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Mahler v. Szucs6/4/1998
Oral Argument Date: 10/28/97
Dissenting: Gerry L. Alexander
En Banc
(Consolidated)
-- In this case we analyze an insurer's right to recover payments made to an insured pursuant to a Personal Injury Protection (PIP) provision in a liability insurance policy when an insured recovers against a tortfeasor. Specifically, we are asked to determine the extent to which the insurer, State Farm Mutual Automobile Insurance Company (State Farm), must pay the insured a share of the expenses the insured incurred to recover from the tortfeasor. We hold State Farm's policy required it to pay its insureds a portion of their expenses necessary to obtain a recovery from the tortfeasors. State Farm was not obligated to pay prejudgment interest on Mahler's expenses, but it was obligated to pay Mahler's attorney fees to enforce this sharing of expenses. We remand the case to the trial court for entry of findings of fact and conclusions of law with respect to the reasonable amount of such fees.
ISSUES
1. Does State Farm's policy require it to pay a share of its insured's expenses required to secure a recovery from a tortfeasor when such recovery is the basis for State Farm's PIP reimbursement?
2. Did the trial court err in awarding prejudgment interest to Mahler?
3. Did the trial court in Mahler err in allowing Mahler to recover attorney fees incurred in this action?
FACTS
A. Mahler
On January 4, 1993, Dr. George Szucs pulled out into traffic from a driveway and hit Elaine Mahler's car. He was cited for failure to yield right of way. Mahler sustained cervical and thoracic sprains, and contusions of her forehead, chest, and right knee. She later suffered from muscle inflammation and spasm, neck, low back, and hip pain, and persistent headaches for which she received chiropractic and physical therapy treatments. Although she claimed to have incurred $8,680 in medical expenses, State Farm paid only $4,173.32 under her PIP coverage, refusing further payments after an examination by a physician State Farm hired concluded no further active treatment was indicated.
Three days after the accident, State Farm sent her a letter that stated: "If you should recover our interest from the responsible party or their {sic} insurance carrier, you must protect our reimbursement rights." Mahler Clerk's Papers at 32. Two months later, Mahler's attorney notified State Farm he was representing Mahler and acknowledged State Farm's "lien for PIP benefits extended in this matter." Mahler Clerk's Papers at 206. State Farm replied it intended to arbitrate the question of its reimbursement with the defendant's insurer and asked Mahler's attorney to "take no action whatsoever in connection with the recovery of State Farm's claim against the adverse party or insurance company." Mahler Clerk's Papers at 34. State Farm subsequently did not assist Mahler in her claim against Szucs.
Mahler, in the meantime, prosecuted her case against Szucs. She filed a complaint; she submitted interrogatories; she prepared for and attended a mediation hearing; she negotiated and entered into a settlement agreement. Szucs defended Mahler's claims vigorously. In his brief for the mediation hearing, he said:
Liability is an open question. . . . It seems likely that a jury will find that both parties are partially responsible for this accident. . . . We anticipate that a jury will relate at least a third of the claimed treatment to pre-existing or unrelated problems and that the general damages award will be rather moderate. Defendant believes that the injuries sustained by Mrs. Mahler in the acci
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