Dignity v. Farmers

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

DIGNITY HEALTH,
Plaintiff/Appellant,

v.

FARMERS INSURANCE COMPANY OF ARIZONA,
Defendant/Appellee.

No. 1 CA-CV 18-0292
FILED 4-4-2019

Appeal from the Superior Court in Maricopa County
No. CV2017-002466
The Honorable Kerstin G. LeMaire, Judge

VACATED AND REMANDED

COUNSEL

Gammage & Burnham PLC, Phoenix
By Richard B. Burnham, Cameron C. Artigue, Christopher L. Hering
Counsel for Plaintiff/Appellant

Jardine, Baker, Hickman & Houston, P.L.L.C., Phoenix
By Bradley R. Jardine
Counsel for Defendant/Appellee
 DIGNITY v. FARMERS
Decision of the Court

MEMORANDUM DECISION

Chief Judge Samuel A. Thumma delivered the decision of the Court, in
which Judge Kent E. Cattani and Judge James P. Beene joined.

T H U M M A, Chief Judge:

¶1 The dispositive issue in this appeal is whether payments
under optional medical payments coverage included in an automobile
insurance policy (which the parties call “medpay coverage”) is “health
insurance” and, therefore, not subject to a health care provider lien under
Arizona Revised Statutes section 33-931. As discussed below, because this
medpay coverage is not health insurance, those payments are subject to the
health care provider lien. Accordingly, the grant of defendant Farmers
Insurance Company of Arizona’s motion to dismiss is vacated and this
matter is remanded.

FACTS1 AND PROCEDURAL HISTORY

¶2 Farmers issued an automobile insurance policy to Bethanie
Elliott that included optional medpay coverage. Plaintiff Dignity Health,
doing business as Mercy Gilbert Medical Center, provided Elliott medical
services after she was injured in a car accident. The usual and customary
charges for those services exceeded $160,000. Dignity recorded and
perfected a health care provider lien for more than $140,000 to secure
payment for those medical services. See Ariz. Rev. Stat. (A.R.S.) § 33-931
(2019).2 Notwithstanding that lien, Farmers directly paid Elliott $99,000 in
medpay benefits under her automobile insurance policy.

¶3 Dignity timely filed this action to enforce its lien, claiming
Farmers’ direct payment to Elliott violated the lien. Farmers moved to
dismiss for failure to state a claim, arguing its payment was not subject to
the lien. After briefing and oral argument, the superior court granted

1In reviewing the grant of a motion to dismiss, this court assumes the truth
of all well-pleaded facts alleged in the complaint. Fid. Sec. Life Ins. Co. v.
State, 191 Ariz. 222, 224 ¶ 4 (1998).

2Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.

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Decision of the Court

Farmers’ motion, stating “the court agrees with the reasoning as set forth
by [Farmers] in its motion and reply.” Dignity timely appealed from the
resulting final judgment. See Ariz. R. Civ. P. 54(c). This court has jurisdiction
pursuant to Article 6, Section 9, of the Arizona Constitution and A.R.S. §§
12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶4 Under A.R.S. § 33-931, a health care provider may obtain a
lien to secure payment of customary charges for services provided to an
injured person. The statute, however, provides exceptions to the scope of
such a lien:

A lien pursuant to this section extends to all
claims of liability or indemnity, except health
insurance and underinsured and uninsured
motorist coverage as defined in § 20-259.01, for
damages accruing to the person to whom the
services are rendered . . . on account of the
injuries that gave rise to the claims and that
required the services.

A.R.S. § 33-931(A) (emphasis added). Thus, if Farmers’ payment of medpay
benefits to Elliott was for health insurance benefits, it was exempt from
Dignity’s lien. But if the payment to Elliott was not a health insurance
benefit, the payment violated the lien. Although aspects of medpay
coverage have been the subject of litigation in Arizona for decades, e.g.,
Sahadi v. Mid-Century Ins. Co., 132 Ariz. 422, 423 (App. 1982), the specific
issue presented here is one of first impression.

