Show Me the Money? Not So Fast!

April 26th, 2020 By Sheila Tan

In a personal injury case, tort claimants typically submit medical bills showing treatment received for injuries. Settlements paid out of insurance policy benefits are often meant to cover such expenses. After settling, plaintiffs’ attorneys routinely negotiate a reduction of the submitted bills directly with the medical providers, leading to a bigger share of the recovery for their clients.
What happens when a carrier pays a hospital’s bill directly? Such direct payments generally reflect a reduction in the original billed amount. We’ve recently dealt with complaints from tort claimants that an insurance carrier’s direct payment of their medical bills constitutes conversion or invasion of privacy. We know the true basis of the complaint is that the claimant can no longer collect the full amount of the billed charges and negotiate his own reduction. But Texas courts have made it abundantly clear that the tort claimant is not entitled to collect a windfall. A tortfeasor is not liable for medical expenses that the claimant is not required to pay to the provider. Haygood v. De Escabedo, 356 S.W.3d 390, 397 (Tex.2011).
The Houston Court of Appeals recently rejected a complaint by an attorney for such a claimant that the carrier’s direct payment unfairly deprived him of his fee. In GEICO v. Stern Law Group, 2019 WL 3819518 (Tex. App. – Houston [1st Dist], Aug. 15, 2019), the court held that the attorney, through a contingency-fee agreement with his client, did not maintain an interest in insurance policy benefits paid directly to third-party medical providers for the client’s past treatment.
SLG represented Maldonado who had been injured by a GEICO insured. GEICO, through ClaimTech and “without permission of Maldonado or SLG” settled Maldonado’s outstanding hospital medical bill. SLG filed suit against GEICO for wrongful payment of an assigned interest and conversion. SLG argued that because the bill was paid from policy benefits on behalf of Maldonado, SLG was entitled to a fee interest in the payment per its contingent fee agreement with Maldonado. The trial court denied GEICO’s motion for partial summary judgment, severed SLG’s claims for wrongful payment of assigned interest and conversion, and entered final judgment on those claims. GEICO appealed.
The Houston Court of Appeals held that SLG had no basis in law, whether by contract or otherwise, that entitled it to payment from GEICO from proceeds GEICO paid to settle Maldonado’s hospital bill. SLG, as Maldonado’s assignee, had no greater rights than she possessed. Maldonado had no right to the hospital’s payment for services rendered, having assigned to the hospital all rights in any benefits payable against all insurance companies for the payment of the hospital services. As such, GEICO acted in accordance with the terms of the assignment. While the Houston Court of Appeals based its holding on the claimant’s assignment of policy proceeds, which typically occurs in the contact of hospital treatment, we think the result would be the same absent an assignment. A claimant cannot present a claim and demand payment for his injuries based on pending medical bills and then complain that the carrier reduced the amount of the bills by paying providers directly.