Opinion ID: 1992243
Heading Depth: 1
Heading Rank: 5

Heading: Enforcing the Lien.

Text: Having held that a hospital lien attaches upon admission of the patient to the hospital for treatment, we find it necessary to address Farmers' argument that it is not a proper party defendant in this case. The Nebraska hospital lien statute provides: Whenever any person shall employ a physician, nurse, or hospital to perform professional service or services of any nature, in the treatment of or in connection with an injury, and such injured person shall claim damages from the party causing the injury, such physician, nurse, or hospital, as the case may be, shall have a lien upon any sum awarded the injured person in judgment or obtained by settlement or compromise on the amount due for the reasonable value of services necessarily performed, except that no such lien shall be valid against anyone coming under the Nebraska Workers' Compensation Act. In order to prosecute such lien, it shall be necessary for such physician, nurse, or hospital to serve a written notice upon the person or corporation from whom damages are claimed that such physician, nurse, or hospital claims a lien for such services and stating therein the amount due and the nature of such services, except that whenever an action is pending in court for the recovery of such damages, it shall be sufficient to file the notice of such lien in the pending action. § 52-401. The Legislature enacted this statute in 1927. Unfortunately, legislative histories for statutes dating that far back do not exist. However, it is the case that [a] lien created by statute is limited in operation and extent by the terms of the statute and can arise and be enforced only in the event and under the facts and conditions provided in the statute. It cannot be extended by the court to cases not within the statute. County Board of Platte County v. Breese, 171 Neb. 37, 44-45, 105 N.W.2d 478, 482-83 (1960). Under the statute, when the injured party claim[s] damages from the party causing the injury, the statute gives the hospital a lien upon any sum awarded the injured person in judgment or obtained by settlement or compromise on the amount due.... § 52-401. Analyzing a similar hospital lien statute, the bankruptcy court for the district of Maryland described such a lien as transferring the interest of the injured party in the proceeds of a judgment or settlement to the hospital. In re Howard, 43 B.R. 135 (D.Md.1983). See, also, In re Nelson, 92 B.R. 837 (D.Minn.1988) (lien attaches to the patient's preexisting cause of action upon rendition of services by the hospital). Applying this interpretation to the case at bar, the lien transferred to West Nebraska Schneider's interest in sums obtained in judgment or settlement of his claims, up to the value of the services provided by West Nebraska less a reasonable portion of the costs of recovery, including attorney fees. See United Services Automobile Assn. v. Hills, 172 Neb. 128, 109 N.W.2d 174 (1961) (subrogor who accepts proceeds of litigation in which he did not participate must contribute proportional share of expenses, including attorney fees). Direct actions against liability insurance carriers based on the negligence of the insured are not permitted in Nebraska. State Auto. & Cas. Underwriters v. Farmers Ins. Exchange, 204 Neb. 414, 282 N.W.2d 601 (1979). Therefore, Schneider could not sue Farmers directly for his injuries. If the lien statute is interpreted as transferring part of Schneider's interest to West Nebraska, then West Nebraska cannot sue Farmers directly either. Such an interpretation is consistent with the language of § 52-401 when read as a whole. The first sentence of the statute gives the hospital a lien on any amounts the injured party receives from judgment or settlement of his claims. The second sentence requires the hospital to perfect the lien by giving the tort-feasor notice of its existence prior to any such settlement or judgment. In the context of the attorney lien statute, Neb.Rev.Stat. § 7-108 (Reissue 1987), the purpose of which is very similar to that of the hospital lien statute, this court noted that the notice requirement is designed `to prevent a bona fide settlement of the controversy by the litigants and payment by the debtor to the creditor in ignorance of the attorney's rights....' (Emphasis omitted.) Kleager v. Schaneman, 212 Neb. 333, 339, 322 N.W.2d 659, 663 (1982), quoting Cones v. Brooks, 60 Neb. 698, 84 N.W. 85 (1900). As noted by the appellant, if the Legislature intended the hospital lien created in the first sentence of § 52-401 to be enforceable against insurance companies, it would have required the hospital to provide them notice as well, as have a number of other states. See, e.g., Colo.Rev.Stat.Ann. § 38-27-102 (West 1990); D.C.Code Ann. § 38-302 (1990); Ind.Code Ann. § 32-8-26-4(b)(3) (Burns Cum.Supp.1991); Iowa Code Ann. § 582.2 (West 1950); N.M.Stat.Ann. § 48-8-2(C) (1987); N.D.Cent.Code Ann. §§ 35-18-03 and 35-18-05 (1987). Moreover, as appellee's attorney stated during oral argument, an insurer acts as the tort-feasor's agent in settling with the injured party. Thus, any settlement reached is not between the injured party and the insurer, but between the injured party and the tort-feasor. That the insurer writes the check is the result of an independent contractual arrangement and does not alter this basic structure. Because the hospital lien statute creates a lien against the proceeds of a settlement, regardless of where the tort-feasor gets the money to pay that settlement, the tortfeasor is generally the party against which the hospital must assert its lien. See, Nationwide Mut. Ins. Co. v. A.H.C.C.C.S., 166 Ariz. 514, 803 P.2d 925 (1990) (no direct action against insurance company to enforce hospital lien where statute