million was for operators of motor vehicles.R Stimulated by this report, Congress finally introduced remedial legislation in the area."

B. CREATION OF AN INDEPENDENT RIGHT OF

RECOVERY

In its initial form, the bill, H.R. 298, provided in section 1(a) that the Government would be subrogated to or assigned any rights which the injured party might have against the tort-feasor for hospital and medical care. 10 At the urging of the House Judiciary Committee this provision was rewritten so as to provide that the Government would have an independent "right" to recover from the third party tort-feasor 11 and section 1(b) was amended so as to provide the Government with procedural measures enabling it to proceed on its own behalf against the tortious third party for medical care or intervene in any action brought by the injured party.12 Referring specifically to the amending of section 1(a), the committee explained that

This amendment makes clear that the United States is granted a distinct right to recover its costs and that this right is to be effectuated through a partial subrogation to any right which the injured or diseased person may have to proceed against the negligent third party.1

The change in section 1(b) further emphasized the existence of independent rights of recovery in the injured party and the Government, making it clear that their exercise was not conditional upon action by either party.14

Thus, it is apparent that Congress intended to and in fact did create a distinct and independent right of recovery in the Government that could not be defeated by a release given to the tortfeasor or his insurer by the injured party.1

15

8. Collections by federal agencies making recoveries under the program for the first 24 months totaled $1,776,169.68. For the first 6 months of 1965 the 3 services alone have collected approximately $1,000,000.00. It is believed that for the year as a whole, collections by the 3 services, Coast Guard, Department of Health, Education, and Welfare, and the Veterans Administration will total approximately $2,500,000.00. (Figures supplied by the Department of Justice.)

9. H.R. 298, 87th Cong., 1st Sess. (1961). 10. H.R. 298 § 1(a), Supra note 9: 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 or suffers a disease... under circumstances creating a tort liability upon some third person (other than or in addition to the United States) to pay damages therefor, the United States shall be subrogated to any right or claim that the injured or diseased person ... has against such third person with respect

C. NOTICE OF CLAIM AND ITS EFFECT ON THE GOVERNMENT'S CLAIM

Subsequent to passage by the House, the Association of Casualty and Surety Companies recommended to the Senate Committee on the Judiciary that the bill be amended so as to create a legislative requirement that notice be given by the Government to the liable third party or his insurer prior to payment of any money by the tort-feasor or his insurer to the injured party as compensation for the injury, and that such notice be a condition precedent to the Government's right of recovery. The Comptroller General, in reporting to the Chairman of the Committee, strongly recommended against the adoption of this amendment as it would condition the Government's recovery on the diligence of its agents in giving notice to the responsible party or parties, and, further, subject the claim to defeat by a hurried settlement between the injured party and the insurer.16 He suggested that this was a procedural matter which should be handled by regulations promulgated in accordance with section 2(a) of the bill. In its final form, the bill did not include the proposal made by the insurance companies. Further, the Attorney General, in promulgating regulations 17 in regard to the program, did not include any such requirement. It is therefore apparent that in spite of the Government's failure to provide notification of claim to the third party or his insurer, separate settlement by the injured party will not in any way affect the Government's claim for the cost of medical and hospital care which it has afforded such party.18

thority for the fact that a release by the injured party is effective against the Government. A perusal of the facts indicates that such is not the case. Basically, the action was against the tort-feasor for payment of the Government's claim. The injured party, Bennett, was also joined in the alternative as he had been reimbursed by the insurer of the tort-feasor and thereafter had released both parties. Bennett asked the court to dismiss the action as it related to him on the ground that the Government failed to state a cause of action in its complaint that he had been unjustly enriched at its expense. The court granted this motion. For practical purposes, this was the end of the case as the insurer, rather than defending on the ground that the release given by Bennett was good as against the rights of the Government, paid the Government's medical care claim. Thus, it is quite clear that the decision does not support the proposition that a general release given to the tort-feasor is good against the rights of the Government.

16. Letter from Comptroller General Campbell to the Hon. James 0. Eastland, May 28, 1962 in 1962 U.S. Code, Cong. & Ad. News, 2654-55.

17. Justice Order No. 287-62, 28 C.F.R. § 43.1-43.4 (1965) as amended by Justice Order No. 344-65, 30 Fed. Reg. 7819 (1965). The President through authority granted by the Act, § 2(a), directed the Attorney General to promulgate regulations to carry out the purposes of the Act. Exec. Order No. 11060, 27 Fed. Reg. 10925 (1962).

