Heusle v. National Mut. Ins. Co.

• Decision Date: 25 August 1980
• Docket Number: 79-2690 and 80-1072,Nos. 79-2483,s. 79-2483
• Citation: 628 F.2d 833
• Parties: Patti A. HEUSLE and George and Joyce Heusle, her parents, Appellants in 79-2483 and 79-2690, v. The NATIONAL MUTUAL INSURANCE COMPANY, Celina Group; The Travelers Insurance Company, and United States of America, Coast Guard and Department of Health, Education and Welfare, United States of America, Coast Guard and Department of Health, Education and Welfare, Appellants in 80-1072.
• Court: U.S. Court of Appeals — Third Circuit

Page 833

628 F.2d 833

Patti A. HEUSLE and George and Joyce Heusle, her parents Appellants in 79-2483 and 79-2690, v. The NATIONAL MUTUAL INSURANCE COMPANY, Celina Group; The Travelers Insurance Company, and United States of America Coast Guard and Department of Health, Education and Welfare United States of America, Coast Guard and Department of Health, Education and Welfare, Appellants in 80-1072.

Nos. 79-2483, 79-2690 and 80-1072.

United States Court of Appeals, Third Circuit.

Argued June 10, 1980.

Decided Aug. 25, 1980.

Clifford A. Rieders (argued), Stuart, Murphy, Smith, Mussina, Harris & Rieders, Williamsport, Pa., for appellants in 79-2483 and 79-2690.

Alice Daniel, Asst. Atty. Gen., Washington, D. C., Carlon M. O'Malley, Jr., U. S. Atty., Scranton, Pa., Freddi Lipstein (argued), William Kanter, Dept. of Justice, Civil Division, Washington, D. C., for United States of America, appellant in 80-1072.

Charles J. Tague, Jr. (argued), Kenneth D. Brown, Hager & Roesgen, Williamsport, Pa., for appellee, The Travelers Ins. Co. C. Edward S. Mitchell (argued), Mitchell & Mitchell, Williamsport, Pa., for appellee, The National Mut. Ins. Co., Celina Group.

Joseph P. Mellody, Jr., Hourigan, Kluger & Spohrer, Civil Division, Wilkes-Barre, Pa., for amicus curiae Pa. Trial Lawyers Ass'n.

Before GIBBONS, WEIS and SLOVITER, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

The Pennsylvania No-fault Motor Vehicle Insurance Act, Pa.Stat.Ann. tit. 40, §§ 1009.101-.701 (Purdon Supp. 1980), radically changed the legal liabilities of the state's automobile operators and their insurers. In this appeal, we conclude that one consequence of that legislation is to deny the federal government reimbursement for medical expenses incurred as a result of injuries received by a member of the Armed Forces in an automobile collision. We also determine that amounts expended by the government for the medical care of a person on active duty are not collateral source benefits recoverable by the insured from the no-fault insurance carrier. Accordingly, we will affirm the district court's judgment which reached the same results.

Plaintiffs Patti Heusle and her parents, George and Joyce Heusle, ¹ sued the Travelers Insurance Company, the National Mutual Insurance Company, and the United States, described in the complaint as defendant or involuntary plaintiff. The parties submitted the case under an agreed statement of facts, and the court granted summary judgment against the plaintiff and the United States, in favor of National Mutual Insurance Company, but in favor of the plaintiff against the Travelers Insurance Company to the extent of unpaid medical expenses and counsel fees incurred in securing that award.

The plaintiff received serious injuries while riding as a passenger in a car struck by another automobile at an intersection in Oriole, Pennsylvania. At the time of the accident, October 23, 1976, she was on active duty with the United States Coast Guard. Because Heusle was a member of the Armed Forces, the United States paid $20,335.65 in medical expenses incurred by her at nongovernmental institutions and provided services at governmental facilities having a reasonable value of $4,563.00, the total outlay being $24,898.65. In addition, the plaintiff incurred medical expenses of $4,235.53 that were not paid by the government.

The plaintiff was an insured under a Pennsylvania no-fault automobile policy issued in the name of her father by the Travelers Insurance Company. The driver of the automobile in which plaintiff was a passenger was insured for both no-fault and third-party liability by the National Mutual Insurance Company. Under Pennsylvania law, both no-fault policies provided coverage for medical expenses without limit. See Pa.Stat.Ann. tit. 40, § 1009.202(a) (Purdon Supp. 1980); Zagari v. Gralka, --- Pa.Super. ---, --- & n.6, 399 A.2d 755, 758 & n.6 (1979). The district court determined that Travelers provided the applicable no-fault coverage for plaintiff and was responsible for payment of unreimbursed medical expenses. Accordingly, National Mutual was absolved of any liability for medical expenses. No appeal has been taken from this determination. ²

