Shelby County Health Care Corporation, d/b/a Regional Medical Center v. John Baumgartner, Elizabeth Baumgartner, a/k/a Daray Baumgartner, Nationwide Mutual Insurance Company, and Hartford Accident and Indemnity

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
July 21, 2009 Session1

SHELBY COUNTY HEALTH CARE CORPORATION,
D/B/A REGIONAL MEDICAL CENTER
v.
JOHN BAUMGARTNER, ELIZABETH BAUMGARTNER, A/K/A DARAY
BAUMGARTNER, NATIONWIDE MUTUAL INSURANCE COMPANY,
AND HARTFORD ACCIDENT AND INDEMNITY

An Appeal from the Circuit Court for Shelby County
No. CT-002323-04 Kay S. Robilio, Judge

No. W2008-01771-COA-R3-CV - Filed January 26, 2011

This appeal involves the impairment of a hospital lien. The individual defendant was treated
at the plaintiff hospital for injuries sustained in an automobile accident caused by a third-
party tortfeasor. The patient incurred substantial medical expenses. The hospital filed a
hospital lien for the amount of the patient’s medical expenses. Subsequently, the patient
received insurance proceeds from his own insurance company under his uninsured motorist
coverage, and another payment from the tortfeasor’s insurance company. Nothing was paid
to the plaintiff hospital. The hospital filed this lawsuit against both insurance companies for
impairment of its hospital lien. The parties filed motions for summary judgment. The trial
court granted in part the hospital’s motion for summary judgment. Against the patient’s own
insurance company, the hospital was awarded one-third of the monies the patient received.
Against the tortfeasor’s insurance company, the hospital was awarded an amount equal to the
policy coverage limit. The hospital now appeals, arguing that it was entitled to recover from
both insurance companies jointly the reasonable cost of the hospital services rendered to the
patient. The insurance companies also appeal, arguing that there was no impairment of the
lien and that, if there was impairment, the hospital’s recovery should have been limited to
one-third of the payments made to the patient. We affirm in part and reverse in part, finding
that the hospital’s lien was valid and was impaired, but that the hospital can recover only for
the damages caused by the impairment of its lien.

1
As explained further herein, this appeal was held in abeyance pending the Tennessee Supreme Court’s
decision in another case involving similar issues.
 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court is
Affirmed in Part and Reversed in Part and Remanded

H OLLY M. K IRBY, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J., and
J. S TEVEN S TAFFORD, J., joined.

John C. Speer, Colleen D. Hitch, and Tiffany A. Yates, Memphis, Tennessee; Jody Manire
Kris and Kelly Thompson Cochran, Washington, D.C., for the Defendant/Appellant, Hartford
Accident & Indemnity Co.

Curtis H. Goetsch, Germantown, Tennessee, for the Plaintiff/Appellant, Shelby County
Health Care Corporation d/b/a Regional Medical Center

Parks T. Chastain and Gordon C. Aulgur, Nashville, Tennessee, for the Defendant/Appellee,
Nationwide Mutual Insurance Company

Robert E. Cooper, Jr., Tennessee Attorney General & Reporter; Michael E. Moore, Solicitor
General, and Shayna Abrams, Assistant Attorney General, as intervenor in defense of the
constitutionality of Tennessee Code Annotated § 29-22-104(b)(1)

OPINION

F ACTS AND P ROCEEDINGS

Background

On November 13, 2003, Defendant John Baumgartner (“Mr. Baumgartner”) and George H.
Brewer (“Mr. Brewer”), both residents of Arkansas, were involved in a two-car automobile
collision in Woodruff County, Arkansas. Mr. Brewer was at fault for the collision. Mr.
Baumgartner was severely injured in the accident, and was initially brought to a hospital in
Arkansas. The next day, in light of the severity of his injuries, he was transferred to the
Regional Medical Center in Memphis, Tennessee, a hospital operated by Plaintiff/Appellee
Shelby County Health Care Corporation (“The MED”).

Upon his arrival, Mr. Baumgartner’s wife, Defendant Elizabeth Baumgartner, a/k/a Daray
Baumgartner (“Mrs. Baumgartner”), informed The MED’s staff that her husband’s injuries
were sustained when his car was hit by another vehicle. She told The MED staff that the
Baumgartners had uninsured motorist insurance coverage under their automobile insurance

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policy issued by Defendant/Appellee Nationwide Mutual Insurance Company
(“Nationwide”).2

Mr. Baumgartner was treated at The MED for over a month. He was finally discharged on
December 23, 2003. The cost of the medical services rendered to Mr. Baumgartner totaled
$529,840.30.

On November 19, 2003, a few days after Mr. Baumgartner’s accident, the Arkansas police
officer who had arrived on the scene completed a Motor Vehicle Collision Report. This
report identified Mr. Brewer as the driver at fault for the collision, and it indicated that he
was insured by Defendant/Appellant Hartford Accident and Indemnity (“Hartford”). The
report was filed in Arkansas, and The MED did not obtain or receive a copy of it.

On November 25, 2003, while Mr. Baumgartner was still being treated at The MED, The
MED filed its initial Affidavit for Hospital Lien for the medical services provided to Mr.
Baumgartner. Pursuant to the Hospital Lien Act of Tennessee, Tennessee Code Annotated
§ 29-22-101, et seq. (“HLA”), the lien affidavit was filed with the Circuit Court Clerk for
the Thirtieth Judicial District at Memphis (“Circuit Court Clerk”). As required under Section
29-22-102, The MED sent a copy of the hospital lien affidavit to Mr. Baumgartner via
registered mail.

Under the terms of the HLA, on January 5, 2004, within thirty days of Mr. Baumgartner’s
discharge, The MED filed an Amended Affidavit for Hospital Lien. The amended affidavit
added Nationwide and updated the amount of the hospital lien to $529,840.30, the total cost
of the medical services provided to Mr. Baumgartner. The MED mailed a copy of the
amended hospital lien via registered mail to Mr. Baumgartner and to Nationwide. The MED
did not name either Mr. Brewer or Mr. Brewer’s insuror, Hartford, on the lien, nor did it mail
either of them a copy of the lien. The record does not indicate that The MED had actual
knowledge of either Mr. Brewer or Hartford at the time it filed the amended hospital lien.

Soon thereafter, on or about January 16, 2004, both Nationwide and Hartford entered into
settlement agreements with Mr. and Mrs. Baumgartner. Under the settlement agreements,
both insurance companies agreed to pay the Baumgartners the policy limits on the applicable
insurance policies. Specifically, Nationwide paid its policy limits of $25,000, pursuant to the
uninsured motorist provisions of the Baumgartners’ automobile insurance policy. Hartford
paid the Baumgartners its policy limits of $100,000, pursuant to Mr. Brewer’s automobile
liability policy. At the time it entered into the settlement agreement with the Baumgartners,
Nationwide had knowledge of The MED’s hospital lien. The record does not indicate that

2
Although the Baumgartners had automobile insurance, they did not have medical insurance.

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Hartford had knowledge of The MED’s hospital lien at the time that it entered into the
settlement agreement with the Baumgartners. Hartford did not check with the Shelby County
Circuit Court Clerk’s office to determine whether a hospital lien had been filed before it paid
insurance proceeds to the Baumgartners. All of the total $125,000 in insurance proceeds
were paid directly to the Baumgartners, and neither the Baumgartners nor the insurance
companies paid any monies to The MED or any other medical service provider.

Trial Court Proceedings

On April 22, 2004, The MED filed a lawsuit in the trial court below against Mrs.
Baumgartner. As damages, the complaint sought the cost of the medical services rendered
to Mr. Baumgartner, plus attorney fees of $176,506.23, interest, and costs. The case was
assigned to Shelby County Circuit Court Division VIII, The Honorable D’Army Bailey
presiding.