¶5 Dignity claims the superior court misinterpreted A.R.S. § 33-
931. In seeking dismissal for failure to state a claim based on an exception
to the lien statute, Farmers had the burden to show Dignity’s claim failed
as a matter of law. See Ariz. R. Civ. P. 12(b)(6); cf. Troutman v. Valley Nat’l
Bank of Ariz., 170 Ariz. 513, 517 (App. 1992) (stating burden of showing
applicability of statutory exception is “on the party asserting that
exception”). This court reviews de novo both the interpretation of a statute
and the grant of a Rule 12(b)(6) motion to dismiss. Coleman v. City of Mesa,
230 Ariz. 352, 355 ¶ 7 (2012); Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co.,
177 Ariz. 526, 529 (1994).

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¶6 “[T]he best and most reliable index of a statute’s meaning is
its language and, when the language is clear and unequivocal, it is
determinative of the statute’s construction.” State v. Hansen, 215 Ariz. 287,
289 ¶ 7 (2007) (citation omitted). “In giving effect to every word or phrase,
the court must assign to the language its ‘usual and commonly understood
meaning unless the legislature clearly intended a different meaning.’” Bilke
v. State, 206 Ariz. 462, 464-65 ¶ 11 (2003) (citation omitted). Only where
statutory text is ambiguous and susceptible to more than one plausible
interpretation does the court use tools of statutory construction, looking to
“the statute’s context; its language, subject matter, and historical
background; its effects and consequences; and its spirit and purpose.” Hayes
v. Cont’l Ins. Co., 178 Ariz. 264, 268 (1994).

I. As Used In A.R.S. § 33-931, “Motorist Coverage As Defined In § 20-
259.01” Does Not Modify “Health Insurance.”

¶7 Farmers argues Section 33-931 should be read so that
“motorist coverage as defined in § 20-259.01” modifies not only the words
“underinsured” and “uninsured,” but also “health insurance.” Arguing the
statute “is clear and unambiguous,” Farmers asserts Section 33-931 excepts
from the lien “health insurance . . . motorist coverage as defined in § 20-
259.01,” which it claims means the payment to Elliott is not subject to the
lien, because medpay is “the only term that meets the definition of ‘health
insurance motorist coverage.’” Dignity argues that Farmers failed to raise
this argument in the superior court, meaning it was waived. In the superior
court, however, Farmers did argue a Section 33-931 lien is limited by Section
20-259.01 and the two statutes “must be interpreted together in a
harmonious and consistent manner.” Accordingly, Farmers at least
minimally raised with the superior court this argument that it now presses
on appeal.

¶8 Contrary to Farmers’ assertion, the text of Section 33-931
excludes from the scope of a health care provider’s lien: (1) health insurance
(without reference to § 20-259.01); (2) uninsured motorist coverage as
defined in § 20-259.01 and (3) underinsured motorist coverage as defined in
§ 20-259.01. Moreover, to the extent any ambiguity exists, the changes to
Section 33-931 over the years negate Farmers’ argument and compel a
reading excepting health insurance without reference to Section 20-259.01.
See Carrow Co. v. Lusby, 167 Ariz. 18, 20 (1990) (“Legislative intent often can
be discovered by examining the development of a particular statute.”).

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¶9 Until 1988, Section 33-931 authorized a health care provider
lien, without any exceptions, on “any and all claims for damages accruing
to the person to whom hospital service is rendered.” Gartin v. St. Joseph’s
Hosp. & Med. Ctr., 156 Ariz. 32, 35 (App. 1988) (quoting A.R.S. § 33-931(A)
(1988)). In 1988, the Legislature amended Section 33-931 to except “health
insurance” from the coverage of such a lien. See 1988 Ariz. Sess. Laws, ch.
298, § 2 (2d Reg. Sess.). It was not until 2004 – 16 years later – that Section
33-931 was amended to also except “underinsured and uninsured motorist
coverage as defined in § 20-259.01.” 2004 Ariz. Sess. Laws, ch. 154, § 1 (2d
Reg. Sess.).

