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Please note that Attorney Bruzonsky has been doing this regular “Liens Corner” column since April 2006. His last “Liens Corner” article was for the November/December 2017 issue of The Advocate, having stepped down from this regular column, as he now works part-time (and is part-time retired) exclusively handling large subrogation/lien claims in very large personal injury and medical malpractice cases for other attorneys. However, attorney Bruzonsky may add notes to this website under the subject lien article headers from time to time. (Please keep in mind that this site contains general information for educational purposes only. It is not intended to provide legal advise, which can only come from a qualified attorney who is familiair with all the facts and circumstances of your specific case and relevant law.) 

 

 

2007-02/03: ARS. 12-962 Liens, Parts 1-2

June 25th, 2016 12:12:45 pm


These articles have been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, February and March 2007 issues, @2007 by Steven J. Bruzonsky, Esq.


A.R.S. §12-962 State, Political Subdivision & School District Lien Claims, Part 1


(This is the first of a two part series on Arizona state, political subdivision and school district lien claims. The second part will be in next month's issue.)



A.R.S. §12-962 gives the State of Arizona or any of its political subdivisions a lien against personal injury settlements when it "provides" accident-related medical care. See A.R.S. §12-961 through §12-964. State agencies and even school districts may claim liens for payment of accident-related medical benefits under this statute. Maricopa Medical Center, which directly furnishes medical care, may claim liens for payment of its accident-related medical bills under this statute.


AHCCCS v. Bentley, 928 P.2d 653, 187 Ariz. 229 (App. 1996), A.R.S. §12-962 gives AHCCCS a statutory cause of action to recover medical benefits paid from proceeds of personal injury/medical malpractice settlements, regardless of whether an AHCCCS statutory lien has been timely filed pursuant to A.R.S. §36-2915 (the AHCCCS lien statute). AHCCCS as a state agency qualifies as a "state or political subdivision" to recover medical benefits.


At the time of the above decision, the first sentence of A.R.S. §12-962(A) stated "If this state or any of its political subdivisions is required by law to furnish medical care and treatment . . .". The statute was amended in 1999 to state "If this state or any of its political subdivisions provides medical care and treatment . . .". (emphasis added) The remaining sections and parts of the statute weren't changed at all. In particular, ARS 12§-961 is the same pre and post 1999 amendment, and ARS §12-961 continues to define that "Medical care and treatment" includes hospital, medical, psychological,surgical and dental care, ambulance services, prostheses, medical appliances and supplies, pharmaceutical supplies, occupational therapy and physical therapy.


Defenses to A.R.S. §12-962 Lien Claims: To date there are no Arizona appellate cases concerning the below defenses to A.R.S. §12-962 lien claims by the State of Arizona and political subdivisions thereof including school districts.


In my opinion, A.R.S. §12-962 doesn't apply when traditional health insurance is purchased.

If the state, agency or political subdivision pays a premium and purchases traditional health insurance, then arguably the state hasn't "provided" the healthcare and no lien would apply. The analogy is similar to that in ERISA (federal Employee Retirement Income Security Act of 1974) healthplan lien claim cases. Although the healthplan may claim a lien, Arizona anti-subrogation caselaw applies and health insurers can't subrogate against personal injury settlements. The common law rule long followed in Arizona is that, absent a statute, an assignment of a cause of action for personal injuries against a third party tortfeasor is void and unenforceable. Harleysville Mutual Ins. Co. v. Lea, 2 Ariz. App. 538, 410 P.2d 495 (App. Div. 1 1966) (auto medical payments); State Farm Fire and Casualty Co. v. Knapp, 107 Ariz. 184, 484 P.2d 180 (1971) (auto medical payments); Allstate Ins. Co. v. Druke, 118 Ariz. 301, 576 P.2d 49 (1978) (auto medical payments); Gallego v. Strickland, 121 Ariz. 160, 589 P.2d 34 (App. Div. 2 1978) (uninsured motorist) (prior to statutory amendment providing for uninsured motorist subrogation); Brockman v. Metropolitan Life Ins. Co., 125 Ariz. 246, 609 P. 2d 61 (1980) (group health insurance); Karp v. Speizer, 132 Ariz. 599, 647 P.2d 1197 (App. Div. 1 1982) (assignment to judgement creditor by judgement debtor of proceeds expected to be recovered from personal injury action) ; Piano v. Hunter, 173 Ariz. 172, 840 P.2d 1037 (App. Div. 1 1992) (same rule applies to local school district health trust fund); and Lingel v. Olbin, 198 Ariz. 249, 8 P3d 1163 (App. 2000) (prohibition against assignment of personal injury claims is based on public policy).


