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ASSOCIATED HOSPITAL SERVICE PHILADELPHIA v. ALAN PUSTILNIK (12/24/81)

decided: December 24, 1981.

ASSOCIATED HOSPITAL SERVICE OF PHILADELPHIA,
v.
ALAN PUSTILNIK, APPELLANT



No. 288 January Term, 1979, Appeal from the Order of the Superior Court dated January 19, 1979, at Nos. 1136 & 1223 October Term, 1977, Reversing the Order of February 15, 1977, of the Court of Common Pleas of Philadelphia at No. 366 December Term, 1972.

COUNSEL

Raymond T. Cullen, Thomas A. Schneider, Philadelphia, for appellee.

Barry J. Goldstein, Malcolm H. Waldron, Jr., Stephen M. Feldman, Philadelphia, for appellant.

O'Brien, C. J., and Roberts, Nix, Larsen, Flaherty, Kauffman and Wilkinson, JJ. Larsen, J., filed a concurring opinion. Wilkinson, J., dissents.

Author: Roberts

[ 497 Pa. Page 223]

OPINION OF THE COURT

This is an appeal from an order of the Superior Court awarding appellee Associated Hospital Service of Pennsylvania (Blue Cross) the full amount of Blue Cross credits to appellant Alan Pustilnik's hospital bills, $18,960.18, less a reasonable attorney's fee, in satisfaction of appellee's claim as subrogee upon the proceeds of a $235,000 settlement between appellant and a third-party tortfeasor. We hold that appellee Blue Cross's recovery as subrogee must be limited to the amount actually paid by Blue Cross on behalf

[ 497 Pa. Page 224]

    of appellant, less a reasonable attorney's fee. Accordingly, we vacate the order of the Superior Court and remand for proceedings consistent with this opinion.

The relevant facts are not in dispute. On May 27, 1968, appellant was seriously injured when he was struck by a Southeastern Pennsylvania Transportation Authority (SEPTA) subway car in Philadelphia. Appellant required three separate periods of hospitalization, resulting in medical bills of $30,200.87, against which appellant received a credit of $18,960.18 pursuant to the terms of his subscription agreement with Blue Cross. Included in this subscription agreement was a provision setting forth the right of Blue Cross to subrogation against any recovery for his injuries which appellant might obtain from a third party.

Shortly after the accident, appellant instituted suit against SEPTA, claiming $500,000 in damages, including all medical expenses. While the suit was pending, Blue Cross notified appellant and his attorney of its subrogation interest and invited appellant's attorney to represent its interest in the suit. However, no agreement as to an appropriate attorney's fee could be reached. Blue Cross did not seek other representation, but continued to advise appellant's attorney of the increase in its subrogation interest resulting from appellant's second and third hospital stays.

On the fifth day of trial, before a verdict was returned, appellant settled his suit against SEPTA for $235,000. Upon learning of the settlement, Blue Cross immediately notified SEPTA and the trial judge of its subrogation claim. When appellant and Blue Cross were unable to agree on the amount of Blue Cross's subrogation interest, the trial judge place $30,000 of the settlement proceeds into an escrow fund. Blue Cross subsequently brought an action in equity to obtain an adjudication of the sum to which it was entitled as subrogee.

In November, 1975, trial was held in the Court of Common Pleas of Philadelphia. The trial court ruled that Blue Cross was entitled to recover the amount it had spent on appellant's ...


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