1

Filed 7/29/14

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(San Joaquin)

----

DAMERON HOSPITAL ASSOCIATION,

Plaintiff and Appellant,

v.

AAA NORTHERN CALIFORNIA, NEVADA AND 

UTAH INSURANCE EXCHANGE et al.,

Defendants and Respondents.

C070475

(Super. Ct. No. 

39201000245260CUMCSTK)

APPEAL from a judgment of the Superior Court of San Joaquin County, Carter P. 

Holly, Judge. Affirmed.

Hatton, Petrie & Stackler, Gregory M. Hatton and John A. McMahon for Plaintiff 

and Appellant.

Coddington, Hicks & Danforth, Richard G. Grotch, R. Wardell Loveland, Sungjee 

Lee for Defendant and Respondent AAA Northern California, Nevada and Utah 

Insurance Exchange; Pollak, Vida & Fisher, Michael M. Pollak and Hamed Amiri 

Ghaemmaghami for Defendant and Respondent Allstate Insurance Company.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae 

on behalf of Defendants and Respondents; Davis & Associates and Monte R. Davis, Jr., 

for Permanent General Assurance Company as Amicus Curiae on behalf of Defendants 

and Respondents.
2

Under California law, hospitals must provide emergency room services without 

regard for a patient’s ability to pay or who will ultimately bear responsibility for the 

medical bill. (Prospect Medical Group, Inc. v. Northridge Emergency Medical Group

(2009) 45 Cal.4th 497, 501-502 (Prospect).) Depending on who pays the bill for 

emergency room services, billing rates for the same treatment can vary substantially. 

(Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 552, 560 (Howell).) 

After patients have received their care, hospitals often face the difficult and complex task 

of trying to secure payment for the emergency room services. The final cost and identity 

of the responsible payer of the emergency room services can remain unresolved for years. 

Sometimes a patient needs emergency room care due to negligent driving by a 

third party tortfeasor with automobile liability insurance coverage. In such an instance, 

the hospital with the emergency room must determine whether the medical bills are the 

responsibility of the patient, the patient’s health care service plan, the tortfeasor, the 

tortfeasor’s liability insurer, or some combination of these potential payers. (Prospect, 

supra, 45 Cal.4th at pp. 501-502; Parnell v. Adventist Health System/West (2005) 35 

Cal.4th 595, 598 (Parnell); Health & Saf. Code, § 1371.4, subd. (b).) Further 

complicating a hospital’s endeavor to bill for emergency room services are varying limits 

on financial responsibility for the medical services. A patient’s financial responsibility 

may be limited to the copayment amounts specified by the health care service plan. 

(Parnell, at p. 611, fn. 15.) The patient’s health care service plan may be limited to 

paying a negotiated rate that is less than the hospital’s customary billing rate.1 (Id. at 

 

1 We refer to the lower billing rates payable by health care service plans having 

contracts with hospitals as “negotiated rates.” Although negotiated rates are lower than 

the “customary rates” charged for emergency room services, they do not necessarily 

constitute “discount” rates. The California Supreme Court has explained that “if it were 

established a medical provider’s full bill generally represents the value of the services 
3

p. 609.) Many hospitals enter into contracts with health care service plans to ensure 

sufficient volume for their emergency rooms and in turn pass along the savings for 

“buying in bulk” the emergency room services provided. While many health care service 

plans contract for such negotiated rates, most automobile liability insurers do not. 

The health care service plan in this case, Kaiser Permanente (Kaiser), covered 

three patients who received care at an emergency room operated by Dameron Hospital 

Association (Dameron). The patients were injured due to the negligence of third party 

tortfeasors who had automobile liability insurance with California Automobile 

Association Inter-insurance Bureau (AAA)2 and Allstate Insurance Company (Allstate). 

Unlike Kaiser, neither AAA nor Allstate has contracts with Dameron. In the absence of 

an agreement for negotiated billing rates, Dameron sought to collect from AAA and 

Allstate its customary billing rates by asserting liens filed under the Hospital Lien Act 

(HLA). (Civ. Code, § 3045.1 et seq.) AAA and Allstate, however, ignored Dameron’s 

HLA liens when paying settlements to the three Kaiser patients. 

Upon learning of the settlements, Dameron sued AAA and Allstate to recover on 

its HLA liens. The trial court granted the automobile liability insurers’ motions for 

summary judgment on grounds the patients’ debts had already been fully satisfied by 

their health care service plans. Reasoning the HLA liens were extinguished for lack of 

any underlying debt, the trial court dismissed the case. The trial court further found 

dismissal was warranted because Dameron failed to timely file some of its HLA liens 

against AAA. 

 

provided, and the discounted price negotiated with the insurer is an artificially low 

fraction of that true value, one could make a parallel argument that relieving the 

defendant of paying the full bill would result in underdeterrence. The complexities of 

contemporary pricing and reimbursement patterns for medical providers, however, do not 

support such a generalization.” (Howell, supra, 52 Cal.4th at p. 560.)

2 California Automobile Association Inter-insurance Bureau is now named AAA 

Northern California, Nevada and Utah Insurance Exchange. 
4

The central question presented in Dameron’s appeal is this: Does a health care 

service plan’s payment of a previously negotiated rate for emergency room services 

insulate the tortfeasor’s automobile liability insurer from having to pay the customary 

rate for medical care rendered? AAA and Allstate contend they are not responsible for 

any amount after Kaiser paid in full the bill for the emergency room services provided by 

Dameron. Dameron responds that it contracted with Kaiser to preserve its rights to 

recover the customary billing rates from tortfeasors and their automobile liability 

insurers. Dameron asserts the tortfeasors and their liability insurers are responsible for 

the entire bill for medical services at the customary rate –- not just the difference between 

the reimbursement received from Kaiser and the customary billing rate. 

In Parnell, supra, 35 Cal.4th 595, the California Supreme Court unanimously held 

hospitals may not recover their customary rates for emergency room care when they have 

contractually agreed to accept negotiated rates as payment in full. (Id. at p. 609.) In so 

holding, the Supreme Court acknowledged that “California hospitals face mounting 

financial pressures, and that many, if not all, of these hospitals may ‘face a genuine 

financial crisis that threatens their ability to continue to serve their communities.’ ” (Id.

at p. 611.) Parnell noted its holding might “result in a significant hardship for many of 

these hospitals.” (Ibid.) To alleviate such hardship, the Supreme Court stated hospitals 

could turn to the Legislature for changes to the HLA. (Id. at p. 611.) 

