ATTORNEYS FOR APPELLANT
Attorney General of Indiana
Christopher L. LaFuse
Deputy Attorney General
ATTORNEYS FOR APPELLEES
Charles R. Vaughan
Linda H. Havel
SUPREME COURT OF INDIANA
FAMILY AND SOCIAL SERVICES )
Appellant (Intervenor Below), ) Indiana Supreme Court
) Cause No. 91S02-0111-CV-594
) Indiana Court of Appeals
WAYNE SCHLUTTENHOFER, ) Cause No. 91A02-0010-CV-638
CHANTEL SCHLUTTENHOFER, )
Appellees (Plaintiffs Below). )
APPEAL FROM THE WHITE SUPERIOR COURT
The Honorable Robert W. Thacker, Judge
Cause No. 91C01-9801-CF-1
ON PETITION TO TRANSFER
May 23, 2002
This case addresses the meaning of the word claim, as it is used
in Indianas lien reduction statute. We hold that each claim to which
a lien holder asserts subrogation rights must be evaluated independently of others that
might arise from an injury. That was not done here. Therefore,
we grant transfer and remand with instructions to reduce FSSAs lien to $15,324.52.
Factual and Procedural Background
On September 11, 1997, Wayne Schluttenhofer stopped his employers pickup truck to assist
Terry Snodgrass, whose truck had been disabled after striking a deer on State
Road 18 in White County. A car driven by James Budreau then
collided with Schluttenhofers vehicle, and pinned Schluttenhofer against a guardrail. Schluttenhofer suffered
severe injuries that resulted in an amputation above his right knee. Schluttenhofer
filed suit against Snodgrass, Budreau, and three other defendants associated with Budreau.
In the meantime, Schluttenhofer received $63,245.24 in Medicaid payments from the Indiana Family
and Social Services Administration (FSSA). FSSA filed a Medicaid lien in that
amount pursuant to Indiana Code sections 12-15-8-1 and -2.
Schluttenhofer also received
$10,000 from State Farm Mutual Insurance Company for medical payments under the policy
covering his employers vehicle. The only issue is the treatment of this
last $10,000 under the lien reduction statute.
Before trial, Schluttenhofer settled with all of the defendants for a total of
Schluttenhofer then filed a petition for reduction of the FSSA lien.
Schluttenhofer contended, and FSSA does not dispute, that he settled his case
for ten percent of his damages. Because his recovery was diminished by
ninety percent, Schluttenhofer contended that the lien reduction statute required that FSSAs Medicaid
lien be reduced by ninety percent as well. Initially, FSSA did not
respond and the trial court granted Schluttenhofers motion without a hearing. FSSA
then filed a motion to set aside the trial courts order, which was
granted. The trial court ruled, after a hearing on the merits, that
a ninety percent reduction of the FSSA lien was warranted. The Court
of Appeals affirmed. FSSA v. Schluttenhofer, 750 N.E.2d 429 (Ind. Ct. App.
Application of the Lien Reduction Statute
FSSA agrees with Schluttenhofer that, as to the medical expenses included in the
$325,000 settlement with the defendants, its lien should be reduced by ninety percent,
in effect prorating the shortfall of actual recovery versus total damages between FSSA
and Schluttenhofer. However, FSSA contends that there should be no reduction of
the $10,000 paid by State Farm. The lien reduction statute states:
If a subrogation claim or other lien or claim that arose out of
the payment of medical expenses or other benefits exists in respect to a
claim for personal injuries or death and the claimants recovery is diminished:
(1) by comparative fault; or
(2) by reason of the uncollectibility of the full value of the claim
for personal injuries or death resulting from limited liability insurance or from any
the lien or claim shall be diminished in the same proportion as the
claimants recovery is diminished. The party holding the lien or claim shall
bear a pro rata share of the claimants attorneys fees and litigation expenses.
Ind. Code § 34-51-2-19 (1998). FSSA contends that the State Farm payment
must be considered independently of the settlement payments for purposes of determining whether
that amount was diminished by comparative fault or by reason of uncollectibility.
FSSA reasons that the medical payments claim under Schluttenhofers employers policy, viewed separately,
was not diminished by either comparative fault or uncollectibility, and no lien reduction
should apply. Schluttenhofer responds that the statute refers to a claimants recovery from
all sources. He contends that the $10,000 from State Farm is to
be aggregated with the $325,000 recovered from the defendants, resulting in a diminished
total claimants recovery of $335,000, and a proportional reduction of the lien.
The Court of Appeals agreed with Schluttenhofer. We do not.
