McMeans v. Scripps Health Inc.

Filed 3/26/02

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

PAUL E. MCMEANS et al.,

D035486

Plaintiffs and Appellants,

(Super. Ct. No. 722004)

SCRIPPS HEALTH,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of San Diego County, Thomas R.

Murphy, Judge. Affirmed in part and reversed in part.

Blumenthal, Ostroff & Markham, Sheldon A. Ostroff, David R. Markham and

Michael D. Marchesini for Plaintiffs and Appellants.

Friestad & Giles and Deborah Giles for Defendant and Respondent.

Masnatt, Phelps & Phillips, Barry S. Landsberg and Harvey L. Rochman for

Catholic Healthcare West as Amicus Curiae on behalf of Defendant and Respondent.

Paul E. McMeans, Joseph P. Denny, and Mary Ann Shaul, as class representatives

(Class members), appeal from an order granting summary judgment in favor of Scripps

Health, Inc. (Scripps) and Medical Liability Recoveries, Inc. (MLR).1 The Class

members are patients who were treated at a Scripps hospital for injuries caused by third

parties and who sued those third parties. The Class members were insured by providers

who had entered into contracts with Scripps that specified fixed charges agreed to in

advance for covered services. Class members and/or their insurance providers paid

Scripps in full for the care provided to Class members. MLR then placed liens in favor of

Scripps on the judgments or settlements Class members received from the third parties or

their insurance providers under California’s Hospital Lien Act (HLA), Civil Code 2

sections 3045.1 through 3045.6. In each case, the liens were based upon charges that

were greater than the amounts Scripps had agreed to accept from the insurance providers.

Class members contend the court erred in granting summary judgment because

Scripps placed section 3045.1 liens on Class members’ recovery when Class members

owed no debts to Scripps. Class members also contend the court should have granted

their motion for summary adjudication of Scripps’s affirmative defense that it was

privileged to assert the liens under section 47, subdivision (b)(2) and of their cause of

action for declaratory relief. We reverse the order granting summary judgment in favor

of Scripps. We affirm the court’s denial of Class members’ motion for summary

1
MLR is in bankruptcy. Accordingly, the appeal is stayed as to MLR under section
362 of the Bankruptcy Code (11 U.S.C. § 362) and we sever MLR from the appeal.
2
All further statutory references are to the Civil Code unless otherwise specified.

adjudication of Scripps affirmative defense of the section 47, subdivision (b)(2) privilege.

We affirm in part and reverse in part the court’s denial of Class members’ motion for

summary adjudication of the cause of action for declaratory relief.

FACTUAL AND PROCEDURAL HISTORY

In November 1996, McMeans was injured in an automobile accident caused by an

uninsured third party and was treated at Scripps Mercy Hospital. As a result of his

accident, McMeans suffered pain in his ribs that interrupted his sleep and prevented him

from sitting, standing, driving and bending. Because he could not work for a period, he

sustained lost income of $6,250. McMeans settled with Farmers Insurance for $35,500,

the uninsured motorist limits of the insurance policy that covered the car in which

McMeans was a passenger.

At that time of his treatment, McMeans was insured under a preferred provider

insurance plan issued by Aetna Life Insurance Company (Aetna) and Scripps Mercy

Hospital was a participating provider under the Aetna plan. Although Aetna paid Scripps

the contract rate for McMeans’s treatment and Farmers Insurance paid McMeans’s share

of the contract rate, MLR asserted a lien on behalf of Scripps in the amount of $4,298.86

against McMeans’s settlement.

On June 5, 1998, Shaul was injured in an automobile accident and underwent

surgery at Scripps Memorial Hospital, consisting of open reduction internal fixation of

her medial malleolus and right talus, and bone grafting of her right talus. As a result, she

was totally disabled for about six months and lost income of about $60,000. She

continues to have chronic right leg and ankle pain, which may require additional medical

treatment. Further, Shaul has incurred out-of-pocket expenses of about $5,000 for

therapy, orthotic devices, and chiropractic treatment.

