Automobile Insurer Liable in Indiana Case for Hospital Lien Arising Out of Settled Ohio Auto Accident Case For Failing to Comply with Indiana Hospital Lien Act

The Indiana Court of Appeals recently held in Parkview Hosp. Inc. v. Am. Family Ins. Co. that a hospital was entitled to judgment as a matter of law on its hospital lien claim against an automobile insurance company that paid settlement funds directly to an injured party pursuant to an Ohio court order due to the insurance company’s failure to comply with the Indiana Hospital Lien Act. After suffering injuries in a car accident in Ohio, Carl Willis (“Willis”) received treatment for his injuries at Parkview Hospital (“Parkview”) in Allen County, Indiana with a balance due of $95,541.88 for the treatment provided at Parkview. Parkview filed a hospital lien in Allen County, Indiana pursuant to the Hospital Lien Act, Ind. Code § 32-33-4-4, and provided notice of such lien to Willis, Willis’ attorney, and American Family Insurance Company (“American Family”). Willis thereafter filed suit in Ohio against the parties responsible for the accident and American Family.

The Ohio trial court granted a motion to join Parkview as a party plaintiff in the Ohio action, ordering Parkview to appear or otherwise waive its rights. Parkview disputed that the Ohio court had subject matter jurisdiction over its claim and did not appear in the action. After settling the claim, Willis filed a motion to enforce the settlement agreement, which the Ohio trial court granted, ordering American Family to pay Willis $50,000.00 and ordering Willis to execute a hold harmless agreement with respect to any remaining valid liens. Parkview was not notified of the motion to enforce settlement agreement or order. The Ohio case was thereafter dismissed with prejudice.

Parkview then filed a complaint in Allen County, Indiana against Willis and American Family. Default judgment was entered against Willis. American Family and Parkview filed motions for summary judgment. American Family argued Parkview’s claim was barred based upon the proceedings in Ohio. Parkview argued that American Family violated the Hospital Lien Act. The trial court denied American Family’s motion finding the Ohio court did not have subject matter jurisdiction over Parkview’s hospital lien claim. The trial court also denied Parkview’s motion finding there existed a genuine issue of material fact as to whether American Family was justified in complying with the Ohio trial court’s order requiring it to pay the settlement proceeds to Willis.

Indiana’s Hospital Lien Act serves to ensure hospitals are compensated for their services and to provide notice of a hospital’s right to recover directly from a settlement or judgment. To perfect a hospital lien, the hospital must file the lien in the office of the recorder of the county in which the hospital is located within 90 days after a person is discharged from the hospital and no later than the date of a final settlement, compromise or resolution, and provide notice of the lien to each person claimed to be liable, to the attorney representing the patient, and to the department of insurance. Ind. Code § 32-33-4-4. A hospital lien is not applicable to certain persons, including those covered by worker’s compensation laws and Medicare, or claims for medical payments coverage, is inferior to any attorney’s lien, must first be reduced by benefits to which the patient is entitled under health insurance and reflect a credit for insurance payments and adjustments, and must be reduced on a pro-rata basis to ensure the patient receives at least 20% of the full settlement or compromise. Ind. Code § 32-33-4-3. Most importantly to this case, a person contesting a hospital lien may do so by filing a motion to quash or reduce the claim in the circuit court, superior court, or probate court in which the lien was perfected, Ind. Code § 32-33-4-4(e), and a hospital lienholder is entitled to damages for the reasonable cost of the hospital’s treatment if a person claimed to be liable for damages enters into a release or settlement with the patient after the lien has been filed and without first obtaining a release of the hospital lien, Ind. Code § 32-33-4-6.

There was no dispute in this case that Parkview properly perfected its lien pursuant to the Hospital Lien Act and that American Family paid the settlement proceeds to Willis without first satisfying Parkview’s hospital lien. While American Family noted that hospitals are required under the Hospital Lien Act to enter in writing their intention to hold a lien in the docket where a judgment is entered, Ind. Code § 32-33-4-1, the Court of Appeals found this section inapplicable as the Ohio case was dismissed with no judgment entered. Therefore, the two issues before the Court were whether the Ohio court’s orders were entitled to full faith and credit by the Indiana trial court, and whether justification was a defense to American Family’s failure to follow the Hospital Lien Act.

The United States Constitution requires state courts give full faith and credit to the public acts, records, and judicial proceedings of every other state. U.S. Const. art. IV, § 1. However, out-of-state judgments can be collaterally attacked based upon the lack of personal or subject matter jurisdiction, such that full faith and credit is not required, so long as the issue of jurisdiction was not fully and fairly litigated and finally decided in the first state. Here, while not arguing that the Ohio trial court had subject matter jurisdiction, as the Hospital Lien Act required any dispute of the hospital lien be raised in the circuit, superior or probate court in which the lien was filed, American Family argued subject matter jurisdiction was fully and fairly litigated in the Ohio court.

The Indiana Court of Appeals disagreed that subject matter jurisdiction had been fully and fairly considered and finally decided by the Ohio court, noting that Willis and American Family were aware of Parkview’s subject matter jurisdiction concerns, Parkview did not participate in the Ohio proceedings, and there was no indication the Ohio court considered Parkview’s subject matter jurisdiction concerns and the controlling provisions of the Hospital Lien Act. Therefore, the Court found the Ohio court’s orders were not entitled to full faith and credit and were void with no effect.

As to justification as a defense, the Indiana Court of Appeals disagreed with the Indiana trial court that a genuine issue of material fact existed, and instead considered the issue as a legal one. Based upon its decision that the Ohio court orders were void with no effect, the Court of Appeals found that such orders could not therefore provide a basis for justification as to American Family’s failure to comply with the Hospital Lien Act. The Court found Parkview’s lien was properly perfected, the lien was not contested by American Family in Allen County, and American Family paid the settlement proceeds without first satisfying Parkview’s hospital lien in violation of the Hospital Lien Act. The Court accordingly affirmed the Indiana trial court’s denial of American Family’s motion for summary judgment but reversed the trial court’s denial of Parkview’s motion for summary judgment and remanded the case for further proceedings consistent with the opinion.

You can read the full opinion here.