Florida Supreme Court Rules on Conflict Between Hospital Liens and Insurance Coverage in a Car Accident Case: Shands Teaching Hospital v. Mercury Insurance
After a woman received an insurance settlement for injuries she sustained in a car accident, a dispute arose between the insurance company and the hospital that treated her over payment of the hospital’s lien. In many personal injury cases, receipt of a settlement or judgment is far from the end of the case. Medical providers and insurers may have claims to all or part of a settlement or judgment amount, and they sometimes fight amongst themselves for how to split a limited amount of money. In Shands Teaching Hospital v. Mercury Insurance, an insurance company asked the Florida Supreme Court to rule on the constitutionality of laws allowing private hospitals to impose primary liens on injury settlements. The court found the state law to be unconstitutional, but upheld the county ordinance.
The case originated with a claim for personal injuries by a woman injured in a car accident. The woman sought treatment at Shands Teaching Hospital in Gainesville, Florida, and received care valued at $38,418.20. A law enacted by the Florida Legislature known as the Alachua County Lien Law (the “Lien Law”), and an ordinance passed by the county known as the Alachua County Lien Ordinance (the “Ordinance”), enabled the hospital to perfect a lien against any potential settlements or judgments that the woman might receive as a result of the accident.
The driver who struck the woman had an auto insurance policy through Mercury Insurance Company of Florida that provided $10,000 in bodily injury coverage and $10,000 in Personal Injury Protection (PIP). Mercury settled for $10,000 in exchange for her signed release. The release did not include Shands, which had already perfected its lien. Shands sent Mercury a copy of its lien, and Mercury sent it $10,000, representing the remaining amount available under the policy. Alleging that Mercury had impaired its lien, Shands sued Mercury for the remaining lien amount, $28,418.20.
The trial court held that Mercury impaired Shands’ lien and that, had Mercury not done so, the underlying injury suit could have yielded a far greater judgment than merely the cost of treatment. The court also ruled that these were nominal damages with no real economic value, because any judgment over $10,000 would not have been collectible. Mercury appealed, asserting several constitutional arguments.
Both the Lien Law and the Ordinance provide that nonprofit hospitals in Alachua County may obtain a lien for reasonable health care costs, and that such liens cannot be released through a lawsuit or settlement without the hospital’s agreement. Mercury argued on appeal that this violated Article III, Section 11(a)(9) of the Florida Constitution, which prohibits any “special law” that creates “liens based on private contracts.” The appellate court reversed the trial court, finding both the Lien Law and the Ordinance to be unconstitutional.
The Florida Supreme Court agreed that the Lien Law is unconstitutional, but it held that the Ordinance is constitutionally permissible. It found that the Ordinance was enacted separately from the Lien Law, and that it does not fall under the prohibitions in Article III, Section 11(a)(9) of the state constitution because it is not a “special law.” The court therefore remanded the case to the trial court, finding that the trial court had entered the correct judgment for the wrong reasons.
The attorneys at Cohn & Smith help recover compensation for people in South Florida who have suffered injuries or lost loved ones in automobile accidents. To schedule a free and confidential consultation with one of our lawyers, contact us today online, at (954) 431-8100, or at (305) 624-9186.
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