INSURER SATISFIED HOSPITAL LIEN BY ISSUING CHECKS CO-PAYABLE TO INJURED PARTIES AND HOSPITAL

November 5, 2012

Recently, the Corpus Christi Court of Appeals held that an insurer that issued checks co-payable to the hospital and injured parties satisfied its statutory duty to protect the hospital lien even though the injured party cashed them without the hospital’s endorsement.   In McAllen Hospitals, L.P. v. State Farm County Mutual Insurance Company of Texas, 2012 WL 52929026 (Tex. App.-Corpus Christi, October 25, 2012), State Farm settled claims on behalf of its insured and recognizing that there was a hospital lien, State Farm included the hospital on the settlement checks.  The injured parties, however, cashed the checks without the hospital’s endorsement and failed to pay off the lien.  The hospital then sued several defendants including State Farm alleging in part that State Farm violated the Texas Hospital and Emergency Medical Services Lien statutes.  State Farm moved for summary judgment and the trial court found that State Farm fully discharged its duty to protect the liens.  The hospital appealed.

On appeal, the court reviewed the hospital lien statute and noted that it was undisputed that the hospital had perfected its lien.  The court observed that the key issue was “whether State Farm’s action of naming MMC as co-payee on the…settlement drafts sufficiently complied with the pertinent statutes.”  After considering the arguments of both parties and related case law from sister courts, the court found that State Farm’s inclusion of the hospital on the settlement checks delivered to the injured parties discharged State Farm’s statutory duty, which then shifted to the injured parties.  And it was their duty to get the hospital’s endorsement and satisfy the lien amounts.  Accordingly, summary judgment in favor of State Farm was upheld.