In a frequently encountered situation, the medical payments insurer is the party asserting
the lien, which is prorated down if the injured partys liability claim against
a third party is not fully paid. Here, however, the lien is
against the payment from the medical payments insurer. Medicaid is a taxpayer
supported program designed to fund medical expenses for those who cannot afford care.
As a part of that program, the lien statute is designed to
provide for the recovery of any payments that may later be reimbursed from
another source. The net effect of Schluttenhofers contention is to divert some
of those funds from reimbursement of medical expenses to compensation for personal injuries.
We do not believe the statute contemplates that result, and its provision
that a claim must be reduced in order for a lien to be
reduced supports the view that the Medicaid lien on the medical benefits reimbursement
is not reduced because Schluttenhofers claim under that policy was paid in full.
Schluttenhofer argues that the lien reduction statutes use of the terms comparative fault
and uncollectibility refer to the plaintiffs inability to recover the full value of
his case. The statute speaks in terms of the value of a
claim, not case. A claim is an assertion of an existing right.
Blacks Law Dictionary 240 (7th ed. 1999). As a result of
his injuries, Schluttenhofer acquired rights to compensation that differed as to different parties,
i.e., his case contained several claims, as the term is used in the
statute. Schluttenhofer expresses his settlement with the defendants as one for $325,000.
In actuality, there were five settlements: he settled his claim against Budreau
for $100,000, his claim against Snodgrass for $75,000, and his claims against the
three remaining defendants for a combined sum of $150,000. There is no
basis to conclude that any of these claims was reduced to a greater
or lesser extent than any others, so each is reduced in the same
proportion, i.e. by ninety percent, representing the shortfall of the total of the
five to his total damages.
Schluttenhofer also cites Dept of Pub. Welfare v. Couch, 605 N.E.2d 165 (Ind.
1992) for the proposition that the phrase claimants recovery, as used in the
lien reduction statute, means amounts received by the plaintiff from whatever source.
From that, he contends that the statute requires a reduction from the sum
of all monies received as a result of his injuries. We do
not read Couch as Schluttenhofer suggests. Couch held that the lien reduction
statute applied to the proceeds of settlement, as well as judgment. That
opinions discussion of the source of recovery referred to the means by which
a plaintiff might receive moneysettlement or judgment. It did not suggest that
all claims are to be aggregated. In Couch, the settlement compensated the
plaintiffs negligence claim less than fully. Here, on the other hand, Schluttenhofer
had multiple claims, one of whichhis claim for $10,000 under the medical payments
provision of the State Farm policywas not reduced. That claim existed as
a matter of contract law independent of his claims against the other parties,
without regard to the negligence liability of any party, and was paid in
full. Section 34-51-2-19 comes into play only when the recovery on a
claim is diminished by comparative fault or uncollectibility of the claims full value.
It does not apply to the State Farm medical benefit because that
claim was not diminished.
At the hearing on Schluttenhofers petition, FSSA conceded the remainder of its lien
should be reduced by ninety percent. Thus that amount of the FSSA
lien$53,245.24is reduced by ninety percent to $5,324.52. The net result is FSSAs
lien is for $15,324.52. The Court of Appeals stated that it cannot
find that it was the intent of our legislature to dissect a claimants
settlement, finding that certain monies should be applied while others are not.
Schluttenhofer, 750 N.E.2d at 432. We agree that it is improper to
attempt to allocate a portion of the funds paid to settle any or
all of the liability claims to medical expenses, as opposed to pain and
suffering or other items. But the statute requires that each claim be
evaluated. To the extent any claim was diminished by comparative fault or
uncollectibility, reduction of the lien is proper. Because there was no reduction
of the State Farm claim, FSSAs lien is valued to the full amount
of the claim against State Farm.
We grant transfer and remand with instructions to reduce FSSAs lien from $63,245.24
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
Indiana Code section 12-15-8-1 provides:
(1) the office pays medical expenses for or on behalf of a person
who has been injured or has suffered an illness or a disease as
a result of the negligence or act of another person; and
(2) the injured or diseased person asserts a claim against the other person
for damages resulting from the injury, illness or disease;
on any recovery under the claim, whether by judgment, compromise, or settlement, the
office has a lien against the other person in the amount paid by
the office to the extent of the other persons liability for the medical
Section 12-15-8-2 states:
(1) the office pays for medical expenses or renders medical services on behalf
of a person who has been injured or has suffered an illness or
a disease; and
(2) the person asserts a claim against an insurer as a result of
that persons injury, illness, or disease;
the office has a lien against the insurer, to the extent of the
amount paid by the office, on any recovery from the insurer.
Footnote: Snodgrass and his employer paid $75,000, Budreau paid $100,000, and the remaining
defendants contributed $150,000.