State of Arizona can Assert Lien Rights for Medical Expenses Paid State Employee against Tort Recovery

Torts—State's Lien Rights Against Tort Damages from Third Party

Arizona Department of Administration v. Cox, __Az Adv Rep __, 2CA-CV 2008-0198 (App., Div II, August 17, 2009) (Justice Howard)

STATE'S STATUTORY LIEN RIGHT ATTACHES TO TORT DAMAGES AGAINST THIRD PERSON WITHOUT LIMIT

Plaintiffs were injured in an automobile accident and received medical care through the state's self insured health plan for state employees. After plaintiffs settled their tort claim against the other driver for $30,000 (and recouped $200,000 in underinsured motorist benefits) the state asserted lien right for $21,746.45.

Plaintiffs argued that the fund in question here was a trust and not the state. Plaintiffs argued that ARS sec. 12-962 only gives lien rights to the state. Further the plan here was administered by a private third party (United Healthcare) and therefore is further removed from the state. The Court of Appeals disagreed finding the legislative intent was to allow public entities that self-insure to seek lien reimbursement rights against a third party tort recovery.

Next, the court found the Arizona Department of Administration could sue in its name and not “The State of Arizona” as there would be no practical benefit to strictly requiring suit be brought in the name of the state as opposed to an agency of the state.

Finally, the court held that the state was not required to reduce the amount of its lien proportionate to those damages paid in a settlement or judgment for medical expenses only. The court found the plain language of ARS sec. 12-963 (B) does not mention or provide for an apportionment. However, the statute does say the state's recovery cannot exceed the amount of money actually received by the plaintiff and therefore that portion of the recovery paid in attorneys' fees and costs were not subject to the lien.