18. This is not to say, however, that the Government's claim against an insurer cannot be frustrated by the insured's failure to give

D. THE ACT

The bill, as passed by Congress, was signed into law by President Kennedy on September 25, 1962, and became effective on January 1, 1963. It provides that

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 or suffers a disease 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 or to be furnished and shall, as to this right be subrogated to any right or claim that the injured or diseased person, his guardian, personal representative, estate, dependents, or survivors has against such third person to the extent of the reasonable value of the care and treatment so furnished or to be furnished."

In addition, the President was given authority to prescribe regulations to carry out the Act, "including regulations with respect to the determination and establishment of the reasonable value . . ." of the expenses incurred.20 Accordingly, he ordered the Director of the Bureau of the Budget to "determine and establish" rates representing the reasonable value thereof.21

II

SOURCES OF COLLECTION

A. THE TORT-FEASOR AND HIS INSURER The typical case which arises under the Act is the one in which a serviceman has been provided hospital and medical care for injuries received in a vehicle accident the sole cause of which was the negligence of a third party. Other cases which arise with less frequency are: those in which the injury was caused by an assault and battery committed by a third person and the usual slip and fall situation. Where the tortfeasor carries insurance, administrative collection is generally a dickering process which revolves around the questions of negligence and the reasonableness of the medical charges. Settlement of these matters-especially when a

the insurer "reasonable” notice of the occurrence of the accident. On the contrary, it seems that if the insurer is not put on notice within the terms of the contract it might well refuse protection to the insured, thus forcing the Government to look directly to the tort-feasor for recovery. This emphasizes a need for notifying both the tort-feasor and his insurance carrier when the same is known. 19. 42 U.S.C. 2651(a) (1964). 20. 42 U.S.C. 2652 (a) (1964).

21. Exec. Order No. 11060, 27 Fed. Reg. 10925 (1962). As promulgated, the present rates are $42.00 per day inpatient care and $8.50 per visit for outpatient care. 29 Fed. Reg. 12482 (1965).

state guest statute 22 is in effect-is often difficult enough. However, the situation becomes doubly confused when the case involves a negligent uninsured motorist for then, assuming the person is judgment proof, it becomes necessary for the Government to look elsewhere for reimbursement.

B. INSURANCE POLICY MEDICAL PAYMENT
PROVISIONS

Under the medical payments clause of the ordinary automobile insurance policy, the insurer obligates itself "to pay all reasonable expenses incurred within one year of the date of the accident..." 23 for the necessary medical and funeral expenses incurred by the named insured or an occupant of a vehicle which he is operating. This clause is contractual in nature, without regard to the question of liability. In fact, collection by a passenger under the liability section of a policy does not necessarily foreclose his right to also collect from the insurer under the medical payments portion of the same policy because this provision is considered by some courts to create a separate and distinct contractual relationship.25

In those cases where the tort-feasor is financially irresponsible the question arises whether the United States may be subrogated to the rights of the injured party under this clause for the cost of the medical care it has provided. A situation somewhat similar has arisen under hospital service plans. There it is clear that, absent a contractual stipulation, the insurer is not subrogated to claims against tortious third persons.26 There are apparently no cases deciding the question whether, in the absence of a stipulation, subrogation is available to insurers in the case of medical payments coverage. However, their reluctance to press for subrogation in these matters strongly suggests that they believe it is not available.27

Under the Act, the United States is subrogated to the rights of an injured party where (1) it has freely provided medical care and (2) circumstances indicate the injuries were the result

22. See guest statutes, supra note 7.

23. United Services Auto. Assn. Vehicle Policy, Part II-Expense for Medical Services, Coverage C-Medical Payments. 24. Medical Payments, ibid.; Severson v. Milwaukee Auto. Ins. Co., 265 Wis. 488, 61 N.W. 2d 872 (1953) (dictum); Sims v. National Casualty Co., 43 So. 2d 26 (La. Ct. App. 1949).

25. Severson v. Milwaukee Auto. Ins. Co., supra note 24. 26. Michigan Hosp. Serv. v. Sharpe, 339 Mich. 357, 63 N.W. 2d 683 (1954), Accord, Public Cab Co. v. Colorado Nat'l Bank, 139 Colo. 205, 338 P. 2d 702 (1959) (relying on Sharpe). See also Royer v. Eskovitz, 358 Mich. 279, 100 N.W. 2d 306 (1960). 27. See Kimball & Davis, The Extension of Insurance Subrogation, 60 Mich. L. Rev. 841, 847 (1962).

of the negligence of a third party. Initially, this leaves one with the impression that the Government's rights are protected and therefore it might seek recoupment by subrogation to the rights which the injured party has under the medical payment provision.28 However, two very real and very difficult issues are present: (1) does the Act foreclose the United States from claiming an interest under the policy, and (2) is medical and hospital care freely provided by the Government actually an "incurred" expense under the policy? 29

