The Georgia Supreme Court’s decision in State Farm Mutual Automobile Insurance Company v. Adams, declined to extend the rationale of Thurmond v. State Farm Mutual Automobile Ins. Co., and appeared to make it more difficult for UM insurers to easily determine the amount by which UM limits exceed the liability limits for a loss. Payments made by the liability insurer to a hospital (Adams) did not serve to reduce the available liability limits to the injured party, while reimbursement of federal worker’s compensation payments (Thurmond) were deemed to reduce the available liability limits, and thus increase the exposure of the UM carrier.
However, upon closer examination, the decisions reveal that the determination of how to apply such payments to third parties depends upon the authority by which the payments are made. In Thurmond, the Supreme Court determined that the payments were made pursuant to federal law, which specifically provides that the federal law supersedes and preempts any state or local law. The Georgia Supreme Court, in Adams, which involved payment of a hospital lien imposed pursuant to O.C.G.A. § 44-14-470, held that
“payment of a hospital lien should not be subtracted from a tortfeasor’s tort liability coverage to determine the underinsured coverage of an insured who has been injured in an accident,”
as the payment of the hospital lien was for the direct benefit of the insured.