On December 9, 2004, The MED filed its first amended complaint, adding Mr. Baumgartner
and Nationwide as defendants. The amended complaint asserted a claim against Mr.
Baumgartner and Nationwide for $529,518.70, the approximate total cost of The MED’s
hospital lien, based on breach of contract and impairment of The MED’s hospital lien in
violation of the HLA.3 On April 20, 2005, Nationwide filed a cross-claim against the
Baumgartners, seeking indemnity for any liability it might incur to The MED, based on an
indemnity provision in the settlement agreement between Nationwide and the Baumgartners.
On May 9, 2005, The MED filed a second amended complaint, adding Hartford as a
defendant and asserting claims against it for the full amount of the hospital lien as damages
for the impairment of its lien.4

On June 1, 2005, Nationwide filed a motion for summary judgment, claiming that it was
entitled to judgment as a matter of law on the undisputed facts. As the premise for its
argument, Nationwide asserted that Arkansas law applied to the issues before the court,
because the Baumgartners were Arkansas citizens and the accident occurred in Arkansas.
Under Arkansas law, Nationwide argued, The MED’s hospital lien could not be enforced
until the Baumgartners were made whole, pursuant to application of the made-whole doctrine

3
It is not clear from the record why the amount sought in th amended complaint is slightly different from the
amount stated in the amended hospital lien.
4
As against Hartford, The MED sought $530,447.42. Again, the reason for the slight difference between
the amount stated on the hospital lien and the amounts claimed as damages in the first and second amended
complaints is not apparent from the record.

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under Arkansas common law.5 Because the Baumgartners were not made whole by the
settlement payment, Nationwide contended, The MED’s lien was not enforceable.
Alternatively, Nationwide claimed that, if the court found that The MED’s hospital lien was
valid and that Nationwide impaired it, then Nationwide would be entitled to indemnity from
the Baumgartners for any amount that Nationwide was obligated to pay to The MED for the
impairment of that lien.

On July 20, 2005, the trial court entered an order granting in part and denying in part
Nationwide’s motion for summary judgment. The trial court held that Arkansas law was not
applicable, because “the contract in this case was done in Tennessee and Tennessee is the
proper jurisdiction for this case and . . . Tennessee law should be applied.” It concluded,
then, that the made-whole doctrine “has no application in this case.” Therefore, it denied
Nationwide’s motion insofar as Nationwide claimed that The MED’s hospital lien was
unenforceable. However, the trial court granted Nationwide’s motion in part by holding that,
in the event that The MED was entitled to a judgment against Nationwide for impairment of
the hospital lien, then Nationwide would be entitled to a judgment against the Baumgartners
under the indemnification provision in the settlement agreement.

Meanwhile, the parties posited to the trial court their various theories on the damages
recoverable by The MED under the HLA for impairment of its hospital lien. The MED
asserted in its complaint that it was entitled to recover the entire amount of the reasonable
medical services provided to Mr. Baumgartner. The MED based this argument on Tennessee
Code Annotated § 29-22-104(b)(1), which states that, in an action to recover damages for the
impairment of a lien, the hospital “may recover from the one accepting such release or
satisfaction or making such settlement the reasonable cost of such hospital care, treatment
and maintenance.” T.C.A. § 29-22-104(b)(1) (2000). In this case, that cost totaled
approximately $530,000.

Nationwide and Hartford, however, took the position that The MED’s damages for
impairment of its hospital lien could not exceed one-third of the amount paid to the
Baumgartners in settlement. The defendant insurance companies relied on Section 29-22-
101(b) of the HLA, which states that a hospital lien “shall not apply to any amount in excess
of one third (1/3) of the damages obtained or recovered by such person by judgment,
settlement or compromise . . . .” T.C.A. § 29-22-101(b) (2000). Thus, Nationwide and
Hartford argued that, although Section 29-22-104 permits recovery for reasonable hospital
costs, under Section 29-22-101(b), in no case could The MED recover more than the amount

5
The made-whole doctrine is the principle that “an insurer cannot assert a subrogation right until the insured
has been fully compensated for his or her injuries.” 44A AM . JUR . 2D Insurance § 1777 (2003) (footnote
omitted).

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to which the hospital’s lien could apply, limited to one-third of the damages paid to the
Baumgartners.

On approximately June 7, 2005, Nationwide filed a motion to amend its answer to challenge
the constitutionality of the HLA. Nationwide argued that, if the trial court agreed with The
MED’s position that Nationwide was liable for the entire amount of the medical services The
MED provided to the Baumgartners, then Sections 29-22-101 and 29-22-104 are
unconstitutional as applied under the due process clause of the Tennessee and federal
constitutions. On June 22, 2005, the Attorney General & Reporter of the State of Tennessee
filed a notice with the trial court to intervene to defend against Nationwide’s allegation that
the HLA was unconstitutional as applied. Subsequently, on June 24, 2005, The MED filed
a motion for summary judgment against Nationwide, asserting that Nationwide was liable
to The MED for the full amount of reasonable hospital costs pursuant to Section 29-22-
104(b)(1). This put the question regarding The MED’s damages at issue before the trial
court.

On July 1, 2005, the trial court entered an order denying Nationwide’s motion to amend its
answer to include a constitutional challenge to the HLA based on its conclusion that The
MED’s interpretation of the statute was incorrect. The trial court held that Section 29-22-
104(b)(1) meant that “if an insurer impairs a hospital lien, . . . the damages that can be
received by the lienholder [is] the amount that the lienholder would have received if the lien
had been complied with by the insurer plus consequential damages and discretionary costs.”
The order did not directly address The MED’s motion for summary judgment against
Nationwide, although the trial court’s ruling was clearly contrary to The MED’s position.

On November 30, 2005, Hartford filed an amended answer. Among other things, Hartford’s
amended answer asserted as a defense that, “[t]o the extent that the Tennessee Hospital Lien
Statute imposes damages that are punitive in nature or disproportionate to the reprehensibility
of the defendant’s conduct, the statute is unconstitutional.” On September 5, 2005, the
Attorney General filed another brief in defense of the constitutionality of the HLA.

On December 29, 2005, The MED filed another motion for summary judgment, this one
against Hartford, asserting that the undisputed facts established that Hartford impaired The
MED’s hospital lien. As in the motion for summary judgment against Nationwide, The MED
contended that Hartford was jointly liable for the entire amount of the lien pursuant to
Section 29-22-104(b)(1). The MED urged the trial court to reconsider its previous holding
in the order denying Nationwide leave to amend its answer, to the effect that The MED’s
damages for impairment of its lien were limited to only one-third of the amount paid to the
Baumgartners.

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On April 26, 2006, Hartford filed a cross-motion for summary judgment against The MED.
It argued that The MED could not recover against Hartford because its lien had not been
perfected by sending notice of the lien directly to Hartford as required by Tennessee law.
Alternatively, consistent with Nationwide’s position, Hartford argued that, even if The Med’s
lien was valid and it was entitled to recover from Hartford for impairment of its hospital lien,
such recovery could not exceed one-third of the payment made to the Baumgartners, pursuant
to Section 29-22-101(b), in accordance with the trial court’s previous ruling. Furthermore,
Hartford claimed that in no event should Hartford be liable to The MED for more than the
limits in the policy with Mr. Brewer, $100,000.6

In June 2006, the trial court held a hearing on the pending motions. At the hearing, The
MED asked the trial court to reconsider its previous ruling that the amount recoverable for
impairment of The MED’s hospital lien was limited to one-third of the amount paid to the
Baumgartners. Convinced that the issue required further consideration, the trial court
ordered the parties to submit supplemental briefs on the measure of damages recoverable
under the HLA for impairment of a hospital lien, and it invited the Attorney General to brief
the issue as well.7 The trial court scheduled a hearing on all outstanding motions for
September 7, 2006.

The hearing was conducted as scheduled on September 7, 2006. On January 8, 2007, before
making any determination as to the Defendants’ liability, the trial court entered an order
reiterating that, as damages for the impairment of its hospital lien, The MED could recover
only one-third of the amount obtained by the Baumgartners in settlement with either
Nationwide or Hartford. In addition to these damages, the trial court concluded that The
MED could recover consequential damages and discretionary costs, and held that
consequential damages could include attorney fees and prejudgment interest.

Nearly a year later, on July 13, 2007, the case was transferred from Division VIII to Division
V of the Circuit Court, The Honorable Kay S. Robilio presiding.

On April 29, 2008, Judge Robilio conducted a hearing on all of the pending summary
judgment motions. At the hearing, consistent with Judge Bailey’s previous ruling, Judge
Robilio granted The MED’s motion for summary judgment against Nationwide for
Nationwide’s impairment of The MED’s hospital lien. Judge Robilio awarded The MED

6
In addition to these arguments, Hartford claimed that the hospital lien was unenforceable because Tennessee
lacks the power to impose a lien on Arkansas property. Apparently this argument was not pursued further.
7
At the hearing, Hartford informed the trial court that the Attorney General’s office had indicated an interest
in expressing a position on this point by filing a brief or otherwise.