The plaintiff contended that she was entitled to be paid for a sum representing all medical expenses, including those constituting payments made and services furnished by the government. Several theories were advanced to support her position. First, she asserted that recovery could be had under the Federal Medical Care Recovery Act, 42 U.S.C. §§ 2651-2653 (1976) (MCRA), on behalf of the United States. That Act provides that when the United States furnishes medical care to a person who is injured under circumstances creating tort liability on a third party, the government may recover the value of medical services from the third party. As another possible ground for recovery by the government, it was contended that the United States was either an additional insured or a third-party beneficiary. As an alternative for recovery on her own behalf, plaintiff asserted that the payments by the government should be viewed as falling under the collateral source rule, thus making her eligible to receive the benefits under the No-fault Act. ³

The district court, ruling on a motion to dismiss, disposed of any claims based on the MCRA. The trial judge concluded that the Pennsylvania No-fault law had abolished tort liability for medical expenses incurred in this type of automobile accident and therefore held that recovery could not be had under the federal statute.

The remaining issues were disposed of on cross-motions for summary judgment. ⁴ First, the district court ruled that Travelers, and not National Mutual, was the applicable insurer. The court then turned to the merits and decided that the United States was neither an additional insured under the Travelers' policy nor a third-party beneficiary. The plaintiffs also were denied recovery under the collateral source theory. The court pointed to § 206(a) of the Pennsylvania No-fault law, Pa.Stat.Ann. tit. 40, § 1009.206(a) (Purdon Supp. 1980), which provides that in computing loss the insured should exclude "all other benefits . . . received by or available to an individual because of the injury from any government." From this provision, the district court reasoned that to the extent medical services had been paid for or furnished by the government, the plaintiffs had suffered no compensable loss. Travelers' victory was not total, however. Some bills had not been paid by the government and the insurance company was directed to pay them, together with an attorney's fee for accomplishing that recovery.

Stated generally, the appeal involves two separate, though interconnected issues the contention that the government is entitled to recover under the MCRA and the claims for recovery based on either the insurance policy or the No-fault law. We will discuss the issues in that order.

I.

THE FEDERAL CLAIM

The MCRA reads in pertinent part:

"In any case in which the United States is authorized or required by law to furnish hospital, medical, surgical, or dental care and treatment (including prostheses and medical appliances) to a person who is injured or suffers a disease, after the effective date of this Act, under circumstances creating a tort liability upon some third person . . . to pay damages therefor, the United States shall have a right to recover from said third person the reasonable value of the care and treatment so furnished or to be furnished and shall, as to this right be subrogated to any right or claim that the injured . . . person . . . has against such third person to the extent of 42 U.S.C. § 2651(a) (1976).

the reasonable value of the care and treatment so furnished. . . ."

The operation of this statute in the context of a routine negligence case is relatively straightforward; the government simply stands in the position of a favored subrogee to the claim of an injured party against the tortfeasor. E. g., United States v. Moore, 469 F.2d 788 (3d Cir. 1972), cert. denied, 411 U.S. 905, 93 S.Ct. 1528, 36 L.Ed.2d 195 (1973). It is complicated in this case, however, because the Pennsylvania No-fault statute has drastically altered the legal liabilities created when personal injury occurs in an automobile accident.

The government contends that the net effect of the Pennsylvania statute is to substitute the no-fault carrier, in this case Travelers Insurance Company, for the actual tortfeasor, and in that circumstance, the MCRA would permit recovery against the insurer. For the reasons stated below, we reject this contention.

The No-fault Act retains some residuals of the traditional tort system in that after meeting a threshold, there may be a common law action for such items of damage as pain and suffering, disfigurement, and inconvenience, but not medical expenses. Pa.Stat.Ann. tit. 40, § 1009.301(a)(5) (Purdon Supp. 1980). As a means of recovering the cost of medical care, Pennsylvania chose to abolish tort liability and substitute a contractual arrangement. Accordingly, the statute provides that auto insurance policies must provide unlimited first-party medical expense coverage. Id. § 1009.202(a). ⁵ Responsibility for medical expenses being exclusively contractual, see Singer v. Sheppard, 464 Pa. 387, 346 A.2d 897 (1975), a person covered by a no-fault insurance policy must look only to his insurance company for the payment of medical bills arising out of an automobile accident. ⁶ In this case, then, Patti Heusle had no tort claim for medical expenses against the driver of the auto in which she was riding, or, for that matter, against the operator of the other car.

It is from this perspective that we must analyze the claim under the MCRA. The statute speaks in terms of tort liability. See United States v. Farm Bureau Insurance Co., 527 F.2d 564, 566 (8th Cir. 1976). That the language speaks only...