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Court Decision| LEE MEMORIAL HEALTH SYSTEM v. PROGRESSIVE SELECT INSURANCE COMPANY

October 25, 2017 | Fla. 2d DCA

Facts

The case arises from an automobile accident when Ruben Gallegos was struck by a car and injured.  Mr. Gallegos received hospital care from the Lee Memorial Health System (LMHS).  LMHS ultimately recorded two liens regarding the services rendered to Mr. Gallegos.  The driver of the car who struck Mr. Gallegos was insured by Progressive and MGA Insurance Company.  Mr. Gallegos ultimately signed and delivered a release to Progressive to settle his claim.

LMHS filed a lawsuit against Progressive and MGA Insurance Company alleging that both insurers impaired their lien filed against Mr. Gallegos.  LMHS alleged that the balance of their liens remained unpaid.  MGA Insurance Company was dismissed from the lawsuit (due to settlement), and Progressive litigated the case on the merits.

Summary Judgment

Specifically, Progressive filed a Motion for Summary Judgment arguing in part, (1) that chapter 2000–439, section 18, “is unconstitutional as a special law pertaining to the creation, enforcement, extension and/or impairment of liens based on private contracts in violation of Article III, § 11(a)(9), of the Florida Constitution” and (2) that chapter 2000–439 “is an unconstitutional impairment of the insurance contract between Progressive and its insured ... under Article I, § 10 of the Florida Constitution.”

Following a hearing, the trial court granted Progressive's motion for summary final judgment, holding that chapter 2000–439 was “unconstitutional as a special law which improperly  creates a lien based on a private contract” and that therefore, the lien imposed by LMHS on the proceeds received by Mr. Gallegos from Progressive was invalid.

Appeal

On or about June 7, 2000, the Governor approved Ch. 200-439, An act related to Lee County, codifying 63-1552 and 78-552, Laws of Florida.  This act created a public health care system in Lee County known as, LMHS.  Section (18) of the law enumerated as follows:

Lee Memorial Health System shall be entitled to a lien for all reasonable charges for hospital, physician, and other health care services provided by the Lee Memorial Health System to ill or injured persons, upon the proceeds of all causes of action, suits, claims, counterclaims, and demands accruing to said persons or to their legal representatives, and upon all judgments, settlements, and settlement agreements rendered or entered into by virtue thereof, on account of injuries giving rise to such causes of action, suits, claims, counterclaims, demands, judgments, settlements, or settlement agreements, which injuries shall have necessitated such hospital, physician, and other services provided to such ill or injured persons.

(3) No release or satisfaction of any cause of action, suit, claim, counterclaim, demand, judgment, settlement, or settlement agreement shall be valid or effectual as against the lien of Lee Memorial Health System unless the lienholder shall join therein or execute a release of its lien prior to the payment of any proceeds thereof.  Any acceptance of a release or satisfaction of any cause of action, suit, claim, counterclaim, demand, judgment, settlement, or settlement agreement in the absence of a release or satisfaction of the lien of Lee Memorial Health System shall prima facie constitute an impairment of such lien and the lienholder shall be entitled to a cause of action for damages against any and all persons, firms, or corporations giving or accepting such release or satisfaction, or paying or accepting the proceeds from the same.  In such action, Lee Memorial Health System may recover the full amount of its charges for such hospital, physician, or other health care services; regardless of the amount of proceeds paid or received in impairment of its lien…

(4) No person shall be entitled to recover or receive damages based on the expense of hospital, physician, or other health care services provided by Lee Memorial Health System unless that person shall affirmatively show that Lee Memorial Health System’s charges have been paid.  Provided, however, that in any action, suit, or counterclaim brought on account of illness or injury, the plaintiff or counterclaimant may include as an item of damages the expense of such hospital, physician, or other health care services provided by Lee Memorial Health System, if prior to trial he or she shall have notified Lee Memorial Health System in writing of the pendency of such action, suit, or counterclaim; whereupon the lienholder shall have the right, without leave of court, to intervene in the case and prove the amount of its charges for such hospital, physician, or other health care services.  Any judgment rendered in favor of the plaintiff or counterclaimant shall provide that the amount proved by the lienholder to be due shall be deducted from the damages awarded and paid to the Lee Memorial Health System.

Chapter 200-439, Section 18, Violated the Florida Constitution Against Liens in Private Contracts

The Florida Constitution states that the “creation, enforcement, extension or impairment of liens based on private contracts, or fixing of interest rates on private contracts is prohibited in a special law. See Art. II, § 11(a)(9), Fla. Const.

Simply put, the contract in this case was the admission contract between Mr. Gallegos and Lee Memorial Hospital.  The admission contract reaffirmed LHMS’s right to a lien regarding their hospitals services.

Ultimately, the Appellate Court held that the admission contract between the hospital (whether public or private) and Mr. Gallegos was a private contract and any lien flowing therefrom was illegal because section 18 of chapter 2000-439 was unconstitutional.  LHMS attempted to argue that the admission contract was a public contract (not private), but this argument was rejected by the Appellate Court because the assets at question were those of the private patient and not the public hospital.

Chapter 200-439, Section 18, Violated the Florida Constitution Against Impairing Obligations of Contracts

The lower court in granted summary judgment and stated that Chapter 2000-439 purports to attach a lien to the private causes of action and assets of the patient (not any insurance company). 

Based on this language the Appellate Court then looked to Art. I, § 10, Fla. Const., which states that, “[n]o bill of attainder, ex post facto law or law impairing the obligation of contracts shall be passed.”

Yet, Chapter 2000-439 allowed LMHS to sue an insurer who was not a party to the admission contact simply for entering into a contract with their insured, or persons injured by their insureds.  The Appellate Court held that this special law unconstitutionally impaired insurers’ contractual rights because it interfered with the insurers obligations under their insured’s policy.

Practical Possibilities

Does the Second DCA’s finding that hospital liens impair the obligations of insurance companies render all hospital liens invalid?

Will the Courts handle hospital lien issues on a case-by-case basis and analyze the language of each special law to determine if constitutional?

Will LMHS take this case to the Supreme Court of Florida?

Joshua A. Golembe

An Associate at Butler Weihmuller Katz Craig LLP in Miami, FL. Joshua practices in our Casualty Defense Litigation, Construction, Employment Law, and Trucking departments.

Key Points
Attorney Court
  • Fla. 2d DCA