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one-third of Nationwide’s $25,000 settlement with the Baumgartners, i.e., $8,333.33, plus
interest. Judge Robilio reversed Judge Bailey’s ruling that attorney fees were recoverable
as consequential damages, finding that an award of attorney fees was not permitted pursuant
to the statute under these circumstances. As to the cross-motions for summary judgment
filed by Hartford and The MED against one another, Judge Robilio asked The MED and
Hartford to submit additional authority on their positions.8

On July 25, 2008, after considering the supplemental authorities submitted by Hartford and
The MED, the trial court entered an order denying Hartford’s motion for summary judgment
against The MED and granting in part The MED’s motion for summary judgment against
Hartford. Judge Robilio concluded that Hartford had constructive notice of the hospital lien,
and that The MED did “not have the responsibility to investigate the identity of potentially
liable third parties. A sophisticated party such as Hartford has the burden of discovery of a
pending hospital lien.” Therefore, the trial court found that Hartford’s $100,000 payment to
the Baumgartners constituted an impairment of The MED’s hospital lien. As damages, Judge
Robilio awarded The MED $100,000, the full amount of Hartford’s settlement with the
Baumgartners. She explained that “it would be against public policy to grant the full amount
of the hospital lien; therefore, Hartford is liable . . . only in the amount of its policy limit.”
Both The MED and Hartford filed notices of appeal from the trial court’s decision.

After Filing of Notices of Appeal

After the notices of appeal were filed, but before the appellate briefs were filed, this Court
issued its decision in another case with somewhat similar facts and even some of the same
parties. In Shelby County Health Care Corp. v. Nationwide Mutual Insurance Co., No.
W2008-01922-COA-R3-CV, 2009 WL 302261 (Tenn. Ct. App. Feb. 6, 2009)
(“Nationwide”), a patient was treated at The MED for injuries sustained in a one-car
automobile accident in Arkansas. He incurred approximately $33,823 in medical bills while
at The MED. Nationwide, 2009 WL 302261, at *1. The patient had an automobile insurance

8
Although the claims by The MED and the Defendant insurance companies against the Baumgartners are
not at issue in this appeal, we note that, at the April 29, 2008 hearing, Judge Robilio granted The MED’s
motion for summary judgment against the Baumgartners for the full amount of Mr. Baumgartner’s hospital
bill and denied Mrs. Baumgartner’s motion for summary judgment against The MED. Judge Robilio also
granted Hartford summary judgment against the Baumgartners for any amount recovered by The MED from
Hartford in the underlying lawsuit based on the indemnification provision in the settlement agreement
between Hartford and the Baumgartners. As to Nationwide, Judge Bailey had previously ruled that
Nationwide was entitled to indemnification from the Baumgartners pursuant to their settlement agreement.
On July 1, 2008, Judge Robilio entered an order consistent with her oral rulings. However, on June 30, 2008,
the day before this order was entered, the Baumgartners filed a petition in bankruptcy, which stayed
proceedings against them.

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policy with Nationwide, and the coverage under the policy included medical payment
benefits of up to $5,000. After The MED filed a valid hospital lien for the $33,000 in
services provided to the patient, Nationwide paid the $5,000 policy limit in medical benefits
to medical care providers other than The MED who rendered services to the patient after the
accident.9 Id. The MED sued Nationwide for impairment of its hospital lien and sought
damages in the total amount of the lien. The trial court held in favor of The MED, but
awarded damages of only $5,000, the amount of the medical coverage under the automobile
insurance policy. The MED appealed. Id.

On appeal, the intermediate appellate court in Nationwide affirmed the trial court’s
conclusion that Nationwide had impaired The MED’s hospital lien. However, it modified
the award to $33,823, the total amount of the medical services provided by The MED. Id.
at *4. In doing so, the Court first found that the hospital lien statute was applicable to
contractual medical payments arising out of insurance coverage, relying on the holding in
University of Tennessee v. Prudential Insurance Co., No. 03A01-9611-CV-00345, 1997
WL 119582 (Tenn. Ct. App. Mar. 18, 1997) (“Prudential”).

The intermediate appellate court in Nationwide then addressed the damages recoverable by
The MED for Nationwide’s impairment of the hospital lien. As in the instant case, The MED
claimed that it was entitled to the full amount of the medical services provided to the patient,
pursuant to Section 29-22-104(b)(1). Also as in the instant case, Nationwide argued that The
MED’s recovery was limited to one-third of the amount paid to the patient pursuant to
Section 29-22-101(b). The Court held that Nationwide was liable to The MED for the full
amount of the medical services provided by The MED to the patient, citing Prudential, as
well as an Alabama decision. Nationwide, 2009 WL 302261, at *4 (citing Prudential, 1997
WL 119582, at *3, and Progressive Specialty Ins. Co. v. Univ. of Ala. Hosp., 953 So. 2d 413
(Ala. Civ. App. 2006) (awarding the full amount of the lien)).

After oral argument on the appeal in the case at bar, the Tennessee Supreme Court granted
permission for Nationwide’s appeal of the intermediate appellate court’s decision in
Nationwide. In light of the fact that the intermediate appellate court’s decision in
Nationwide regarding damages was directly applicable to the issues in the instant case, we
held this case in abeyance pending the Supreme Court’s disposition of the appeal in
Nationwide.

On October 13, 2010, the Supreme Court handed down its decision in Nationwide, reversing
the intermediate appellate court’s decision and overruling Prudential. The Supreme Court

9
A payment of $1,290 was made to an ambulance service, and $3,710 was paid to the Arkansas hospital that
first treated the patient.

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held that the HLA does not apply to payments made pursuant to the medical benefits
provision of the patient’s automobile insurance policy. Nationwide, 325 S.W.3d 88, 97-98
(Tenn. 2010). In light of this holding, the Nationwide Court did not reach the issue of
whether The MED’s lien was impaired by Nationwide, nor did it address the amount of
damages that would have been recoverable by The MED for any impairment of the hospital
lien. Id. at 98.

After Nationwide was decided, the parties in the instant case sought, and were granted,
permission to submit supplemental briefs on the application of the holding in Nationwide to
the facts of this case. After careful consideration of the parties’ supplemental briefs, we now
address the issues presented in this appeal.

ISSUES P RESENTED AND S TANDARD OF R EVIEW

Hartford, Nationwide, and The MED all challenge the trial court’s decision.10 Hartford
argues that the trial court erred in holding that it was liable for impairment of The MED’s
lien despite the fact that The MED did not give Hartford direct notice of the hospital lien and
thus did not perfect the lien. Alternatively, Hartford argues that, even if it is found that the
lien was perfected and that Hartford impaired the lien, the trial court erred in granting The
MED damages in the amount of Hartford’s policy limits of $100,000, an amount in excess
of one-third of the monies Hartford paid to the Baumgartners ($33,333.33). Hartford argues
that in no event should The MED be awarded the full amount of its hospital lien, as such a
holding would result in a windfall to The MED and would implicate Hartford’s due process
rights.

Nationwide’s position on appeal is generally aligned with that of Hartford, but it raises
somewhat different issues. Nationwide first argues that the trial court erred in declining to
apply the made-whole doctrine under Arkansas law in determining whether The MED’s lien
is enforceable.11 Alternatively, Nationwide argues that the trial court’s judgment against

10
Hartford and The MED filed notices of appeal, but Nationwide did not. Nevertheless, Nationwide sought
to preserve for appeal its argument that the made-whole doctrine should have applied in this case.
11
Nationwide also argues that The MED should be judicially estopped from asserting that it is entitled to
recover the full amount of its lien, based on the position taken by The MED in an unrelated hospital lien case.
In Spivey v. Anderson, No. 02A01-9704-CV-00075, 1997 WL 563199 (Tenn. Ct. App. Sept. 9, 1997), it was
noted by the appellate court that “[t]he Med does not dispute that it is entitled to only one-third of the
$50,000.00 settlement in this case” for the impairment of its lien. Spivey, 1997 WL 563199, at *5. Because
Spivey involved the enforcement of a hospital lien, not the impairment of a lien, it is not applicable here, and
Nationwide’s judicial estoppel argument is without merit. In its reply brief, The MED requests an award of
(continued...)

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Nationwide in the amount of $8,333 should be affirmed, because The MED’s recovery for
the impairment of the lien must be limited to one-third of the amount of Nationwide’s
payment to the Baumgartners. Like Hartford, Nationwide asserts that in no event should The
MED recover more than Nationwide’s policy limits. Nationwide maintains that allowing The
MED to recover the full amount of its lien would be contrary to the legislative intent and
legislative history of the HLA, as well as current case law, and it would result in unjust
enrichment to The MED. Similar to Hartford, Nationwide argues that permitting the
recovery of the full amount of The MED’s lien would be so excessive as to be
unconstitutional.