More importantly for purposes of this case, the Parnell court held that “the 

solution lies in the hands of the hospitals. By precluding the Community Hospital from 

asserting a lien under the HLA in this case, we ‘simply give[] effect to’ its contracts. 

(Lopez v. Morley [(2004)] 817 N.E.2d [592,] 599.) If hospitals wish to preserve their 

right to recover the difference between usual and customary charges and the negotiated 

rate through a lien under the HLA, they are free to contract for this right. Our decision 

today does not preclude hospitals from doing so. (See, e.g., Andrews [v. Samaritan 

Health System (Ct. App. 2001)] 36 P.3d [57,] 61.)” (Parnell, supra, 35 Cal.4th at p. 611.) 
5

Although Dameron claims it should benefit from the California Supreme Court’s 

holding that it may avoid extinguishment of its HLA liens upon receiving payments from 

health insurers, the contract in this case preceded Parnell by 10 years. The 

Dameron/Kaiser contract did not seek to avail itself of the Parnell court’s guidance. 

Instead, the Dameron/Kaiser contract is silent as to whether Dameron may collect from 

tortfeasors and their automobile insurers after receiving negotiated rate payments from 

the patients’ health care service plans. Dameron attempts to supply the contract term by 

relying on a history of “uniform conduct” in which Dameron and Kaiser have cooperated 

in seeking payment from third party tortfeasors and their liability insurers. 

We conclude the Dameron/Kaiser contract does not contain the term described by 

the Parnell court as sufficient to preserve the right to recover the customary billing rate 

for emergency room services from third party tortfeasors. To paraphrase Parnell, if 

Dameron wishes to preserve its right to recover its customary billing rates through an 

HLA lien, it is free to contract for this right. (Parnell, supra, 35 Cal.4th at p. 611.) But 

Dameron must actually contract for this right. (Ibid.) A history of voluntary cooperation 

with Kaiser does not suffice to avail Dameron of the Parnell court’s guidance on 

reservation of contractual rights under the HLA. Consequently, the trial court properly 

granted summary judgment in favor of AAA and Allstate. Because we affirm the 

granting of summary judgment for lack of contractual reservation of billing rights against 

third party tortfeasors, we do not reach the question of whether all of the HLA liens in 

this case were timely filed by Dameron.

BACKGROUND

Dameron’s Claims Against AAA and Allstate

In July 2010, Dameron sued AAA and Allstate for damages as well as injunctive 

and declaratory relief. Dameron’s complaint alleges it gives emergency room care to 

patients regardless of their ability to pay, as required by Health and Safety Code section 
6

1317. Thus, Dameron provided emergency room services to Denise H.3 and Don P. The 

bill for Denise H. amounted to $1,724 and Don P.’s bill was $3,445. After these patients 

were discharged from the emergency room, Dameron learned each was injured by the 

negligence of a driver insured by Allstate. 

Dameron also provided emergency room services to Rita H., Sara M., and D.S. 

Rita H.’s emergency room bill totaled $33,831.74, Sara M.’s was $1,976, and D.S.’s was 

$2,029.76. After these patients were discharged, Dameron learned they were all injured 

by drivers insured by AAA. 

The record indicates Kaiser provided health insurance for each of these patients 

except Rita H. and D.S. For each of these patient’s emergency room services bills 

Dameron served HLA liens on all entities known to Dameron and who might be liable for 

causing each patient’s injuries. And, for each of these patients, Dameron learned AAA or 

Allstate paid a settlement to the patient without satisfying any part of Dameron’s HLA 

liens. Dameron filed the present action within a year of learning of the settlements and 

judgments. 

Dameron further alleges each of the contracts with health care service plans for the 

patients in this case contains an “applicable rate agreement” that “preserves Dameron’s 

HLA rights, as contemplated by the California Supreme Court in Parnell[, supra, 35 

Cal.4th at p. 611].” Dameron asserts it follows the same procedure in collecting on its 

HLA liens whenever a third party has caused injury to an emergency room patient who 

has coverage with a health insurer having a rate agreement contract with Dameron. 

Specifically, Dameron bills the full amount of the emergency room costs to the injured 

patient’s health plan per Dameron’s contract with the health plan. Dameron also bills the 

 

3 The names of the patients at issue in this case are redacted to protect their privacy. 
7

full amount of emergency room costs to the third party tortfeasor and/or tortfeasor’s 

liability insurer by serving an HLA notice under Civil Code section 3045.3.4 

If the tortfeasor, tortfeasor’s liability insurer, or any responsible party pays 

Dameron’s HLA claim before the patient’s health care service plan pays Dameron the 

negotiated rate, Dameron cancels its bill to the patient’s health care service plan. 

However, if the patient’s health plan pays the negotiated rate under the applicable rate 

agreement before any other responsible party pays under the HLA lien, Dameron “holds 

the health plan’s payment in abeyance (as well as any co-payment received from the 

injured patient), pending resolution of Dameron’s HLA claim.” If Dameron recovers 

money on its HLA claim following payment from the patient’s health care service plan, 

Dameron refunds the patient’s copayment and then refunds the health care service plan 

from the proceeds of the HLA lien recovery. If there are any proceeds remaining after 

reimbursements to the patient and patient’s health plans, Dameron keeps the remainder. 

In any event, Dameron does not “attempt to collect or retain more than its reasonable and 

necessary charges in any patient’s account.” 

Dameron’s complaint also alleges payments of settlements and judgments to 

patients while ignoring HLA liens “are not isolated or random events. Rather the HLA 

violations . . . are part of an industry-wide business strategy adopted primarily by 

automobile liability insurers in California . . . and by other similarly situated responsible 

parties under the HLA.” In addition to violating the HLA, Dameron claimed the 

 

4

In other words, Dameron does not seek to “balance bill” tortfeasors or their 

liability insurers for the difference between the negotiated rates paid by health care 

service plans and the customary rate Dameron would ordinarily charge. Instead, 

Dameron seeks to recover the entirety of its customary rates from the tortfeasors and their 

liability insurers. 
8

practices also violated the Unfair Competition Law (Bus. & Prof. Code, § 17200 et 

seq.).

