mut. Auto. Ins. Co., 236 Ga. App. 832 , 513 S.E.2d 48 (1999).

                                                         -10-
the settlement documents or judgment, if:
    (1) The amount of the recovery exceeds the sum of all economic and noneconomic losses
incurred as a result of the injury, exclusive of losses for which reimbursement may be sought
under this Code section; and
    (2) The amount of the reimbursement claim is reduced by the pro rata amount of the
attorney's fees and expenses of litigation incurred by the injured party in bringing the claim.
    (c) In the settlement of any claim for personal injury, under circumstances where it is claimed
that the amount of the recovery does not exceed the sum of all economic and noneconomic losses
incurred as a result of the injury, a benefit provider which has paid benefits to or on behalf of the
injured person may seek a declaratory judgment pursuant to Code Section 9-4-2 as to what extent
it may equitably share in said settlement. If the court determines said settlement does not fully
and completely compensate the injured party, the benefit provider has no right of reimbursement.
     (d) In the trial of any case for personal injury submitted to a court or jury, the trier of fact may
allocate the amounts paid among the categories of damages actually sought by the plaintiff at
trial, and it shall be conclusively presumed that such allocation by the trier of fact is reasonable.
    (e) Subrogation for medical expenses and disability payments by a benefit provider against a
person at fault for injury is prohibited and no defendant or liability insurance carrier shall include
any insurer seeking reimbursement under subsection (b) of this Code section as a copayee on any
check or draft in payment of a settlement or judgment.
    (f) No benefit provider shall be entitled to reduce the amount for which it is liable under an
insured party's coverage for liability, uninsured motorist, disability, medical payments, or other
benefits as a setoff against any claim for reimbursement under subsection (b) of this Code
section, nor shall any benefit provider be entitled to withhold or set off insurance benefits as a
means of enforcing a claim for reimbursement. Nothing in this subsection shall be deemed to
prohibit the coordination of benefits between or among benefit providers.
    (g) When a recovery for personal injury is sought from a third party by or on behalf of a
person for whom any benefit provider has paid medical expenses or disability benefits, the
person asserting the claim for recovery against the third party shall provide notice of the
existence of the claim, by certified mail or statutory overnight delivery unless some other form of
notice is agreed to by the designated recipient of the notice, to any benefit provider which the
person asserting the claim has reason to believe has paid benefits relating to the injury for which
the injured party seeks a recovery. This notice shall be provided no later than ten days prior to the
consummation of any settlement or commencement of any trial unless a shorter notice period is
agreed to by the designated recipient of the notice and shall include a request for information
regarding the existence of any claim by a benefit provider and an itemization of payments for
which the benefit provider seeks reimbursement including the names of payees, the dates of
service or payment or both, and the amounts thereof.
    (h) If the notice required in subsection (g) of this Code section is provided, a claim for
reimbursement under subsection (b) of this Code section is enforceable against an injured party
only to the extent that such person has actual notice prior to the consummation of a settlement or
commencement of trial, by certified mail or statutory overnight delivery or other form of notice if
agreed to by the designated recipient of the notice, of the claim of the benefit provider for


                                                  -11-
reimbursement including a specific itemization of payments for which the benefit provider seeks
reimbursement, including the names of payees, the dates of service or payment or both, and the
amounts thereof. Nothing contained in this subsection shall prohibit the supplementation of a
claim prior to the consummation of a settlement or judgment, except that any supplemental
claims shall be subject to the notice requirements contained in this subsection.
    (i) If the notice required in subsection (g) of this Code section is not provided, then
subsection (h) of this Code section shall not apply, and a claim for reimbursement under
subsection (b) of this Code section is enforceable subject to the other provisions of this Code
section.
   (j) No benefit provider contracts or policies containing or incorporating provisions in conflict
with this Code section may be issued in this state, and no policy or contract provisions for
subrogation or reimbursement in conflict with this Code section may be enforced by a benefit
provider with regard to claims or injuries.
    (k) Any settlement which is subject to this Code section that contains a confidentiality
provision as to any terms of the settlement which are necessary to a proceeding under this Code
section shall be unenforceable as to the disclosure of such required information.
    (l) This Code section shall not apply to the rights of the Department of Community Health to
recover under Article 7 of Chapter 4 of Title 49, nor shall it affect the subrogation rights and
obligations provided in Code Section 34-9-11.1.




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