The MED argues that the trial court was correct in holding that its lien was perfected as to
both Hartford and Nationwide. It argues, however, that the trial court erred in declining to
hold both Hartford and Nationwide jointly responsible for the full cost of the medical
services provided by The MED, pursuant to Section 29-22-104(b)(1). The MED insists that
this interpretation of the relevant statutes does not implicate the substantive due process
rights of either Hartford or Nationwide.

Tennessee’s Attorney General filed an appellate brief in defense of the constitutionality of
the HLA. The Attorney General asserts that the Act is constitutional on its face, because the
damages provision in Section 29-22-104(b)(1) is not mandatory, but rather gives the trial
court discretion to award a hospital whose lien has been impaired an amount of damages
commensurate with the equities in the given case. The Attorney General also argues that,
even if The MED were allowed to recover the full cost of the medical services provided to
Mr. Baumgartner in this case, such a decision would be a constitutional application of the
statute.

A trial court’s grant of summary judgment is reviewed de novo with no presumption of
correctness. Warren v. Estate of Kirk, 954 S.W.2d 722, 723 (Tenn. 1997). Summary
judgment is appropriate where “the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Tenn. R. Civ. P. 56.04; see Hannan v. Alltel Publ’g Co., 270 S.W.3d 1, 5 (Tenn. 2008). To
determine whether a grant of summary judgment is appropriate, we must view the evidence
in a light most favorable to the nonmoving party, giving that party the benefit of all
reasonable inferences. Warren, 954 S.W.2d at 723 (quoting Bain v. Wells, 936 S.W.2d 618,
622 (Tenn. 1997)). Once the moving party demonstrates that no genuine issues of material

11
(...continued)
attorney fees incurred in responding to this argument. This request is respectfully denied.

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fact exist, the non-moving party must demonstrate, by affidavits or otherwise, that a disputed
issue of material fact exists for trial. Byrd v. Hall, 847 S.W.2d 208, 211 (Tenn. 1993).

Decisions regarding the interpretation of a statute are conclusions of law, which are reviewed
de novo, with no presumption of correctness. Sullivan ex rel. Hightower v. Edwards Oil
Co., 141 S.W.3d 544, 547 (Tenn. 2004) (citing Wallace v. State, 121 S.W.3d 652, 656 (Tenn.
2003)). In Nationwide, the Supreme Court capsulized the applicable tenets of statutory
construction:

[W]hen interpreting a statute, we “must first ascertain and then give full
effect to the General Assembly’s intent and purpose” in drafting those
sections. Waldschmidt v. Reassure Am. Life Ins. Co., 271 S.W.3d 173, 176
(Tenn. 2008). Our chief concern is to carry out the legislature’s intent without
unduly broadening or restricting the statute. Houghton v. Aramark Educ.
Res., Inc., 90 S.W.3d 676, 678 (Tenn. 2002) (quoting Owens v. State, 908
S.W.2d 923, 926 (Tenn. 1995)). We presume that every word in a statute has
meaning and purpose and should be given full effect if so doing does not
violate the legislature’s obvious intent. In re C.K.G., 173 S.W.3d 714, 722
(Tenn. 2005) (quoting Marsh v. Henderson, 221 Tenn. 42, 424 S.W.2d 193,
196 (1968)). When the statutory language is clear and unambiguous, we simply
apply its plain meaning. Eastman Chem. Co. v. Johnson, 151 S.W.3d 503,
507 (Tenn. 2004). When a statute is ambiguous, however, we may refer to the
broader statutory scheme, the history of the legislation, or other sources to
discern its meaning. Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836
(Tenn. 2008).

Nationwide, 325 S.W.3d at 92; see also Waters v. Farr, 291 S.W.3d 873, 881 (Tenn. 2009).

Constitutional interpretation also presents questions of law, which we review de novo,
affording no presumption of correctness to the trial court’s interpretation. Waters, 291
S.W.3d at 882.

A NALYSIS

Overview of Hospital Lien Act

Tennessee’s HLA was adopted in 1970 in order “to create for hospitals a lien upon all causes
of action for damages accruing to persons having received care and treatment for illness or
injuries and to provide the procedure for the perfecting, recording, enforcement and release
of such lien.” Nationwide, 325 S.W.3d at 92-93 (quoting 1970 Tenn. Pub. Acts 529). The

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purpose of the HLA is to ensure that hospital bills are paid and, in turn, to keep hospital costs
down:

In enacting this legislation, the legislature indicated that the purpose of this
Act is to create liens for hospitals to ensure that hospital bills are paid. The
legislature recognized that hospitals were losing funds from providing care to
individuals who later collected a settlement or judgment for their injuries but
failed to pay their hospital bills. The legislature noted that this Act would help
keep hospital costs down by setting up an orderly method for the establishment
of liens on such settlements or judgments.

Id. at 93 (quoting Tenn. Att’y Gen. Op. No. 94-067 (May 13, 1994) (citations omitted)); see
Martino v. Dyer, No. M1999-02397-COA-R3-CV, 2000 WL 1727778, at *2 (Tenn. Ct. App.
Nov. 22, 2000). Similar to hospital lien laws in other states, the Tennessee HLA embraces
“the very humane purpose of encouraging physicians, hospitals and nurses to extend their
services and facilities to indigent persons who suffer personal injuries through the negligence
of another, by providing the best security available to assure compensation for services and
facilities.” Nationwide, 325 S.W.3d at 93 (quoting Buchanan v. Beirne Lumber Co., 124
S.W.2d 813, 815 (Ark. 1939)); see also Cmty. Hosp. v. Carlisle, 648 N.E.2d 363, 365 (Ind.
Ct. App. 1995) (“By allowing health care providers direct interests in funds collected by
personal injury patients, the statute furthers the important policy of reducing the amount of
litigation . . . otherwise . . . necessary to secure repayment of the health care debts.”);
Bashara v. Baptist Mem’l Hosp. Sys., 685 S.W.2d 307, 309 (Tex. 1985) (observing that a
hospital lien statute is to provide an additional method of securing payment for medical
services, thus ensuring the prompt and adequate treatment for accident victims).12

Tennessee Code Annotated § 29-22-101(a) sets forth who may file a hospital lien and the
parameters of such a lien:

(a) Every person, firm, association, corporation, institution, or any
governmental unit, including the state of Tennessee, any county or
municipalities operating and maintaining a hospital in this state, shall have a
lien for all reasonable and necessary charges for hospital care, treatment and
maintenance of ill or injured persons upon any and all causes of action, suits,
claims, counterclaims or demands accruing to the person to whom such care,

12
The legislative history indicates that hospitals were given the right to file a statutory lien because “a
hospital under the law must take a patient that comes in an emergency. The hospital is not able to choose
whether or not they will expend services and give medicines to this person that requires immediate attention.”
Statement of Sen. Farris, Senate Session, Feb. 11, 1970.

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 treatment or maintenance was furnished, or accruing to the legal
representatives of such person in the case of such person's death, on account
of illness or injuries giving rise to such causes of action or claims and which
necessitated such hospital care, treatment and maintenance.

T.C.A. § 29-22-101(a). Thus, the hospital’s lien may be for “all reasonable and necessary
charges” for a patient’s care and treatment. As noted above, Section 29-22-101(b) limits the
extent to which a hospital lien may apply:

(b) The hospital lien, however, shall not apply to any amount in excess of one
third (1/3) of the damages obtained or recovered by such person by judgment,
settlement or compromise rendered or entered into by such person or such
person’s legal representative by virtue of the cause of action accruing thereto.

T.C.A. § 29-22-101(b) (emphasis added).

Section 29-22-104 of the HLA is captioned, “Impairment; damages.” The pertinent
subsection of this provision states:

(b)(1) Any acceptance of a release or satisfaction of any such cause of action,
suit, claim, counterclaim, demand or judgment and any settlement of any of the
foregoing in the absence of a release or satisfaction of the lien referred to in
this chapter shall prima facie constitute an impairment of such lien, and the
lienholder shall be entitled to an action at law for damages on account of such
impairment, and in such action may recover from the one accepting such
release or satisfaction or making such settlement the reasonable cost of such
hospital care, treatment and maintenance.

T.C.A. § 29-22-104(b)(1) (emphasis added). Thus, this section addresses what constitutes
impairment of a hospital lien and the damages recoverable for such impairment.