¶10 Contrary to Farmers’ argument, there is no suggestion that
the 2004 amendment to Section 33-931, which first added the reference to
Section 20-259.01, was designed to modify the “health insurance”
exemption added in 1988. Indeed, Legislative materials make clear the 2004
amendment was made solely to exempt “underinsured and uninsured
motorist coverage as defined in § 20-259.01,” not to alter the “health
insurance” exemption in Section 33-931. See House Bill Summary, H.B. 2681
(Apr. 20, 2004) (explaining the 2004 amendment “[p]rohibits private and
county health care institutions from recovering an injured person’s
uninsured or underinsured motorist coverage when enforcing a lien to
recover hospital charges for medical care”); Senate Fact Sheet, H.B. 2681
(Mar. 30, 2004) (similar). This history of Section 33-931 undercuts Farmers’
argument that the statute should be read to exempt from a lien “[h]ealth
insurance motorist coverage as defined in § 20-259.01.”

¶11 Apart from this history, the term “health insurance” is not
defined in Section 20-259.01. Thus, it would be illogical to read Section 33-
931 to mean “health insurance as defined in § 20-259.01.” Section 20-259.01
is entitled “Motor vehicle liability policy; uninsured optional; underinsured
optional; subrogation; medical payments liens; definitions.” The section
contains three definitions: “[u]ninsured motor vehicles;” “[u]ninsured
motorist coverage” and “[u]nderinsured motorist coverage.” A.R.S. § 20-
259.01(D), (E) & (G). The fact that “health insurance” is not used in, much
less defined in, Section 20-259.01 negates any suggestion that Section 33-931
should be read such that “motorist coverage as defined in § 20-259.01”
modifies the phrase “health insurance.” See Callen v. Rogers, 216 Ariz. 499,
507 (App. 2007) (“[W]hen the legislature has specifically included a term in
some places within a statute and excluded it in other places, courts will not
read that term into the sections from which it was excluded.”) (citation
omitted).

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¶12 Had the Legislature wanted to exempt “[h]ealth insurance
motorist coverage as defined in § 20-259.01” from a healthcare provider
lien, it could have done so, either by amending Section 33-931 or by defining
“health insurance” in Section 20-259.01. It did neither. Based on this history
of Section 33-931, and the text used (and not used) in that statute and in
Section 20-259.01, “motorist coverage as defined in § 20-259.01,” as used in
Section 33-931, does not modify “health insurance.” Accordingly, Farmers’
argument to the contrary fails.

II. As Used In A.R.S. § 33-931, “Health Insurance” Does Not Include
Medpay Coverage.

¶13 Farmers argued before the superior court that “‘health
insurance’ from A.R.S. § 20-259.01 is synonymous with terms such as
‘medpay,’” meaning “health insurance” as used in Section 33-931 should be
read to include medpay. Dignity argues Farmers failed to raise this
argument on appeal, which it claims should be treated as a confession of
error. Because Farmers failed to press this argument on appeal, arguing
instead that medpay is “health insurance motorist coverage,” it has been
waived. See, e.g., Van Loan v. Van Loan, 116 Ariz. 272, 274 (1977) (“[F]ailure
to raise an issue either at the trial level or in briefs on appeal constitutes a
waiver of the issue.”). Even absent waiver, Farmers’ argument would fail.

¶14 An argument that “health insurance” (a phrase that does not
appear in Section 20-259.01) is the same as medpay would run counter to
the directive that different statutory terms or phrases are not to be treated
as synonymous unless the context permits no other meaning. See P.F. West,
Inc. v. Superior Court, 139 Ariz. 31, 34 (App. 1984). Although not defined in
Sections 33-931 or 20-259.01, the A.R.S. Insurance Title (Title 20) defines
“health insurance” in the context of a “[p]remium tax credit for health
insurance certificates submitted by qualified persons,” A.R.S. § 20-
224.05(H)(3), to mean a “a licensed health care plan or arrangement that
pays for or furnishes medical or health care services and that is issued by a
health care insurer.” This statute directs that “[h]ealth insurance does not
include limited benefit coverage,” id., defined as “an insurance policy that
is designed, advertised and marketed to supplement major medical
insurance and that includes accident only” and other types of coverage,
A.R.S. § 20-1137(B). This definition would exclude from health insurance
the medpay at issue here. And although this definition is limited to the
premium tax credit context, Farmers has not shown that the Legislature
defined “health insurance” to mean two irreconcilably different things
depending upon whether the phrase was used in Section 33-931 or Section
20-224.05. Cf. Wyatt v. Wehmueller, 167 Ariz. 281, 284 (1991) (“A court also