In my opinion, A.R.S. §12-962 applies only if the governmental entity directly provides medical services (such as county hospital or AHCCCS). A.R.S. §12-962 continues to permit AHCCCS liens as it did prior to 1999 amendment, because AHCCCS care is "furnished" (prior to 1999 amendment) or "provided" (1999 amendment) for by the "state or any of its political subdivisions". Prior to the 1999 amendment, ARS 12-962 permitted a lien only if the "state or any of its political subdivisions". was " required by law to furnish" medical care. The 1999 amendment deleted the "required by law" requirement, such that a lien is permitted if the "state or any of its political subdivisions" "provides" (the same as "furnish") medical care. So with the 1999 amendment, the "state or any of its political subdivisions" may claim a lien when it "provides" medical care regardless of whether it is required by law to provide this medical care. For example, now Maricopa County may claim a lien under A.R.S. §12-962 whenever it "provides" medical care such as by Maricopa County Hospital, even if AHCCCS isn't involved. Prior to the 1999 amendment, Maricopa County Hospital had to file a hospital lien, pursuant to A.R.S. §33-931, if AHCCCS care wasn't involved, to have a lien.


As noted above, A.R.S. §12-962 remains the same pre and post 1999 amendment, and defines "medical care and treatment" as various medical services "furnished", or post 1999 amendment "provided", by the "state or any of its political subdivisions". The various treatment modalities are defined in terms of services, not payments or insurance for such services. If the legislature intended to create lien rights when the "state or any of its political subdivisions" purchased health insurance or paid, instead of "furnishing" or "providing" for medical services, then the legislature would have specifically stated this in an amendment to the statute. The Arizona Supreme Court has repeatedly held that if the legislature truly wishes to change a statute from its plain meaning, it must adopt explicit language in order to effectuate the claimed new intent.


ARS A.R.S. §12-962(A) states that "The head of the department or agency furnishing the medical care or treatment" is in charge of enforcing the lien claim. It is not the CEO of the state's or agency's insurer, or the claim handler for the company providing administrative assistance but, rather, the chief officer of the department or agency that actually furnishes the medical care or treatment. The identification and function of the person charged with asserting the subrogation claim excludes anyone or anything else from eligibility for subrogation.


A.R.S. §12-962(A) further states that the lien claim is "to the extent of the reasonable value of the medical care or treatment." This is consistent with A.R.S. §12-962 giving lien rights only for medical care "furnished" (pre 1999 Amendment) or "provided" (1999 Amendment) by hospitals or facilities operated by the "state or any of its political subdivisions". The "reasonable value of the medical care or treatment" is a common term in both Federal and state law when the government or an agency thereof furnishes or provides medical care from a government, county or agency health facility. For example, military members receive free treatment at military hospitals; the military will bill the "reasonable value" of the services under the Federal Medical Care Recovery Act as a lien against a personal injury settlement; but when someone not eligible for "free" treatment receives care at a military hospital, they will receive an itemized bill for services. Similar examples on the Federal level include American Indian "free" care at U.S. Public Health Service facilities, and Veterans care at the VA Hospitals.


The other side will argue that the 1999 amendment was intended to get around the decision in Piano v. Hunter, 173 Ariz. 172, 840 P.2d 1037 (App. Div. 1 1992), which held that a local school district health trust fund subrogation provision was not enforceable as it violated Arizona anti-subrogation caselaw.


4. Reduction or Termination of Healthplan Benefits for Failure to Reimburse:


Does your client's healthplan contain provisions that the plan may terminate or reduce future benefits for failure to reimburse the plan? Has the healthplan threatened such action? Perhaps your client will be changing employers with no plans to go back to the same employers and will not be concerned about this. If the healthplan has a coordination of benefits provision that the injury settlement provides primary coverage, then can the healthplan sue your client in state court to recover accident-related benefits paid regardless of whether it has a lien? This should all be discussed with your client.


(The second part, in next month's issue, discusses why in my opinion these lien claims are not applicable to uninsured, underinsured or medical payments settlements.)


A.R.S. §12-962 State, Political Subdivision & School District Lien Claims, Part 2


(This is the second of a two part series on Arizona state, political subdivision and school district lien claims. The first part was in last month's issue and addressed several defenses to such lien claims, and that in my opinion, A.R.S. §12-962 doesn't apply when traditional health insurance is purchased, and that A.R.S. §12-962 applies only if the governmental entity directly provides medical services (such as county hospital or AHCCCS). Concern regarding reduction or termination of healthplan benefits for failure to reimburse was also discussed. This second part discusses why in my opinion A.R.S. §12-962 lien claims are not applicable to uninsured, underinsured or medical payments settlements.)


A.R.S. §12-962 gives the State of Arizona or any of its political subdivisions a lien against personal injury settlements when it "provides" accident-related medical care. See A.R.S. §12-961 through §12-964. State agencies and even school districts may claim liens for payment of accident-related medical benefits under this statute. Maricopa Medical Center, which directly furnishes medical care, may claim liens for payment of its accident-related medical bills under this statute.


In my opinion, A.R.S. §12-962 Lien Not Applicable to Uninsured, Underinsured or Medical Payments. However, to date there are no Arizona appellate cases concerning the below defenses to A.R.S. §12-962 lien claims by the State of Arizona and political subdivisions thereof including school districts.