Against this backdrop, then, we first address the issues on appeal regarding whether The
MED’s lien was impaired. If impairment is found, we will then address the damages
recoverable for such impairment.

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 Impairment of Hospital Lien

Notice

We first address Hartford’s argument that the trial court erred in concluding that The MED’s
hospital lien was perfected as to Hartford. Section 29-22-102 sets out the requirements for
perfecting a hospital lien:

(a) In order to perfect such lien, the agent or operator of the hospital, before
or within one hundred twenty (120) days after any such person shall have been
discharged therefrom, shall file in the office of the clerk of the circuit court of
the county in which the hospital is located, and in the county wherein the
patient resides, if a resident of this state, a verified statement in writing setting
forth the name and address of the patient as it appears on the records of the
hospital, and the name and address of the operator thereof, the dates of
admission and discharge of the patient therefrom, the amount claimed to be
due for such hospital care, and to the best of the claimant’s knowledge, the
names and addresses of persons, firms or corporations claimed by such ill or
injured person or by such person’s legal representative, to be liable for
damages arising from such illness or injuries.

(b) A copy of the claim shall, within ten (10) days from the filing thereof be
sent by registered mail, postage prepaid, to each person, firm or corporation
so claimed to be liable on account of such illness or injuries, at the address
given in the statement, and to the attorney, or attorneys, representing the
person to whom services were rendered by the hospital if such attorney, or
attorneys, are known to the claimant or could, with reasonable diligence, be
known to the claimant.

(c) The filing of the claim shall be notice thereof to all persons, firms or
corporations who may be liable on account of such illness or injuries, whether
or not they are named in the claim or lien and whether or not a copy of the
claim shall have been received by them.

T.C.A. § 29-22-102(a) - (c) (2000) (emphasis added).13

13
Although a lien may be perfected within 120 days after the patient has been discharged, an insurance
company that makes payments to a patient thirty days or more after the patient’s discharge will not incur
additional liability from a subsequently filed hospital lien. See T.C.A. § 29-22-102(e).

-15-
In this case, The MED filed its lien with the Shelby County Circuit Court Clerk’s Office,
listed the required information, and sent a copy of the lien to the Baumgartners. Hartford
was not sent a copy of the lien notice. The MED did not have actual notice of Hartford’s
involvement, and Hartford did not have actual notice of The MED’s hospital lien. The trial
court held that Hartford had constructive notice of the hospital lien, commenting that The
MED did “not have the responsibility to investigate the identity of potentially liable third
parties. A sophisticated party such as Hartford has the burden of discovery of a pending
hospital lien.” On appeal, Hartford argues that, despite not having actual notice of Hartford’s
involvement, The MED was required to specifically include Hartford and Hartford’s address
in the lien filings and mail it a copy of the hospital lien in order to perfect its lien. Hartford
notes that The MED knew that Mr. Baumgartner had been hit by another driver. Because
Section 29-22-102 requires the hospital to use “the best of [its] knowledge” in naming
potentially liable persons or entities in the lien filings, Hartford argues from this language
that The MED had a duty to use “reasonable diligence” or “best efforts” to discover the
identity of the other driver and the other driver’s insurance company, namely, Hartford. In
this case, Hartford claims, The MED could have easily obtained such information by simply
asking the Baumgartners about the driver of the other car or by reviewing the Arkansas
highway patrol report. Because it did not do so, Hartford argues, The MED did not perfect
its lien as to Hartford, and its lien is unenforceable as to Hartford.

Hartford further contends that the trial court’s finding that Hartford had “constructive notice”
based on subsection (c) of Section 29-22-102 ignored The MED’s obligations under
subsections (a) and (b) of the statute to use reasonable diligence to identify persons claimed
to be legally liable for the patient’s injuries and to include those persons’ names and
addresses on the lien statement. Reading all of the subsections of Section 29-22-102 in pari
materia, Hartford claims, the hospital must give the best notice practicable under subsections
(a) and (b) before subsection (c)’s “notice . . . to all persons” provision is effective. The
MED’s failure to do so in this instance, Hartford argues, is fatal to its claim against Hartford.

In response, The MED argues that the language of Section 29-22-102 is plain and
unambiguous, and that the trial court interpreted it correctly. The MED contends that
Hartford confuses the statutory requirements for perfection of the hospital lien with those for
notice. The MED claims that, under Section 29-22-102, the hospital lien is perfected once
the requirements of subsections (a) and (b) are satisfied, and those subsections do not impose
a burden on the hospital to take active steps to ascertain third parties who may be potentially
liable. Rather, The MED argues, the “best knowledge” referred to in subsection (a) is the
actual knowledge of the hospital at the time the lien is filed. Notice, however, is
accomplished at the time the lien is filed, and under subsection (c), such notice is effective
as “to all persons, . . . whether or not they are named in the claim or lien and whether or not
a copy of the claim shall have been received by them.” T.C.A. § 29-22-102(c). The MED

-16-
asserts that its lien met all of the statutory requirements for perfection and was perfected as
to Hartford. Therefore, as held by the trial court, Hartford is deemed to have constructive
notice of The MED’s lien under Section 29-22-102(c).

“Tennessee’s courts have generally required strict compliance with the lien statutes.”
Holston Valley Hosp. & Med. Ctr. v. Moffitt, No. 03A01-9608-CV-00271, 1997 WL
147530, at *2 (Tenn. Ct. App. Mar. 31, 1997) (quoting D.T. McCall & Sons v. Seagraves,
796 S.W.2d 457, 460 (Tenn. Ct. App. 1990)); see Vulcan Materials Co. v. Gamble Constr.
Co., 56 S.W.3d 571, 573 (Tenn. Ct. App. 2001). Strict compliance is required because liens
are wholly statutory and, therefore, “it is beyond the power of [the] court to waive its
provisions or substitute others.” Holston Valley, 1997 WL 147530, at *2; see Nationwide,
325 S.W.3d at 93 (“A lien created by statute is limited in operation and effect by its terms
and can be enforced only in the circumstances provided for in the legislation.”). Therefore,
if The MED failed to perfect its lien in accordance with subsections (a) and (b) of Section
29-22-102, this would be fatal to its claims against Hartford under the lien. Holston, 1997
WL 147530, at *3 (concluding that the hospital’s failure to send a copy of the lien to the
patient’s attorney pursuant to subsection (b) was fatal to the hospital’s claim under the
hospital lien).

Subsection (a) of Section 29-22-102 requires the hospital to, among other things, set forth
in its verified statement the names and addresses of (1) the patient as it appears on the
hospital records, (2) the operator of the hospital, and (3) persons, firms, or corporations who
“to the best of the claimant’s knowledge” are “claimed by such ill or injured person . . . to
be liable for damages arising from such illness or injuries.” T.C.A. § 29-22-102(a).
Subsection (b) of the statute in turn requires the hospital to send by registered mail a copy
of the lien claim to each person, firm, or corporation “so claimed to be liable” in the verified
statement, as well as to the patient’s attorney, if the attorney is known or “with reasonable
diligence” could be known to the hospital. T.C.A. § 29-22-102(b).

Hartford essentially argues in this case that the phrase “the best of the claimant’s knowledge”
in Section 29-22-102(a) includes “reasonable diligence” or “best efforts” to find information
beyond the claimant’s actual knowledge. Although Hartford cites no Tennessee authority
in support of its position, it cites caselaw from other jurisdictions, including Board of
Trustees of Clark Mem. Hosp. v. Collins, 665 N.E.2d 952, 956 n.1 (Ind. Ct. App. 1996). We
have carefully reviewed these authorities and respectfully conclude that they are either
inapplicable or not persuasive.14 We find no language in subsection (a) that appears to place

14
Hartford cites the Indiana case for the proposition that a hospital must employ “reasonable diligence” or
“best efforts” in discovering the identity of any potential tortfeasors so that they may have notice in order
(continued...)

-17-
a burden on the hospital to engage in fact-finding efforts to ascertain the identity of persons
or corporations who may be liable for the patient’s injuries. Subsection (b) refers to
“reasonable diligence,” but only in connection with the name and address of the patient’s
attorney, in order to send him a copy of the lien. Moreover, the provision in subsection (c)
that the filing of the lien is constructive notice to “all persons” indicates the legislature’s
intent to require a person or entity who settles with the patient for his injuries to check the
relevant courthouse for a lien before paying the settlement monies to the patient.

