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    Damages include written-off medical expenses in underinsured motorist case

    Joe Forward
    Legal Writer

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    Plaintiff’s underinsured motorist policy allowed her to recover the reasonable value of medical services, including those amounts that were written-off by the medical provider, Wisconsin Supreme Court concludes.

    Damages include written-off medical 
expenses in underinsured motorist case March 15, 2012 – An arbitration panel did not include written-off medical expenses totaling $61,487 when it awarded Lindy Orlowski damages resulting from an auto accident. The panel should have, a unanimous Wisconsin Supreme Court recently ruled.

    Orlowski was injured in a car accident with an underinsured motorist (UIM). When those policy limits ran out, Orlowski submitted a claim to her own auto insurance provider under her UIM policy, which required the parties to enter arbitration to settle the damages amount.

    The arbitration panel awarded Orlowski $11,498 in medical expenses, although the reasonable value of the medical services provided came to $72,985. The medical provider had written-off (waived) $61,487 based on discounts through her health insurance coverage.

    Orlowski maintained health insurance coverage with United Healthcare, which paid a portion ($9,498) of Orlowski’s medical expenses. The panel awarded an additional $2,000 to cover Orlowski’s out-of-pocket medical expenses, plus other damages like lost wages.

    Orlowski sued in circuit court for a modification of the award.

    The Milwaukee County Circuit Court modified the award to include the written-off amount – meaning State Farm Mutual Auto Insurance Company would be required to reimburse Orlowski for $61,487 – reasoning that insured individuals should get “what they bargained for.”

    State Farm appealed the decision, and a Wisconsin appeals court certified the case, asking the state supreme court to resolve a conflict involving the collateral source rule, which allows plaintiffs to recover full amounts for torts despite payments from other (collateral) sources.

    Graser is limited

    One of the justifications underlying the collateral source rule is to allow insured individuals to receive the full benefit of the coverage they pay for through monthly premiums.

    However, in Heritage Mutual Ins. Co. v. Graser, 2002 WI App 125, 254 Wis.2d 851, 647 N.W.2d 385, a state appeals court ruled that a plaintiff insured could not recover medical expenses paid by the health insurer where the UIM insurer waived a subrogation right to those expenses.

    Specifically, the Graser court held that “the collateral source rule, which finds its genesis in tort law, is inapplicable to claims made by an insured under his or her UIM policy.”

    The arbitration panel followed Graser to conclude that Orlowski could not recover the value of medical expenses that were written-off by her medical provider. But the circuit court limited Graser’s applicability to cases involving waived subrogation rights.

    In Orlowski v. State Farm Mutual Auto Ins. Co., 2012 WI 21 (March 7, 2012), the supreme court affirmed the Milwaukee County Circuit Court ruling by Judge Dennis Moroney.

    “The holding in Graser that was addressed to the specific factual scenario in that case is not implicated here, where the dispute centers on written-off medical expenses and not a waived subrogation right,” wrote Justice Patrick Crooks for the unanimous court.

    The supreme court overruled Glaser “to the extent that it created a blanket rule that the collateral source rule does not apply to an injured part’s UIM action.”

    The court also rejected State Farm’s argument that Orlowski would receive a “windfall” or “double recovery” if allowed to receive the value of medical services waived.

    “To the contrary, Orlowski has paid a premium to United Healthcare for the benefit of coverage for medical expenses, and to State Farm to recover the reasonable value of her medical expenses under her UIM coverage,” Justice Crooks wrote.

    The Milwaukee County Circuit Court could modify the arbitration’s panel’s award, the court explained, because the panel “exceeded its authority and manifestly disregarded the law when it failed to award the reasonable value of medical services without a reasonable legal basis.”


    Kevin Kukor, Keith Stachowiak, and Josef Zimmerman of Murphy & Prachthauser S.C., Milwaukee, represented Lindy Orlowski. Thomas Goss of Mueller, Goss & Possi S.C., Milwaukee, represented State Farm Insurance. The Wisconsin Association for Justice filed an amicus brief.

    By Joe Forward, Legal Writer, State Bar of Wisconsin