CALIFORNIA STATE AUTOMOBILE ASSOCIATION INTER INSURANCE BUREAU v. Department of Health Care Services, Lien Claimant, Respondent and Cross-Appellant.

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Court of Appeal, Third District, California.

CALIFORNIA STATE AUTOMOBILE ASSOCIATION INTER-INSURANCE BUREAU, a reciprocal inter-insurance exchange, Plaintiff, v. Joe JACKSON, Jr., Defendant, Appellant and Cross-Respondent, Department of Health Care Services, Lien Claimant, Respondent and Cross-Appellant.

Civ. 13341.

Decided: September 13, 1972

Clarence S. Brown, Sacramento, for Joe Jackson, Jr. Colley & McGhee, Sacramento, for Avery Sanders and others. Evelle J. Younger, Atty. Gen. by John Fourt, Deputy Atty. Gen., Sacramento, for Dept. of Health Care Services.

This appeal involves the propriety of a superior court order impressing a lien on personal injury damages in favor of the state, which had spent money in supplying Medi-Cal benefits for the injured party. The appeal turns on the fact that these damages were not paid by the tortfeasor or his insurer, but rather by an insurance carrier who had become liable under an uninsured motorist clause.

Joe Jackson was a passenger in an automobile owned by Sanders. Members of the Sanders family were in the vehicle with him. They were struck by an uninsured motorist. Sanders had an automobile policy with uninsured motorist coverage of $15,000 for injury to any one person and $30,000 for injuries suffered in a single accident. The insurance carrier brought an interpleader action and paid the entire $30,000 into court for distribution among the injured occupants of the Sanders vehicle. After hearing evidence, the court awarded $19,000 to the Sanders family and $11,000 to Jackson. In its award the court declared that the sum distributed was inadequate to compensate the parties for their injuries; that it was accomplishing no more than a distribution of the uninsured motorist proceeds.

In the meantime the Director of the State Department of Health Care Services had filed a claim of lien upon any sum payable to Jackson. The state's claim was for $9,833.39, representing bills for physicians' services supplied to Jackson at public expense under the Medi-Cal program. The trial court ordered the lien impressed on the $11,000 awarded to Jackson, who now appeals. Following the notice of appeal the state voluntarily reduced its lien claim to $4,916.69.

Two statutes are controlling. One is Welfare and Institutions Code section 14117, which authorizes the state to seek reimbursement for Medi-Cal benefits supplied to the injured claimant. We quote its determinative provisions: ‘(a) When benefits are provided or will be provided to a beneficiary under this chapter because of an injury for which another person is civilly liable, the director [of Health Care Services] shall have a right to recover from such person reasonable value of the benefits so provided. The Attorney General . . . may, to enforce such right, institute and prosecute legal proceedings against the third person who is liable for the injury . . .. In enforcing such right the director may commence and prosecute actions, file liens, or intervene in court proceedings all in the same manner, with the same rights and authority as to notice, settlement and other matters, and to the same extent provided in Chapter 5 (commencing with Section 3850), Part 1, Division 4 of the Labor Code for an employer or workmen's compensation insurer where payments have been made or a liability incurred by an employer or an insurer under the workmen's compensation laws. . . .’

Additional provisions of section 14117 call for notices to the state of lawsuits and settlements involving such injuries and authorize the Director of Health Care Services to settle or waive claims in hardship cases. It is important to note that section 14117 imprints upon the state the characteristics (‘with the same right . . . and to the same extent’) of a workmen's compensation employer or insurer seeking reimbursement under the Labor Code out of damages which an injured employee recovers from a third party tortfeasor.

The other key statute is the uninsured motorist law, Insurance Code section 11580.2. Subdivision (a) of that statute requires automobile policies to cover the ‘insured’ for damages caused by an uninsured vehicle. Subdivision (b) defines an insured to include ‘any person with respect to damages he is entitled to recover for care or loss of services because of bodily injury to which the policy provisions or [uninsured motorist] endorsement apply . . ..’ Subdivision (c) lists a group of exemptions, declaring that uninsured motorist coverage shall not apply: ‘(4) In any instance where it would inure directly or indirectly to the benefit of any workmen's compensation carrier or to any person qualified as a self-insurer under any workmen's compensation law.’

The first problem posed by the briefs is whether, in the parlance of section 14117, an insurance carrier supplying uninsured motorist coverage is a ‘person . . . civilly liable’ or a ‘third person who is liable for the injury . . ..’ Jackson contends that section 14117 confines the state to a claim against the tortfeasor only. No policy consideration occurs to us as a basis for so narrow a legislative choice. Under comparable federal legislation the government may seek reimbursement whenever the circumstances create tort liability in some third person. (United States v. Haynes (5th Cir. 1971) 445 F.2d 907; United States v. Housing Authority of the City of Bremerton (9th Cir. 1969) 415 F.2d 239; see generally, Note, 7 A.L.R.Fed. 289.) Although we are inclined against Jackson's position on this point, it is not determinative.