5

 

Motions for Summary Judgment

AAA and Allstate each moved for summary judgment, arguing Dameron could not 

recover anything under the HLA liens because the underlying debts had been 

extinguished by payments in full by the patients’ health plans. AAA also argued two of 

the three claims asserted by Dameron were time-barred. 

In support of its motion, Allstate introduced the Dameron/Kaiser agreement for the 

provision of hospital services to Kaiser patients. The Dameron/Kaiser contract, effective 

January 1, 1995, provides in pertinent part: 

“3. Member Billing. [¶] (a) Hospital shall look solely to Kaiser Permanente (or 

another responsible payer) for compensation for Hospital Services rendered to Members 

under this Agreement, and, except as expressly provided in this Section, Hospital agrees 

that in no event, including but not limited to non-payment by Kaiser Permanente, 

insolvency or breach of this Agreement, shall Hospital bill, charge, collect a deposit 

from, seek compensation, remuneration or reimbursement from, or have any recourse 

against any Member for Hospital Services provided pursuant to this Agreement. Hospital 

further agrees that this provision shall (i) survive the termination of this Agreement 

regardless of the cause giving rise to termination and shall be construed to be for the 

 

5 Dameron urges us to consider the judgment entered in an earlier class action 

lawsuit titled Ruacho, et al. v. Dameron Hospital Association (Superior Court 

San Joaquin County (2012) SV231473), not as “controlling authority in any manner” but 

to supply “a historical perspective, because it is part and parcel of the uniform 

performance of the Dameron/Kaiser contract in regard to HLA claims.” We decline to do 

so. As Dameron acknowledges, the trial court’s decision in that case cannot be cited as 

legal authority. (Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761.) 

Moreover, the outcome of the earlier and unrelated case does not constitute evidence in 

this case. (Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 768.)
9

benefit of the Members, and (ii) supersede any oral or written contrary agreement now 

existing or hereafter entered into by the parties. [¶] (b) Hospital may assert claims for 

compensation other than claims against Kaiser Permanente, in the following 

circumstances: [¶] (i) Copayments. . . . [¶] (ii) Services After Coverage Exhausted or 

Disallowed. . . . [¶] (iii) No benefit. . . . [¶] (iv) Regular Medicare. . . . [¶] (c) 

Hospital understands and agrees that surcharges against Members are prohibited and 

Kaiser Permanente shall take appropriate action if surcharges are imposed. A surcharge 

is an additional fee which is charged to a Member for a covered Hospital Service but 

which is not approved by the Commissioner of Corporations or provided for under the 

applicable Membership Agreement and disclosed in the Member’s evidence of 

coverage.” 

Dameron opposed summary judgment on grounds the Dameron/Kaiser contract

allowed collection of the HLA liens against AAA and Allstate. Dameron also asserted its 

claims against AAA were not time-barred because the hospital filed the HLA lien notices 

within a year of discovering the identity of the responsible payers. 

The trial court granted summary judgment in favor of AAA and Allstate. The trial 

court reasoned Kaiser’s payment of an agreed-upon rate for emergency room payments 

extinguished the debt owing to Dameron and had the effect of also extinguishing the 

HLA liens. As to two of the claims against AAA, the trial court found the discovery rule 

did not apply to render the HLA claims timely. 

Dameron timely filed notices of appeal from the judgments of dismissal. 

DISCUSSION

I

Standards of Review

We apply the independent standard of review to the trial court’s order granting 

summary judgment. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) As this 

court has noted, “We review the issues framed by the pleadings to determine the scope of 
10

the issues tendered and to determine whether the moving party has established facts 

negating the opponent’s claim and justifying a judgment in the moving party’s favor. 

(AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064–

1065.) In so doing we determine whether the opposition to the motion demonstrates the 

existence of a triable issue of material fact. (Ibid.) We review the evidence in the light

most favorable to the opposition to the motion, and liberally construe the opposition’s 

evidence, while strictly scrutinizing the successful party’s evidence and resolving any 

evidentiary ambiguities in the opposition’s favor. (Saelzler v. Advanced Group 400 

(2001) 25 Cal.4th 763, 768.)” (Avidity Partners, LLC v. State of California (2013) 221 

Cal.App.4th 1180, 1192.) We also independently review contractual agreements, 

including the question of whether the language used in a contract is ambiguous. 

(American Alternative Ins. Corp. v. Superior Court (2006) 135 Cal.App.4th 1239, 1245.) 

Finally, “[w]e are not bound by the trial court’s reasons for granting summary judgment 

because we review the trial court’s ruling, and not its rationale.” (Avidity, supra, at 

p. 1192.)

II

The HLA as Interpreted in Parnell

Dameron’s right to recover its customary rates for emergency room services from 

third party tortfeasors and their liability insurers depends on whether the hospital’s HLA 

liens are extinguished when accepting payments by the emergency room patients’ health 

care service plans. The HLA provides a hospital with a statutory lien against any 

judgment, settlement, or compromise paid by a third party tortfeasor or tortfeasor’s 

liability insurer to a patient who received emergency room care. (Parnell, supra, 35 

Cal.4th at p. 598; Civ. Code, § 3045.2.) Civil Code section 3045.1 states a hospital that

“furnishes emergency and ongoing medical or other services to any person injured by 

reason of an accident or negligent or other wrongful act . . . shall, if the person has a 

claim against another for damages on account of his or her injuries, have a lien upon the 
11

damages recovered, or to be recovered, by the person, or by his or her heirs or personal 

representative in case of his or her death to the extent of the amount of the reasonable and 

necessary charges of the hospital.” 

