Nash Hosps., Inc. v. State Farm Mut. Auto. Ins. Co.
254 N.C. App. 726
| N.C. Ct. App. | 2017Background
- Whitaker was injured in an auto accident; total medical bills $2,272 ($1,515 to Rocky Mount Chiropractic; $757 to Nash Hospitals). Defendant (State Farm) settled with Whitaker for $1,943.
- Nash Hospitals and Rocky Mount had given Defendant statutory notice of medical liens under N.C. Gen. Stat. §§ 44-49 / 44-50 before settlement.
- Defendant issued a single check for the full settlement made payable jointly to Whitaker, Nash Hospitals, and Rocky Mount; the check was delivered to pro se Whitaker and Defendant did not notify Nash Hospitals of the settlement.
- Nash Hospitals repeatedly demanded payment; Defendant did not reissue payment to Nash Hospitals alone until after suit; Nash Hospitals sued alleging violation of §§ 44-50/44-50.1 and an unfair or deceptive trade practice under § 75-1.1.
- The trial court granted summary judgment for Nash Hospitals and awarded treble damages; on appeal the Court of Appeals affirmed liability but found the trial court miscalculated damages and remanded for a corrected pro rata award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether issuing a multi-party check to a pro se claimant satisfied insurer’s duty under N.C. Gen. Stat. § 44-50 to retain funds to pay medical liens | Nash Hospitals: insurer must retain sufficient portion of settlement and pay lienholders pro rata before disbursing to claimant | State Farm: joint-payee/multi-party check did not constitute a disbursement and thus complied with the statute | Held: Issuing the multi-party check was a disbursement because insurer lost control of funds; insurer violated §§ 44-50 and 44-50.1 by failing to retain and pay lienholders pro rata |
| Whether Nash Hospitals had standing/privity to sue under § 75-1.1 for unfair or deceptive trade practices | Nash Hospitals: lien perfection on notice creates privity; insurer’s post-settlement conduct harmed it and is actionable | State Farm: Nash Hospitals lacked privity and cannot bring a UDTP claim against insurer | Held: Nash Hospitals was in privity (intended third‑party beneficiary via lien notice) and may bring a § 75-1.1 claim |
| Whether insurer’s conduct constituted an unfair or deceptive trade practice under § 75-1.1 | Nash Hospitals: failure to retain funds, failure to notify, and directing hospital to seek payment from pro se claimant was unfair/deceptive and caused injury | State Farm: conduct was not immoral/unscrupulous and caused no injury to Nash Hospitals | Held: Conduct was unfair and deceptive (inequitable assertion of insurer power, tendency to deceive, injury from delayed recovery); good faith not a defense |
| Proper measure of damages for statutory lien and UDTP treble damages | Nash Hospitals: sought full lien amount trebled | State Farm: argued lien enforcement limited to pro rata share when 50% cap insufficient | Held: Pro rata calculation required; Nash Hospitals’ pro rata share of 50% of settlement = $323.69; trebled under § 75-16 = $971.07. Trial court award vacated and remanded to enter judgment for $971.07 |
Key Cases Cited
- Charlotte–Mecklenburg Hosp. v. First of Ga. Ins. Co., 340 N.C. 88 (1995) (insurer must account for liens before making payments)
- Smith v. State Farm Mut. Auto. Ins. Co., 358 N.C. 725 (2004) (liens arise by operation of law on settlement proceeds; insurer’s duty to protect liens affirmed)
- Murray v. Nationwide Mut. Ins. Co., 123 N.C. App. 1 (1996) (procedural summary judgment standards and third‑party beneficiary context)
- Marshall v. Miller, 302 N.C. 539 (1981) (good faith is not a defense to a § 75‑1.1 claim; effect on consumers is dispositive)
- N.C. Baptist Hosps., Inc. v. Crowson, 155 N.C. App. 746 (2003) (construction of Article 9 lien statutes; later statutory amendment requires pro rata accounting)
- Dalton v. Camp, 353 N.C. 647 (2001) (summary judgment review standard)