{
  "id": 8521978,
  "name": "JOHNSTON COUNTY v. PEGGY K. McCORMICK, DOUGLAS H. McCORMICK and FARM BUREAU INSURANCE COMPANY",
  "name_abbreviation": "Johnston County v. McCormick",
  "decision_date": "1983-11-15",
  "docket_number": "No. 8211SC1204",
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    "name": "North Carolina Court of Appeals"
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      "year": 1966,
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      "cite": "268 N.C. 503",
      "category": "reporters:state",
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  "last_updated": "2023-07-14T21:11:09.312138+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
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  "casebody": {
    "judges": [
      "Chief Judge VAUGHN and Judge JOHNSON concur."
    ],
    "parties": [
      "JOHNSTON COUNTY v. PEGGY K. McCORMICK, DOUGLAS H. McCORMICK and FARM BUREAU INSURANCE COMPANY"
    ],
    "opinions": [
      {
        "text": "WELLS, Judge.\nThe threshold issue we must decide in this case is whether plaintiffs appeal is premature. Since summary judgment was allowed for fewer than all defendants and the trial court\u2019s judgment did not contain a certification pursuant to G.S. \u00a7 1A-1, Rule 54(b) of the Rules of Civil Procedure that there was \u201cno just reason for delay,\u201d plaintiffs appeal is premature unless the summary judgment for defendant Farm Bureau affected a substantial right under G.S. \u00a7 l-277(a) and G.S. \u00a7 7A-27(d)(l). For reasons which will be stated in this opinion, we hold that a substantial right of plaintiff was affected and that the appeal is not premature.\nWe begin our decision on the merits by calling attention to two statutory provisions dealing with the rights of agencies of state government to recover sums paid for medical care on behalf of Medicaid recipients. The pertinent statutes in force to be construed under the facts in this case were G.S. \u00a7\u00a7 108-59, 108-60, 108-61.2, and 108-61.4. The statutes have been recodified as G.S. \u00a7\u00a7 108A-54, 108A-55, 108A-57, and 108A-59 respectively.\nG.S. \u00a7 108-59 provided for the creation of a Medicaid fund and G.S. \u00a7 108-60 provided for methods of payment from the fund. G.S. \u00a7\u00a7 108-61.2 and 108-61.4 are directly at issue in this case, and we will therefore set them out, in pertinent part, verbatim.\n\u00a7 108-61.2. Subrogation rights; withholding of information a misdemeanor. \u2014\n(a) To the extent of payments under this Part, the county involved shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of assistance under this Part against any person. It shall be the responsibility of the county commissioners, with such cooperation as they shall require from the county board of social services and the county director of social services, to enforce this section through the services of the county attorney in accordance with attorneys\u2019 fee arrangements approved by the Department of Human Resources. The United States and the State of North Carolina shall be entitled to share in each net recovery under this section. Their shares shall be promptly paid under this section and their proportionate parts of such sums shall be determined in accordance with the matching formulas in use during the period for which assistance was paid to the recipient.\n(b) It shall be a misdemeanor for any person seeking or having obtained assistance under this Part for himself or another to willfully fail to disclose to the county department of social services or its attorney the identity of any person or organization against whom the recipient of assistance has a right of recovery, contractual or otherwise.\n\u00a7 108-61.4. Acceptance of medical assistance constitutes assignment to the State of right to third party insurance benefits; recovery procedure.\u2014\n(a) By accepting medical assistance, the recipient shall be deemed to have made an assignment to the State of the right to third party insurance benefits to which he may be entitled.\n(b) The responsible State agency shall disseminate the contents of this bill to all involved parties; the county government agencies, all Medicaid eligibles, all providers, and all insurance companies doing business in North Carolina.\nAlthough in its complaint, plaintiff alleged \u201c[t]hat pursuant to G.S. \u00a7 108-61.2, the State of North Carolina is subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of assistance and brings this action pursuant to G.S. \u00a7 108-61.2 against Peggy K. McCormick and Douglas H. McCormick,\u201d it is clear from plaintiffs complaint, motion for summary judgment, briefs and oral arguments, that plaintiff based its action against Farm Bureau on the provisions of G.S. \u00a7 108-61.4. Plaintiffs central argument is that G.S. \u00a7 108-61.4 gave plaintiff a statutory lien against McCormick\u2019s rights to payment from Grimes through his insurance carrier, Farm Bureau. We do not reach the question of whether G.S. \u00a7 108-61.4 creates a statutory lien because we hold that G.S. \u00a7 108-61.4 is not applicable to the facts in this case.\nIn insurance law, the term \u201cbenefits\u201d describes the contract coverage as the obligation of the insurer to the insured in the event of a loss by or injury covered by the policy. See e.g., G.S. \u00a7\u00a7 58-251.1(b)(4), (5); -251.5(a); -251.6(a); -254.1; -254.2; -254.4(e), (f); -262.14(l)(a), (6); and particularly -262.16 which establishes benefit standards for Medicaid supplement insurance; and G.S. \u00a7 58-367(1). It is clear therefore from the language of the statute that G.S. \u00a7 108-61.4 was intended as the vehicle through which the state might obtain an assignment of a benefit recipient\u2019s rights to collect the same benefits (i.e., medical expenses) from the recipient\u2019s own insurance coverage. It does not apply to a tort-feasor\u2019s liability insurance policy.