North Carolina Baptist Hospitals, Inc. v. Mitchell
323 N.C. 528 (1988)
North Carolina Supreme Court
This case arose out of a personal injury claim by Mr. Henry Clark. Mr. Clark was treated at North Carolina Baptist Hospitals (hospital) following the accident, and accrued medical expenses in the amount of $2,579.69. Clark retained Mrs. Beverly Mitchell, the defendant, as his attorney in his personal injury case. The dispute centered on the lien that the hospital held for unpaid medical bills and how Mrs. Williams disbursed the settlement for her client.
The hospital brought an action against the attorney in order to recover on Mr. Clark’s assignment of settlement proceeds for his unpaid medical bills. The District Court dismissed the case, and the hospital appealed. The Court of Appeals of North Carolina affirmed the ruling of the district court and dismissed the case, which led to the hospital seeking discretionary review of the decision.
After Mr. Clark was involved in an automobile accident and treated at North Carolina Baptist Hospitals, Inc., he retained Mrs. Mitchell as counsel to represent him in a personal injury action. Williams eventually settled the claim with the driver of the other vehicle involved in the accident, at the limits of that driver’s liability insurance, in the amount of $25,000.00. After receiving the settlement, Mitchell distributed the funds, pursuant to North Carolina Gen. Stat. § 44-50, in the following manner: $6,250 as attorney’s fees for legal services rendered; $5,812.50 to the hospital for medical bills; $3,562.50 for other medical bills; $45.00 to an investigator; and the balance of the remaining funds of $9,330.00 to Clark. When they did not receive the entire amount of their medical lien, the hospital obtained a default judgment against Clark for the entire amount. The hospital then brought this action against Mitchell, alleging that she failed to honor the assignment as executed by her client, Mr. Clark.
The governing North Carolina General Statute §44-50 provides:
A lien as provided under G.S. 44-49 shall also attach upon all funds paid to any person in compensation for or settlement of the injuries, whether in litigation or otherwise. If an attorney represents the injured person, the lien is perfected as provided under G.S. 44-49. Before their disbursement, any person that receives those funds shall retain out of any recovery or any compensation so received a sufficient amount to pay the just and bona fide claims for any drugs, medical supplies, ambulance services, services rendered by any physician, dentist, nurse, or hospital, or hospital attention or services, after having received notice of those claims. Evidence as to the amount of the charges shall be competent in the trial of the action. Nothing in this section or in G.S. 44-49 shall be construed so as to interfere with any amount due for attorney’s services. The lien provided for shall in no case, exclusive of attorneys’ fees, exceed fifty percent (50%) of the amount of damages recovered. Except as provided in G.S. 44-51, a client’s instructions for the disbursement of settlement or judgment proceeds are not binding on the disbursing attorney to the extent that the instructions conflict with the requirements of this Article.
Essentially, this statute requires that the attorney who receives any recovery or compensation for a client related to a personal injury claim in which the medical provider has perfected a lien on the funds must pay the medical provider the amount of that lien, after deducting attorney’s fees and provided that the lien does not exceed 50% of the remaining amount recovered. Applying this statute to the facts in this matter, once Williams distributed the $6,250.00 for attorney’s fees to herself, there would be $18,750.00 remaining. If we take half of that amount, we are left with $9,375.00, which is the sum of the two medical bill payments that were disbursed by Williams to the medical providers. Thus, Williams made all disbursements in accordance with N.C.G.S. § 44-50.
The Court held that Williams was not liable to the hospital for failure to pay the hospital according to the terms of the assignment agreement between Mr. Clark and the hospital. Williams, as the injured party’s attorney, had a duty to follow the statute when distributing settlement funds, and because she obeyed this duty, she was not liable for the balance remaining on the hospital bill after settlement funds were disbursed.
The key takeaway from this case is that the medical provider lien statute must be followed in order for a medical provider to perfect, and ultimately collect, a lien. However, an assignment of settlement proceeds may only be enforced up to the statutory amounts stated in N.C.G.S. § 44-50.