extends lien only to claims for damages); Booth v. Seaboard Fire & Marine Insurance Company, 285 F.Supp. 920 (D.Neb.1968), rev'd on other grounds 431 F.2d 212 (8th Cir.1970) (no direct action against tort-feasor's insurer under subrogation provision of Workers' Compensation Act). We are careful to point out, however, that insurance companies are not completely shielded from liability under our holding. Upon perfection of a lien by a hospital, a duty arises on the part of the tort-feasor's insurer not to impair the hospital's rights under that lien. If such an insurer settles directly with the injured party despite the existence of a perfected hospital lien, it has breached that duty and is liable directly to the hospital. See Palm Springs Gen. Hosp. v. State Farm Mut. Auto. I. Co., 218 So.2d 793 (Fla.App.1969). Thus, had West Nebraska sued the Kehms in this case, and complied with the notice provisions of the statute, it would have had a lien on any amounts paid by or on behalf of the Kehms to the extent of Schneider's unpaid bills. If Farmers desired to settle directly with Schneider it would, as the Kehms' agent, have a duty to satisfy the lien and if it failed to do so would be liable to the hospital. Thus, the only remaining issue is whether the lien in this case was perfected prior to the settlement. For the reasons set out below, we hold that it was not. Perfection of the Lien. The hospital lien statute requires a hospital asserting a lien to serve a written notice upon the person or corporation from whom damages are claimed ... except that whenever an action is pending in court for the recovery of such damages, it shall be sufficient to file the notice of such lien in the pending action. § 52-401. Rolla Community Hosp. v. Dunseith Com. N. Home, 354 N.W.2d 643 (N.D.1984), is often cited in discussions of the significance of noncompliance with the notice provisions of a hospital lien statute. There, a woman sued a nursing home for injuries allegedly sustained there. The hospital which treated her filed a hospital lien statement and served it on the nursing home and the attorney representing the injured party. The hospital filed its statement more than 30 days after providing services to the woman, however, in contravention of the statute. Subsequently, the woman settled her suit against the nursing home. The hospital then brought suit in federal court against the nursing home's insurance company to enforce its lien. The federal district court certified to the North Dakota Supreme Court the question of whether the hospital's failure to strictly comply with the statute's notice provisions barred its suit. The North Dakota court replied that the suit was not barred, holding that if the insurer had actual notice of the filed lien but nevertheless settled with the injured party, the lien was enforceable. It is important to note that Rolla and other cases holding that actual notice is sufficient to satisfy a hospital lien's notice requirements involve situations wherein the hospital filed some notice of its lien, but that filing did not comply with the statute for technical reasons. See, S.W. Com. Health Services v. Safeco Ins., 108 N.M. 570, 775 P.2d 1287 (1989) (mailing of copy of lien statement to insurer's local office rather than its home office as required by statute); Illini Hospital v. Bates, 135 I11.App.3d 732, 482 N.E.2d 235 (1985) (notices sent by certified mail rather than by registered mail as required by statute); Rolla, supra (failure to file within 30 days of provision of services as required by statute). Here, West Nebraska is not asserting such a technical defect, but argues that Farmers' actual knowledge that the hospital was treating Schneider and of the amount of his bills is sufficient notice under the statute. Knowledge that the hospital treated Schneider is different from notice that the hospital is claiming a lien for the amounts owed, however. As several of Farmers' witnesses pointed out, Schneider's rich uncle, his mother, or another insurance company might have paid his hospital bills. Without notice that the hospital is claiming a lien on settlement proceeds to satisfy the injured party's debts, knowledge that such debts exist is not sufficient to satisfy the notice provisions of § 52-401. Such an analysis is consistent with prior Nebraska cases interpreting lien statutes. See, Commerce Sav. Scottsbluff v. F.H. Schafer Elev., 231 Neb. 288, 436 N.W.2d 151 (1989) (fertilizer lien inapplicable against subsequent lienholders where not filed within 60 days of the last date the product, machinery, or labor is supplied, as required by statute); County Board of Platte County v. Breese, 171 Neb. 37, 105 N.W.2d 478 (1960), quoting United States v. Beaver Run Coal Co., 99 F.2d 610 (3d Cir.1938) (a lien is enforceable only when there has been at least substantial compliance with the statutory requirements). We therefore hold that at least substantial compliance with the notice requirements of § 52-401 is necessary to perfect a hospital lien. Although we do not decide what may constitute substantial compliance in any given case, it is clear that West Nebraska did not substantially comply with the statute's notice provisions in this case. It mailed its notice of intention to claim a lien to Farmers on the day the settlement agreement was reached. This was more than 6 weeks after Schneider's release from the hospital. Prior to the time the settlement agreement was reached, West Nebraska provided no indication whatsoever that it planned to claim a lien. Farmers could have no actual or constructive knowledge of such an intent and is not liable under the hospital lien statute. Therefore, the trial court erred in granting West Nebraska's motion for summary judgment. We reverse, and remand the cause for the entry of judgment in favor of Farmers.