N.C. Business Court Affirms the Assignability of MedPay Benefits to Treating Hospitals and Reminds Litigants to Direct Appeals to the Proper Court

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Fox Rothschild LLPIn a series of recent opinions in Justice v. Mission Hospital, Inc., the Business Court dismissed claims that MedPay benefits were improperly routed to a treating hospital, dismissed the appeal of the dismissal, and dismissed the appeal of the dismissal of the appeal. First, the Court dismissed a purported class action on behalf of the Plaintiffs who complained that the medical payments coverage (“MedPay”) under their automobile insurance policy was improperly directed to the hospital where they were treated, rather than to them. See 2019 NCBC 21 (N.C. Super. Ct. Mar. 27, 2019). Second ,after the Plaintiffs directed their Notice of Appeal to the Court of Appeals instead of the North Carolina Supreme Court (as required by statute), the Court reluctantly reaffirmed its 2018 ruling in a similarly postured case that a trial court does not have authority to address such a jurisdictional defect. The Plaintiffs’ misdirected appeal was dismissed, with their only recourse to seek discretionary review from the Supreme Court. See 2019 NCBC 36 (N.C. Super. Ct. Jun. 5, 2019).  Third, Plaintiffs timely appealed the Court’s dismissal of its first appeal, and the Business Court dismissed it, too, finding that the Court of Appeals was not vested with jurisdiction in such circumstance.  See 19 NCBC 52 (N.C. Super. Ct. Aug. 21, 2019).

Takeaways:

  • The Business Court holds that MedPay benefits may appropriately be considered “health insurance” and can be assigned to a treating entity.
  • The Business Court reaffirmed that clients and counsel need to be vigilant about directing appeals to the North Carolina Supreme Court in cases filed after October 1, 2014.

Plaintiffs were involved in an automobile accident, and were brought to defendant Mission Hospital for treatment. 19 NCBC 21 at ¶7. As part of a Consent to Treatment/Financial Agreement executed contemporaneously with treatment, the Plaintiffs assigned all “liability and health insurance benefits” to the provider. Id. at ¶10. The carrier paid out three checks to the provider constituting the limits of the subject MedPay. Id. at ¶14. The Plaintiffs objected that these payments were made without them being consulted. Even if their obligations to the provider exceeded the MedPay, Plaintiffs felt the money was theirs to control and pay out, if they chose, at their discretion. Id. at ¶30.

The Court ruled that the MedPay benefits were “unambiguously” assigned under the agreement executed by the Plaintiffs. Id. at ¶35. The Court was unable to conclude that MedPay could be considered “liability insurance” under the Agreement, but it had no trouble deciding that it was “clearly and unambiguously” considered “health insurance.” Id. at ¶41. As the Court noted, “MedPay coverage is first-party coverage where one seeks to provide coverage for injury irrespective of fault and liability.” Id.

Plaintiffs also contended they could not assign their MedPay payments because of an anti-assignment clause in their policy with the insurance carrier. The Court noted this was an issue of first impression in North Carolina as it related to MedPay. Id. at ¶49. The Court dismissed the challenge because such clauses are interpreted to benefit the carrier, and do not prevent assignments after a loss has occurred. Id.

The Court did not tread new ground in dismissing Plaintiffs’ misdirected appeal. Indeed, it took “no pleasure in doing so.” 19 NCBC 36 at ¶19. But, N.C. Gen. Stat. § 7A-27(a)(2) requires appeals from final judgments in cases designated as a mandatory complex business case to be directed to the North Carolina Supreme Court, not the Court of Appeals. Judge Gale did the analytical work on the issue the previous year in Zloop, Inc. v. Parker Poe Adams & Bernstein. See 2018 NCBC 39 (N.C. Super. Ct. Apr. 30, 2018). Citing his opinion in Zloop, Inc., Judge Gale put it frankly: “The Court here again concludes it must dismiss the appeal, even though the jurisdictional defect was clearly inadvertent and the record would allow for no finding that Defendant was surprised as to the matter being appealed from or otherwise suffered prejudice.” 19 NCBC 36 at ¶2.

This issue has attracted attention and discussion in the state’s appellate Bar. Our colleagues at the North Carolina Appellate Practice Blog have discussed the application of Rule 3 of the North Carolina Rules of Appellate Procedure, if it should be amended, and whether the Notice of Appeal rule interpreted and applied in these cases is truly jurisdictional. See Zloops! Another Rule 3 Dismissal (June 6, 2019); When Is a Deadline or Other Requirement for Filing a Notice of Appeal Jurisdictional? (State Edition) (May 3, 2018).

Plaintiffs’ second appeal challenged whether the Court had the authority “to dismiss a second appeal that seeks appellate review of its earlier order dismissing a first appeal.” 19 NCBC 52 at ¶4. In an exchange worthy of a fancy flow chart:

  • Plaintiffs argued that App. Rule 25 only applies to instances of untimely appeal filings; and
  • The Business Court held that Court of Appeals cases deciding issues of untimely filings under App. Rule 25 compelled a finding that no appellate jurisdiction vests from a notice of appeal of an order dismissing an appeal.

Id. at ¶¶5-8. As in last year’s Zloop decision, the Court found that “where a record on appeal has not been filed, the trial court has power to dismiss a timely notice of appeal that is jurisdictionally defective.” Id. at ¶10.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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