In June 1998, Shaul was insured under Sharp Health Plan, a managed care plan.

Sharp Health Plan paid Scripps the contracted rate for Shaul’s treatment and Shaul paid a

$100 copayment. Shaul settled with Farmer’s Insurance for $100,000, the insurance

policy limits of the tortfeasor responsible for her injuries. MLR filed a lien on behalf of

Scripps in the amount of $6,168.17 “upon any damages which a claim of action has been

brought or will be brought.”

On April 17, 1996, Denny was injured in an automobile accident and sustained

multiple head, neck, shoulder and knee injuries. He later had neck surgery at Scripps

Memorial Hospital, which consisted of an anterior cervical discectomy and fusion.

Denny was disabled for several months, resulting in lost wages in excess of $4,000. As a

result of his injuries, Denny continues to suffer limited movement in his neck and chronic

pain. He can no longer participate in activities he used to enjoy, such as hiking,

bicycling, and physical education with his students. Denny received $100,000 in

settlement.

At the time of surgery, Denny was insured under the CaliforniaCare HMO plan of

Blue Cross of California and Scripps Memorial was a participating provider under that

plan. Blue Cross paid Scripps the contract rate for its services and Denny paid any

applicable copayments or deductibles. Nine days after Denny’s settlement, MLR filed a

lien on behalf of Scripps for $13,790.38 on Denny’s recovery from the tortfeasor.

This class action was filed on July 1, 1998. The operative complaint is the third

amended complaint, which was filed on October 18, 1999, and contains causes of action

for unfair business practices, violation of the consumer legal remedies act, trespass to

chattels, breach of contract, negligence, accounting, unjust enrichment, declaratory relief,

mandatory injunction and prohibitory injunction.

On April 21, 1999, the trial court certified the laws uit as a class action “to include

as class plaintiffs all persons who: [1] were injured in accidents and thereafter treated at

hospitals operated by ScrippsHealth (‘Scripps’); [2] were insured under individual or

group medical insurance plans, including but not limited to Health Maintenance

Organization plans, Preferred Provider Organization plans and /or Managed Care plans;

[3] whose medical insurers have contracted with Scripps in which Scripps agreed to

provide covered services for the insurer’s policyholders/beneficiaries at negotiated

discounted rates; or alternatively, pursuant to the Knox-Keene Health Care Service Plan

Act of 1975, the payments received by Scripps based on pre-determined rates from the

patient’s insurer (plus any applicable co-pay or deductible) constitute full payment; [4]

whose bills at such negotiated discounted rates or pre-determined rates have been paid;

and [5] against whom Scripps within the last four years either directly, or through the

action of Medical Liability Recoveries, Inc. or any other agent of Scripps, has asserted a

lien under Civil Code section 3045.1 demanding payment of the difference between the

negotiated discounted rate or pre-determined rate and Scripps’ ordinary full charge for the

covered service.”

On May 21, the court denied Scripps’s motion for judgment on the pleadings,

which asserted that each cause of action was barred by the litigation privilege. (§ 47,

subd. (b)(2).) On September 2, the court denied a renewed motion for judgment on the

pleadings.

The parties then agreed to file cross-motions for summary adjudication and

summary judgment. Class members filed a motion for summary adjudication of Scripps’s

thirteenth affirmative defense, the privilege conferred under section 47, subdivision

(b)(2), and the eighth cause of action for declaratory relief. Scripps filed a motion for

summary judgment. On February 23, 2000, the court granted Scripps’s motion for

summary judgment and denied Class members’ motion for summary adjudication.

DISCUSSION

I. Summary Judgment

Summary judgment is granted when there is no triable issue as to any material fact

and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc.,

§ 437c, subd. c.) We review de novo the trial court’s decision to grant summary

judgment and are not bound by the trial court’s stated reasons or rationales. (Hersant v.