From our review of the language of the statute, construing all of the subsections in pari
materia, we must conclude that the phrase “the best of the claimant’s knowledge” in
subsection (a) refers to the hospital’s actual knowledge at the time the lien is filed. Thus, we
agree with the trial court’s holding that The MED did not have a duty under Section 29-22-
102 to conduct an inquiry into the identity of potential third-party tortfeasors in order to
perfect its hospital lien. Hartford raises no other challenges on appeal to the trial court’s
finding that it impaired The MED’s hospital lien.

Made-Whole Doctrine

Nationwide argues on appeal that Arkansas law should apply to the issues in this case,
because this case arose out of an automobile accident that occurred in Arkansas. As
Arkansas has adopted the “made-whole” doctrine, Nationwide contends, The MED’s hospital
lien did not arise, i.e., did not become effective, until the Baumgartners had been made whole
by the insurance settlement payments made to them. See S. Centr. Ark. Elec. Coop. v. Buck,
117 S.W.3d 591, 595-96 (Ark. 2003).

In response, The MED argues that Tennessee law controls, because the injured party was
treated in Tennessee by a Tennessee hospital, his hospital debt was incurred in Tennessee,
and the hospital lien was filed in Tennessee. Moreover, The MED argues, the made-whole
doctrine has been adopted in Tennessee as well. The MED notes, however, that the made-
whole doctrine applies only to situations involving an insurer’s claim to subrogation, where
the insurer asserts a right to proceeds recovered by the insured from a third-party tortfeasor.
It insists that the made-whole doctrine does not apply to a hospital lien. Therefore, regardless

14
(...continued)
to perfect a hospital lien. See Board of Trustees of Clark Mem. Hosp. v. Collins, 665 N.E.2d 952, 956 n.1
(Ind. Ct. App. 1996). However, there is no indication in the Collins opinion that the Indiana statutes at issue
were similar to those in Tennessee, and the Indiana statutes at issue have since been repealed. Cases from
other jurisdictions can be persuasive authority on the proper interpretation of a Tennessee statute, but
generally, to be persuasive authority, it must appear that the other jurisdiction was applying or interpreting
a statute similar to the Tennessee statute at issue in pertinent part.

-18-
of whether Arkansas or Tennessee law is applied, The MED claims, the “made-whole”
doctrine is inapplicable to this case.

Generally, when faced with an issue involving choice of law, the court must first determine
whether there is, in fact, a conflict of laws. See Hataway v. McKinley, 830 S.W.2d 53, 55
(Tenn. 1992); see also Gov’t Em ployees Ins. Co. v. Bloodworth, No.
M2003-02986-COA-R10-CV, 2007 WL 1966022, at *29 (Tenn. Ct. App. June 29, 2007)
(stating that determining whether a conflict exists precedes a determination of which state’s
law applies). It is unnecessary to apply choice of law rules if the relevant laws do not
conflict. See Bloodworth, 2007 WL 1966022, at *29.

Here, both Arkansas and Tennessee apply the classic formulation of the made-whole
doctrine, that is, the principle that “an insurer cannot assert a subrogation right until the
insured has been fully compensated for his or her injuries.” 44A A M. J UR. 2d Insurance §
1777 (2003) (footnote omitted); see Franklin v. Healthsource of Ark., 942 S.W.2d 837, 839-
40 (Ark. 1997); York v. Sevier County Ambulance Auth., 8 S.W.3d 616, 619-21 (Tenn.
1999); Blankenship v. Estate of Bain, 5 S.W.3d 647, 650-51 (Tenn. 1999).

In this case, Nationwide asks us to apply the made-whole doctrine as employed in South
Central Arkansas Electric Company v. Buck, supra. In Buck, the made-whole doctrine was
applied in the context of a worker’s compensation subrogation claim.

Regardless of the variation on the made-whole doctrine urged by Nationwide, we find that
the doctrine has no application in this case. The MED is not the Baumgartners’ insurer, and
The MED is not seeking recovery pursuant to any subrogation rights; rather, it is simply a
creditor of the Baumgartners with a statutory lien enforceable against any recovery received
by the Baumgartners from a third party. The MED’s claim against Nationwide arises from
the provision in Tennessee’s HLA which specifically grants The MED a cause of action
based on the impairment of its statutory hospital lien. Nationwide cites no authority applying
the made-whole doctrine under such circumstances, and we have found none. Therefore, we
find that the made-whole doctrine, as that doctrine has been applied in either Arkansas or
Tennessee, is not applicable to this case, and reject Nationwide’s argument that The MED’s
hospital lien did not arise until the Baumgartners were made whole.

Accordingly, we affirm the trial court’s finding that the payments made by Hartford and
Nationwide to the Baumgartners in settlement of their claims constituted impairment of The
MED’s properly perfected hospital lien.

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 Damages Recoverable for Impairment of Hospital Lien

We now turn to the issue of damages. As it argued to the trial court, The MED contends on
appeal that Hartford and Nationwide are jointly and severally liable for the full amount of
Mr. Baumgartner’s medical expenses as damages for impairment of the hospital’s lien. The
MED bases this argument on Section 29-22-104(b)(1), which states that, if a lien is impaired,
the lienholder “may recover . . . the reasonable cost of such hospital care, treatment and
maintenance.” The MED relies on the interpretation of that statute by the intermediate
appellate court in Nationwide and in Prudential. The MED acknowledges, of course, that
Prudential was overruled by the Supreme Court, and that the intermediate appellate court’s
decision in Nationwide was reversed. It points out, however, that the Supreme Court’s
opinion in Nationwide was narrowly tailored to a different issue, and that the Supreme Court
did not address the issues presented in the instant case. Therefore, it claims, the intermediate
appellate court’s interpretation of Section 29-22-104(b)(1) in Nationwide remains valid, as
does the interpretation of that statute in Prudential.

In response, both Nationwide and Hartford argue that the Supreme Court’s decision in
Nationwide eliminates any authority whatsoever for The MED’s argument, because
Prudential was overruled, and the intermediate appellate court’s decision in Nationwide was
reversed. They speak in sweeping terms, contending that the Supreme Court decision
“nullified” both Prudential and the Nationwide intermediate court’s opinion, and that it left
The MED with “no Tennessee case law” supporting its position. Furthermore, Hartford
claims that the Supreme Court’s decision in Nationwide bolsters its position that Section 29-
22-101(b), limiting the application of a hospital lien to “one third (1/3) of the damages
obtained or recovered,” must be read in conjunction with Section 29-22-104(b)(1), and that
The MED’s recovery for the impairment of its hospital lien should be limited to one-third of
the amount paid to the Baumgartners.15

Both Hartford and Nationwide argue in the alternative that, should this Court find that The
MED’s damages are not limited by Section 29-22-101(b), then in no event should The
MED’s recovery exceed the Defendant insurance companies’ respective policy limits as set
forth in their insurance contracts with their insureds. At no time, they argue, did they
contract to be liable for more than the policy limits. Interpreting Section 29-22-104(b)(1) so
as to permit The MED to recover from them the full amount of Mr. Baumgartner’s medical
expenses — an amount well beyond the policy limits — would be excessive, overly punitive,
and disproportionate to the actual damages related to the impairment of the lien. Such an
application, they argue, would render that statute unconstitutional as applied.

15
While Hartford seeks a reversal on this basis, Nationwide simply argues that the judgment against it for
one-third of the amount paid to the Baumgartners should be affirmed.

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We examine first the precedential value of the intermediate appellate court opinions in
Prudential and Nationwide, which were overruled and reversed, respectively, by our
Supreme Court. As indicated above, the facts in Nationwide involved payments to medical
providers other than the plaintiff hospital (The MED), pursuant to a medical benefits
provision in the patient’s automobile insurance policy. The Supreme Court viewed the
pivotal issue to be whether a hospital lien would apply to medical benefit payments from the
patient’s insurance policy, which required the Court to construe Section 29-22-101.
Nationwide, 325 S.W.3d at 98. Ultimately, the Supreme Court concluded that a statutory
hospital lien does not extend to payments made pursuant to the medical payment benefits
provision of the patient’s insurance policy.16 Id. In its opinion, the Supreme Court discussed
Prudential and, of course, the intermediate appellate court’s opinion in Nationwide, but it
did not address the issue presented here, namely, the damages recoverable by The MED for
impairment of its lien. The Court stated specifically that, based on its disposition of the case,
“it is not necessary to address whether the Med’s lien was impaired by Nationwide.” Id.
Because the Court found it unnecessary to address whether the lien was impaired, it did not
address the damages recoverable for such impairment.

