• Philadelphia American Life Insurance Co. v. Buckles No. 09-12533 (11th Cir. Oct. 23, 2009) (per curiam)
  • December 21, 2009 | Authors: Matthew T. Fornataro; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The Eleventh Circuit held that the phrase “actual charges incurred” in a supplemental health insurance policy was unambiguous and referred to the amount actually accepted as full payment by a hospital rather than the amount charged. The defendant (“Buckles”) had purchased a supplemental health insurance policy from Central States Health & Life Insurance Co. of Omaha (“CSH”), which covered any “actual charges incurred” above those paid by his primary insurer. When Buckles was diagnosed with a covered disease, his primary insurer paid the hospital treating him a reduced, negotiated rate which the hospital accepted as payment in full.

    Subsequently, Philadelphia Life Insurance (“ Philadelphia”) acquired the supplemental policy and filed a declaratory judgment seeking construction of the phrase “actual charges incurred.” Buckles responded with a counterclaim for declaratory judgment. Granting Philadelphia’s motion for summary judgment, the lower court held that “actual charges” meant the amount billed by the provider, but that “actual charges incurred” represented the reduced amount that the hospital accepts from an insurance company as full payment. Buckles appealed and the Eleventh Circuit affirmed.

    On appeal, Buckles argued that the district court erred by construing the policy against him in light of the ambiguity of the phrase at issue and the extrinsic evidence available, namely that CSH had already paid him for the amounts billed rather than the amounts accepted by the hospital as full payment. The court rejected Buckles’s argument that the phrase “actual charges incurred” was ambiguous, however, because the dictionary defines “incurred” to require the insured to pay for or become liable for the charge. Thus, the plain meaning of “actual charges incurred” is the “amount the provider accepts from an insurer as full satisfaction of the policyholder’s liability.”

    In this case, because the payments made under the primary insurance policy were accepted as full payment, Buckles did not incur any liability. Reading the contract such that Buckles could recover an amount above that which was accepted as full payment by the hospital would “give him a benefit based on a fictional amount and lead to an absurd result.” Thus, the court held that the phrase “actual charges incurred” was not ambiguous and extrinsic evidence could not be considered.