by Alden Thomas | Jul 18, 2019 | Insurance
The Holding
In Dignity Health v. Farmers Ins. Co. of Ariz., 1 CA-CV-18-0292, 2019 WL1499855 (Ariz. App. June 11, 2019), the Arizona Court of Appeals recently held MedPay benefits are subject to health care provider liens because MedPay coverage does not qualify as “health Insurance” exempt from medical provider liens under A.R.S. § 33-931.
The Takeaways
- An insurer’s payment of MedPay benefits to an insured is subject to health care provider liens under A.R.S. § 33-391.
- Although this is an issue of first impression in Arizona, the Court’s ruling is consistent with statutory schemes and case law that distinguish health insurance from MedPay coverage.
The Facts
The Defendant Insurer issued an auto policy that included MedPay coverage. The Insured was in an accident and was treated by the Plaintiff Hospital. The Insured incurred medical expenses exceeding $160,000, and the Hospital perfected a $140,000 heath care provider lien. Notwithstanding the lien, the Insurer paid $99,000 in MedPay benefits to the Insured. The Hospital sued the Insurer to enforce its health care provider lien. The Insurer argued its payment of MedPay benefits was exempt from the lien because MedPay coverage is “health Insurance” exempt from health care provider liens, pursuant to A.R.S. § 33-931. The trial court dismissed the Hospital’s complaint, holding MedPay coverage qualifies as exempt “health insurance. The Arizona Court of Appeals vacated the trial court’s ruling and held MedPay coverage is not “health insurance.” Thus, MedPay benefits are subject to health care provider liens.
The Rationale
- Under A.R.S. § 33-931 “health insurance and underinsured and uninsured motorist coverage as defined in § 20-259.01” are exempt from health care provider liens.
- The Court of Appeals rejected the argument that MedPay benefits are exempt as “health insurance . . . motorist coverage as defined in § 20-259.01” because:
- The phrase “motorist coverage as defined in § 20-259.01” only modifies the phrase “underinsured and uninsured,” and does not modify “health insurance.”
- And, if the Legislature wanted to exempt “health insurance motorist coverage as defined in A.R.S. § 20-591.01” from health care provider liens, then it could have done so by explicitly amending A.R.S. § 33-931 to that effect or by defining “health insurance” in A.R.S § 20-591.01. It did neither.
- Although A.R.S. § 33-931 does not define “health insurance,” the A.R.S. Insurance Title (Title 20) excludes MedPay coverage from the definition of “health insurance.” The Insurer failed to show the Legislature intended “health insurance” to have an irreconcilably different definition in A.R.S. § 33-931.
- There is a separate statutory scheme applying to MedPay coverage, demonstrating the Legislature treats “health insurance” and MedPay coverage as legally separate.
- Arizona courts have distinguished “health insurance” from MedPay coverage in other contexts. See Haisch v. Allstate Insurance Co., 197 Ariz. 606, 607 ¶ 2 (App. 2000).
by Alden Thomas | Jul 18, 2018 | Insurance
The Holding
In Teufel v. Am. Family Mut. Ins. Co., 244 Ariz. 383, 419 P.3d 546 (2018), the Arizona Supreme Court recently held that a Contractual Liability Exclusion in homeowner policies did not apply to a claim for negligent excavation against the Insured, an alleged builder-vendor, because the claim arose from the Insured’s alleged breach of a common law duty to construct a home as a reasonable builder rather than solely from the contract between the Insured and the plaintiff.
The Takeaway
- The Contractual Liability Exclusion in a homeowner’s policy does not preclude an insurer’s duty to defend a breach of contract claim against an insured when pled with a tort claim arising from a common law duty that exists independent of the contract, even if the tortious conduct would not have occurred but for the contract between a plaintiff and an insured.
- The Court’s ruling is consistent Desert Mountain Properties Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194, 236 P.3d 421, (Ct. App. 2010), aff’d, 226 Ariz. 419, 250 P.3d 196 (2011), in which the Court of Appeals held a Contractual Liability Exclusion in a CGL policy did not automatically bar coverage for claims involving contracts.
The Facts
The Insured hired a design group, with which he had a loose partnership, to build a mountainside home on a vacant lot. The Insured ultimately sold the mountainside home, moved into another home, and bought a homeowner’s policy. The Policy provided coverage for “compensatory damages for which any insured is legally liable” because of “bodily injury or property damage caused by an occurrence.” Rockslides subsequently occurred at the home and damaged the purchaser’s property. The purchaser alleged that improper excavation during construction caused the rockslides. The purchaser sued the Insured, alleged the Insured was a builder-vendor, and asserted claims for breach of contract, negligence, and fraud. After the Insurer declined coverage, the Insured sued the Insurer for damages and declaratory relief. The trial court granted summary judgment in favor of the Insurer. Although the trial court determined the rockslides were an “occurrence” during the Policy period, it held the Contractual Liability Exclusion precluded coverage. The Arizona Court of Appeals reversed, holding the Contractual Liability Exclusion did not apply. The Arizona Supreme Court affirmed the Arizona Court of Appeals.
The Rationale
- In affirming the Arizona Court of Appeals’ determination that the Contractual Liability Exclusion did not bar coverage for tort claims, the Arizona Supreme Court reasoned:
- The Contractual Liability Exclusion precluded coverage for “personal liability under any contract or agreement”, but did not define “under.” The Supreme Court referred to Webster’s definitions of “under” in the contractual context, which are “required by,” “in accordance with,” and “bound by.” Applying these definitions, it concluded, “the contractual liability exclusion applies to personal liability required by or originating from a contract; it is not triggered simply because a contract brought the injured party and the insured together.”
- The Insured would reasonably expect the Insurer to defend against a stand-alone tort claim regardless of any contractual relationship between plaintiff and the Insured.
- Plaintiff’s negligence claim arose from the common law duty to construct a home as a reasonable builder would, both tort and contract claims may exist when an insured negligently constructs a home, and tort duties may arise independently of contractual duties.
- The Contractual Liability Exclusion did not apply because the complaint sought damages for property damage caused by negligent excavation. Thus, the Insurer owed the Insured a duty to defend.
The Arizona Court of Appeals affirmed the trial court’s ruling that the Policy’s Business Pursuits Exclusion did not bar coverage, but the Insured did not appeal that determination, and the Arizona Supreme Court did not address the Business Pursuits Exclusion. Read the entire Teuful decision here.