For the HLA lien to become effective, the hospital must serve written notice of 

“the amount claimed as reasonable and necessary charges” on each person or entity 

“known to the hospital and alleged to be liable to the injured person . . . for the injuries 

sustained prior to the payment of any moneys to the injured person.” (Civ. Code, 

§ 3045.3.) The HLA notice must also be served on any known liability insurers 

responsible for the actions of the alleged tortfeasors. (Ibid.) However, the hospital need 

not provide notice of the HLA lien to the emergency room patient. (Parnell, supra, 35 

Cal.4th at p. 601.)

Tortfeasors and their liability insurers are required to satisfy the HLA lien at the 

same time as they pay any money to the emergency room patients. As the Parnell court 

explained, “If the tortfeasor pays the injured person ‘after the receipt of the notice as 

provided by [Civil Code] Section 3045.3, without paying to the’ hospital ‘the amount of 

its lien claimed in the notice, or so much thereof as can be satisfied out of 50 percent of 

the moneys due under any final judgment, compromise, or settlement agreement,’ then 

the tortfeasor ‘shall be liable to the’ hospital ‘for the amount of its lien claimed in the 

notice which the hospital was entitled to receive as payment for the medical care and 

services rendered to the injured person.’ ([Civ. Code,] § 3045.4.)” (Parnell, supra, 35 

Cal.4th at pp. 601-602.) This statutory penalty payment to the hospital does not come 

from recovery of funds paid to the injured patient, but must be paid separately by the 

tortfeasor or tortfeasor’s liability insurer. (Mercy Hospital & Medical Center v. Farmers 

Ins. Group of Companies (1997) 15 Cal.4th 213, 221.)

The HLA creates a statutory lien that “is ‘nonconsensual’ and ‘compensates a 

hospital for providing medical services to an injured person by giving the hospital a direct 

right to a certain percentage of specific property, i.e., a judgment, compromise, or 
12

settlement, otherwise accruing to that person.’ (Ibid.)” (Parnell, supra, 35 Cal.4th at 

p. 602.) Parnell further notes that, “[a]s a general rule, ‘[a] lien is a charge imposed in 

some mode other than by a transfer in trust upon specific property by which it is made 

security for the performance of an act.’ ([Civ. Code,] § 2872.) Because ‘[a] security 

interest cannot exist without an underlying obligation’ (Alliance Mortgage Co. v. 

Rothwell (1995) 10 Cal.4th 1226, 1235), a lien is typically ‘but an incident of the debt 

secured’ (Lewis v. Booth (1935) 3 Cal.2d 345, 349) and ‘presupposes the existence of a 

debt’ (Dorr v. Sacred Heart Hosp. (1999) 228 Wis.2d 425, 597 N.W.2d 462, 470 

(Dorr)).” (Parnell, supra, 35 Cal.4th 595, 602-603.) 

The typical dependence of a lien on an underlying debt led the Parnell court to 

conclude payment of the underlying debt –- such as by an injured patient’s health plan –-

extinguished the hospital’s HLA lien. (Parnell, supra, 35 Cal.4th 595, 602-603.) Thus, a 

hospital’s acceptance of “payment in full” from a health care service plan relieved the 

third party tortfeasor and his or her liability insurer from any further payment under the 

HLA. (Ibid.) However, the Parnell court noted hospitals could contractually preserve 

the right to recover their usual and customary rates from tortfeasors and their liability 

insurers. Parnell states that “[i]f hospitals wish to preserve their right to recover the 

difference between usual and customary charges and the negotiated rate through a lien 

under the HLA, they are free to contract for this right.” (Id. at p. 611.) Parnell further 

noted neither the Insurance Code nor the Health and Safety Code “precludes hospitals 

from contractually preserving their right to recover ‘reasonable and necessary charges’ 

pursuant to a lien under the HLA.” (Id. at p. 611, fn. 15.) 

The Parnell court’s unanimous conclusion that hospitals can contractually reserve 

the right to recover customary emergency room billing rates from third party tortfeasors 

delineates the extent of its holding that a hospital’s acceptance of payment in full from a 

health care services plan extinguishes any HLA lien premised on the same debt. 

(Parnell, supra, 35 Cal.4th at p. 611 & fn. 16 [noting its “holding relies solely on the 
13

absence of a debt underlying the lien” and does not extend to resolving issues of whether 

the HLA applies in the Medicaid context, violates due process, is subject to waiver by 

hospitals, or is subject to litigation immunity].) Contrary to respondents’ suggestion, 

Parnell’s statements regarding the availability of contractual remedies for hospitals were 

not mere dicta. The Parnell court’s guidance regarding contractual options “was 

responsive to the issues raised on appeal and was intended to guide the parties” and lower 

courts in addressing HLA issues in the future. (Garfield Medical Center v. Belshé (1998) 

68 Cal.App.4th 798, 806.) We are bound to follow the Supreme Court’s holdings. (Auto 

Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)

In holding California hospitals may contractually reserve the right to recover their 

customary billing rates from third party tortfeasors, the Parnell court cited the example of 

Andrews v. Samaritan Health System (Ct.App. 2001) 36 P.3d 57, 61 (Andrews),

disapproved on another ground in Blankenbaker v. Jonovich (2003) 205 Ariz. 383, 385-

386, 71 P.3d 910, 912-913.

6

(Parnell, supra, 35 Cal.4th at p. 611.) In Andrews, the 

Arizona Court of Appeals held injured patients could not prevent hospitals from balance 

billing by enforcing statutory medical liens on judgments received from third-party 

tortfeasors. (Andrews, supra, at p. 59.) In so holding, the Andrews court provided two 

rationales. (Id. at p. 61.) One rationale was Arizona Revised Statutes, section 33–931, 

automatically created a medical lien providing that “a [hospital] provider ‘is entitled to a 

lien for the customary charges for care and treatment . . . of an injured person’ without 

specifying further action by the hospitals.” (Andrews, supra, at p. 61.) 