Department of Social Services (1997) 57 Cal.App.4th 997, 1001.) Further, we review

issues of statutory interpretation de novo. (Heavenly Valley v. El Dorado County Bd. of

Equalization (2000) 84 Cal.App.4th 1323, 1334. )

A. Hospital Lien Act (HLA)

Section 3045.1 provides: “Every person, partnership, association, corporation,

public entity, or other institution or body maintaining a hospital licensed under the laws

of this state which furnishes emergency and ongoing medical or other services to any

person injured by reason of an accident or negligent or other wrongful act . . . , shall, if

the person has a claim against another for damages on account of his or her injuries, have

a lien upon the damages recovered, or to be recovered, by the person . . . to the extent of

the amount of the reasonable and necessary charges of the hospital . . . , in which services

are provided for the treatment, care, and maintenance of the person in the hospital or

health facility affiliated with the hospital resulting from that accident or negligent or

other wrongful act.” Section 3045.1 creates a “statutory nonpossessory lien . . . in favor

of a hospital against third persons liable for the patient’s injuries.” ( Mercy Hospital &

Medical Center v. Farmers Ins. Group of Companies (1997) 15 Cal.4th 213, 217

(Mercy ).) The lien “compensates a hospital for providing medical services to an injured

person by giving the hospital a direct right to a certain percentage of specific property,

i.e., a judgment, compromise, or settlement, otherwise accruing to that person .” ( Ibid.,

italics added.)

Scripps contends section 3045.1 creates a direct obligation between the tortfeasor

and the hospital in the amount of the hospital’s reasonable charges and the amount of its

lien is not based upon the injured patient’s debt to the hospital. Scripps bases its

contention upon section 3045.3, which requires the hospital to give notice of its lien only

to the tortfeasor and the tortfeasor’s insurer; section 3045.4, which requires the tortfeasor

to pay the hospital directly; and section 3045.5, which gives the hospital a cause of action

to enforce its lien against the tortfeasor, not against the injured patient. These provisions

define who shall pay the hospital, but do not define from whose property the payment is

made.

Class members contend they and/or their insurance providers had paid Scripps in

full for its services and, by placing a lien on their recoveries, Scripps seeks amounts

greater than the amounts Scripps agreed to accept from the providers. In addressing

issues raised by Class members, we initially note, notwithstanding the class certification,

the contracts between Class members and their insurance providers and between Scripps

and the insurance providers differ substantially. As we will discuss below, Scripps

wrongfully placed a lien on the recovery of two of the class representatives but rightfully

placed a lien on the recovery of the third class representative.

The issues raised in this appeal were recently addressed in Nishihama v. City &

County of San Francisco (2001) 93 Cal.App.4th 298, 306-309 ( Nishihama ). We find the

reasoning of Nishihama compelling and elect to follow it.

“Even if the HLA contemplated an independent right in the hospital, the extent of

that right would be defined by any contract between the injured party or her insurer and

the health care provider. Civil Code section 3045.4 accordingly provides that the third

party ‘shall be liable to the [health care provider] for the amount of its lien claimed in the

notice which the hospital was entitled to receive as payment for the medical care and

services rendered to the injured person.’ (Italics added.) The amount that a hospital is

entitled to receive as payment necessarily turns on any agreement it has with the injured

person or the injured person’s insurer.” (Nishihama, supra, 93 Cal.App.4th at pp. 307-

308.)

The patient’s debt to the hospital is the foundation for the hospital’s right to a lien.

(Nishihama, supra, 93 Cal.App.4th at p. 308.) The “reasonable and necessary charges,”

then, are the charges made to the patient or the patient’s insurance provider. The HLA

does not give hospitals a cause of action against tortfeasors; it allows hospitals to place a

lien on the patient’s cause of action. The amount of the lien is the “reasonable and

necessary charges” for the patient’s treatment. (§ 3045.1.) If these charges have been

paid, the hospital has no amount, reasonable or otherwise, it may seek from a third-party

tortfeasor.

