COA finds insurance company not liable for more than policy cap

Editor’s note: This article has been updated.

A dispute between a Fort Wayne hospital and an insurance company over payment of medical care returned to the Court of Appeals of Indiana, which found the insurance provider’s obligation under the state’s Hospital Lien Act is not greater than its policy limits.

Parkview Hospital filed a lien under Indiana’s Hospital Lien Act, Indiana Code §§ 32-33- 4-1 to -8 (2015), after it provided $95,541.88 in medical care to Carl Willis. Although he was injured in an auto accident in Ohio, Willis was treated at Parkview.

Willis filed a personal injury lawsuit in Ohio against the parties responsible, American Family and several other defendants. Eventually, the lawsuit was settled but Parkview was not informed and its lien was not satisfied. The Ohio court then ordered American Family to issue the settlement check for $50,000 made payable to Willis and his wife and their attorney, Bolotin Law Offices.

Parkview responded by filing a complaint in Allen County against American Family and Willis. The hospital obtained a default judgment against Willis. When the trial court denied the motions for summary judgment filed separately by American Family and Parkview, the parties filed an interlocutory appeal.

In Parkview Hosp. Inc. v. Am. Fam. Ins. Co., 151 N.E.3d 1218 (Ind. Ct. App. 2020), the Court of Appeals concluded the Ohio court’s order did not justify American Family’s failure to comply with the lien act, and the insurance company violated the act when it paid the settlement proceeds to the Ohio plaintiffs and their attorney without satisfying Parkview’s lien. On the question of whether American Family had violated the Act, the appellate panel held that Parkview was “entitled to judgment as a matter of law.”

On remand, the trial court entered judgment for Parkview in the full amount of the lien, or $95,541.88. The court tacked on additional costs including prejudgment interest of 8% per annum from April 2, 2018.

The case was again appealed to the Court of Appeals, with American Family filing a cross-appeal, arguing the trial court erred when it awarded Parkview the full amount of its hospital lien rather than capping the liability the insurance policy’s limit of $50,000.

In Parkview Hospital, Inc. v. American Family Insurance Company, 21A-PL-1369,  the Court of Appeals agreed and reversed the trial court’s judgment that American Family had to pay more than the policy’s $50,000 cap.

In reviewing the hospital lien statute, the appellate panel noted the language provides for “the release or settlement of a claim with a patient by a person claimed to be liable for damages incurred by the patient … .”

The Court of Appeals also pointed out its first opinion in this case and said Parkview wrongly identified American Family as insuring Joseph Gregg and Michael Gregg, the parties responsible for the accident. American Family insured Willis and provided the underinsured motorist coverage while State Farm Insurance Co. insured the Greggs.

At the outset, the appellate court noted, Parkview’s attempt to recover the full amount of its hospital lien from American Family was based on the faulty premise that the insurance company provided liability coverage for the parties responsible for the injuries.

“… We conclude that because American Family insured the patient and not ‘a person claimed to be liable for the damages incurred by the patient,’ American family is not chargeable for the entire ‘reasonable cost of the hospital care, treatment, and maintenance’ that Parkview provided to the patient,” Judge Edward Najam Jr. wrote.

“Had American Family done what it should have done and included Parkview as a payee on its $50,000 settlement draft, Parkview would have received all it was due from American Family,” Najam continued. “When American Family failed to comply with the Act, it assumed the risk of having to pay the $50,000 policy limits twice, but that failure does not entitle Parkview to be placed in a better position than it would have been if American Family had simply complied with the Act in the first instance.”