The Act provides that the United States Government is to be subrogated to those rights which the injured party has against the tortious third party. Since it is clear that the medical payments clause is a contract between the insured and the company which has no bearing on the presence of a negligent third party, it would seem to follow that the Government would not have a subrogated interest under the statute. Such a strict interpretation, however, not demanded by the statute, would largely defeat the objectives of Congress as it would prevent the United States from recovering in a vast number of cases involving third party liability.30

Difficulty under the medical payments provision arises because that provision specifically limits the insured's right to recovery to those expenses which he has "incurred." The available cases indicate that the courts do not believe an individual who has been given gratuitous care at a federal hospital has incurred expenses for which he or anyone subrogated to his rights would have a right to recover.31 In United States v. St. Paul Mercury Indemnity Company 32 the Eighth Circuit considered a case in which a veteran had been admitted to a Veterans 28. See Bernzweig, Public Law 87-693: An Analysis and Interpretation of the Federal Medical Care Recovery Act, 64 Colum. L. Rev. 1257, 1268 (1964). This is an excellent discussion of the Act and should be read by all persons having any connection with claims arising thereunder. A copy may be obtained from the Judge Advocate General, Litigation and Claims Division, Rm. 2D326, Pentagon Building, Washington, D.C.

29. See Groce, Public Law 87-693: The Federal Medical Care Recovery Act-A Partial Dissent, Ins. L.J. 337 (June 1965).

30. Bernzweig, supra note 28 at 1268. Payment under the clause in these cases is a direct result of the negligent action of a third party. Therefore, the Government's rights under the Act should not necessarily be defeated merely because the clause does not condition payment on the presence of a third party tort-feasor. On the contrary, once it has been shown that the conditions of the statute have been met, it would seem quite arguable that the Government should be entitled to payment under the clause because the right of the injured party has accrued only because of the third party's action.

31. United States v. St. Paul Mercury Indemnity Co., 238 F.2d 594 (8th Cir. 1956); Gordon v. Fidelity & Casualty Company of New York, 238 S.C. 438, 120 S.E.2d 509 (1961); Drearr v. Connecticut General Life Insurance Co., 119 So.2d 149 (La. 1960).

32. Supra note 31.

Administration hospital for treatment of polio under a regulation 33 which provided that no charge would be made if the patient signed a statement to the effect that he was unable to pay for such service. The statement was signed and the veteran also assigned to the VA his rights under a polio insurance policy providing him with protection to the extent of $5,000 for "expenses actually incurred." The Government brought an action under this assignment for the reasonable value of the expenses it had incurred on behalf of the insured. The court held that the Government, being assigned the rights of the veteran, could not thereby legally obtain any more payment than the veteran. Since what he was entitled to receive under the statute was to be given without charge or obligation of any nature, it was concluded that what he accepted and received could hardly be termed an actual expense.

In a related case, a serviceman while on leave was injured in a vehicle accident and entered a private hospital for treatment. The medical and hospital bills were paid by the Navy under 10 U.S.C. 6203.35 This statute provides for payment by the Government for emergency care received by personnel on leave status at private facilities in those cases where Government facilities are not available. In a subsequent action by the injured party against the insurer, the court held that the expenses in question were incurred under the policy as he did contract to pay the same, and the fact that he had other arrangements for the payment of his expenses did not relieve the insurer from its contract obligation.36 By dictum the court indicated that where one is in a federal hospital it cannot be stated that he in any way incurs a debt.

It is apparent from the above that the courts applied the general definition 37 that for an expense to be incurred it must be shown that a liability or debt has accrued. The terms "liability" or "debt", however, are accordion in nature, flexing within the content in which they are placed. Therefore, it would be judicial simplicity to apply such a rule without first giving consideration to the facts at bar. In theory it seems that the injured serviceman does pay for his medical care just as any private individual. 33. 38 C.F.R. 17.48 (f) (1965) issued under the authority of 72 Stat. 1114, 38 U.S.C. 210.