Although Scripps contends it seeks payment from tortfeasors, there is no question

such payments ultimately come from the Class members. Under California law, the most

a personal injury plaintiff can recover for medical services is the amount that has been

paid or incurred for those services, even if that amount is less than the market rate.

(Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, 641.)

In the cases involved in Class members’ class action, those amounts are based

upon Class members’ medical insurance contracts and the contracts those insurance

providers negotiated with Scripps. If Scripps’s liens exceed these amounts, then Scripps

collects more from the Class members’ judgments or settlements than the Class members

are legally entitled to recover for medical expenses. In effect, Scripps collects the portion

of Class members’ judgments attributable to lost wages or pain and suffering.

Accordingly, we conclude Scripps’s “lien rights do not extend beyond the amount it

agreed to receive from [Class members’ insurance providers] as payment in full for

services provided to [Class members].” (Nishihama, supra, 93 Cal.App.4th at p. 307.)

We also reject Scripps’s contention that the legislative history of section 3040,

enacted in September 2000, gives it a right to place a section 3045.1 lien for its usual and

customary charges. Section 3040 limits the lien rights of medical providers to the

amount they actually paid for the health care, but specifically exempts hospitals pursuing

section 3045.1 liens. (§ 3040, subd. (g)(3).) The Consumer Attorneys of California

argued to the Legislature that section 3040 should apply to hospital liens and provided the

Legislature with a copy of Satsky v. United States of America (S.D.Texas 1998) 993

F.Supp. 1027, 1029 (holding that a hospital could not place a lien on a patient’s recovery

under a Texas statute similar to section 3045.1 because the statute “was clearly not

intended to overcompensate hospitals that accept patients who do have the ability to pay,

nor to provide a windfall for hospitals who feel aggrieved by the circumscription of

hospital charges by insurance plans”).

The fact that section 3040 expressly places no limit on a hospital’s lien rights says

nothing about whether those lien rights were already limited under the HLA. Further,

subsequent legislation is, at best, an unreliable gauge of legislative intent. (United States

v. Price (1960) 361 U.S. 304, 312 [recognizing that “the views of a subsequent Congress

form a hazardous basis for inferring the intent of an earlier one”].) For similar reasons,

we do not place much weight on the existence of other statutory liens that purportedly

exist in the absence of an underlying debt. The unique nature of a hospital lien under the

HLA makes such comparisons questionable.

B. Insurance Contracts

We look at Class members’ medical insurance contracts and the contracts Scripps

entered into with those providers in order to determine whether the liens are lawful.

When we review the contracts of the three class representatives, we find Scripps was not

entitled to place a lien on the recoveries of McMeans or Shaul, but was entitled to place a

lien on Denny’s recovery.

1 . McMeans

The Aetna insurance plan that covered McMeans provides that if a third party is

liable for a patient’s injury, Aetna shall be subrogated to the patient’s recovery to the

extent of the benefits Aetna paid. McMeans was treated at Scripps Mercy Hospital. The

contract between Scripps Mercy Hospital and Aetna provides in part: “In no event . . .

shall any Member be liable to Hospital for any sums owed to Hospital by the applicable

Payor. In addition, neither Hospital nor its agents, trustees, or assignees shall maintain

any action at law against a Member to collect sums owed by the applicable Payor;

provided, however, that Hospital may collect from Members co-payments, coinsurance or

deductibles for Covered Services, or amounts due for non-Covered Services. Amounts

for non-Covered Services may be charged at Hospital’s usual and customary charges.”

This agreement provides that Scripps may not collect payment from patients insured by

Aetna, other than copayments or deductibles, unless the service provided to the patient is

not covered under the insurance agreement. This agreement allows Scripps to bill at its

usual and customary rate for services not covered in the patient’s insurance agreement.

