Here is one for people in Weatherford, Grand Prairie, Fort Worth, Dallas, Aledo, Richardson, Garland, Mesquite, Irving, and anywhere else in Texas to know. It regards insurance settlements and hospital liens.
This is an opnion issued on March 17, 2011, by the Texas Court of Appeals, First District, Houston. The style of the case is, Memorial Hermann Hospital System v. Progressive County Mutual Insurance Company.
In this case, Progressive settled a claim brought against one of its insureds arising out of injuries in a car accident. Memorial filed a hospital lien for the cost of medical treatment to the injured person half an hour before Progressive issued the settlement check. Under the Texas Hospital Lien Law, a hospital “has a lien on a cause of action or claim of an individual who receives hospital services for injuries caused by an accident that is attibuted to the negligence of another person.” Texas Property Coce, Section 55.002. To secure the lien, Section 55.005 requires the hospital file notice with the county clerk before payments to the entitled party. The statute also declares that the county clerk “shall index the record in the name of the injured individual.”
A hospital lien usually attaches to settlement proceeds, and an insurance company usually names the hospital lienholder as a payee on the settlement check. But in this case, because the clerk had not yet indexed the lien, Progressive maintains that it was unaware of the lien and, therefore, it did not name Memorial as a payee.
In this case Memorial contends that the lien is secured on filing, and thus it was entitled to allocation of the settlement proceeds. The court agreed.
Progressive had issued the check at 3:23 PM on December 12, 2007. Thirty minutes before, Memorial had filed its notice of lien with the Harris County Clerk’s Office. Before issuing the check, Progressive conducted a lien search on the county clerk’s website. It had conducted two searches, one at 2:25 PM and the other at 3:30 PM.
According to the county clerk, the process of recording and indexing the lien usually takes two business days after filing. In this case, the lien was not indexed until December 17, 2007.
This case concerns the proper reading of the hospital lien statute. In interpreting the statute, the court, according to the Texas Government Code, Section 311.023, is to consider the legislatures intent in: the object sought to be obtained; the circumstances of the statute’s enactment; the legislative history; the common law or former statutory provisions, including laws on the same or similar subjects; the consequences of a particular construction; administrative construction of the statute; and the title, preamble, and emergency provision. Per Section 311.021, the court also presumes that the legislature intended a just and reasonable result; a result feasible of execution; the entire statute to be effective; and the public interest to be favored over any private interest.
The court stated, “We read the plain language of Section 55.005 as providing that a lien is secured when the lienholder properly files with the county clerk a written notice of lien that complies with the statutory requirements.” The court then further discusses what the language of Section 55.005 means.
They tell us that, “Subsection (c) requires the county clerk to index the lien, but does not set any deadline.” Progressive argued that Section 13.002 of the Property Code, which declares that a properly recorded instrument is “notice to all persons of its existence” and “subject to inspection by the public,” is evidence that the legislature intended that proper recordation be necessary to provide the public notice. According to Progressive, the provision’s emphasis on recording, rather than filing, supports the conclusion that the lien is not effective until it is properly recorded.
This court says, “The Propery Code, however, specifies that the duty of proper recordation belongs to the county clerk. Section 11004(a).” This section gives the clerk “within a reasonable time after delivery” as leeway in getting the document filed.
In this writer’s opinion, the court got this case completely wrong. The purpose of having a lien filed is to put the world on notice of the lien. All the world had to do is search the county records. Yet if the clerk has not filed the lien, how does the world know of it’s existence.
There are remedies to this situation, but to work it out, an experienced Insurance Law Attorney is needed.
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