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Government Employees Insurance Co. v. Group Hospitalization Medical Services Inc.5/6/1991
The District of Columbia Court of Appeals has certified to this Court questions relating to a subrogee's rights against an automobile casualty insurer who settled with the subrogor after receiving notice of the subrogee's interest. The facts as given to us by the certifying Court, and the questions presented, are as follows:
"On May 25, 1985, Frederick J. Proctor and a passenger were traveling south on Piscataway Road in Clinton, Maryland, on Proctor's motorcycle when an automobile driven by Louise D. Thompson emerged from a driveway onto Piscataway Road. Proctor's motorcycle struck Thompson's automobile as the automobile, attempting to turn northward, crossed the southbound lane . . . .
"Investigating police officers determined that the motorcycle was being driven at a very high rate of speed, in excess of sixty-five miles per hour. It was also determined that Proctor, the driver of the motorcycle, had been drinking, and several witnesses reported that the motorcycle had rapidly accelerated just before the collision.
"Group Hospitalization Medical Services, Inc. ("GHI"), had a health care contract with Mr. Proctor which provided that, in the event he was injured as a result of the negligence of another person, GHI would be subrogated
to Proctor's rights against that person. Pursuant to this contract, GHI paid $21,518.26 for medical services rendered to Proctor as a result of his injuries. The contract provided further that GHI would have the right to obtain from Proctor any payments he received from that other person as the result of such injuries, or from any insurance company making such payments, as much of the recovery as would reimburse GHI for any medical expenses it paid.
"At the time of the accident, Louise Thompson was insured by Government Employees Insurance Company ("GEICO") with policy limits of $25,000/$50,000 per accident. On December 19, 1985, GHI sent GEICO written notice of its subrogation right regarding any settlement agreement that GEICO might make with Proctor. On the same date, GHI sent a letter to Proctor and his attorney notifying them of GHI's right of subrogation and its right to recover any fees for medical expenses received by them from, or on behalf of, the other party involved in the accident, Louise Thompson.
"On January 7, 1986, GEICO, despite the contributory negligence of Mr. Proctor (which is stipulated in this case), settled Proctor's claim against Thompson for the policy limit of $25,000. An internal GEICO memorandum dated January 2, 1986, reveals that GEICO had received GHI's notice of December 19, 1985, which the memorandum characterized as a 'lien letter.' After receiving payment from GEICO, Proctor declared bankruptcy . GHI filed a claim in the bankruptcy proceedings to recover the amount of its subrogated medical expenses, but the claim was disallowed as not recoverable from Proctor.
"On May 14, 1986, GHI sent a second letter to GEICO, again giving notice of GHI's right of subrogation and the amount claimed, $21,518.26. GEICO replied in a letter dated June 9, 1986, informing GHI that $25,000 had been paid to Proctor and his attorney on January 7, and stating that since the policy limit had been exhausted, GEICO would not honor any subrogation lien.
"GHI then filed this action in the Superior Court of the District of Columbia seeking judgment against GEICO in the amount of its subrogation claim, plus interest and costs. The trial court granted summary judgment for GHI, and GEICO brought this appeal.
"This appeal presents two questions of law:
"1. Under Maryland law, may GEICO defend against GHI's subrogation claim by asserting th
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