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UNITED STATES v. LEONARD

March 16, 1978

UNITED STATES OF AMERICA, Plaintiff
v.
MICHAEL C. LEONARD, KATHLEEN SHEDLARSKI, THOMAS SHEDLARSKI and HARTFORD INSURANCE GROUP, Defendants



The opinion of the court was delivered by: CURTIN

The United States brings this action under the Federal Medical Care Recovery Act, 42 U.S.C. § 2651, and the Declaratory Judgment Act, 28 U.S.C. § 2201. The Government seeks to recover the reasonable value of medical care and treatment furnished to defendant Michael Leonard at the Government's expense and, in addition, requests a permanent injunction against defendant Leonard instituting or pursuing any action against defendant Hartford Insurance Group for the value of said care. In the alternative, the Government claims that it is entitled to recover its expenses under Leonard's automobile insurance policy. *fn1"

 The facts can be briefly stated. On February 6, 1975, defendant Leonard, a member of the United States Coast Guard, was injured when the automobile he was driving was struck by another vehicle driven by defendant Kathleen Shedlarski. Since Leonard's injuries were sustained in the line of duty, the United States was authorized and required, pursuant to 42 U.S.C. § 253(a), to furnish him medical care and treatment. The expenses incurred by the United States for said care, as of November 26, 1975, amounted to $4,490.

 Defendant Hartford Insurance Group was the insurer of both defendant Leonard and, under her husband's policy, Kathleen Shedlarski. Leonard filed a claim with Hartford for his medical costs and lost earnings. In September 1975, Hartford paid Leonard's claim for 80% of his lost earnings for the period February 6 through September 3, 1975, but refused to pay for the reasonable value of his medical care. Pursuant to New York Insurance Law § 675(2), Leonard commenced arbitration proceedings in October of 1975 against Hartford, claiming recovery of the cost of his medical care. With the consent of all the parties, this court ordered a temporary stay of said arbitration proceedings.

 On December 16, 1975, the Department of Health, Education and Welfare [HEW] submitted a claim to Hartford for $4,490 in accordance with the Medical Care Recovery Act. Hartford admits liability for the $4,490, but is uncertain whether that sum is owed to the Government or to Leonard, and so has refused to honor either claim. The United States instituted this action on February 18, 1976.

 The Medical Care Recovery Act [MCRA] states in pertinent part:

 
In any case in which the United States is authorized or required by law to furnish hospital, medical, surgical, or dental care and treatment . . . to a person who is injured . . . under circumstances creating a tort liability upon some third person. . . to pay damages therefor, the United States shall have a right to recover from said third person the reasonable value of the care and treatment so furnished . . . and shall, as to this right be subrogated to any right or claim that the injured . .. person . . . has against such third person to the extent of the reasonable value of the care and treatment so furnished. (Emphasis added).

 The purpose of the MCRA was to avoid windfall recoveries to accident victims who were immune from a Government suit under United States v. Standard Oil Co., 332 U.S. 301, 91 L. Ed. 2067, 67 S. Ct. 1604 (1947). See United States v. Jones, 264 F. Supp. 11 (E.D.Va. 1967). In other cases, the value of the services performed at Government expense became a windfall for the third party tort-feasor or his insurance company since the injured person could not recover for expenses that he had not incurred. See United States v. York, 398 F.2d 582, 583 (6th Cir. 1968).

 It is undisputed that the Government bore the full cost of Mr. Leonard's medical care, and that he incurred no expense whatsoever for the medical services provided him. The initial question in this case is whether the New York no-fault statute has so altered New York Insurance Law as to eradicate the Government's § 2651 claim. Leonard argues that the New York statute, § 673(1), by eliminating tort liability for basic economic loss up to a $50,000 amount, has "so changed the perches that there is no where [sic] for the federal eagle to roost" (defendant Leonard's Memorandum at 7) under § 2651. The Government argues that "tort liability remains the gravamen of the action" (Brief for the Government at 14), because § 674(1) provides:

 
Any insurer liable for the payment of first party benefits to or on behalf of a covered person shall have the right to recover the amount of such benefits so paid from the insurer of any other covered person if and to the extent that such other covered person would have been liable, but for the provisions of this article, to pay damages in an action at law. (Emphasis added).

 The Government's position draws substantial support from those cases which have held that the MCRA "confers on the United States an independent right of recovery which is unimpaired by the vagaries" of certain state laws. See United States v. Moore, 469 F.2d 788, 790 (3d Cir.), cert. denied, 411 U.S. 905, 36 L. Ed. 2d 195, 93 S. Ct. 1528 (1975) (Maine inter-spousal immunity law). See also United States v. Haynes, 445 F.2d 907 (5th Cir. 1971) (Louisiana community property law); United States v. Forte, 427 F. Supp. 340 (D.De. 1977) (Delaware guest statute); Government Employees Insurance Co. v. Bates, 414 F. Supp. 658 (E.D.Ark. 1975) (Arkansas guest statute).

 However, in those cases cited there was no dispute regarding the negligence of the driver in question. In this case, as far as the record shows, the question of Kathleen Shedlarski's negligence has not been determined.

 It is unnecessary to resolve the uncertainties regarding the relation of the MCRA and the New York no-fault law, however, because the court is persuaded that the United States is entitled to recover directly under the no-fault provisions of Leonard's policy.

 Section 672(1) of the New York Insurance Law requires every automobile insurance policy to provide compensation for "basic economic loss" resulting from injuries arising out of the use or operation of the automobile in the state, regardless of fault. *fn2" Basic economic loss is defined to include medical expenses of up to $50,000 per person. N.Y.Ins.L. § 671(1). Compensation for basic economic loss is payable out of first party benefits, which are defined as "payments to reimburse a person for basic economic loss on account ...


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