Personal Injury Law Just Got Trickier For Hospitals

What Is Reasonable and Necessary?

We thought the tort law in personal injury cases was fairly well defined, but a new appellate opinion has got hospitals and their attorneys in a dither, while plaintiffs and their lawyers are throwing a big party.

Especially now that they can afford it.  Let me explain.

Michael Huff got injured in a car accident and went to the hospital.  When he left the hospital’s care seven days later, it slapped him with a $34,000 bill that he didn’t pay.  Huff’s lawyer then sued Steven and Matthew Wilkins for negligence in causing the car collision that injured Huff.  State Farm insurance defended the Wilkinses.  The hospital, Pioneer’s Memorial Healthcare District, duly filed a lien in Huff v. Wilkins, claiming the $34,000 that Huff owed.

The jury awarded Huff more than $350,000, and before State Farm could even get out its checkbook to pay Huff, the hospital said, “First dibs on the $34,000 that Huff owes us.”

That’s legal talk, in case you missed it.

Summoning all of the chutzpah they could muster, Huff’s lawyers replied to the hospital, “Hold on there, bucko, those expenses weren’t needed.”

That’s more legal talk.  I’m getting into a pattern here in case you were wondering.

Like any good neighbor, State Farm put the disputed $34,000 in the Court’s hands and told Huff and the hospital that they had to fight over the disputed money. 

In legal talk, that step is called an interpleader.  I know, legal talk is really boring.  That’s why I was warming you up to the first couple of legal phrases like “first dibs” and “bucko.”  Well, sure enough, Huff and the hospital both told the Court that they wanted the $34,000.  At the trial of the matter, four things happened:

1.  The hospital submitted the bills that Huff didn’t pay;

2.  Huff told the hospital that he had no insurance but should bill the Wilkinses;

3.  The hospital submitted its lien notice that it sent to State Farm; and,

4.   Huff’s personal injury attorney confirmed that he had submitted all of Huff’s medical bills in the case Huff filed against the Wilkinses and authenticated the $350K Judgment in Huff’s favor.

Notice what’s missing.  Didn’t notice?  Well, how about the hospital’s proof of the expenses it charged to Huff?  Nowhere did the hospital say that the charges were reasonable or necessary.  It just said Huff incurred the expenses.

Those are magic words in personal injury law.  “Reasonable and necessary.”

You see, in order for the hospital to recover the $34,000 lien that it placed on Huff’s recovery of the $350,000, the hospital should have proved that the expenses it charged Huff were both reasonable and necessary.  Under the Hospital Lien Act at California Civil Code sections 3045.1-3045.6 (a whopping five subparts), the hospital can only recover on its personal injury lien if it can prove that the expenses were both reasonable and necessary.

Look back on that list of four items that were introduced in the trial.  Look carefully to see if there’s anything there about the expenses being “reasonable” or “necessary.”  Can’t find it?  Neither could I, and I wrote it.

That’s because the hospital either forgot or failed to do so.  Now comes the Court’s ruling.  Because the hospital had the opportunity in the trial to introduce this evidence, say through a doctor who treated Huff, but failed to do so, the hospital got stiffed.

That’s right:  no recovery for the hospital, and Huff walked away with the $34,000.  But don’t get excited.

I suspect this case isn’t completely over, however.  Despite the hospital’s failure to recover on its lien, the hospital can still sue Huff on both a breach of contract and equitable basis.  Huff did get $34,000 in services that he apparently still hasn’t paid for, and with this loss, that debt is pretty high on the hospital’s radar screen.  We’ll see.