The Texas Supreme Court heard oral arguments this week in a dispute over settlement proceeds, in which the hospital contends that the insurance company did not satisfy its obligation to recognize the hospital’s lien. The insurance company had notice of the hospital’s lien, made the settlement checks jointly payable to the claimants, and then sent the checks to the claimants. The claimants deposited the checks without the hospital’s endorsement and the checks were negotiated. The court of appeals held that that the insurance company fulfilled its duty by issuing the checks with the hospital as a joint payee. The hospital argues that the insurance company could not satisfy its obligations under the Hospital Lien Statute by making the checks jointly payable to the claimants and the hospital and then sending the check to the claimants. The insurance company argues that it did what was required and that liability lies with the banks that negotiated the checks without the endorsements of both payees. 12-0983, McAllen Hospitals, L.P. v. State Farm County Mutual Insurance Company
Until the Texas Supreme Court issues its opinion, safe practice would be to honor the hospital lien in the settlement of the case by making a separate checks to the hospital and the plaintiff. Please do not make the check jointly to the plaintiff and the hospital, and certainly do not make the check to the plaintiff as the sole payee and expect the plaintiff and his/her attorney to pay off the lien. Until further notice, safe practice also dictates applying this same protocol to all subrogation interests and assignments as well.