Insurer Must Pay $34,000 Bill Under $5000 Med Pay Coverage - Hospital Lien Statute Can Create Liability for Med Pay Insurer

If you prosecute or defend personal injury actions, you need to be aware of  Shelby County Health Care Corp. v. Nationwide Mutual Ins. Co. The facts are simple. "The Med" is the hospital that treated Holt after an automobile accident. The hospital bill was close to $34,000. The Med filed a hospital lien with the Shelby County Circuit Court Clerk for the total amount of its bill. Holt was insured by Nationwide and had $5,000 worth of medical payments ("med pay") coverage. Nationwide paid a $1300 ambulance bill and then paid the remaining $3,700 of the med pay limits toward The Med’s bill. The Med sued claiming Nationwide impaired its lien by not paying the entire $5000 to the hospital.

The Court of Appeals’ holding: Nationwide impaired The Med’s lien by applying some of the med pay proceeds to the ambulance bill. As a result, Nationwide is liable for the entire hospital bill (close to $34,000) pursuant to Tenn. Code Ann. § 29-22-104(b)(1).

Assuming the Western Section’s February 6 opinion stands, the end result will be that Nationwide will pay close to $35,000 despite the fact that its med pay coverage was capped at $5,000. Ouch!

Insurance companies paying under the med pay provisions of their policies are going to have to be very careful to determine if any hospital liens were filed before paying any med pay benefits. The only way to be certain whether a lien has been perfected is to search for liens in the office of the circuit court clerk in the county in which the patient resides. (The statute also requires the hospital to file a lien in the county where the treatment was rendered).

If the Tennessee Supreme Court does not accept and reverse this case, expect the insurance industry to push for an amendment to the hospital lien statutes, Tenn. Code Ann. § 29-22-101, et seq. to avoid the virtually unlimited liability that can arise under this scenario. The other option may be to try to eliminate med pay coverage altogether.

Dan Berexa
Nashville, Tennessee