The state argues that it is an ‘insured’ as defined by subdivision (b) of the Insurance Code provision, because it ‘is entitled to recover for care.’ Its argument finds support in United States v. Hartford Accident & Indemnity Co. (U.S.D.C., E.D., Cal.1970) 320 F.Supp. 648. In that case the federal government had supplied medical care to a person injured in an accident with an uninsured motorist in California. As authorized by a medical reimbursement statute similar to California's, the government sought recovery from the insurance carrier. Although the court found the government barred by tardiness, it held the government to be an ‘insured’ under section 11580.2 of the California Insurance Code. Similar decisions are collected in 7 A.L.R.Fed. at pages 319–320.

Even though it achieve statutory status as an insured, the state cannot surmount the hurdle posed by subsection (c)(4) of the Insurance Code section. This provision bars any recovery under uninsured motorist coverage when it would inure ‘directly or indirectly’ to the benefit of a workmen's compensation carrier or employer. Subdivision (c)(4) of the Insurance Code section firmly shuts the door against any attempt at collecting workmen's compensation outlays out of the proceeds of uninsured motorist coverage. The Welfare and Institutions Code provision, section 14117, places the Director of Health Care Services in precisely the position of an employer or workmen's compensation carrier seeking reimbursement under the provisions of the Labor Code. The employer or carrier is barred from reimbursement out of uninsured motorist proceeds. Ergo, by force of section 14117, the state is barred. To sanction the lien would cause the uninsured motorist coverage to inure ‘directly or indirectly’ to the state, a result not available to a lien claimant who occupies (as does the state) the same legal position as a workmen's compensation carrier or self-insured employer.

The Attorney General points out that the uninsured motorist statute does not expressly exclude the state. The contention is correct only if one's vision is confined to Insurance Code section 11580.2. The exclusion has a dual source: in Welfare and Institutions Code section 14117 (which likens the state to a workmen's compensation carrier) and in the Insurance Code provision (which precludes that carrier's reimbursement out of uninsured motorist proceeds).

The apparent policy objective of Insurance Code section 11580.2(c)(4) is to prevent a shift of cost from industry, which bears the economic burden of industrial injury, to the motoring public, which bears the economic burden of uninsured motorist coverage. Here the state seeks reimbursement from the insured, not the insurer. In a sense Jackson, the ‘insured,’ invokes a defense really designed for the insurer. The insurance company settled for the full amount of its coverage, and the state's lien would cost the company nothing. If the defense is not available to Jackson, the uninsured motorist coverage would inure directly to an entity whose rights are those of a workmen's compensation carrier—a result forbidden by statute. The statute is not lulled or activated by the fortuity of the insurance company's choice to settle or be sued.

The result may fall short of wise public policy and individual equity. The legislative division of economic burdens between industry and the motoring public may be irrelevant as regards the economic burden of the Medi-Cal program. Possibly, the statute analogizing the Medi-Cal agency to a workmen's compensation carrier was a legislative accident, which occurred without recognition of the statutory handicap emanating from subdivision (c)(4) of the uninsured motorist statute. A revised choice is not within judicial power. The rights of the parties are wholly statutory, and any undesirable result should be brought to the attention of the legislature rather than the courts. (Dodds v. Stellar, 30 Cal.2d 496, 503, 506, 183 P.2d 658.)

On behalf of the Director of Health Care Services, the Attorney General requests parity with the federal government, which may recover its own medical disbursements from uninsured motorist proceeds. (United States v. Hartford Accident & Indemnity Co., supra.) He correctly points to the illogic of allowing a lien for medical outlays to the United States and denying it to the state. At this point too, the seeming disadvantages of this purely statutory predicament are beyond judicial amelioration.

At oral argument we explored with counsel the possibility of some kind of equitable apportionment. Here, where the medical expenses almost equal the injured man's award, there is not enough money to go around. In another case the award or settlement may fully cover his general damages and medical expenses. In the latter case the state's exclusion may present the recipient with double payment of his medical expenses. On reflection we see no rescue from statutory inflexibility. There is need here for legislative review.

Relying upon a stipulation between Sanders and Jackson abjuring any appeal, the Attorney General argues that Jackson waived his appeal from the lien award. The parties were agreeing among themselves and did not mean to shelter the state beneath the umbrella of their stipulation.

The order awarding a lien to the State of California is reversed and the cause is remanded to the trial court with a direction to deny the state's claim of lien.

FRIEDMAN, Associate Justice.

RICHARDSON, P. J., REGAN, J., concur.

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