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should interpret two sections of the same statute consistently, especially
when they use identical language.”).

¶15 A statute authorizing a different type of lien also undercuts
the thought that “health insurance” and medpay coverage mean the same
thing. A qualified insurer providing specified medpay coverage benefits
(“medical payments coverage of a motor vehicle insurance policy”) is
authorized to obtain an insurer’s lien for any medpay coverage payment
exceeding $5,000 “that is paid to or on behalf of that insured.” A.R.S. § 20-
259.01(J). Farmers did not obtain such a lien and this statute is not
applicable to the health care provider lien recorded and perfected by
Dignity. This insurer’s lien statute, however, is evidence that the
Legislature treats “health insurance” and medpay coverage as two different
things. A similar distinction comes from the one other reference to
“[m]edical payments coverage” in Title 20 as being one of seven types of
“basic coverage” within motor vehicle insurance policies subject to certain
renewal limitations. See A.R.S. § 20-1631(K)(5).

¶16 Apart from these statutory differences, this court has
recognized the difference between health insurance and medpay coverage,
albeit in a different context. In Haisch v. Allstate Insurance Co., the plaintiff
had health insurance coverage for all “charges resulting from health care
services listed in her plan” and had an “automobile liability policy that
included optional Med Pay coverage.” 197 Ariz. 606, 607 ¶ 2 (App. 2000).
After the plaintiff was treated for injuries sustained in a car accident, her
automobile insurer refused to pay medpay benefits for any treatment
covered by health insurance. Id. at 608 ¶ 3. The plaintiff sued her automobile
insurer, arguing it “engage[d] in a systematic practice of unfairly marketing
Med Pay coverage, because it fails to disclose to its customers that Med Pay
will not cover any medical expenses already covered by the insured’s . . .
health insurance.” Id. at 609 ¶ 8. Although rejecting the plaintiff’s claims, id.
at 612 ¶ 27, Haisch repeatedly acknowledged the difference between health
insurance and medpay coverage and that the two phrases are not
synonymous.

¶17 Had the Legislature wanted to exempt “medical payments
coverage” from the scope of a Section 33-931 health care provider lien, it
could have done so. It has not done so, and that has meaning. Padilla v.
Indus. Comm’n, 113 Ariz. 104, 106 (1976) (“[W]hat the Legislature means, it
will say.”). The exclusion of “health insurance” for a Section 33-931 lien
does not also exclude medpay coverage. For these reasons, even absent
waiver, Farmers has not shown that its medpay coverage payment was
included in the “health insurance” exception to Dignity’s health care

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provider lien under Section 33-931. Accordingly, the superior court erred in
dismissing Dignity’s complaint.3

¶18 Dignity requests an award of attorneys’ fees incurred both on
appeal and in the superior court proceedings pursuant to A.R.S. § 33-934.
In the exercise of the court’s discretion, Dignity is awarded an amount of
reasonable attorneys’ fees incurred on appeal, as well as its taxable costs on
appeal, contingent upon its compliance with Ariz. R. Civ. App. P. 21. This
court leaves to the superior court’s discretion any award of attorneys’ fees
resulting from proceedings before that court.

CONCLUSION

¶19 The dismissal of Dignity’s complaint is vacated, and this
matter is remanded for further proceedings consistent with this decision.

AMY M. WOOD • Clerk of the Court
FILED: AA

3Given this conclusion, the court need not address Dignity’s arguments
based on the classifications in Arizona’s insurance code.

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