Indiana Court of Appeals Determines That UIM Insurer’s Liability for Properly Recorded Hospital Lien Does Not Exceed Coverage Limits

Michael R. Giordano

Parkview Hospital, Inc. v. American Family Ins. Co. 2022 WL 1132893 (Ind. Ct. App. 2022)


The present appeal is the second in this dispute between a hospital and an underinsured motorist’s (“UIM”) insurer (American Family).  American Family’s insured was involved in an automobile accident in Ohio and received treatment from Parkview Hospital, located in Fort Wayne, Indiana.  Parkview filed and recorded a hospital lien for approximately $95,000.

The insured filed a personal injury lawsuit in Ohio against the parties responsible for the accident and American Family.  After Parkview failed to appear, the Ohio court issued an order stating that Parkview had waived its lien. The insured eventually settled the Ohio lawsuit without informing Parkview, whose lien was not satisfied with the settlement proceeds.  The insured later filed a motion to enforce the settlement, which the Ohio court granted, and ordered American Family to issue a settlement draft for $50,000, the UIM policy limits, to its insured and his attorney. The Ohio court also ordered that the insured execute a hold harmless agreement for American Family with respect to any liens.

Parkview later filed a complaint in Indiana against American Family and its insured. After Parkview obtained a default judgment against its insured, both Parkview and American Family filed cross-motions for summary judgment regarding their respective obligations to address the hospital lien.  American Family argued that Parkview was trying to circumvent the Ohio court’s order and that Parkview’s hospital lien was no longer valid.  Parkview contended that it had satisfied the requirements of the Indiana Hospital Lien Act (“the Act”) such that its lien was valid and enforceable.  The Indiana trial court determined that Parkview had complied with the requirements of the Act and the Ohio court’s order by paying its insured its policy limits.  The trial court also determined that both summary judgment motions filed by Parkview and American Family should be denied.  Each side then filed cross-motions for certification of an interlocutory appeal.

The Court of Appeals initially held that the Ohio court lacked subject matter jurisdiction and thus its order declaring Parkview’s Hospital Lien as invalid was void and of no effect.  The Court of Appeals also found that American Family failed to honor Parkview’s lien, and because the Ohio court’s order was void, American Family could not rely upon it to avoid responsibility.  Thus, the Court of Appeals held that Parkview was “entitled to judgment as a matter of law” and remanded the matter to the trial court for further proceedings.

On remand, the trial court entered judgment for Parkview and against American Family in the full amount of its lien, $95,000, plus prejudgment interest and costs.  The court then set the matter for a hearing to determine a reasonable amount of Parkview’s attorney fees for American Family’s violation of the  Act.  However, American Family filed a motion to correct error arguing that Parkview’s lien recovery was limited to the UIM coverage limit of $50,000.  American Family also argued that Parkview was not entitled to attorney fees.  The trial court denied American Family’s motion to cap its liability to its policy limits, but granted its request that Parkview was not entitled to attorney fees.  Another appeal then ensued.

The Court of Appeals observed that when it entered judgment for Parkview in the first appeal, it did not determine the amount of damages or whether Parkview was entitled to attorney fees.  In addressing the second appeal, the Court of Appeals determined that American Family’s liability to Parkview was capped at the UIM coverage limit of $50,000.  In doing so, the Court of Appeals reasoned that American Family’s responsibility for UIM coverage is not a tort liability coverage but contractual coverage intended to indemnify the insured, including the insureds’ medical treatment providers.  The Court further observed that American Family should have included Parkview as a payee on its settlement draft issued to its insured.  By doing so, American Family would have complied with the Act and avoided having to pay its policy limits on a second occasion.

The Court of Appeals also found the trial court was correct in refusing to award Parkview attorney fees for American Family’s violation of the Act.  Because there was no provision within the Act permitting the recovery of attorney fees, the Court of Appeals applied the American Rule, under which each party is responsible for its own fees.

This decision is a reminder that insurers need to be watchful and protective of hospital liens. Here, American Family’s failure to do so resulted in it having to pay its UIM limits twice.