Midtown Medical Group, Inc. v. Farmers Insurance Group (7/15/2014)

July 28, 2014

Arizona Court of Appeals Division One Holds That a Healthcare Provider May Enforce a Medical Lien Against a Tortfeasor’s Insurer Even if the Insurer Issues a Joint Check to the Victim and Healthcare Provider.

A healthcare provider treated the victims of car accidents and recorded medical liens.  The victims settled their claims with the tortfeasor’s insurer but did not pay the liens.  The insurer issued settlement checks made payable jointly to the victims and the healthcare provider.  The victims cashed the checks without the healthcare provider’s endorsement.

Under A.R.S. § 33-934(A), a healthcare provider with a valid medical lien can enforce the lien against a tortfeasor’s insurer if the victim settles a claim without paying the lien.  Here, the healthcare provider invoked that statute and sued the insurer on the lien.  The superior court granted a motion to dismiss in favor of the insurer, reasoning that the insurer satisfied its obligation by listing the healthcare provider as a joint payee on each check.

The Court of Appeals reversed, holding that listing the provider as a joint payee on the checks does not discharge the insurer’s obligation to satisfy the lien.  A.R.S. § 33-934(A) provides a cause of action if the healthcare lienholder has not been paid, and here the healthcare provider was not in fact paid because the victims cashed the checks without paying the lien. 

The insurer pointed out that a bank should not have negotiated the checks without the healthcare provider’s endorsement.  Any error by the bank, however, does not excuse the insurer from its statutory responsibility for the liens.  As a result, merely issuing the checks with joint payees does not immunize the insurance company from an action under A.R.S. § 33-934(A).

Judge Portley authored the opinion; Judges Kessler and Norris concurred.