Riddell v. State of California

50 Cal. App. 4th 1607, 96 Daily Journal DAR 14068, 58 Cal. Rptr. 2d 555, 96 Cal. Daily Op. Serv. 8535, 1996 Cal. App. LEXIS 1087

• Court: California Court of Appeal
• Decided: November 21, 1996
• Docket: B095171
• Status: Published

Opinions

Opinion

GILBERT, J.

Welfare and Institutions Code section 14124.70 et seq., allows the Department of Health Services of the State of California to recover Medi-Cal benefits paid to a beneficiary who is injured by a third party.¹ But what if the tortfeasor is another department of the State of California? May the Department of Health Services obtain a lien against the proceeds of a pretrial settlement between the Medi-Cal beneficiary and the state? We hold that it can. We also hold that the provisions of Government Code section 985, subdivision (f), allowing the trial court to reduce the amount of the Medi-Cal lien, do not apply to a pretrial settlement. We reverse.

Facts

Brett Kevin Riddell was injured in an automobile accident. He received Medi-Cal benefits for the treatment of his injuries.

He brought an action against the Department of Transportation of the State of California (hereinafter Transportation) alleging that an unsafe bridge on Highway 101 was the cause of his injuries. The trial court ordered a representative of the Department of Health Services (hereinafter Health Services) to appear as the Medi-Cal lienholder at the settlement conference.

Attorneys for both Transportation and Health Services appeared at the conference. Riddell and Transportation agreed to settle the case for $290,000. Riddell and Transportation also stipulated that Riddell was 80 percent at fault. Health Services’ attorney brought up the question of its Medi-Cal lien. Because there was no formal claim of lien on file, the trial court declined to consider the matter.

After the conference, Health Services filed a formal notice of Medi-Cal lien. It claimed $45,559.34, less attorney’s fees and its share of costs for a total of $31,116.58. Riddell refused to honor the claim and Health Services brought a motion to enforce its lien pursuant to section 14124.70 et seq.

Riddell opposed the motion on the ground that section 14124.70 et seq. applies only to claims for Medi-Cal reimbursement against third party tortfeasors. He argued that because Transportation and Health Services are departments of the same party, the State of California, the sections did not apply. Instead Riddell posited that Government Code section 985 applied, and he believed that under section 985 the trial court had the discretion to reduce or eliminate the Medi-Cal lien.

The trial court agreed with Riddell. In light of the severe injuries suffered by Riddell, the court reduced the amount of the lien to zero.

Discussion

Where Medi-Cal benefits are provided to a beneficiary because of an injury for which another person is liable, section 14124.71² authorizes Health Services to bring an action against the person liable to recover the reasonable value of the benefits. Kizer v. Ortiz (1990) 219 Cal.App.3d 1055, 1058 [268 Cal.Rptr. 666], interprets section 14124.71 to apply to entities as well as persons.

Section 14124.74, subdivision (a) allows Health Services a first lien against a judgment or award obtained in a “suit or claim against a third party or [insurance] carrier” where the action or claim is prosecuted by the Medi-Cal beneficiary alone.* *³

Section 14124.78 makes it clear that the entire amount of any settlement of the beneficiary’s action is subject to a Medi-Cal lien.

The question is whether a division of the state is a “third party” within the meaning of the statute. Riddell argues that there are only two parties here, himself and the state. There is no doubt that Transportation and Health Services are simply two parts of the same entity: the State of California. This fact does not deprive Health Services of its lien rights.

“[I]n construing a statute, the goal is to effect the objectives of the law, and once a particular legislative intent has been ascertained, it must be given effect even though it may not be consistent with the strict letter of the statute. [Citations.]” (Kagy v. Napa State Hospital (1994) 28 Cal.App.4th 1, 6 [33 Cal.Rptr.2d 741].)

The focus of the entire statutoiy scheme found in section 14124.70 et seq. is the recovery of Medi-Cal funds. Section 14124.74 refers to a claim against a “third party,” but does not define that term. Section 14124.71, subdivision (a) gives us a clue as to what “third party” means. The section allows Health Services to recover the reasonable value of benefits provided to a beneficiary because of an injury “for which another person [or entity] is liable.” This means that if any person or entity other than the beneficiary is responsible for the injury, Health Services is entitled to reimbursement. Of course when the beneficiary is solely responsible for his injuries, Health Services receives no reimbursement.

Moreover, there is no reason to believe the Legislature intended to treat victims of the state’s negligence differently than victims of any other party’s negligence. If the Legislature did intend different treatment, it is certainly capable of saying so more clearly than by the term “third party.” Here it is undisputed that the settlement entered into by Transportation and Riddell did not encompass the recovery of Medi-Cal funds. To hold that Medi-Cal lien statutes do not apply under those circumstances would both deprive the state of reimbursement and provide a benefit to the victim not enjoyed by victims of non-state tortfeasors. Neither result was contemplated by the Legislature.