Scripps does not contend McMeans’s treatment was for noncovered services. Therefore,

in McMeans’s case, Scripps was not entitled to place a lien on McMeans’s recovery based

upon its reasonable and necessary charges.

Scripps contends, however, that it may collect its reasonable and necessary fees

from a third party tortfeasor, under the “Coordination of Benefits” (COB) section of its

agreement with Aetna, which states the following: “Hospital shall be entitled to all COB

recoveries relating to Covered Hospital Services. Hospital shall make a reasonable effort

to seek reimbursement for Covered Hospital Services under other third party coverages

when applicable. . . . For per diem or discount off charges payments, in the event that

Payor is the secondary carrier under the coordination of benefits rules, Payor shall be

required to pay Hospital the difference between Hospital’s full customary charges and the

amount collected by Hospital from third party payors, but in no event to exceed the

amount the Payor is required to pay if it were the primary carrier.”

We are not persuaded by this contention. Coordination of benefits is a term used

when there is duplicate health care coverage. ( Kaiser Foundation Health Plan, Inc. v.

Lifeguard, Inc. (1993) 18 Cal.App.4th 1753, 1757.) The term “coverage” is normally

used to refer to insurance coverage. For instance, Insurance Code section 10270.98 states

in part: “Group disability policies may provide, among other things, that the benefits

payable thereunder are subject to reduction if the individual insured has any other

coverage (other than individual policies or contracts) providing hospital, surgical or

medical benefits, whether on an indemnity basis or a provision of service basis, resulting

in such insured being eligible for more than 100 percent of the covered expenses.”

(Italics added.) The reference to “coverage” is clearly a reference to other insurance

coverage. A tort obligor does not provide insurance coverage. Additionally, although the

contract does not expressly define the term “third party payor,” it clearly contemplates an

institutional payer, such as another insurance company or Medicare. (See Palumbo v.

Myers (1983) 149 Cal.App.3d 1020, 1030-1034 [a settling third party tortfeasor is not a

“third party payer” as the term is used in Welfare and Institutions Code section 14019.4].)

Therefore, this contract provision does not change our analysis.

2. Shaul

Shaul was enrolled in the Sharp Choice plan. Scripps’s contract with Sharp

provided in part: “Hospital shall obtain Authorization for a Member and shall not bill or

not allow Plan Providers or any other providers to bill, or attempt to collect from a

member for services rendered, except for Copayments and noncovered services.” Like

Aetna’s agreement with Scripps, this agreement provides that Scripps may not collect

payment from patients insured by Aetna, other than copayments or deductibles, unless the

service provided to the patient is not covered under the insurance agreement.

Shaul’s contract with Sharp provides in part: “If you or your Dependent are

injured in an accident caused by a negligent or intentional act or omission of another

person, the Plan will advance Covered Benefits subject to an automatic lien by agreement

to reimburse the Plan for any recoveries or reimbursement you receive from the person

who caused the injury.” Although this contract allows Sharp to place a lien and uses the

word “advance,” it does not specifically exclude benefits. Therefore, as in McMeans’s

case, Scripps was not entitled to place a lien on Shaul’s recovery based upon its

reasonable and necessary charges.

3. Denny

Unlike the prior contracts, Denny’s CaliforniaCare contract with Blue Cross does

not provide benefits for medical care of injuries caused by third parties. Under the

heading “Reimbursement for Acts of Third Parties,” the CaliforniaCare disclosure form

states in part: “No benefits will be provided under this plan for medical care for, or

received in connection with, any illness, injury, or condition for which a third party may

be liable or legally responsible by reasons of negligence, an intentional act or breach of

any legal obligation. But benefits will be provided under this plan subject to the

following: [¶] 1. CaliforniaCare and your medical group will automatically have a lien

to the extent of benefits provided, upon any recovery, whether by settlement, judgment or

otherwise, that you receive from the third party, the third party’s insurer, or the third

party’s guarantor. The lien will be for the reasonable cash value of the benefits provided

by your medical group or by us under this plan for the treatment of the illness disease,

injury or condition for which the third party is liable. . . .” (Original italics omitted;

italics added.)