 

6 Remarkably, none of the parties nor amici curiae mentions Andrews, supra, 36 

P.3d 57 in any of their extensive briefing on the meaning and continuing validity of 

Parnell’s holding hospitals have the ability to contractually retain their right to seek their 

customary rates for emergency room services.
14

The other rationale in Andrews arose from the language of the contracts between 

the defendant hospitals and the patients’ health care services plans. Andrews explained 

that “the instant contracts each contained language stating that the hospitals accepted the 

plaintiffs’ insurer’s payment as ‘payment in full,’ and all . . . expressly reserved the right 

to recapture the difference between any payments made by the insurer and the providers’

customary charges. Unlike the contracts in the cases from other jurisdictions, this 

reservation clearly qualifies the ‘payment in full’ language and sets forth the hospitals’ 

expectation to recover their customary charges when possible.” (Andrews, supra, 36 P.3d 

at pp. 60-61, italics added.) As a consequence, “[t]he fact that the hospitals have no 

personal recourse against plaintiffs, by virtue of their insurance coverage, does not alter 

the fact that a debt remains between the hospitals’ customary charges and the amounts 

paid by plaintiffs’ insurers.” (Id. at p. 61.) This contract-based rationale for preserving a 

hospital’s right to recover its customary charges from third-party tortfeasors was cited 

with approval by the California Supreme Court in Parnell, supra, 35 Cal.4th at p. 611.

Notably, the patients in Andrews, supra, 36 P.3d 57 did not have their recoveries 

from third party tortfeasors reduced by the hospitals’ ability to recover their customary 

charges when the patients’ health plans paid only a negotiated rate because “[i]n their 

various personal injury suits, plaintiffs all quantified their damages by including the 

hospitals’ full charges for medical services, rather than the discounted amount paid by 

their insurers.” (Andrews, supra, 36 P.3d at p. 59.) In other words, plaintiffs in Andrews

were able to claim damages in the amount of customary rates based on the express 

contracts between the hospitals and the health care service plans. (Ibid.) The Andrews

plaintiffs nonetheless argued the hospitals’ reservation of rights to customary rates 

constituted an unfair assignment of their personal injury claims against the third party 

tortfeasors. The Andrews court rejected the argument, explaining that “[t]he legislature, 

in limited circumstances, may abrogate the rule against assigning tort claims. [Citation.] 

The medical lien statute represents the legislature’s abrogation of that rule. The 
15

abrogation effected by the medical lien statute serves to ease the financial burden on 

providers and to encourage hospitals to render emergency care to patients without regard 

to ability to pay. [Citation.] Here, the plaintiffs’ insurers did not assign any rights to the 

hospitals. Rather, the right to the medical liens springs from [Arizona Revised Statutes]

§ 33–931. We see no reason to invalidate the medical lien statute as written by the 

legislature given its obvious value and purpose.” (Andrews, supra, at p. 63.)

Taken together, Parnell, supra, 35 Cal.4th 595 and Andrews allow for statutory 

medical liens to recover customary billing rates for emergency room services if the 

hospital has an express contract with the health care service plan to that effect.

III

Parnell’s Continuing Validity

AAA and Allstate argue Parnell, supra, 35 Cal.4th 595 is no longer valid authority 

for the proposition that hospitals can contractually reserve the right to recover their 

customary rates even after being paid the negotiated rate by injured patients’ health plans. 

In so arguing, AAA and Allstate rely on the Knox-Keene Health Care Service Plan Act of 

1975 (Knox-Keene Act) (Health & Saf. Code, § 1340 et seq.) and the California Supreme 

Court’s subsequent decisions in Prospect, supra, 45 Cal.4th 497 and Howell, supra, 52 

Cal.4th 541. We conclude these authorities do not undermine Parnell’s holding that 

hospitals may contractually preserve their right to recover their customary rates from 

third party tortfeasors and their liability insurers.

California hospitals are required to provide emergency care without regard to the 

injured patient’s ability to pay. (Health & Saf. Code, § 1317, subd. (d).) The treating 

hospital may require only that “the patient or his or her legally responsible relative or 

guardian . . . execute an agreement to pay therefor or otherwise supply insurance or credit 

information promptly after the services are rendered.” (Ibid.) The Knox-Keene Act 

requires health plans to reimburse hospitals for emergency care even if the hospital is not 
16

included in the health care service plan’s network. (Health & Saf. Code, § 1371.4, 

subds. (a) & (d).) 

The Knox-Keene Act also includes the following patient-protection provisions: 

“(a) Every contract between a plan and a provider of health care services shall be in 

writing, and shall set forth that in the event the plan fails to pay for health care services as 

set forth in the subscriber contract, the subscriber or enrollee shall not be liable to the 

provider for any sums owed by the plan. [¶] (b) In the event that the contract has not 

been reduced to writing as required by this chapter or that the contract fails to contain the 

required prohibition, the contracting provider shall not collect or attempt to collect from 

the subscriber or enrollee sums owed by the plan. [¶] (c) No contracting provider, or 

agent, trustee or assignee thereof, may maintain any action at law against a subscriber or 

enrollee to collect sums owed by the plan.” (Health & Saf. Code, § 1379 (Section 1379).)

We reject the contentions of AAA and Allstate that section 1379 insulates them 

from balance billing by hospitals. Section 1379 does not mention balance billing, third 

party tortfeasors, or liability insurance companies. Instead, the statute mentions only 

health care service plans, providers of medical care, and patients. The clear import of 

section 1379 is to protect patients with health care service plan coverage from any 

collection attempts by providers of such medical care as emergency room services.

Section 1379’s patient protections were examined by the California Supreme 

Court in Prospect, supra, 45 Cal.4th 497. Prospect involved billing disputes between 

health care service plans and emergency room physicians with whom they did not have 

preexisting contractual relationships. (45 Cal.4th at p. 503.) The health care service 

plans argued the Knox-Keene Act (along with other provisions of law) prevented the 

emergency room physicians from billing the patients for the difference between the bill 

submitted and the amount paid by the health care service plans. (Id. at pp. 501, 505.) 

Thus, the question presented for the Supreme Court was whether the lack of contract 

between the health care service plans and the emergency physicians precluded section 
17

1379’s prohibition on “balance billing” –- i.e., billing for the difference between the usual 

and customary rate and the negotiated rate paid. (Id. at pp. 505-506.) 

The Prospect court concluded the Knox-Keene Act precludes any attempt to bill 

patients for the amount exceeding the negotiated rate paid by health care service plans. 

