INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Hospital Lien Act debated
In December 2017, the Long Beach Medical Center treated Vernon Barnes for injuries he received in a car accident. Afterward, Barnes submitted a personal injury claim to Allstate, which insured the driver Barnes claimed was at fault in the accident. The medical center informed Allstate by letter that Barnes had incurred $116,714.67 in expenses for his treatment at the medical center and that the medical center was asserting a lien for that amount under the Hospital Lien Act (HLA).
In February 2020, Barnes and Allstate settled his claim for $300,000. The settlement agreement provided that Allstate would pay this amount by sending Barnes’s attorneys three checks: one made payable to Medicare for $24,230.93, one made payable to Barnes and his attorneys for $159,054.40, and one made payable to Barnes and the medical center for $116,714.67, the amount of the lien. The settlement agreement also provided that Barnes and his attorneys would indemnify, defend, and hold harmless Allstate and its insured against claims by the medical center or anyone else with a statutory right of recovery against Allstate and its insured.
Later, in February 2020, Allstate sent Barnes’s attorneys a check for $116,714.67 made payable to Barnes and the medical center (the February check). That check, however, was never deposited, and by March 2021 it had expired. At that time, Allstate sent Barnes’s attorneys a second check for the same amount made payable to the same parties (the March check). To Allstate’s knowledge, that check was never cashed.
In May 2021, the medical center filed an action against Allstate, asserting a single cause of action for violating the HLA. The medical center alleged that Allstate, having received written notice of the medical center’s lien regarding Barnes’s medical treatment, violated the HLA by paying Barnes to settle his personal injury claim without paying the medical center the amount of its lien.
Allstate filed a motion for summary judgment, contending that the medical center could not establish one or more elements of its cause of action. Specifically, Allstate argued that the undisputed facts established that it “protected the lien by issuing a two-party check including [the medical center] as a payee on the check” or, alternatively, that “there has been no payment because the multi-party check has not been cashed.” Allstate did not specify whether the check it referred to was the February 2020 check or the March 2021 check. But the gist of Allstate’s argument appears to have been that, by delivering to Barnes’s attorneys a check for $116,714.67 made payable to Barnes and the medical center, Allstate had either (a) made a payment to the medical center for the amount of its lien or (b) made no payment to either Barnes or the medical center because no such check was ever cashed.
In either event, according to Allstate, the medical center could not establish that Allstate made a settlement payment to Barnes without paying the medical center the amount of its lien.
In opposition, the medical center agreed that the undisputed facts established that Allstate had not paid it the amount of its lien because no check payable to the medical center had been cashed. The medical center disagreed, however, that this also meant that Allstate had not made a settlement payment to Barnes. The medical center pointed out that the settlement agreement between Barnes and Allstate called for Allstate to send Barnes’s attorneys a separate check payable to Barnes and his attorneys for $159,054.40. The medical center also cited an exhibit of a declaration by counsel for Allstate in support of the motion for summary judgment that appeared to show that just such a check had been issued, mailed, and cashed in February 2020.
The trial court granted Allstate’s motion for summary judgment. The medical center appealed.
On appeal, the medical center contended that the trial court erred in ruling that Allstate demonstrated that the medical center could not establish that Allstate made a settlement payment to Barnes without paying the medical center the amount of its lien. The court agreed.
Allstate declined to specify which check made payable to the medical center as co-payee it claimed satisfied its payment obligation to the medical center—the February 2020 check or the March 2021 check. But the court said that did not matter: Neither check was a payment to the medical center.
Allstate argued that the check(s) in question constituted payment to the medical center because a “check issued to multiple payees, delivered to one payee, is delivery of a check.” The court said, however, the fact that Allstate may have delivered the check(s) to the medical center does not mean that Allstate made a “payment” to the medical center. As a general rule, a check of itself is not payment until cashed.
There is no evidence that either check Allstate made out to the medical center as a co-payee was ever cashed. In fact, it appears undisputed that neither was.
Finally, Allstate argued that “public policy supports a finding that [its] conduct did not violate the HLA.” Allstate suggested that the medical center was not harmed by the manner in which Allstate purported to satisfy its obligations under the HLA because “when a check is delivered to one of multiple payees, all payees [must] negotiate the check,” and all the medical center “had to do was resolve the lien with Mr. Barnes.”
Allstate, however, cites no authority authorizing courts to create a public policy exception to the HLA. And Allstate’s argument that the medical center suffered no harm because it could “resolve” its lien with Barnes seems disingenuous: The obvious point of including Barnes as co-payee was to empower him to negotiate keeping some portion of the amount of the medical center’s lien for himself. The HLA does not condition the hospital’s right to payment on the timing or resolution of a negotiation between the patient and the hospital.
The court of appeal reversed the judgment of the trial court and directed the court to vacate its order granting Allstate’s motion for summary judgment and enter a new order denying the motion. The medical center was to recover its costs on appeal.
Long Beach Memorial Medical Center v. Allstate Insurance Company—Court of Appeal of the State of California, Second Appellate District, Division Seven—No. 21STCV17810—September 19, 2023.