The Ninth Circuit interpreted a similar provision in another Blue Cross contract3

and held the following: “The contract excludes Blue Cross from liability for injuries

tortiously caused by third parties, and provides an exception for benefits which will be

3
“Blue Cross relied on Section Seven AA of the policy which excluded coverage
for ‘[a]ny illness, injury or other condition for which a third party may be liable or legally
responsible by reason of negligence, an intentional act or breach of any legal obligation
on the part of such third party. Nevertheless, Blue Cross will advance the benefits of this
Agreement to the Member subject to the following: . . . Blue Cross will automatically
have a lien, to the extent of benefits advanced, upon any recovery, whether by settlement,
judgment or otherwise, that the Member receives from the third party . . . .’ ” (Qualls v.
Blue Cross of California (9th Cir. 1994) 22 F.3d 839, 842.)

advanced in anticipation of possible future recovery. Once recovery has been made, the

conditions of the exception no longer exist and the exclusion remains.” (Qualls v. Blue

Cross of California, supra, 22 F.3d at p. 845, original italics.) That is, under the

CaliforniaCare plan, Blue Cross does not provide benefits for medical care for injuries

caused by a third party tortfeasor. It merely advances money.

Because Denny was injured by a third party tortfeasor, his medical services were

not covered under the CaliforniaCare plan. Blue Cross merely advanced payment to

Scripps on Denny’s behalf. Therefore, the contract between Scripps and Blue Cross does

not govern the amount Scripps may charge for the medical services it provided to Denny.

Instead, under the CaliforniaCare plan, Scripps may place a lien for the “reasonable cash

value of the benefits” it provided.

Although Scripps has shown it has a contractual right to place a lien on Denny’s

recovery, Scripps has not met its burden of proof that the lien is for “reasonable and

necessary charges.” (§ 3045.1.) The reasonable value and necessity of Scripps’s services

are questions of fact. Although the amount paid or incurred for hospital services is some

evidence as to its value, we also require evidence of the value and necessity of the

professional services of the physicians and the hospital. (Guerra v. Balestrieri (1954)

127 Cal.App.2d 511, 520; Harris v. Los Angeles Transit Lines (1952) 111 Cal.App.2d

593, 598 ( Harris).) Typically, a physician testifies as to these issues. (See Harris, supra,

111 Cal.App.2d at p. 598.) Scripps produced a declaration by Clelia Ki-Ki Barbeau,

president and CEO of MLS. She declared, “The lien asserted . . . is the difference

between the payment from the insurer and the actual reasonable and customary charges

incurred by the patient.” (Italics added.) Class members objected to this evidence under

Evidence Code section 702. The court did not rule as to the objection. Under Biljac

Associates v. First Interstate Bank (1990) 218 Cal.App.3d 1410, 1420, we “presume[] on

appeal that a judge has not relied on irrelevant or incompetent evidence.” Accordingly,

we presume the court sustained the objection as to Barbeau’s use of the word

“reasonable.” Barbeau had no personal knowledge of the reasonable value of the medical

services Scripps provided to Denny. Further, Scripps introduced no evidence that its

services were necessary. Accordingly, Scripps has produced no admissible evidence that

the amount of the lien on Denny’s recovery was reasonable. Therefore, summary

adjudication of the amount of Denny’s debt to Scripps is inappropriate.

Because Scripps was not entitled to place a lien on McMeans’s or Shaul’s

recoveries and because there is a triable issue of fact as to the reasonable value of the

services Scripps provided to Denny, the court erred by granting summary judgment.