(Prospect, supra, 45 Cal.4th at p. 502.) Instead, the health care service plans and 

emergency room physicians are required to resolve their billing disputes without injecting 

their patients into the process. (Ibid.) On this point, the Prospect court noted that “the 

Legislature contemplated there may be disputes over the amounts owed to noncontracting 

providers such as emergency room doctors, and therefore the Knox–Keene Act requires 

that each [health maintenance organization] ‘shall ensure that a dispute resolution 

mechanism is accessible to noncontracting providers for the purpose of resolving billing 

and claims disputes.’ (§ 1367, subd. (h)(2); see also § 1371.38, subd. (a) [directing the 

Dept. of Managed Health Care to adopt regulations ensuring that each HMO adopt a 

dispute resolution mechanism that is ‘fair, fast, and cost-effective for contracting and 

noncontracting providers’].)” (Prospect, supra, at p. 507.) Ultimately, however, “[a] 

patient who is a member of an HMO may not be injected into the dispute.” (Id. at 

p. 502.)

The California Supreme Court’s decision in Prospect does not mention its earlier 

case of Parnell, supra, 35 Cal.4th 595. (See Prospect, supra, 45 Cal.4th at pp. 497-511.) 

This omission is explained by the fact Prospect did not involve any claim of recovery 

against third party tortfeasors or their liability insurers. (Ibid.) “An opinion is not 

authority for a point not raised, considered, or resolved therein.” (Styne v. Stevens (2001) 

26 Cal.4th 42, 57.) Nothing in Prospect abrogates Parnell’s holding that hospitals may 

contract with health care service plans to preserve rights to recover customary billing 

rates via HLA liens against third party tortfeasors. 

We reject AAA’s argument that the California Supreme Court’s decision in 

Howell, supra, 52 Cal.4th 541 overruled its earlier statement in Parnell that hospitals 
18

may contract with health care service plans to preserve the right to balance bill third party 

tortfeasors. Howell involved the question of whether an injured patient could sue a 

tortfeasor for damages that included the customary charges for emergency room care 

billed by the hospital. (Id. at p. 548.) The Howell court concluded that when the hospital 

has accepted a lesser amount as full payment under the terms of a prior agreement with 

the health care service plan, the injured patient could only recover this negotiated rate. 

(Ibid.) 

Howell explains that “[t]he collateral source rule, which precludes deduction of 

compensation the plaintiff has received from sources independent of the tortfeasor from 

damages the plaintiff ‘would otherwise collect from the tortfeasor’ [citation], ensures that 

plaintiff . . . may recover in damages the amounts her [or his] insurer paid for her [or his] 

medical care. The rule, however, has no bearing on amounts that were included in a 

provider’s bill but for which the plaintiff never incurred liability because the provider, by 

prior agreement, accepted a lesser amount as full payment. Such sums are not damages 

the plaintiff would otherwise have collected from the defendant. They are neither paid to 

the providers on the plaintiff’s behalf nor paid to the plaintiff in indemnity of his or her 

expenses. Because they do not represent an economic loss for the plaintiff, they are not 

recoverable in the first instance.” (Howell, supra, 52 Cal.4th at pp. 548-549.) 

Howell addressed whether a patient could recover the customary billing rate from 

a tortfeasor, whereas this case involves a claim by the hospital against tortfeasors and 

their liability insurers. (Howell, supra, 52 Cal.4th at p. 548.) In every instance in which 

Howell articulated its holding, the Supreme Court noted the hospital in that case agreed 

the negotiated rate constituted payment in full. (Id. at pp. 548 [collateral source did not 

apply because hospital agreed to accept negotiated rate as full payment], 554 [hospital 

accepted negotiated rate of “$3,600 in full payment for its services to the plaintiff”].) 

Rather than overruling Parnell, the Supreme Court in Howell repeatedly cited its 

earlier decision with approval. In each of the four instances in which Howell cited 
19

Parnell, the California Supreme Court expressly noted Parnell involved a situation in 

which the hospital accepted a negotiated rate as payment in full. (Howell, supra, 52 

Cal.4th at pp. 554, 557, 558, 563.) For example, the Howell court noted it “reached the 

same conclusion in Parnell . . . , holding the hospital could not assert a lien against a 

patient’s tort recovery for its full bill when it had agreed to accept an insurer’s lesser 

reimbursement as full payment.” (Howell, supra, 52 Cal.4th at p. 554, italics added.) 

Similarly, Howell reiterated its holding that, “[h]aving agreed to accept the negotiated 

amount as full payment, a provider may not recover any difference between that and the 

billed amount through a lien on the tort recovery. (Parnell . . . , supra, 35 Cal.4th at 

p. 598.)” (Howell, supra, 52 Cal.4th at p. 558.) Based on the hospital’s acceptance of a 

negotiated rate as payment in full, Howell concluded that “[p]laintiff cannot meaningfully 

be said ever to have incurred the full charges. (See Parnell . . . , supra, 35 Cal.4th at 

p. 609 [where hospital had agreed with plaintiff’s health plan to accept discounted 

amounts as payment in full, plaintiff owed hospital nothing beyond those discounted 

payments] . . . .)” (Howell, supra, at p. 557.) In short, Howell does not overrule the 

Parnell court’s statement that hospitals have the ability to enter into agreements with 

health care service plans that preserve the right to recover customary rates from 

tortfeasors for emergency room care provided.

We are also not persuaded by AAA that its interpretation of Howell, supra, 52 

Cal.4th 541 was confirmed in Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308 

(Corenbaum). AAA argues Corenbaum stands for the proposition that “the tortfeasor, 

and by extension his [or her] insurer, is not liable for the delta between what the hospital 

‘charged’ and what it accepted from the health insurer.” AAA overstates the scope of 

decision in Corenbaum. The Corenbaum court expressly noted that: “As in Howell, the 

medical providers who treated plaintiffs . . . accepted, pursuant to prior agreements, less 

than the full amount of their medical billings as payment in full for their services.” 

(Corenbaum, supra, at p. 1318.) Based on the similarity in the hospitals’ acceptance of 
20

the negotiated rate as payment in full, Corenbaum holds evidence of the customary rate 

for emergency room services may not be introduced at trial to prove medical expenses or 

noneconomic damages when the hospital accepted full payment in a lesser amount. (Id.

at p. 1318.) 

