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IMPAIRMENT OF HOSPITAL LIEN - § 35-11-370 THROUGH-372 - EX PARTE ALFA MUTUAL INSURANCE COMPANY

Ex parte Alfa Mutual Insurance Company, [Ms. 1141343, Apr. 28, 2017] __ So. 3d __ (Ala. 2017). Plurality opinion (Murdock, J.; Parker, Main and Wise, JJ. concur; Bolin and Shaw, JJ., concur in the result and Stuart, C.J., recuses).

Alfa’s insured was injured in an automobile accident and was admitted to USA Hospital less than one week after the accident. Alfa’s insured died of his injuries, and Alfa paid the limits of a $2,000 coverage to the parents of the decedent for funeral expenses pursuant to the med-pay provision in the parents’ Alfa automobile-insurance policy. A month later, Alfa issued a draft in the amount of $2,000 to USA Hospital.

After a trial on stipulated facts, the circuit court entered summary judgment in favor of USA in the full amount of its lien of $36,438.50, based on the entirety of the hospital’s charges. The Court of Civil Appeals affirmed on the authority of University of South Alabama v. Progressive Insurance Co., 904 So. 2d 1242 (Ala. 2004). The Supreme Court granted certiorari.

In University of South Alabama v. Progressive Insurance Company, supra, the Court had affirmed a judgment against Progressive for impairing a hospital lien by paying $6,000 in exchange for full release of claims against a tortfeasor. The Court rejected Progressive’s argument that the amount of damages for impairment of a hospital lien is limited to the payment made by the insurer to obtain the release of the tortfeasor. Chief Justice Nabers dissented in the Progressive case as to the amount of damages concluding that the hospital “was entitled to be made whole and to seek the fair value of the claim against the wrongly-released tortfeasor, but was not automatically entitled to the full amount of its lien.” Ms. *10.

Construing § 35-11-372, Ala. Code 1975, providing for “a civil action for damages on account of such impairment,” the plurality opinion in Ex parte Alfa Mutual Insurance Company concludes that where its lien is impaired, a hospital should “be restored to the position it would have been in had its lien not been impaired.” Ms. *11-12, quoting University of South Alabama v. Progressive Insurance Co., supra, 904 So. 2d at 1250, Nabers, C.J., dissenting. The plurality opinion notes that “damages on account of an impairment means damages caused by or resulting from the impairment.” Ms. *12, emphasis in the original. In a case involving a medical payment benefit with a discrete policy limit “the value of the lien could not be more than the value of the claim to which it attaches.” Ms. *12. The opinion described University of South Alabama v. Progressive as

involv[ing] a release of a tortfeasor, which, unlike an insurer whose potential liability is limited pursuant to a pre-injury contract, could potentially be liable for an amount that equals or exceeds the full amount of the hospital’s lien (assuming that liability for at least that amount can be shown).

Ms. *12-13.

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