II. Section 47, Subdivision (b)(2)

Class members contend the court erred by denying their motion for summary

adjudication of Scripps’s thirteenth affirmative defense, the privilege conferred by section

47, subdivision (b)(2). Class members contend this privilege does not apply because

Scripps’s actions were not communicative and were not connected to litigation. We

disagree.

The privilege conferred by section 47, subdivision (b)(2), bars all tort causes of

action, other than malicious prosecution, based upon conduct protected by the privilege.

(Silberg v. Anderson (1990) 50 Cal.3d 205, 215-216.) The principal purpose of the

privilege is to afford litigants and witnesses freedom of access to the courts without fear

of being subsequently harassed by derivative tort actions. ( Id. at p. 213.) “[T]he

privilege applies to any communication (1) made in judicial or quasi-judicial

proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the

objects of the litigation; and (4) that has some connection or logical relation to the

action.” ( Id. at 212.) “Further, it applies to any publication required or permitted by law

in the course of a judicial proceeding to achieve the objects of the litigation, even though

the publication is made outside the courtroom and no function of the court or its officers

is involved.” ( Ibid.)

We reject Class members’ contention that the filing of liens in favor of Scripps was

not connected with any litigation. “If the publication has a reasonable relation to the

action and is permitted by law, the absolute privilege attaches.” ( Albertson v. Raboff

(1956) 46 Cal.2d 375, 381.) A federal court held that a lien for the treatment of a Medi-

Cal patient filed under Welfare and Institutions Code section 14124.791 was sufficiently

related to the claims in the Medi-Cal patient’s personal injury action to support

intervention as of right. ( Ghazarian v. Wheeler (C.D.Cal. 1997) 177 F.R.D. 482, 486-

487.) The court relied upon two cases that allow intervention by the holder of a

protectable statutory lien interest because, in part, “this interest relates to a cognizable

legal interest in any monetary proceeds resulting from a settlement or judgment in the

action.” ( Id. at p. 487, relying upon Diaz v. Southern Drilling Corp (5th Cir. 1970) 427

F.2d 1118, 1124 [tax lien] & McDonald v. E.J. Lavino Co., (5th Cir. 1970) 430 F.2d

1065, 1071 [insurance provider’s lien under workers compensation law].) Similarly, a

hospital filing a section 3045.1 lien has an interest to be adjudicated in an injured person’s

personal injury lawsuit because if the injured person does not prove the third party’s

liability, the hospital’s lien loses all value. The publication of the notice of lien is

reasonably related to the personal injury action because it informs the tortfeasor and/or

the tortfeasor’s insurance provider that the amount of the lien, unless a smaller amount is

prescribed by section 3045.4, must be paid directly to the hospital. Therefore, Scripps’s

liens were filed in connection with the tort actions brought by Class members.

We also reject Class members’ contention that Scripps’s actions are not protected

by the privilege because Scripps engaged in a tortious course of conduct that incidentally

included the publication of the lien. Class members claim their injuries are due, not to

the imposition of the lien, but to the wrongful collection process. Class members rely

upon LiMandri v . Judkins (1997) 52 Cal.App.4th 326, 345 ( LiMandri), where we held

that a privileged communication does not shield a defendant from liability for a wrongful

course of conduct that incidentally includes the communication. In LiMandri, an attorney

had a fee agreement granting him a portion of the clients’ recovery. ( Id. at p. 334.) The

defendant allegedly interfered with that contractual relationship by arranging a loan to the

clients secured by the same recovery and filing a notice of lien in the lawsuit asserting the

lender’s security interest in the recovery. ( Id. at p. 345.)

This case is distinguishable from LiMandri. The security interest in LiMandri was

created by executing documents; filing the notice of lien was merely incidental to the

creation of the security interest. ( Id. at pp. 342, 346.) In contrast, the HLA requires a

hospital to send notice of the HLA lien to the third party and his insurance provider.

