In a case with significant implications for insurer liability and provider billing practices, California’s Third District Court of Appeal has ruled against Dameron Hospital Association in its attempt to recover payment directly from a patient’s uninsured motorist (UM) coverage under an automobile policy issued by Progressive Casualty Insurance Company.
The court’s May 27 decision in Dameron Hospital Association v. Progressive Casualty Insurance Company affirmed that hospitals cannot bypass California’s Medi-Cal reimbursement structure by enforcing an assignment of benefits (AOB) to claim UM benefits owed to a patient.
The dispute arose after a patient, M.G., who was covered by Medi-Cal, received emergency and ongoing treatment from Dameron following an automobile accident. During the admissions process, either M.G. or her representative signed the hospital’s Conditions of Admission (COA) form. That form included an AOB clause covering “all uninsured and underinsured motorist insurance benefits payable to or on behalf of the patient.” Dameron did not bill Medi-Cal. Instead, the hospital billed Progressive for $2,686.75 directly from M.G.’s UM coverage.
After Progressive settled a lump sum with M.G. – which may or may not have included a promise to pay the hospital – Dameron received no payment and sued Progressive, asserting claims for unfair business practices and breach of contract. Dameron sought damages, a permanent injunction requiring Progressive to honor AOBs in future cases, and declaratory relief.
The trial court dismissed the complaint, and the Court of Appeal affirmed. The appellate court relied heavily on Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah Ins. Exchange (2022) 77 Cal.App.5th 971 – a near-identical case involving the same hospital and the same AOB language – which held that such AOBs were unenforceable contracts of adhesion.
Applying that precedent, the court concluded that a Medi-Cal patient like M.G. would not reasonably expect to assign her UM benefits to a hospital for full-rate payment of emergency services, particularly when the hospital made no effort to bill Medi-Cal. The court noted that California law mandates billing Medi-Cal upon proof of eligibility and prohibits providers from pursuing payments from patients or third parties not legally obligated to provide healthcare.
In its published opinion, the court emphasized: “It is not within the reasonable expectation of the UM insureds who receive medical care through a Medi-Cal plan that a standard hospital admissions form will cause them to (1) assign their UM benefits to pay a hospital bill at above Medi-Cal rates; (2) without Medi-Cal ever being notified of a potential claim; and (3) before the extent of the UM insurer’s obligation to cover the patient’s damages… has been determined.”
The decision reinforces that uninsured motorist coverage, which exists to compensate the insured directly for losses from accidents involving uninsured drivers, is not intended to be used as a payment source for hospitals outside the state’s established reimbursement system.
The ruling is final. Dameron was ordered to pay Progressive’s appellate costs.