34. American Indemnity Co. v. Olesijuk, 353 S.W. 2d 71 (Tex. Civ. App. 1961).

35. Act of August 10, 1956, ch. 1041, 70A Stat. 387, 10 U.S.C. 6203 (1964).

36. But see Neck v. Reliance Industrial Life Insurance Co., 159 So. 449 (La. App. 1935).

37. See 20a, Words and Phrases p. 452.

The care he receives is actually a part of the wages paid in return for the service he performs.38 Had he not been a member of the armed services, he would have drawn a salary from which payment for hospitalization would have had to be made. Thus the price of the medical care and hospitalization is borne by the individual, whether he be serviceman or not, in the form of the services performed. It is merely the manner of payment which is to determine whether a "liability" is to occur. On the one hand the courts imply that it does not occur because satisfaction has already been made in the form of services performed. However, they imply that it does occur on the other because care has been received for which "in kind" or monetary payment has not previously been made. This reasoning, however, seems to be shallow. Suppose that an individual does pay $100 for medical care to be received in the future. Certainly the courts would not hold that because the medical expenses were prepaid that the individual did not thereby incur an expense under the policy and was therefore barred from receiving payment. make sense then to hold that the serviceman has not incurred an expense for which he may be reimbursed? 39

Does it

The above notwithstanding, the statutory language and existing legal precedent in the area make collection under this policy provision extremely difficult and the Government generally finds itself empty handed at the end of the chase. When the funds are made available, however, they should certainly be tapped.

C. UNINSURED MOTORISTS PROVISIONS Under the uninsured motorists provision of an insurance contract the carrier agrees to pay to the insured

. . . all sums which the insured . . . shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury. . . arising out of the . . . use of such uninsured automobile."

38. See Gillis v. Farmers Union Oil Co., 186 F. Supp. 331, 338 (D.N.D. 1960) (dictum). It is a common knowledge that when service pay is considered by Congress, hospitalization and other privileges offered to servicemen are always alluded to as being part of compensation.

39. See Herrick v. Sayler, 160 F. Supp. 25 (N.D. Ind. 1958). 40. United Services Auto. Assn. Vehicle Policy, Part IV-Protection Against Uninsured Motorists, Coverage J-Uninsured Motorists (Damages for Bodily Injury). The insurer agrees

"To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called 'bodily injury,' sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile; provided,

41

"Insured" generally encompasses the named insured, any passenger he may have, and any person who is legally entitled to recover damages because of injury to either of the above insured. This protection has been developed to help alleviate the problems arising out of injuries caused by financially irresponsible motorists. It is clear from past litigation that the nature of this clause is contractual between the parties although premised upon the contingency of third party liability. The insurer is in no way the alter ego of the negligent party; it is insuring only injured parties covered by the policy against the risk of inadequate compensation.42

States recognizing the collateral source doctrine 43 will allow an insured to collect from the insurer under this clause the reasonable cost of hospital and medical care afforded to him by a service hospital" for injuries caused by the negligent uninsured motorist. Since the passage of the Act, the question has arisen whether the United States has acquired the right to collect for these expenses.

One approach would be that since the insurer's obligation to pay is predicated upon the tort

for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration. Under the clause, 'insured' means (a) the named insured and any relative; (b) any other person while occupying an insured automobile; and (c) any person, with respect to damages he is entitled to recover because of bodily injury to which this Part applies sustained by an insured under (a) or (b) above. The insurance afforded under Part IV applies separately to each insured, but the inclusion herein of more than one insured shall not operate to increase the limits of the company's liability."

41. Protection Against Uninsured Motorists, supra note 40. 42. Commissioners of the State Ins. Fund v. Miller, 4 App. Div. 2d 481, 166 N.Y.S. 2d 777 (1957); Hobbs v. Buckeye Union Casuality Co., 212 F. Supp. 349 (W.D. Va. 1962). Cf. Laird v. Nationwide Insurance Co., 243 S.C. 388, 134 S.E. 2d 206 (1964). Plaintiff had a judgment against an uninsured motorist which included a sum for punitive damages. In an action against the insurer under the uninsured motorists provision to collect the judgment, the court held that the insurer need not pay for the punitive damages but only the actual damages. The court said that the public policy of the uninsured motorists law is only to protect the insured against actions of the uninsured motorist and to allow him to collect for bodily injury. Punitive damages are considered something in addition to compensation for the injury. 43. As a general rule, total or partial compensation for an injury received by the injured party from a collateral source wholly independent of the wrongdoer will not operate to lessen the damages recoverable from the person causing the injury. 15 Am. Jur. Damages § 198 (1938).

44. Reyfield v. Lawrence, 253 F. 2d 209 (4th Cir. 1958); Gillis v. Farmers Union Oil, 186 F. Supp. 131 (D.N.D. 1960). But see Koons v. Nelson, 113 Colo. 574, 160 P. 2d 367 (1945) (The court implied in its opinion that it would not consider reimbursement to the plaintiff for the reasonable cost of medical care received from the Government); United States v. Gaidys, 194 F. 2d 762 (10th Cir. 1952) (The court denied reimbursement to the plaintiff for salary lost during his period of incapacity because his employer had continued to pay him).

