Medical Liens – Who Pays?

June 2, 2014

In its recent decision in Watertown Reg’l Med. Ctr. v. Gen. Cas. Ins. Co., No. 2013AP2511, slip op. (Wis. Ct. App. Apr. 17, 2014) the Court of Appeals addressed responsibility for the payment of hospital liens in the context of a personal injury action. The hospital provided treatment to an injured person and placed General Casualty, the insurer of the person causing the injury, on notice of its lien. General Casualty ultimately negotiated a settlement with Hupy & Abraham, who represented the injured person. Hupy & Abraham disbursed the proceeds of the settlement without paying the hospital lien. The hospital sued both General Casualty and Hupy. It did not sue the injured person.

The trial court found both General Casualty and Hupy & Abraham were liable to the medical center for its lien. The Court of Appeals concluded, while General Casualty was legally responsible, Hupy & Abraham was not.

The court relied on the language of Section 779.80, the Hospital Lien Statute. They focused on subsection (4) of that statute, which provides the lien is valid against “the person making any payment to such injured person or legal representative as compensation for the injuries.”

The court concluded the plain language of the statute made General Casualty liable to the hospital as a person making payment as compensation for injuries. The court found the Hupy firm was not such a person, but was simply passing on the payment from General Casualty to its client.

General Casualty argued it was entitled to be reimbursed by Hupy since the settlement clearly included any and all liens or subrogation claims. That specific language appeared in the release executed by the injured person and approved by the Hupy firm.

The court held the Hupy firm was not liable, because the release provided the liens would be satisfied by the “undersigned.” The court found the undersigned was the injured party, not the Hupy firm. The mere fact the firm approved the release did not make it responsible for the satisfaction of the lien. The court also noted the mediation agreement required the injured party satisfy the liens, but made no mention of any duty on the part of Hupy to do so.

General Casualty argued alternatively Hupy should be responsible based on its negligence in failing to satisfy the liens or based on equitable estoppel. The court noted a lawyer is not liable to a third party for acts committed in the exercise of his duty as an attorney. The court also rejected the equitable estoppel claim, noting it was based on actions that were taken after General Casualty had entered into the settlement and paid the agreed-upon amount.

The decision raises concerns for insurers. While I believe most lawyers who represent injured persons would have taken steps to resolve the lien, the Court of Appeals concluded they are not obligated to do so. In order to protect themselves, settling insurers and their counsel should consider taking one or more steps.

First, language could be inserted in the release requiring Plaintiff’s attorney to ensure any liens or subrogation claims are satisfied from the proceeds of the settlement. Second, the transmittal letter forwarding the release and/or the check could contain language which specifically states the check is being forwarded with the express understanding that the plaintiff’s attorney will ensure any outstanding liens or subrogation claims are satisfied. Both attorneys for the parties and mediators should consider adding language to any mediation agreement which makes it clear the obligation to satisfy any liens or subrogation claims rest with both the injured person and his attorney.

Any of these options would likely have resulted in Hupy being found liable to indemnify General Casualty, although it would not have made the firm directly liable to the hospital.

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