\nThe question, so narrowed, which is dispositive of this appeal, is whether a liability insurance carrier who pays, on behalf of its insured, a claim to which a Medicaid provider has become subrogated under G.S. \u00a7 108-61.2 may be held liable to the Medicaid provider.\nThe general rule in insurance subrogation cases, which are clearly analogous to the circumstances under review in this case, is that payment by a tort-feasor of an injured party\u2019s claim without notice of a subrogee\u2019s interest is a complete defense to a subrogee\u2019s claim against the tort-feasor. See Annot. 92 A.L.R. 2d 102, \u00a7 5 (1963 & 1983 Supp.). See also Insurance Co. v. Bottling Co., 268 N.C. 503, 151 S.E. 2d 14 (1966), where the court stated the general rule, but held that where the evidence showed that the tort-feasor settled with knowledge of the subrogee\u2019s interest, such settlement was not a defense to the subrogee\u2019s claim. See also Insurance Co. v. Spivey, 259 N.C. 732, 131 S.E. 2d 338 (1963).\nApplying these principles of the law of subrogation to the case at bar, we are persuaded that if Farm Bureau settled with McCormick without notice, actual or constructive, of plaintiffs subrogated right of recovery against Grimes, then plaintiff cannot recover either against Grimes or Farm Bureau the sums it paid on McCormick\u2019s behalf. We hold that the forecast of evidence before the trial court clearly shows lack of such notice and that, therefore, summary judgment was properly entered for Farm Bureau.\nIn its complaint, plaintiff alleged that it had paid the following sums on McCormick\u2019s behalf:\nProvider Amount Medicaid Paid\nJohnston Memorial Hospital $ 1,341.40\nCharlotte Memorial Hospital 1,873.85\nCharlotte Rehabilitation Hospital 3,705.45\nCharlotte Memorial Hospital 348.27\nRehabilitation Associates 38.52\nCharlotte Rehabilitation Hospital 5,707.36\nDr. Manuel Vers\u00f3la 57.96\nMedical Transport Service 48.00\nDr. Edwin Martinat 80.33\nForsyth Memorial Hospital 55.45\nCarroll Pharmacy; Reveo Drugs;\nJohnson\u2019s Drug Co.; Pruett Drug Co.;\nPowell\u2019s Pharmacy; and Mann\u2019s of\nAsheboro, N.C. 109.66\nIn response to plaintiffs interrogatories, Farm Bureau listed three bills for medical services in its possession when it settled with McCormick:\nWake Radiology Consultants, P.A. $ 133.00\nCape Fear Valley Hospital 21,103.38\nRaleigh Neurosurgical Clinic 760.00\nAll of these bills were attached to Farm Bureau\u2019s response. None of them bear any indication on their face that any of the charges had been paid by anyone or that there were any sources available to the provider of the services for payment of the bills except the patient. None of them shows any Medicaid information of any kind. In his affidavit in support of Farm Bureau\u2019s motion, Raymond Boykin stated the following:\nI am the Senior Field Claimsman for North Carolina Farm Bureau Mutual Insurance Company.\nI am familiar with the case of Johnston County vs. Peggy K. McCormick, Douglas H. McCormick and Farm Bureau Insurance Company. I was responsible for investigation, negotiations and settlement of the original claim made on behalf of Douglas H. McCormick. His claim was for personal injuries sustained in an automobile accident. I have completely reviewed North Carolina Farm Bureau Mutual Insurance Company\u2019s file regarding this matter and I find no notice or information in the file, or otherwise, that the injured party (Douglas H. McCormick) was receiving assistance through the Department of Human Resources. I find no letter, or other documentation in the file which ever put North Carolina Farm Bureau Mutual Insurance Company on notice prior to its disbursement of the monies paid in full settlement of the claim, that Johnston County was claiming a lien pursuant to G.S. 108-61.4. In addition, I do not remember ever discussing the fact that Douglas H. McCormick had received medical assistance payments with anyone prior to the settlement of this claim. We received all of the medical bills regarding Douglas H. McCormick injuries through attorney Wiley Bowen. The bills do not indicate Douglas H. McCormick had received medical assistance payments. Mr. Bowen did not indicate that Douglas H. McCormick had received medical assistance payments.\nFarm Bureau\u2019s forecast of evidence clearly shows that it was without notice, actual or constructive, of plaintiffs payments on behalf of McCormick. Plaintiff made no response to Farm Bureau\u2019s forecast of evidence, but relied solely on the allegations in its complaint. Under such circumstances, Farm Bureau was entitled to summary judgment. See Lowe v. Bradford, 305 N.C. 366, 289 S.E. 2d 363 (1982).\nAffirmed.\nChief Judge VAUGHN and Judge JOHNSON concur.\n. We note that while G.S. \u00a7 44-49 creates a lien in favor of any person, corporation or governmental body which has provided medical care, upon personal injury damages recovered in civil actions by patients who have received medical treatment, there is no provision for creation of a lien where the patient settles with the wrongdoer, instead of filing a civil action. Thus, G.S. \u00a7 44-49 is inapplicable to the case before us since the record does not indicate that McCormick at any time filed an action against Grimes.",
        "type": "majority",
        "author": "WELLS, Judge."