Riddell argues that if Health Services has Medi-Cal lien rights in cases where the state is the tortfeasor, Government Code section 985 provides the proper mechanism for recovering Medi-Cal funds. Riddell prefers Government Code section 985 because, unlike section 14124.70 et seq., it allows the trial court to reduce reimbursement to take into account such matters as plaintiff’s comparative fault. (Gov. Code, § 985, subd. (f)(3)(A).)

Government Code section 985 concerns the treatment of “collateral source payments” in actions against public entities. Medi-Cal payments are included within the definition of a collateral source. (Gov. Code, § 985, subd. (f)(1).) The heart of section 985 is subdivision (b).⁴ It states that a collateral source payment is inadmissible in an action against a public entity for personal injuries or wrongful death. After a “verdict has been returned” against a public entity, the public entity may request a “posttrial hearing” for the reduction of the judgment for collateral source payments for services or benefits provided “prior to the commencement of trial.”

It is at this posttrial hearing that subdivision (f) of Government Code section 985 allows the trial court to adjust the amount of the Medi-Cal lien. But subdivision (b) makes it clear that there is no such adjustment hearing without a trial and verdict. It provides, “the hearing shall not occur until after the determination of any motions for a new trial, for judgment notwithstanding the verdict, for remittitur, for additur, and after any mandatory settlement conference pursuant to Section 962 of the Government Code.” Government Code section 962 provides for a mandatory settlement conference after entry of the verdict.

It is true, as Riddell points out, that Government Code section 985, subdivision (c) allows the trial court to request a collateral source provider to attend a settlement conference, and if it does not attend, the collateral source “shall waive its rights to reimbursement. . . .” But nothing in subdivision (c) or elsewhere in section 985 allows the trial court to impose or adjust reimbursement pursuant to subdivision (f) without a posttrial hearing.

Government Code section 985 represents a compromise between public entities, which would like to have juries hear about collateral source payments, and the plaintiff’s bar, which would like to keep that information out of the trial. The statute keeps the information out of the trial, but gives the public entity the possibility of reducing after trial the amount of judgment by the amount of the collateral source payment. The statute was never intended to apply to pretrial settlements.

We conclude that Health Services has a lien pursuant to section 14124.70 et seq., and the lien is not subject to Government Code section 985.

The judgment (order) is reversed. Costs on appeal are awarded to appellant.

Stone (S. J.), P. J., concurred.

1 All statutory references are to the Welfare and Institutions Code unless otherwise stated.

2 Section 14124.71, subdivision (a) provides:

“When benefits are provided or will be provided to a beneficiary under this chapter because of an injuiy for which another person is liable, or for which a carrier is liable in accordance with the provisions of any policy of insurance issued pursuant to Insurance Code Section 11580.2, the director shall have a right to recover from such person or carrier the reasonable value of benefits so provided. The Attorney General, or counsel for the fiscal intermediary under the Medi-Cal program with the permission of the Attorney General, or a contractor pursuant to Section 14124.80, or a county through its civil legal adviser, may, to enforce such right, institute and prosecute legal proceedings against the third person or carrier who may be liable for the injury in an appropriate court, either in the name of the director or in the name of the injured person, his guardian, conservator, personal representative, estate, or survivors.”

3 The text of section 14124.74, subdivision (a) provides:

“In the event of judgment or award in a suit or claim against a third party or carrier:

“(a) If the action or claim is prosecuted by the beneficiary alone, the court or agency shall first order paid from any judgment or award the reasonable litigation expenses incurred in preparation and prosecution of the action or claim, together with reasonable attorney’s fees, when an attorney has been retained. After payment of these expenses and attorney’s fees the court or agency shall, on the application of the director, allow as a first lien against the amount of the judgment or award, the amount of the director’s expenditures for the benefit of the beneficiary under the Medi-Cal program, as provided in subdivision (d) of Section 14124.72, and as a second lien, the amount of any claims, pursuant to Section 14019.3, owed to a provider, as provided in Section 14124.791.”

4 Government Code section 985, subdivision (b) provides:

“Any collateral source payment paid or owed to or on behalf of a plaintiff shall be inadmissible in any action for personal injuries or wrongful death where a public entity is a defendant. However, after a verdict has been returned against a public entity that includes damages for which payment from a collateral source listed below has already been paid or is obligated to be paid for services or benefits that were provided prior to the commencement of trial, and the total of the collateral source payments is greater than five thousand dollars ($5,000), that amount to be increased 5 percent compounded on January 1, 1989, and each January 1 thereafter, the defendant public entity may, by a motion noticed within the time set in Section 659 of the Code of Civil Procedure, request a posttrial hearing for a reduction of the judgment against the defendant public entity for collateral source payments paid or obligated to be paid for services or benefits that were provided prior to the commencement of trial. The hearing may be noticed with any motions pursuant to Sections 962 and 984 of the Government Code or Section 659 of the Code of Civil Procedure; however, the hearing shall not occur until after the determination of any motions for a new trial, for judgment notwithstanding the verdict, for remittitur, for additur, and after any mandatory settlement conference pursuant to Section 962 of the Government Code.”