Progressive Specialty Insurance Co. v. University of Alabama Hospital

Citations: 953 So. 2d 413; 2006 Ala. Civ. App. LEXIS 439Docket: 2041124

Court: Court of Civil Appeals of Alabama; July 21, 2006; Alabama; State Appellate Court

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Progressive Specialty Insurance Company issued an automobile insurance policy to Deborah McFarland, which included $2,000 in medpay coverage. Following a single-vehicle accident on January 19, 2004, Nick Williams, driving McFarland's car, incurred $27,898.57 in hospital charges during his hospitalization from January 20-24, 2004. On January 29, 2004, the University of Alabama Hospital (UAB) filed a hospital lien for this amount. Progressive paid the medpay limits directly to Williams on February 11, 2004, after being notified of UAB’s lien. UAB claimed that this payment impaired its lien. Progressive then sought a declaration that the hospital-lien statute applied only to proceeds from tort actions. The trial court ruled that the hospital-lien statute does apply to amounts due from insurance contracts, determined that Progressive impaired UAB’s lien, and awarded UAB $27,898.57 plus $4,000 in attorney fees. Progressive appealed, arguing the statute's language limits its application to tort liability proceeds; UAB countered that the statute does not specify such limits. The court emphasized that statutory language must be interpreted according to its plain meaning. The judgment was affirmed, asserting that the statute encompasses moneys arising from contractual obligations such as insurance policies.

Progressive's argument relies on comparing the hospital-lien statute with Ala.Code 1975, § 25-5-11(a), which governs employer reimbursements from third-party damages in workers’ compensation. In Bunkley v. Bunkley Air Conditioning, Inc., the court established that § 25-5-11(a) allows employer reimbursement only for recoveries from third-party wrongdoers whose actions caused the worker's injury. This section specifies that reimbursement applies when injuries arise from circumstances creating third-party legal liability. 

In contrast, the hospital-lien statute, § 35-11-370, allows a lien on "any and all actions, claims, counterclaims and demands" accruing to the patient without limiting the lien to claims based on legal liability from the injury’s circumstances. Consequently, Progressive's claim that the hospital-lien statute does not apply to funds from contractual obligations, such as insurance policies, lacks support, as § 25-5-11(a) has different language. The terms "claim" and "demand" in the hospital-lien statute are not restricted to legal claims and can encompass broader interpretations, as defined in Merriam-Webster's dictionary.

Additionally, Alabama's supreme court has implicitly supported the notion that hospital liens can attach to moneys owed to patients from contractual obligations, as seen in cases like Mitchell v. Huntsville Hospital and Guin v. Carraway Methodist Medical Center. Although these cases did not address the specific argument presented here, they involved hospitals asserting rights to insurance payments for unpaid patient bills. In Guin, the case involved an interpleader action regarding the allocation of insurance policy benefits, ultimately resulting in a summary judgment favoring the hospital.

The patient's husband assigned insurance policy benefits to Carraway, but the patient and her father contested the validity of this assignment in both the trial court and on appeal. The trial court ruled that § 35-11-370 granted Carraway an automatic lien for the reasonable value of medical services rendered to the patient. The supreme court affirmed the trial court's decision based solely on the hospital-lien statute, without addressing the assignment issue. In a related case, Mitchell, the supreme court concluded that an attorney could not take fees from insurance benefits paid directly to a hospital, emphasizing that the hospital's lien would persist regardless of how the benefits were distributed. The court interpreted the hospital-lien statute broadly to protect valid hospital claims. 

Additionally, Progressive argued against the trial court's award of attorney fees to UAB, claiming such fees are not permissible in a declaratory judgment action, referencing the case City of Vestavia Hills v. Randle. The Randle court reversed an attorney fee award, stating that fees are only allowable when authorized by statute or contract. Progressive contended that the declaratory judgment act's provision for "further relief" permitted attorney fees; however, it was clarified that this provision does not authorize attorney fees in such actions.

Randle does not establish that attorney fees are never recoverable in a declaratory-judgment action; rather, it highlights that the declaratory-judgment act lacks a specific provision for attorney fees. However, it acknowledges that a trial court can award additional relief authorized by law in such cases. UAB was not entitled to attorney fees merely for defending the declaratory-judgment action, but the trial court's finding that Progressive impaired UAB's hospital lien justified the award of attorney fees under Ala.Code 1975, § 35-11-372, which entitles a prevailing lienholder to costs and reasonable attorney fees in lien impairment actions. Therefore, the trial court's award of attorney fees to UAB was lawful and affirmed. Justices Thompson and Bryan concurred, while Judge Pittman noted that Progressive failed to raise this issue in the trial court, although its opposition to UAB's evidentiary submission did address the attorney fees. The opinion also mentions that attorney-fee awards can be justified by special equity under certain circumstances, referencing Lee v. Baldwin County Elec. Membership Corp. regarding the exceptions to the American rule on attorney fees.