A.R.S. §12-962 only provides for subrogation against the liability insurance carrier - as the statute uses the term "third person" and does not mention first party claims such as uninsured motorist, underinsured motorist or medical payments coverages.


The very language of A.R.S. §12-962 expressly applies only to liability claims. A.R.S. §12-962(A) provides that the lien may be recovered "from the third person or the injured or diseased person". A.R.S. §12-963(B) provides that "A release executed by the state or any of its political subdivisions shall not release a third party from any claims of the injured or diseased person except that the third party shall be entitled to offset amounts paid to the state or political subdivision if such expenses are included in the claim of the injured or diseased person." A.R.S. §12- 961 defines "third party" broadly to include "any governmental entity, corporation, company, partnership, firm, association, society and a natural person". However, the A.R.S. §12-961 definition of "third party" arguably isn't broad enough to include first party Uninsured and Underinsured Motorist benefits.


A.R.S. §12-962(B) provides for enforcement of A.R.S. §12-962 AHCCCS liens, as AHCCCS may intervene or join in any action or proceeding brought by or on behalf of the injured person against the liable third person; AHCCCS may institute and prosecute legal proceedings against the liable third party if an action or proceeding is not brought by or on behalf of the injured person with six months after the first day on which the medical care and treatment were furnished; and that AHCCCS can recover the cost of care from the injured or diseased person or his estate. Each of these actions must be brought against the "third person" who is liable for the injured person's injuries.


If the legislature had intended for A.R.S. §12-962 liens to apply to Uninsured,Underinsured Motorist claims and Medical Payments claims, then wouldn't the legislature have provided for specific enforcement against the first party insurer?


A.R.S. §12-962 hasn't been amended to include the term "indemnity". The term "indemnity", as inserted into A.R.S. §36-2915 (the AHCCCS lien statute) by 1990 amendment, is defined by Black's Law Dictionary as "A collateral contract or assurance, by which one person engages to secure another against an anticipated loss or to prevent him from being damnified by the legal consequences of an act or forbearance on the part of one of the parties or of some third person." However, the term "indemnity" arguably was never intended to apply to a direct monetary claim by an insured against his carrier, but only to those situations in which an insured was constrained to bring suit to enforce the provisions of a liability or indemnity policy whereby the carrier was obliged to defend and indemnify.


In Nationwide Mut. Ins. Co. v. AHCCCS, the Court mentions the "indemnity" language added to A.R.S. §36-2915 by 1990 amendment, stating that "The fact that the statute now includes that language means, of course, that the issue in this case can only arise again with liens that were recorded prior to September 27, 1990." However, that case involved holding a tortfeasor's insurance carrier liable for an A.R.S. §36-2915 AHCCCS lien, and it would be a stretch to say that case has any bearing on the Uninsured and Underinsured Motorist issue.


Workman's Compensation (A.R.S. §23-1023) liens have long been held to only apply to third party tortfeasors, and do not apply to Uninsured and Underinsured Motorist claims. However, A.R.S. §23-1023 has unique language which make it unequivocally clear that the Workman's Compensation lien only applies to third party claims. A.R.S. §23-1023 is entitled "Liability of third person to injured employee; election of remedies". A.R.S. §23-1023(A) permits an employee who "is injured or killed by the negligence or wrong of another not in the same employ" to "pursue his remedy against such other person". A.R.S. §23-1023(C) states that the lien is "on the amount actually collectable from such other person" and that "Compromise of any claim by the employee or his dependents at an amount less than the compensation and medical, surgical and hospital benefits provided for shall be made only with written approval of the compensation fund, or of the person liable to pay the claim."


Hospital/healthcare provider statutory liens, A.R.S. §33-931 et seq, expressly exclude "underinsured and uninsured motorist coverage" at A.R.S. §33-391(A), pursuant to amendment effective August 26, 2004. Prior to that date, Arizona caselaw does everything but outright state that the A.R.S. §33-931 lien excludes Uninsured and Underinsured Motorist claims. However, A.R.S. §33-934 has unique lien enforcement language which makes it unequivocally clear that the A.R.S. §33-931 hospital/healthcare provider lien is only enforceable against the third party tortfeasor, and as that lien is not enforceable against an insurance company, per Blankenbaker and Barfield (see above), it would appear that pre-amendment that lien also probably doesn't apply to Uninsured and Underinsured Motorist claims. As A.R.S. §2915 contains no specific enforcement provision, and A.R.S. §12-962 arguably contains enforcement provisions somewhat similar in language to A.R.S. §33-934, this gives a good argument that AHCCCS liens do not apply to Uninsured and Underinsured Motorist claims.


Contrast this limited language of ARS 12-962 to that of the Federal Medicare lien at 42 U.S.C. §1395y(b)(2), which is very broad in scope to ensure that Uninsured and Underinsured Motorist claims are clearly covered by the Federal Medicare lien.



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© Copyright 2006, Steven J. Bruzonsky, Attorney
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