Also, sub-part (c) normally includes as an insured any person entitled to recover damages from the uninsured motorist because of the bodily injury suffered by an insured.18 That the Government has a right to recover from the financially irresponsible tort-feasor can hardly be questioned since the passage of the Act. Furthermore, the fact that the insured should here be defined as a "person" should cause little trouble as it has been held many times that the United States is a "person" within the meaning of provisions applying to persons.19

It is apparent from the foregoing that the United States does fit very nicely within the policy definition of insured as (1) it is a person (2) entitled to recover damages from an uninsured motorist (3) for hospitalization and medical care afforded to the insured or his passenger for bodily injury (4) which arose out of an accident with an uninsured automobile. Certainly it is just this type of claim which was contemplated

45. Bernzwieg, supra note 28 at 1268. 46. Groce, supra note 29.

47. This approach is being used by the Department of Justice in a case against the Government Employees Insurance Co. The case was argued in the U.S. District Court in Alexandria, Virginia on 1 October 1965. A decision has not been handed down as of this writing.

48. Uninsured motorists coverage, supra note 40. 49. E.g., Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 91-3 (1934) (United States a "resident, corporate or otherwise," within the meaning of federal statute); Ohio v. Helvering, 292 U.S. 360, 370 (1934) (United States within federal statute applying to "every person who sells or offers for sale foreign or domestic distilled spirits"); McCrary v. United States, 235 F. Supp. 33 (E.D. Tenn. 1964) (United States a "person or organization legally responsible for the use" of the insured automobile under the liability policy); Patterson v. United States, 233 F. Supp. 477 (S.D. Tenn 1964) (Same).

when sub-part (c) was drawn up. The fact that it applies to the Government should make no difference.50

It is again emphasized that the right here exercised is one under contract and not the provisions of the Act. The Act has only provided the United States with an action against the uninsured motorist, a condition precedent to a right under the contract. That the United States has the right to bring an action on a contract without benefit of statute was recognized long ago.51 It was again tested and upheld in a recent series of cases strikingly similar to the problem at hand.52 The United States had impleaded insurers in actions brought against it for damages for injuries suffered in collisions between the injured parties and automobiles owned by employees of the Government which were being operated by them in the course of their work. The Government's lawyers contended that the United States was an insured within the language of the omnibus clause 55 contained in each of the private motor vehicle policies carried by the employees and therefore the insurance carriers were liable to pay any judgment against the Government up to the policy limits. The courts upheld this contention. Of definite influence in the earlier cases was the fact that an action could have been brought against the tort-feasor himself and the insurer would have been obligated to defend such suit and pay all damages which might have been recovered. That the Federal Tort Claims Act was later amended 55 so as to provide that an

54

50. It is noted that the typical uninsured motorist coverage includes an exclusion clause. However, it appears that this would not interfere with the Government's case as its closest applicability to our situation only precludes a recovery which would benefit a workmen's compensation carrier or organization qualifying as a self-insurer under such laws or any similar law. See United Services Auto Assn. policy, Part IV, Exclusions.

51. The right was asserted in Dugan v. United States, 16 U.S. (3 Wheat) 172 (1818), was recognized in United States v. Buford, 28 U.S. (Pet.) 12, 28, (1830), and was reasserted in United States v. Tingey, 30 U.S. (Pet.) 115, 127-8 (1831).

52. Government Employees Ins. Co. v. United States, 349 F.2d 83 (10th Cir. 1965); McCrary v. United States, 235 F. Supp. 33 (E.D. Tenn. 1964); Patterson v. United States, 233 F. Supp. 447 (E.D. Tenn. 1964); Gahagan v. United States, 233 F. Supp. 171 (W.D. La. 1964); Vaughn v. United States, 225 F. Supp. 890 (W.D. Tenn. 1964); Nistendirk v. United States, 225 F. Supp. 884 (W.D. Mo. 1964); Irvin v. United States, 148 F. Supp. 25 (D.S.D. 1957); Rowley v. United States, 140 F. Supp. 295 (D. Utah 1956). But see Gipson v. Shelley, 219 F. Supp. 915 (E.D. Tenn. 1963); Myers v. United States, 241 F. Supp. 515 (N.D. Tex. 1965).

53. Such a clause normally provides that an insured under the policy will include "any.. person or organization but only with respect to his or her liability because of acts or omissions of the named insured in the policy or any person using the owned vehicle with his permission". See United Services Automobile Assn. policy, Part I-Liability, Persons Insured.

54. Irvin v. United States, supra note 52; Rowley v. United States, supra note 52.

55. 62 Stat. 984, as amended 75 Stat. 539, 28 U.S.C. 2679 (b) (1964).