We agree that the Supreme Court’s decision in Nationwide nullified the intermediate
appellate court’s holding, as well as the same holding in Prudential, that the HLA applies
to payments made to the patient pursuant to the medical benefits provision of the patient’s
automobile insurance policy under the circumstances of that case. See 5 C.J.S. Appeal and
Error § 1106 (2010) (“The effect of a general and unqualified reversal of a judgment, order,
or decree is to nullify it completely and to leave the case standing as if such judgment, order
or decree had never been rendered, except as restricted by the opinion of the appellate court.”
(Footnotes omitted)). In light of the limited scope of the Supreme Court’s decision, however,
we conclude that it did not have the effect of completely nullifying the appellate decisions
in Prudential and Nationwide but rather left the decisions intact insofar as the Court in both
cases addressed the issue of damages. Nevertheless, the intermediate appellate court
decisions in both Prudential and Nationwide are unpublished opinions. As such, under Rule

16
In the instant case, the payments at issue were made pursuant to the tortfeasor’s insurance policy (Hartford)
and the uninsured motorist provision of the Baumgartners’ automobile insurance policy (Nationwide).
Therefore, it is apparent that the payments constituted “damages obtained or recovered . . . by . . . settlement
. . . by virtue of the cause of action accruing” to the Baumgartners. T.C.A. § 29-22-101(b). No issue has
been raised on appeal by Hartford or Nationwide, either before or after the Supreme Court issued its
Nationwide opinion, as to whether The MED’s hospital lien applied to the payments made to the
Baumgartners, except the issues addressed above relating to notice to Hartford and application of the made-
whole doctrine.

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4(G)(1) of the Tennessee Supreme Court Rules,17 they are considered persuasive but not
controlling authority on the issues not addressed by the Supreme Court in Nationwide.
Moreover, after reviewing the analysis by the Supreme Court in Nationwide, as explained
below, we deem it prudent to revisit the interpretation of Section 29-22-104(b)(1) adopted
by the intermediate appellate courts in Prudential and Nationwide.

The gist of Section 29-22-104(b)(1) is to establish a right of action for a hospital whose
properly perfected hospital lien has been impaired. It states that the hospital “shall be
entitled to an action at law for damages on account of such impairment, and in such action
may recover from one accepting such release or satisfaction or making such settlement the
reasonable cost of such hospital care, treatment and maintenance.” T.C.A. § 29-22-
104(b)(1). The hospital’s statutory right of action is against any person or entity “making
such settlement” in impairment of the hospital’s lien, and thus arises out of the payor’s action
of making a settlement payment in contravention of the lien, without reference to whether
the payor’s reason for making the settlement payment arose from contract or otherwise. This
is important in considering the argument of Hartford and Nationwide that their policy limits
should be the outside limit of their liability, because that is all they contracted to pay. In light
of the nature of their liability under this statute, we find that the insurance policy limits are
not relevant to the damages recoverable by The MED for impairment of its lien.

Hartford and Nationwide correctly note that, in its Nationwide decision, the Supreme Court
took pains to interpret Section 29-22-101(a) in pari materia with other provisions of the
HLA, namely, subsection (b) of that same statute. In Nationwide, the Supreme Court
initially observed that the language in Section 29-22-101(a), describing the types of things
to which a hospital lien may be applied, is quite broad. This was narrowed substantially by
the Court’s consideration of the language in subsection (b). See Nationwide, 325 S.W.3d at
97. The Supreme Court considered these subsections in pari maria despite the fact that the
Nationwide case involved a claim for impairment of a hospital lien, and subsection (b)
pertains to the enforcement of a hospital lien. The MED argues in this appeal that subsection
(b) should not be considered as relevant to our inquiry because this case involves the
impairment of a lien, not the enforcement of a lien. Indeed, this argument was adopted by
the Prudential court and by the intermediate appellate court in Nationwide in reliance on the
Prudential decision. See Nationwide, 2009 WL 302261, at *3 (citing Prudential, 1997 WL

17
Tennessee Supreme Court Rule 4(G)(1) states in pertinent part: “An unpublished opinion shall be
considered controlling authority between the parties to the case. . . . Unless designated ‘Not For Citation,’
‘DCRO’ or ‘DNP’ pursuant to subsection (F) of this Rule, unpublished opinions for all other purposes shall
be considered persuasive authority.” Although the distinction between “published” and “unpublished”
decisions seems of greatly diminished value in an age when both published and unpublished opinions are
equally accessible through online legal research, which is now the primary mode of legal research, we, of
course, defer to Rule 4(G)(1) as a duly adopted rule of our Supreme Court.

-22-
119582, at *2). We agree with The MED that Section 29-22-101(b) is not directly applicable
to a case involving the impairment of a lien. However, compartmentalizing Sections 29-22-
101(b) and 104(b)(1) as urged by The Med would be contrary to the Supreme Court’s
analysis in Nationwide.

Examining the interplay between Section 29-22-104(b)(1) and Section 29-22-101, we
observe that these provisions of the HLA refer specifically to two different financial
amounts. Sections 29-22-101(a) and 104(b)(1) refer to the “reasonable charges” or the
“reasonable cost” of the hospital care and treatment.18 Section 29-22-101(b) states that the
hospital lien “shall not apply to any amount in excess of one third (1/3) of the damages
obtained or recovered by such person.” In this case, the amount of damages paid by Hartford
and Nationwide to the Baumgartners, a total of $125,000, was far less than the approximately
$530,000 in the reasonable cost of medical care provided by The MED for Mr.
Baumgartner.19 However, the cost of the medical services may not always exceed the
damages paid.20 The ill or injured person may receive a payment, from an insurance
company or otherwise, that exceeds the reasonable cost of his medical care where, for
example, he receives a payment to settle a claim for pain and suffering or other damages.21
Conceivably, “one third (1/3) of the damages obtained or recovered” could exceed “the
reasonable cost of [the] hospital care.” T.C.A. §§ 29-22-101(b) and 104(b)(1). Therefore,
the “damages obtained” under Section 29-22-101(b), or the “settlement” made in impairment
of the lien under Section 29-22-104(b)(1), may be more, or may be less, than the reasonable
cost of the medical care, depending on the circumstances.

18
Section 29-22-101(a) states that the hospital shall have a lien “for all reasonable and necessary charges for
hospital care, treatment and maintenance.” Section 29-22-104(b)(1) states that, as damages for impairment,
the lienholder may recover “the reasonable cost of such hospital care, treatment and maintenance.” For
purposes of this Opinion, we will view the “reasonable and necessary charges” as essentially the same as the
“reasonable cost” of the hospital care, treatment, and maintenance of the patient at issue.
19
There has been no allegation that the amount of The MED’s hospital lien did not represent the “reasonable
cost” of Mr. Baumgartner’s medical care.
20
In Prudential, the patient incurred hospital medical care in the amount of $5,060.76, and the defendant
insurance company paid this same amount to the patient, without making any payment to the hospital, despite
being aware of the hospital’s lien. Prudential, 1997 WL 119582, at *1. In Nationwide, the patient incurred
medical expenses at The MED totaling $33,823.02, and the defendant Nationwide insurance company paid
a total of $5,000 without making any payment to The MED. Nationwide, 325 S.W.3d at 91.
21
In the legislative history, the Senate sponsor of the bill described to the Senate the provision giving the
hospital a lien as to “the recovery amount” in a settlement, and observed: “As you know, recoveries are made
for various things including pain and suffering, certain amounts called specials to lawyers which includes
hospital costs and other costs such as doctor’s bills.” Statement of Sen. Farris, Senate Session, Feb. 11, 1970.

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We construe Section 29-22-104(b)(1) against this background. Although The MED focuses
on the portion of the statute describing the extent of damages that may be available, it is
important to first define what the statute grants. The statutory language granting a right of
action to the lienholder for impairment of its lien states that “the lienholder shall be entitled
to an action at law for damages on account of such impairment . . . .” The definition of
“damages” quoted in Nationwide is “pecuniary compensation or indemnity, which may be
recovered in the courts by any person who has suffered loss, detriment, or injury . . . through
the unlawful act or omission or negligence of another.” Nationwide, 325 S.W.3d at 97
(quoting B LACK’S L AW D ICTIONARY 389 (6TH ed. 1990)). Under this definition, the pecuniary
compensation is linked to the unlawful act of another. The goal of a damages award has been
described:

The stated goal of the damages remedy is compensation of the plaintiff for
legally recognized losses. This means that the plaintiff should be fully
indemnified for his loss, but that he should not recover any windfall. Stated
in this way, damages is an instrument of corrective justice, an effort to put the
plaintiff in his or her rightful position.