(§ 3045.3.4) Further, the course of tortious conduct in LiMandri included executing the

security interest, refusing to concede the superiority of the attorney’s lien, and inducing

the clients to breach their fee agreement with the attorney. ( Id. at p. 345.) In contrast, the

wrongful conduct Class members have identified is Scripps’s overcharging them by

noticing liens.5 The act of overcharging is the same act as the assertion of the lien on

Class members’ recoveries. Labeling the assertion of a lien as an attempt to overcharge

Class members does not change its nature as a communicative act.

The privilege conferred by section 47, subdivision (b)(2), bars Class members’ tort

causes of action against Scripps. It does not, however, bar those causes of action that do

not lie in tort, including the eighth cause of action for declaratory relief.

III. Declaratory Relief

Class members contend the court erred by denying their motion for summary

adjudication of the cause of action for declaratory relief. In the motion for summary

adjudication of the eighth cause of action, Class members asked the court for a judicial

4
Section 3045.3 provides in part: “A lien shall not be effective, however, unless a
written notice . . . is delivered . . . to each person, firm, or corporation known to the
hospital and alleged to be liable to the injured person for the injuries sustained . . . .
(Italics added.)

5
Class members appear to contend Scripps engaged in a tortious course of conduct
because Scripps published the liens in bad faith. There is no evidence Scripps published
the liens in bad faith. At the time Scripps filed the liens, no California appellate court
had decided the issue posed by this appeal, and several trial courts had enforced Scripps’s
liens.

declaration that (1) Scripps’s collection practices and the assertion of liens in favor of

Scripps is unlawful and (2) Class members are not indebted to Scripps for the amounts

asserted in the liens.

A party may bring an action for declaratory relief under Code of Civil Procedure

section 1060, which provides in part: “Any person interested under a written instrument,

excluding a will or a trust, or under a contract, or who desires a declaration of his or her

rights or duties with respect to another, or in respect to, in, over or upon property, . . .

may, in cases of actual controversy relating to the legal rights and duties of the respective

parties, bring an original action . . . in the superior court . . . for a declaration of his or her

rights and duties in the premises, including a determination of any question of

construction or validity arising under the instrument or contract.” A declaratory relief

action may be brought on behalf of a class, Serrano v. Priest (1971) 5 Cal.3d 584, 618,

and may be used to determine the construction of a statute, Lane v. City of Redondo

Beach (1975) 49 Cal.App.3d 251, 255, as well as the rights and duties of the parties under

a contract.

As discussed above, the liens Scripps placed on the recoveries of McMeans and

Shaul were not lawful and those two class representatives owe no debt to Scripps.

Therefore, we reverse the court’s denial of Class members’ motion for summary

adjudication of the declaratory relief cause of action as to those two class representatives.

On the other hand, Scripps’s assertion of a lien on Denny’s recovery is lawful because

Blue Cross, Denny’s insurance provider, does not provide benefits when an insured is

injured by a third party tortfeasor. Accordingly, we affirm the court’s denial of Class

members’ motion for summary adjudication of the declaratory relief cause of action as to

Denny.

DISPOSITION

In accordance with this court’s order of June 11, 2001, staying this appeal as to

Medical Liability Recoveries, Inc. under title 11 United States Code section 362, Medical

Liability Recoveries, Inc.’s appeal is severed from that of Scripps Health.

The court’s grant of summary judgment in favor of Scripps is reversed. The

court’s denial of Class members’ motion for summary adjudication of Scripps’s defense of

privilege under section 47, subdivision (b)(2) is affirmed. The court’s denial of Class

members’ motion for summary adjudication of their eighth cause of action for declaratory

relief is reversed as to class representatives McMeans and Shaul, but affirmed as to class

representative Denny. Class members and Scripps to bear their own costs on appeal.

O’ROURKE, J.

CERTIFIED FOR PUBLICATION

WE CONCUR:

BENKE, Acting P. J.

McDONALD, J.