Texas Supreme Court Holds Insurer Must Pay Settlement Twice; Payment to One is Not Payment to All Despite Check Being Made Jointly Payable to Claimant and Hospital
This morning, the Texas Supreme Court handed down a decision that will grab the attention of check writers near and far, at least those who are trying to settle personal injury claims. In this case, State Farm issued a personal injury settlement check made payable jointly to the personal injury claimant and the hospital that provided treatment and consequently held a lien. So far, so good or one would think. State Farm then sent the check to the personal injury claimant, who promptly endorsed it and cashed it without the hospital’s endorsement or paying off the hospital lien. Feeling left out, the hospital sued State Farm seeking full payment of its lien, saying State Farm had improperly disregarded it. State Farm retorted that it had fully discharged its duty to honor the lien when it made the check jointly payable.
The trial court granted State Farm a summary judgment and the court of appeals affirmed. The court of appeals held the insurer has met its statutory duty to comply with the lien. Still feeling left out, the hospital appealed to the Texas Supreme Court.
The Texas Supreme Court reversed, and held for the hospital. Both the hospital lien statute and the Uniform Commercial Code invalidated the release and revived the plaintiff/patient’s claim, and consequently the lien as well. in other words, the lien had to be actually paid, or it’s still enforceable.
As we have been saying for some time now, it is not a good idea to make a single check payable to both the claimant and the lienor. Moreover, we don’t think it’s a good idea to make a single check made payable to a claimant and a subrogee or loss payee (mortgagee, security interest owner, etc). We recommend you ascertain the exact amount of the lien, subrogation interest or security interest, and write and deliver two checks and two releases. Otherwise, you may be the guy who ends up paying the claim twice.
Chamberlain McHaney’s Amy Welborn has been elected Treasurer of the Austin Bar Association, meaning she will serve as president of the Austin Bar in three years. Amy will be the second Chamberlain McHaney lawyer to lead the Austin Bar in a five year span. The Austin Bar, located in the capital city, is the third largest local bar association in Texas with over 4,000 lawyers, including members of the Texas Supreme Court, the Attorney General, and several members of the legislature.
Mark your calendars now and save the date for our full day, fully accredited XIX Annual Ultimate Claims Handling Seminar on October 10, 2014 at CityPlace Conference Center in Dallas, Texas.
Chamberlain♦McHaney, with offices in Austin and San Antonio, handles all types of civil litigation throughout the state. The firm is A-V (highest peer review) rated by Martindale-Hubbell (Bar Registry of Preeminent Lawyers) and is listed in A.M. Best’s Directory of Recommended Attorneys. For information regarding our areas of practice and a list of representative clients, please visit: www.chmc-law.com.