D AN B. D OBBS, D OBBS H ORNBOOK ON R EMEDIES § 3.1 (2d ed. 1993) (subsection on
Compensatory and Non-compensatory Goals). With damages, as with any remedy, the
award should be “congruent with” the plaintiff’s rights. Id. at § 1.7 (subsection on Rights
and Remedies). Therefore, to formulate the appropriate award of damages, we “must know
the nature and scope of the underlying right.” Id.

What then is “the nature and scope of” The MED’s underlying right? Had Hartford and
Nationwide honored The MED’s lien as required, under Section 29-22-101(b) of the HLA,
The MED would have received one-third of the settlement monies paid to the
Baumgartners.22 Even though Section 29-22-101(b) does not apply to an action for
impairment, we find that it circumscribes the “scope of [The MED’s] underlying right.” Id.

The MED argues that its underlying right should be measured by Section 29-22-101(a),
which gives the hospital a statutory lien “for all reasonable and necessary charges for hospital
care, treatment and maintenance.” The remedy for impairment of its lien, The MED asserts,
is set forth in Section 29-22-104(b), which states that, in an action at law for impairment of

22
The legislative history reflects that this was the legislature’s intent. In explaining that a settlement with
a patient would not require the approval of the hospital holding a lien, the Senate sponsor described: “So,
if the hospital had a lien for one-third of the recovery amount, if there was any question about assigning the
check, one check could be made for a third paid to the clerk of the court [for the hospital], and the balance
could be paid to the clients.” Statement of Sen. Farris, Senate Hearing, Feb. 11, 1970.

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a hospital lien, the hospital “may recover . . . the reasonable cost of such hospital care,
treatment and maintenance.” The MED states that this amounts to a legislative directive that
a party who impairs a hospital lien “must pay the full amount of the hospital lien filed for the
medical services rendered to a patient.” It emphasizes that such an award would be
compensatory, not punitive, because The MED suffered a concrete loss in the form of the
unpaid medical services provided to Mr. Baumgartner.

We agree with The MED that it has been damaged by the Baumgartners’ failure to pay for
the medical services provided to Mr. Baumgartner. However, payment of the full amount
of the medical costs has never been the responsibility of either Hartford or Nationwide.
Rather, under the HLA, Hartford and Nationwide each had a duty to honor The MED’s lien
by paying one-third of the Baumgartners’ settlement monies to The MED, an amount which
is, in this case, far less than the total medical expenses. One-third of the settlement monies
is the amount that The MED lost “on account of [the] impairment” of the lien, i.e., the
portion of The MED’s total loss that is attributable to the insurance companies’ wrongful
conduct. Requiring the insurance companies to pay the entire cost of The MED’s hospital
care would result in a remedy that is incongruent with The MED’s underlying right vis-a-vis
the insurance companies.

Moreover, Section 29-22-104(b)(1) states that a hospital “may recover . . . the reasonable cost
of such hospital care, treatment and maintenance.” Use of the word “may” in a statute is
typically construed as permissive rather than mandatory. See Robinson v. Fulliton, 140
S.W.3d 312, 320 (Tenn. Ct. App. 2003) (citations omitted). Under Section 29-22-104(b)(1),
the hospital may, of course, recover the cost of the hospital care, but only if such an award
would reflect the hospital’s “damages on account of [the] impairment” of its lien. This could
occur when, for example, “one third (1/3) of the damages obtained” by the ill or injured
person equals or exceeds the cost of the hospital care. T.C.A. § 29-22-104(b)(1).

Construing Section 29-22-104(b)(1) as applying to the damages actually attributable to the
impairment of the hospital lien is consonant with the legislative history. Although the
legislative history does not directly address the issue presented in this appeal, it is extensive;
the bill was debated thoroughly and was the subject of several amendments. One amendment
deleted a provision in the HLA allowing a hospital that sues for the impairment of its lien to
recover its attorney fees. A supporter of this amendment in the House discussion stated: “I
think there are sufficient protective measures in the bill that if the monies are wrongfully paid
then the paying business or corporation is still liable. They may have to come pay it again.”
Statement of Rep. Runyon, House Session, Feb. 20, 1970. The same representative later
clarified that the proposed amendment took out the provision requiring a party who impairs
the lien to pay the hospital’s attorney fees:

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 This amendment took that [provision for the payment of the hospital’s attorney
fees] out. That is, again if I understand your question, the way the bill was
drawn, it said that if the person making the payment, or making the settlement,
or the compromise, failed to pay the hospital when all of these notices had
been given, then that person, which normally I would think would be a
defendant insurance company normally, would not only pay the bill of the
hospital, but would pay the attorneys that the hospital had to employ to collect
it. My amendment took this feature of it out. The hospital will now have to
pay their own attorney, because we could only assume under the law, and I
think the sponsor agrees, there’s not going to be an intentional refusal to pay
this. If it’s done, it will be done [due] to oversight, and I didn’t think it was
proper, and I think the sponsor agreed, to penalize a person who simply made
a mistake and in all honesty.

Statement of Rep. Runyon, House Session, Feb. 20, 1970. Thus, the amount of damages to
be paid by a party who impairs the lien is described in various ways, such as paying “it again”
and paying “the bill of the hospital.” However, it is clear that legislators expected that the
impairment of the hospital lien by an entity such as an insurance company would likely be
done inadvertently, and the legislators did not wish “to penalize a person who simply made
a mistake.” Id. An award of damages against the insurance companies that is not congruent
with the monies The MED would have received had its lien been honored would be
inconsistent with this statement of legislative intent.

We think it is incumbent on this Court to construe Section 29-22-104(b)(1) in pari materia
with Section 29-22-101(b), the approach taken by our Supreme Court in its interpretation of
the HLA in Nationwide. Accordingly, we find that The MED’s “damages on account of
[Hartford’s and Nationwide’s] impairment” are “one third (1/3) of the damages obtained” by
the Baumgartners from Hartford and Nationwide. A damage award in this amount puts The
MED in its “rightful position” and is commensurate with the wrongful conduct by Hartford
and Nationwide.

Under such circumstances, the “damages on account of such impairment” may not be limited
to one-third of the amount paid in settlement to the patient. In its initial ruling, the trial court
below held that a lienholder whose lien is impaired can recover “the amount that the
lienholder would have received if the lien had been complied with by the insurer plus
consequential damages and discretionary costs.” This was later appropriately clarified to
exclude an award of attorney fees to The MED. Apart from attorney fees, the language of
Section 29-22-104(b)(1) does not preclude the inclusion of “consequential damages and other
damages” in the award for damages for impairment of The MED’s hospital lien. It is unclear
from the record whether The MED sought such “consequential damages and other damages.”

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Therefore, we must remand the case to the trial court for further proceedings consistent with
this Opinion.

C ONCLUSION

In sum, we affirm the trial court’s holding that, in the absence of actual knowledge of
Hartford’s involvement, The MED was not required to name Hartford in its lien or send
Hartford a copy of its lien. We also affirm the trial court’s holding that the made-whole
doctrine is not applicable under the facts of this case. Thus, we affirm the trial court’s
holding that the payments to the Baumgartners by both Hartford and Nationwide constituted
impairment of The MED’s valid lien. We hold that The MED may recover only the damages
that are attributable to the impairment of its lien by Hartford and Nationwide, in light of the
fact that, had The MED’s lien been honored, The MED would have received only one-third
of the amounts paid to the Baumgartners by Hartford and Nationwide. On this basis, we
reverse the trial court’s award of $100,000 against Hartford. We also reverse the trial court’s
award of $8,333.33 against Nationwide only because it is unclear from the record whether
The MED also seeks “consequential damages or other damages” against Nationwide. In the
absence of such consequential damages or other damages, the amount of the trial court’s
award against Nationwide would be correct under the HLA.

These holdings pretermit all other issues raised on appeal.

The decision of the trial court is affirmed in part and reversed in part as set forth
above, and the cause is remanded to the trial court for further proceedings consistent with this
Opinion. Costs of this appeal are assessed one-half to Appellant Shelby County Health Care
Corporation and its surety, one-fourth to Appellant Hartford Accident & Indemnity Co. and
its surety, and one-fourth to Appellee Nationwide Mutual Insurance Company, for which
execution may issue, if necessary.

____________________________________________
HOLLY M. KIRBY, JUDGE

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