      }
    ],
    "attorneys": [
      "W. A. Holland, Jr. for plaintiff.",
      "Mast, Tew, Armstrong & Morris, P.A., by L. Lamar Armstrong, Jr., and George B. Mast, for defendant."
    ],
    "corrections": "",
    "head_matter": "JOHNSTON COUNTY v. PEGGY K. McCORMICK, DOUGLAS H. McCORMICK and FARM BUREAU INSURANCE COMPANY\nNo. 8211SC1204\n(Filed 15 November 1983)\n1. Social Security and Public Welfare 8 2\u2014 assignment of insurance rights to Medicaid provider \u2014 effect of statute\nThe statute providing that the acceptance of Medicaid assistance constitutes an assignment to the State of the recipient\u2019s \u201cright to third party insurance benefits to which he may he entitled,\u201d G.S. 108-61.4, does not apply to a tort-feasor\u2019s liability insurance policy but applies only to the recipient\u2019s own insurance coverage.\n2. Social Security and Public Welfare 8 2\u2014 subrogation rights of Medicaid provider-liability insurance carrier\u2019s payment to recipient \u2014 carrier\u2019s absence of notice of subrogation right\nAn automobile liability insurance carrier who paid, on behalf of its tort-feasor insured, a claim to which a Medicaid provider has become subrogated under G.S. 108-61.2 may not be held liable to the Medicaid provider for the sum paid in the absence of actual or constructive notice by the insurance carrier of the Medicaid provider\u2019s subrogated right of recovery against its insured.\nAppeal by plaintiff from Battle, Judge. Judgment entered 3 August 1982 in JOHNSTON County Superior Court. Heard in the Court of Appeals 17 October 1983.\nPlaintiff Johnston County brought suit in June, 1981 against Douglas McCormick, a seventeen-year-old Medicaid recipient; his mother, Peggy McCormick; and Farm Bureau Insurance Company, which had paid nearly $30,000.00 to McCormick in settlement of his personal injury claim against one of Farm Bureau\u2019s policyholders.\nThe events giving rise to the county\u2019s suit began in February, 1978, when Douglas McCormick was injured while a passenger in a car driven by Farm Bureau\u2019s insured, Timothy Grimes. McCormick sued Grimes and the settlement which led to Farm Bureau\u2019s payment to McCormick was reached in late 1980. Meanwhile, in September 1978, Mrs. McCormick applied for Medicaid to assist in paying her son\u2019s medical bills. Medicaid, as administered by plaintiff, eventually paid out $13,366.25 in benefits on McCormick\u2019s behalf. When plaintiff learned that McCormick had settled his personal injury claim it sought reimbursement of the Medicaid payments from defendants jointly and severally.\nDefendant Farm Bureau answered and asserted as an affirmative defense that it had settled McCormick\u2019s claim against its insured without notice of plaintiffs subrogation rights.\nAfter the pleadings were joined, plaintiff moved for summary judgment. In support of its motion, plaintiff submitted interrogatories served by plaintiff on Farm Bureau and the affidavit of Donald J. Best, Chief of the Third Party Recovery Section of the North Carolina Department of Human Resources.\nPlaintiffs motion for summary judgment was followed by Farm Bureau\u2019s motion for summary judgment. Farm Bureau\u2019s motion was supported by the affidavit of Raymond Boykin, its Senior Field Claimsman, who was responsible for the investigation, negotiation, and settlement of McCormick\u2019s claim against its insured.\nFrom the trial court\u2019s grant of summary judgment against it, plaintiff appeals.\nW. A. Holland, Jr. for plaintiff.\nMast, Tew, Armstrong & Morris, P.A., by L. Lamar Armstrong, Jr., and George B. Mast, for defendant."
  },
  "file_name": "0063-01",
  "first_page_order": 95,
  "last_page_order": 101
}
