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January 14, 2019 | Blog Post| Checking the Vitals of Hospital Liens

Claims adjusters, plaintiffs’ attorneys and defense attorneys all deal with the headaches of hospital liens.  And recent case law and inconsistent recording of liens by clerks in different counties makes matters worse.  But when reading and analyzing the cases of Shands Teaching Hospital and Clinics Inc. v Mercury Ins. Co., 97 So. 3d 204 (Fla. 2012), Lee Memorial Health System v. Progressive Select Insurance Company, 230 So. 3d 558 (Fla. 2d DCA 2017), and Lee Memorial Health System v. Progressive Select Insurance Company, 2018 WL 6695982 (Fla. 2018) together, we can get a clearer picture of how to determine whether a hospital lien is valid.  In order to understand how to analyze whether a hospital lien is valid, a summary of these cases is important.

In Shands Teaching Hospital and Clinics Inc. v Mercury Ins. Co., 97 So. 3d 204 (Fla. 2012) the Florida Supreme Court reviewed a holding by the First DCA, in favor of Mercury, that a Florida statute “special law” (Ch. 88-539, Laws of Fla.) and Alachua County Ordinance (Alachua Cnty. Code §§ 262.20, 262.23) enforcing hospital liens were unconstitutional.[1]  The Shands court affirmed the First DCA’s holding that the “special law” was unconstitutional because it violates Article III, section 11(a)(9) of the Florida Constitution, but reversed the First DCA’s holding that the Alachua ordinance was unconstitutional.  Id. at 208.  This in turn meant that because the Alachua county ordinance was valid, Shands had a valid hospital lien (which was impaired by Mercury when it settled with the claimant). 

Article III, section 11(a)(9) of the Florida Constitution, states, in part:

(a) There shall be no special law or general law of local application pertaining to:

(9) creation, enforcement, extension or impairment of liens based on private contracts, or fixing of interest rates on private contracts.

The Shands court explained that Ch. 88-539, Laws of Fla., was indeed a “special law” that created a lien based on a private contract. Because such a “special law” is not allowed to create a lien based on a private contract, it was unconstitutional.  Id. at 210.

However, even though the Shands court held the “special law” regarding hospital liens was unconstitutional, the Alachua County Ordinance, which also creates enforceable hospital liens, was valid and enforceable.  Id. at 210-211.  The Alachua ordinance did not violate any state statutes and the county “validly exercised its broad powers of local self-government in enacting the Ordinance.”  Id. at 211. 

Further, the Shands court held the Alachua ordinance was valid even though the “special law” and the ordinance had identical language.  Id. at 209-211.  Shands explained that while “[a]n ordinance enacted by authority of an unconstitutional [“special law”…] is void,” the Alachua County Ordinance did not state it was enacted pursuant to the “special law” that the Court found unconstitutional.  Id. at 210-11.  Although both the unconstitutional “special law” and the Alachua County Ordinance had the exact same language, and even though the Alachua ordinance referred to certain sections of the “special law,”

[t]he Ordinance does not state that it was enacted pursuant to the [“special law”] … and the [“special law”] does not contain a grant of power authorizing Alachua County to enact an ordinance. 

Id. at 210-11.

Essentially, Shands says that if there is a “special law” (Florida Statute) and an ordinance creating enforceable hospital liens, the “special law” is invalid as a matter of law because it violates the Florida Constitution.  However, the county ordinance creating enforceable hospital liens may still be valid.  It depends on the wording of both the “special law” (if there is one) and the ordinance to determine if the hospital lien created pursuant to same is enforceable. 

Even after Shands, there appeared to be some confusion as to whether the same rules regarding “special laws” espoused in Shands applied to liens file by a “public”/non-profit hospital, as opposed to private hospitals.  The Second DCA in Lee Memorial Health System v. Progressive Select Insurance Company, 230 So. 3d 558 (Fla. 2d DCA 2017), and the Florida Supreme Court’s review of same in Lee Memorial Health System v. Progressive Select Insurance Company, 2018 WL 6695982 (Fla. 2018) provides some clarification regarding the public vs. private status of the hospital regarding whether a “special law” is unconstitutional.

In Lee Memorial Health System v. Progressive Select Insurance Company, 230 So. 3d 558 (Fla. 2d DCA 2017) (referred to as “Lee Memorial I”), the Second DCA affirmed the trial court’s ruling that Florida “special law” Ch. 2000-439, section 18, Laws of Florida, which allowed hospitals in Lee County to enforce liens, was in violation of Article III, section 11(a)(9) of the Florida Constitution and therefore unconstitutional (consistent with Shands, above).  Lee Memorial argued to the Second DCA that the “special law” did not violate Article III, section 11(a)(9) of the Florida Constitution because Lee Memorial is a “public” hospital, and therefore, the “special law” did not create or enforce a lien “based on private contracts… .”  Lee Memorial I, 230 So. 3d at 562.  Lee Memorial argued that because it was a “public” hospital, the contract it entered into with the patient was also “public,” and that the “special law” only violated the Florida Constitution regarding “private contracts.”  Id. The Second DCA rejected Lee Memorial’s argument and held that the contract between Lee Memorial and the patient was a “private” contract, despite Lee Memorial’s status as a “public” hospital.  Id. at 562-63. Therefore, the “special law” creating and enforcing liens filed by hospitals in Lee County was unconstitutional, and therefore, Lee Memorial’s liens were invalid. Id.     

Lee Memorial appealed to the Florida Supreme Court.  The Florida Supreme Court in Lee Memorial Health System v. Progressive Select Insurance Company, 2018 WL 6695982 (Fla. 2018) (referred to as “Lee Memorial II”) affirmed the Second DCA’s holding in Lee Memorial I that the “special law” granting Lee Memorial the right to create and enforce a lien was invalid because it violated Article III, section 11(a)(9) of the Florida Constitution.  Lee Memorial II, 2018 WL 6695982 at *1.  The Florida Supreme Court agreed with the Second DCA that it did not matter the status of the hospital as “public” vs. “private,” and that the contract between the hospital and the patient for the services rendered was a “private” contract.  Id. at *4-*5.  Therefore, the Florida Supreme Court clarified for us that it does not matter the status of the hospital as either “public” or “private,” and that any “special law” that allows the creation or enforcement of liens upon a contract between a hospital and its patient for services rendered, is as a matter of law, unconstitutional.

The caveat here is that while these cases concentrate on whether a “special law” is unconstitutional, the second part of the Shands decision remains intact. That is, a hospital lien can be enforceable if there is a county ordinance prescribing the creation and enforcement of hospital liens.  It ultimately depends on the wording of the ordinance and the wording of any “special law,” if indeed there is one.  Your best bet is to have an attorney versed in the intricacies of these cases to help you determine if a hospital lien is enforceable. On the other hand, if the county does not have an ordinance regarding creating and enforcing liens, but merely refers to a “special law” regarding liens, then we know the hospital lien is unenforceable.

[1]  A “special law” is a statute created by the Florida Legislature.

A profile photo of S. Cristina PerezS. Cristina Perez | SENIOR ASSOCIATE

Extra-Contractual, First-Party Coverage and Third-Party Coverage

(813) 281-1900 | TAMPA

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