Moeller v. Associated Hospital Service

Froessel, J. Plaintiff had a contract for hospital insurance with defendant, a nonprofit corporation organized under the Insurance Law of this State. Paragraph III of its policy defined “ Hospital Service ”, but as an exclusion under subdivision 4f provided: “ Hospital Service provided for under any Compensation Law, or other law enacted by the Legislature of any State or the Congress of the United States.” During the life of said policy, plaintiff was injured in the course of his employment, and his hospital expenses were paid by his employer through its compensation carrier. Thereafter plaintiff brought a third-party action, and, on settlement of same, for the sum of $35,000 — which sum necessarily included hospital expenses and other special damages — the compensation carrier enforced its lien upon the proceeds of the settlement for the amount it had paid on account of the compensation claim, which embraced the hospital expenses. Plaintiff now seeks to recover the hospital expenses from defendant under his hospital [75] insurance contract with it inasmuch as the third party reimbursed the compensation carrier. The controversy was submitted to the Appellate Division on an agreed state of facts. The court below held that when “ the carrier has been thus reimbursed it has no longer 6 provided ’ the hospital service under the compensation statute.” (278 App. Div. 723.) It overlooked the fact that the insurance contract does not read “ Hospital Service provided ”, but “ Hospital Service provided for under any Compensation Law ” (emphasis supplied). Surely the hospital service was here provided for under subdivision (a) of section 13 of the Workmen’s Compensation Law, which requires that the “ employer shall promptly provide for an injured employee such medical * * * and hospital service ” (emphasis supplied), and the “ employer shall be liable ” therefor. This liability “ shall not be affected by the fact that his employee was injured through the fault or negligence of a third party ” (§ 13, subd. [c]; see, also, § 10) nor by any hospital insurance contract (Insurance Law, § 258). There can be no doubt, therefore, that the plain provisions of the insurance contract excluded that service from coverage. Plaintiff never lost the protection of the statute with respect to hospital expenses; he did not even have to ‘ ‘ elect whether to take compensation and medical benefits * * * or to pursue his [third-party] remedy” (Workmen’s Compensation Law, § 29, subd. 1). If he did not prevail in the third-party action, he nevertheless retained the benefits of the hospital expenses furnished by the employer’s insurance carrier; if he did prevail, he likewise retained these benefits, but the third-party wrongdoer, not plaintiff, had to reimburse the carrier. While plaintiff was entitled to sue for these expenses, it was on behalf of the carrier, and the law gave the carrier a lien therefor (Workmen’s Compensation Law, § 29; Calhoun v. West End Brewing Co., 269 App. Div. 398). He could never recover these medical expenses for himself ; they belonged under the statute to the carrier. How then can it be said that he paid them? The statute gives the employee the first opportunity to bring the third-party action subject to the carrier’s lien for hospital expenses and other payments made. If the employee fails to bring the action within the statutory [76] time, the carrier may then bring suit and reimburse itself in full for such payments, the employee receiving only a portion of the excess. Certainly in the latter event the employee is not entitled to recover such hospital expenses. We could not very well make one rule in case the employee sues and another when the carrier institutes the action. When it is recognized that the statute provides for hospital care in any event, giving to the employer or its carrier a right of recovery against the third party through the medium of the employee’s action against said party (Calhoun v. West End Brewing Co., supra), or, if the employee chooses not to sue, through its own action, it becomes apparent that the employee does not pay for his own hospital service. The initial liability is the employer’s, and the ultimate liability therefor falls, as it should, upon the wrongdoer responsible for his injuries. To adopt plaintiff’s view would give him a windfall; without paying these expenses, he would in effect be collecting his hospital bill from the third-party wrongdoer for his employer, and again from the defendant. The language of the policy does not bear this construction and we should not strain to reach such result, the effect of which can only mean an increase in hospital plan premiums generally. Such plans are administered, as here, by nonprofit organizations (Insurance Law, art. IX-C) with a view to making their service widely available at low cost, and not to profit their subscribers. The judgment of the Appellate Division should be reversed and judgment directed in favor of defendant, without costs.