Also based on the Supreme Court’s guidance in Howell, the Corenbaum court 

reasoned that “[a]n insured plaintiff incurs no liability for the negotiated rate differential 

and suffers no pecuniary loss in that amount.” (Corenbaum, at p. 1325.) Thus, 

“[e]vidence of the full amount billed . . . is not relevant to the amount of damages for past 

medical expenses if the plaintiff never incurred liability for that amount.” (Id. at 

p. 1327.) As in Howell, the decision in Corenbaum did not involve any action by the 

hospital against the third party tortfeasor or tortfeasor’s liability insurer.

Based on our survey of decisional authority following the Supreme Court’s 

unanimous decision in Parnell, supra, 35 Cal.4th 595, we conclude no case undermines 

Parnell’s guidance to hospitals that they may preserve the right to recover from a third 

party tortfeasor the differential between the negotiated rate paid by an injured patient’s 

health care service plan and the customary rate billed for the emergency room services. 

Moreover, neither the HLA nor applicable provisions of Knox-Keene has been amended 

by the Legislature since the Supreme Court’s 2005 decision in Parnell. (Civ. Code, §§ 

3045.2, 3045.3, 3045.4 [pertinent HLA statutes]; § 1379 [pertinent Knox-Keene statute].) 

Thus, the Legislature has not changed how the HLA statutory lien operates either in 

substance or procedure since the Parnell court examined the HLA statutory scheme. In 

short, Parnell remains valid insofar as it allows hospitals to contract for a reservation of 

rights to recover from tortfeasors the differential between the negotiated and the usual 

and customary rates for emergency room services provided.7

 

7

In so concluding, we are not called to determine whether or to what extent a 

hospital is limited in the amount it asserts to be its “customary rates.” (Cf. Howell, supra, 
21

IV

Whether the Dameron/Kaiser Contract Preserved Dameron’s Right to Recover its 

Customary Emergency Room Rates from Third-party Tortfeasors

Having concluded Dameron had the prerogative under Parnell, supra, 35 Cal.4th 

595 to enter into a contract to preserve its billing rights against third party tortfeasors 

liable for injuries to its emergency room patients, we consider whether the 

Dameron/Kaiser contract actually preserved such rights. Dameron contends its contract 

with Kaiser suffices to allow it to pursue its customary billing rate from third party 

tortfeasors who injure Kaiser-covered patients. 

In evaluating Dameron’s claim, we apply well-established principles governing 

review of contractual agreements. “The ordinary rules of contract interpretation apply 

equally to contracts of insurance. (Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 

1109, 1115.) The mutual intention of the contracting parties at the time the contract was 

formed governs. (Civ. Code, § 1636; Palmer, supra, at p. 1115.) We ascertain that 

intention solely from the written contract if possible, but also consider the circumstances 

under which the contract was made and the matter to which it relates. (Civ. Code, 

§§ 1639, 1647.) We consider the contract as a whole and interpret the language in 

context, rather than interpret a provision in isolation. (Id., § 1641.) We interpret words 

in accordance with their ordinary and popular sense, unless the words are used in a 

technical sense or a special meaning is given to them by usage. (Id., § 1644.) If 

contractual language is clear and explicit and does not involve an absurdity, the plain 

meaning governs. (Id., § 1638.)” (American Alternative Ins. Corp. v. Superior Court

(2006) 135 Cal.App.4th 1239, 1245.)

 

52 Cal.4th at p. 551 [limiting economic damages to “any reasonable charges for 

treatment the injured person has paid or, having incurred, still owes the medical provider 

are recoverable as economic damages”], italics added.)
22

Here, the Dameron/Kaiser contract was entered into in 1995, a decade before the 

California Supreme Court issued its decision in Parnell, supra, 35 Cal.4th 595. The 

contract does not expressly reserve to Dameron a right to recover its customary billing 

rates for emergency room services from anyone. The Dameron/Kaiser contract does not 

mention HLA liens, third party tortfeasors, or liability insurers for third party tortfeasors. 

Instead, the contract sets forth the reciprocal obligations of Dameron to provide 

emergency medical services and Kaiser to pay negotiated rates for those services.8 

Rather than reserving the right to recover the entirety of the customary charge from third 

party tortfeasors, the Dameron/Kaiser contract states payment of the negotiated rates 

constitutes payment in full. Exhibit A of the Dameron/Kaiser contract provides:

“[Kaiser] will pay [Dameron] for Covered Services the rates set forth in this 

Exhibit A, reduced by applicable Copayments . . . . [Dameron] will accept such amounts 

as payment in full for Covered Services, irrespective of the cost to [Dameron] of 

providing such services, or of [Dameron]’s customary charges for such services.” (Italics 

added.) 

This contract provision does not reserve to Dameron any right to recover 

additional payments from any other person or entity. Moreover, it imposes on Kaiser no 

obligation to assist or take any other action to help Dameron recover its customary 

charges from any third party tortfeasor or liability insurer. And, there is no mention of 

HLA liens. To escape this express agreement to accept the negotiated rate as “payment 

in full,” Dameron looks to the “Member Billing” section of the contract. Specifically, 

Dameron points to language stating that “Hospital shall look solely to Kaiser Permanente 

 

8

In the copy of the Dameron/Kaiser contract filed in the trial court, the pages 

specifying the negotiated billing rates are marked “with[h]eld as proprietary trade secret 

info.” Even so, the parties agree the contract supplied Kaiser with negotiated billing rates 

for emergency room services that were less than Dameron’s customary rates for the same 

services. 
23

(or another responsible payer) for compensation for Hospital Services rendered to 

Members under this Agreement.” (Italics added.) 

Dameron argues the italicized language renders this contract provision sufficiently 

ambiguous to allow extrinsic evidence to prove that “another responsible payer” includes 

tortfeasors and their liability insurers. A contract is ambiguous when it contains language 

that is reasonably susceptible to more than one meaning. (MacKinnon v. Truck Ins. 

Exchange (2003) 31 Cal.4th 635, 648.) For several reasons, the contract’s reference to 

“another responsible payer” cannot reasonably be construed to refer to third party 

tortfeasors or their liability insurers. 

