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Kearny County Hospital v. Allstate Insurance Co.

November 9, 2007

KEARNY COUNTY HOSPITAL, ST. CATHERINE HOSPITAL, APPELLEES,
v.
ALLSTATE INSURANCE CO., APPELLANT.



Appeal from Kearny District Court; MICHAEL L. QUINT, judge.

SYLLABUS BY THE COURT

1. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, appellate courts apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.

2. Interpretation of a statute presents a question of law over which an appellate court has unlimited review. An appellate court is not bound by the trial court's interpretation of a statute.

3. K.S.A. 65-408 imposes a duty upon insurance carriers to ensure that hospital liens are satisfied when an insurance carrier compensates an injured party.

4. Under K.S.A. 65-408, when an insurance carrier compensates individuals injured in an automobile accident without satisfying a properly-filed hospital lien, it remains liable to the hospital for 1 year for the amount the hospital was entitled to receive.

5. The amount that a hospital is entitled to receive on its hospital lien under K.S.A. 65-408 is governed by K.S.A. 65-406(a), which gives a hospital a lien only upon that part going or belonging to the hospital's patient of any recovery or sum had or collected or to be collected by the patient by judgment, settlement, or compromise. That amount is further limited by K.S.A. 65-406(c), which allows a hospital to recover the amount of its hospital lien over $5,000 only to the extent that such enforcement constitutes an equitable distribution of any settlement or judgment under the circumstances.

6. Under K.S.A. 65-406(c), when a patient and a hospital cannot stipulate to an equitable distribution of a settlement, the trial court must determine an equitable distribution of the settlement under the circumstances.

7. In this case, because the hospital liens filed by Kearny County Hospital totaled less than $5,000, the hospital was entitled to recover the entire amount of its liens under K.S.A. 65-406(c). Nevertheless, because the hospital liens filed by St. Catherine Hospital totaled more than $5,000 on each injured party, the trial court must determine what would have been an equitable distribution of the settlement proceeds in these circumstances under K.S.A. 65-406(c).

The opinion of the court was delivered by: Green, J.

Affirmed in part, reversed in part, and remanded with directions.

Before HILL, P.J., GREEN and MARQUARDT, JJ.

Kearny County Hospital and St. Catherine Hospital (collectively appellees) filed this case against Allstate Insurance Co. (Allstate) under K.S.A. 65-408 after learning that Allstate, in an interpleader action, compensated the appellees' patients for their injuries without paying the appellees' hospital liens. The appellees' two patients each settled for $13,967.21 of Allstate's $50,000 policy proceeds, while six other claimants divided the remainder of the proceeds. The appellees argued that under K.S.A. 65-408, Allstate was liable to them in the amount of $50,000. The trial court granted summary judgment to the appellees and awarded them $50,000.

First, Allstate contends that it cannot be held liable to the appellees when the trial court in the interpleader action had notice of the appellees' liens and distributed the funds to the injured parties. Nevertheless, K.S.A. 65-408 imposes a duty upon insurance carriers to ensure that hospital liens are paid when compensating a hospital's patients for injuries sustained in an accident. Because nothing in the record shows that Allstate ever notified the trial court that the appellees' hospital liens needed to be paid out of the insurance policy proceeds, Allstate's argument fails. Next, Allstate argues that K.S.A. 65-408 does not impose liability in this case. We disagree. K.S.A. 65-408 imposes liability upon an insurance company that has failed to pay a hospital lien when compensating the hospital's patient. Here, because Allstate compensated the appellees' patients for their injuries without paying the appellees' hospital liens, the trial court properly found that K.S.A. 65-408 applies to this case.

Next, Allstate argues that even if K.S.A. 65-408 is applicable to this case, the trial court erred in awarding a $50,000 judgment to appellees. We agree. Under K.S.A. 65-406, the maximum amount the appellees could recover was the amount "going [to] or belonging to" the appellees' patients, that is, the $13,967.21 going to each patient. Moreover, under K.S.A. 65-406(c), Kearny County Hospital was entitled to receive the entire amount of its hospital liens, $1,355. Nevertheless, in order to decide the amount that St. Catherine Hospital was entitled to recover out of each patient's settlement, the trial court needs to determine what an equitable distribution would have been under K.S.A. 65-406(c). Accordingly, we affirm in part, reverse in part, and remand for a determination in accordance with this decision.

The appellees are two separate hospitals that provided medical care to both Rosa Salazar and Cesar Castillo after an automobile accident in November 2002. The party at fault in the accident had a $50,000 automobile insurance policy with Allstate. Kearny County Hospital filed hospital liens of $870 for Salazar and $485 for Castillo with the Kearny County District Court. St. Catherine Hospital filed two hospital liens totaling $63,670.74 for Salazar and two hospital liens totaling $42,864.93 for Castillo with the Finney County District Court. The hospital liens were filed between February 2003 and December 2003. Notices of the hospital liens were sent to Allstate.

On January 26, 2004, Allstate brought an interpleader action in the Kearny County District Court. Eight people involved in the automobile accident had made claims against the Allstate policy. Allstate requested that it be allowed to pay the amount of its $50,000 policy into the court and that the court determine the distribution to the eight claimants named as defendants in the interpleader action. The appellees were not named in the petition, nor did they ever receive notice of the interpleader action.

In January 2005, the defendants answered the interpleader petition. Attached to the answer was an agreed distribution of the $50,000 Allstate policy that was signed by all of the adult defendants. The defendants agreed that Allstate should pay its $50,000 policy limit into the court for distribution. The trial court found that the defendants had agreed to an equitable division of Allstate's insurance policy proceeds and ordered Allstate to pay the $50,000 policy limits into the court for distribution. Based on the distribution agreement, Salazar and Castillo were each awarded $13,967.21, which was net of attorney fees.

In September 2005, the appellees sued Allstate. Arguing that Allstate had violated K.S.A. 65-408 by making payments to the injured parties without first paying the hospitals their lien amounts, the appellees sought a judgment of $50,000 plus interest against Allstate. A default judgment was entered against Allstate for failing to answer the appellees' petition. Nevertheless, the trial court later set aside the default judgment. Allstate moved to dismiss the appellees' petition on the ground that K.S.A. 65-408 did not apply to the present case. Finding that K.S.A. 65-408 did apply to the present case, the trial court denied Allstate's motion to dismiss.

The appellees moved for summary judgment, arguing that they were entitled to $50,000 damages under K.S.A. 65-408. The trial court granted the appellees' motion for summary judgment and ...


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