Lee Memorial Health System v. Progressive Select Insurance Company
230 So. 3d 558
| Fla. Dist. Ct. App. | 2017Background
- Ruben Gallegos was injured in an auto accident; Lee Memorial Health System (LMHS) provided hospital care and recorded two hospital liens totaling $84,199.99 under chapter 2000-439 §18 (a special act creating LMHS).
- Progressive Select (insurer of the tortfeasor) paid policy limits to Gallegos and made additional PIP payment to LMHS; LMHS claimed its liens remained unpaid and sued Progressive alleging lien impairment.
- Progressive moved for summary judgment arguing §18 was unconstitutional: (1) as a special/local law creating/enforcing liens based on private contracts (Art. III, §11(a)(9)); and (2) as impairing insurers’ contracts (Art. I, §10).
- The trial court granted summary judgment for Progressive, holding §18 unconstitutional for permitting liens based on private contracts and for impairing insurers’ contractual rights.
- The Second District affirmed: it held the patient–hospital admissions contract is a private contract, §18 impermissibly creates a lien based on that private contract, and the statute unconstitutionally impairs insurers’ contractual obligations by exposing insurers to liabilities beyond policy limits.
Issues
| Issue | LMHS's Argument | Progressive's Argument | Held |
|---|---|---|---|
| Whether §18’s lien is prohibited as a special/local law creating or enforcing liens based on private contracts (Art. III, §11(a)(9)) | LMHS: LMHS is a public hospital so its admissions contract is a public contract, so §18 is permissible | Progressive: The admissions contract is a private contract; §18 creates/enforces a lien based on that private contract and thus is unconstitutional | Court: Admissions contract is private; §18 violates Art. III, §11(a)(9) and is unconstitutional |
| Whether §18 unconstitutionally impairs insurers’ contracts (Art. I, §10) | LMHS: (implicit) statute validly protects hospital liens and may attach to settlement proceeds | Progressive: §18 permits suit against insurers who settle or pay limits, exposing them to liability beyond policy limits, thus impairing contracts | Court: §18 impairs contractual obligations and exposes insurers to liability exceeding policy limits; violates Art. I, §10 |
Key Cases Cited
- Mercury Ins. Co. of Fla. v. Shands Teaching Hosp. & Clinics, Inc., 21 So. 3d 38 (Fla. 1st DCA 2009) (liens against patient proceeds arise from private contract between patient and hospital)
- Shands Teaching Hosp. & Clinics, Inc. v. Mercury Ins. Co. of Fla., 97 So. 3d 204 (Fla. 2012) (Florida Supreme Court approving First DCA’s conclusion that lien law created lien based on private contract and was unconstitutional)
- Citrus Cty. Hosp. Bd. v. Citrus Mem'l Health Found., Inc., 150 So. 3d 1102 (Fla. 2014) (special law impermissibly rewritten parties’ contractual agreements; impairment of contract clause analysis)
- Dewberry v. Auto-Owners Ins. Co., 363 So. 2d 1077 (Fla. 1978) (subsequent legislation diminishing contract value violates constitution)
- Nationwide Mut. Fire Ins. Co. v. Voigt, 971 So. 2d 239 (Fla. 2d DCA 2008) (absent bad faith, insurer liability limited to policy limits)
- State Farm Mut. Auto. Ins. Co. v. St. Godard, 936 So. 2d 5 (Fla. 4th DCA 2006) (final judgment against insurer cannot exceed policy limits without bad faith)
- Cohn v. Grand Condo. Ass'n, Inc., 26 So. 3d 8 (Fla. 3d DCA 2009) (statute unconstitutional as applied for impairing contract), aff'd, 62 So. 3d 1120 (Fla. 2011) (affirmation on impairment principles)