First, the reference to another responsible payer is qualified by the restriction that 

Dameron is limited to “compensation for Hospital Services rendered to Members under 

this Agreement.” (Italics added.) The purpose of the Dameron/Kaiser contract is to agree 

upon negotiated billing rates and to insulate patients covered by Kaiser from charges 

beyond their individual copayment responsibilities. Under this agreement, there is no 

mention of customary billing rates or HLA liens. 

Second, the paragraphs immediately following language cited by Dameron serve 

to limit Dameron’s “claims for compensation” to copayments, services after coverage is 

exhausted or disallowed by Kaiser, instances in which the patient turns out to have no 

Kaiser coverage at all, and “regular Medicare.” Even if the meaning of “another 

responsible payer” were ambiguous, these paragraphs preclude any interpretation of the 

phrase to include third party tortfeasors or their liability insurers. 

Third, any interpretation of “another responsible payer” as including third party 

tortfeasors would create a conflict with the portion of the Dameron/Kaiser contract in 

which Dameron has agreed to accept the negotiated rates “as payment in full for Covered 

Services, irrespective of the cost to [Dameron] of providing such services.” (Italics 

added.) We reject this interpretation as introducing an unnecessary internal inconsistency 

into the Dameron/Kaiser contract. “It is a cardinal rule of construction that a contract is 
24

to be construed as a whole, effecting harmony among and giving meaning to all the parts 

thereof. (Civ. Code, § 1641.)” (People ex rel. Dept. of Parks and Recreation v. West-ARama, Inc. (1973) 35 Cal.App.3d 786, 793.)

Fourth, Dameron’s assertion of the ability to collect customary rates from other 

parties would have the effect of imposing new duties on Kaiser that are not otherwise 

spelled out in the contract. In its briefing, Dameron contends we should accept a history 

of cooperation between Dameron and Kaiser in pursuing additional payments from third 

party tortfeasors. In other words, Dameron argues Kaiser has a contractual duty to assist 

in recovering the customary billing rates for its patients from others. Crediting this 

argument would mean Dameron could sue Kaiser for breach of contract if that health care 

service plan did not help pursue Dameron’s HLA liens. The Dameron/Kaiser contract 

spells out no such obligation for Kaiser. 

The Dameron/Kaiser contract’s silence as to any obligation to assist in collection 

from third party tortfeasors does not allow us to graft a new obligation into the 

agreement. Indeed, the contract itself provides that “[a]ny other agreements, promises, 

negotiations, or representations relating to the subject matter of this Agreement . . . not 

expressly set forth herein are of no force and effect.” “Courts will not add a term about 

which a contract is silent. (Moss Dev. Co. v. Geary (1974) 41 Cal.App.3d 1, 9.)” (Levi 

Strauss & Co. v. Aetna Casualty & Surety Co. (1986) 184 Cal.App.3d 1479, 1486 

dismissed, remanded and ordered published sub nom. Levi Strauss and Co. v. Aetna Cas. 

and Sur. Co. (1987) [237 Cal.Rptr. 455].) Instead, “[a] contract extends only to those 

things which it appears the parties intended to contract. Our function is to determine 

what, in terms and substance, is contained in the contract, not to insert what has been 

omitted. We do not have the power to create for the parties a contract that they did not 

make and cannot insert language that one party now wishes were there.” (Vons 

Companies, Inc. v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 58-59.)
25

Dameron correctly points out that “[n]either law nor equity requires that every 

term and condition be set forth in a contract.” (Frankel v. Board of Dental Examiners

(1996) 46 Cal.App.4th 534, 545.) Thus, “usual and reasonable terms found in similar 

contracts may be considered, unexpressed provisions of the contract may be inferred 

from the writing, external facts may be relied upon, and custom and usage may be 

resorted to in an effort to supply a deficiency if it does not alter or vary the terms of the 

agreement.” (Ibid.) However, supplying implied terms to give effect to the expressed 

intent of the contract does not allow us to impose new duties and obligations to which the 

parties never agreed. “[C]ourts cannot make better agreements for parties than they 

themselves have been satisfied to enter into or rewrite contracts because they operate 

harshly or inequitably. It is not enough to say that without the proposed implied 

covenant, the contract would be improvident or unwise or would operate unjustly. 

Parties have the right to make such agreements. The law refuses to read into contracts 

anything by way of implication except upon grounds of obvious necessity.” (Ibid.)

Although Parnell, supra, 35 Cal.4th 595 allows Dameron to contractually reserve 

the right to recover its customary billing rate for emergency room services for Kaiser 

patients and caused by third party tortfeasors, Dameron has not done so in this case.9

 

9 We note the summary judgments in favor of AAA and Allstate included claims 

pertaining to emergency room patients covered by health care service plans other than 

Kaiser. In the trial court, Dameron argued summary judgment could not be granted in 

favor of AAA and Allstate because their motions did not seek to dispose of all claims. 

The trial court granted summary judgment in favor of AAA and Allstate concluding 

claims involving Kaiser patients failed for lack of a debt underlying Dameron’s breach of

contract claims. As to the non-Kaiser patients, the trial court found Dameron had not 

amended the complaint to include these claims. In this appeal, Dameron does not 

contend the trial court erred in dismissing the claims based on these non-Kaiser patients. 

Accordingly, we affirm also as to the trial court’s dismissal of claims premised on 

patients not covered by Kaiser.
26

DISPOSITION

The judgment is affirmed. Each party shall bear its own costs. (Cal. Rules of 

Court, rule 8.278(a)(1) & (2).)

 HOCH , J.

We concur:

 ROBIE , Acting P. J.

 BUTZ , J.

 

Given our conclusion the judgments of dismissal were properly entered because 

the Dameron/Kaiser contracts did not reserve Dameron’s rights to pursue customary 

billing amounts under HLA liens, we do not reach the question of whether Dameron 

timely filed its HLA liens in this case.

Finally, we do not address whether the billing scheme asserted by Dameron to be 

its contractually reserved right complies with California law by reimbursing Kaiser for 

the entirety of its payments if Dameron recovers the full customary billing rate from a 

third party tortfeasor or tortfeasor’s liability insurer.