Using Unjust Enrichment in Healthcare Recovery

Generally, when an individual seeks admission to a healthcare facility, he or she will meet with the admissions staff and ultimately sign an admission agreement memorializing the parties' understanding of the rights and responsibilities of each during the stay. The admission agreement is an essential part of the process and expresses not only what is required of the respective parties, but also the consequences for when those obligations are not met.  Thus, if and when it becomes necessary to institute legal proceedings to recover monies owed for treatment, care, services, supplies, etc. provided during the resident's stay, the admission agreement plays a significant part in that litigation.  This is because the cause of action is based upon the breach of this contract, i.e. the failure to make payments, and the remedies for the breach are outlined therein.

However, there are times (probably more than one would like to admit) where the admission agreement is not signed by the resident, is incomplete, missing or is otherwise unenforceable due to various circumstances or legal deficiencies.  The scenario plays out countless times: a patient comes in under some sort of abnormal or emergency circumstances and bypasses the regular admittance process and all forget to have the admission agreement signed; the family member who admits the resident does not have a valid power-of-attorney to execute the agreement on their behalf; the resident signs the agreement but is later found to lack sufficient capacity to contract; or simply the admissions associate forgets in the chaos of the work day to ensure the resident actually signed the agreement.  

While these situations should obviously be avoided, they do arise from time to time and can present a problem when a matter must proceed to litigation.  If there is no contract to base the lawsuit, how can the facility prevail?  Or more specifically, if the facility does not have an admission agreement, yet provided treatment, care and services to the resident, can they still recover the value of those services rendered in court?  The answer to that question is undoubtedly yes. 

The legal theory of unjust enrichment was specifically developed through our common law to address just this sort of headache.¹ Unjust enrichment is an equitable remedy available to an aggrieved party upon a quasi-contractual basis.² There are two types of contracts – express and implied – and it is the later that gave rise to unjust enrichment claims.  Unjust enrichment is formally defined as "the retention of a benefit conferred by another, without offering compensation, in circumstances where compensation is reasonably expected" or "a benefit obtained from another, not intended as a gift and not legally justifiable, or which the beneficiary must make restitution or recompense."³ The premise is essentially that regardless of whether a contract exists, one was implied from the conduct of the parties and a party cannot benefit from another’s service without providing just compensation for the same. 

While there is a means to recover under this promise and/or implied contract, the burden of proof remains on the creditor facility to establish, "1) a benefit was conferred upon another at the party's expense; 2) the benefit resulted in an appreciation by the other; and (3) the other accepted the benefit under circumstances which render its retention without payment."⁴ The key question under this claim is has the resident been "enriched" by these benefits conferred.  Thus, the court will undoubtedly view the claim from the perspective of the resident to see what was actually received and whether it would be inequitable for them not to pay for the same.

Next, to understand a claim of unjust enrichment, you must also understand the other similar, yet distinct, doctrine of quantum meruit (Latin for "as much as he deserved"), which concerns the measure of damages owed in restitution.  Quantum meruit is defined as "the reasonable value of services," or "damages awarded in an amount considered reasonable to compensate a person who has rendered services in a quasi-contractual relationship."⁵ Both unjust enrichment and quantum meruit are equitable legal theories with unjust enrichment acting as the legal claim and quantum meruit providing the measure of recovery for such an equitable claim. The Kentucky Court of Appeals explained the relationship between the two theories:

[A] Contract implied by law allows for recovery quantum meruit for another's unjust enrichment.  It is not based upon a contract, but a legal fiction invented to permit recovery where the law of natural justice says there should be a recovery as if promises were made.  The courts supply the fiction of the promise to permit the recovery.

In order to obtain quantum meruit recovery a party must show: 1) valuable services rendered to the person from whom recovery is sought; 2) acceptance of those services rendered; and 3) that the person was notified in a reasonable way or manner by the provider of said services that payment for the same was expected.⁶

You may be reading this and thinking, "What is the difference between these two?"  Many, including judges and attorneys alike, use unjust enrichment and interchangeably.  In fact, proceeding under either theory may likely get you to the same damage result.  Yet, while the two theories are indeed interrelated, they are different.  With quantum meruit recovery, a court is still looking at the relationship and communications between the parties, and whether there was some understanding, assent or "meeting of the minds" between the parties which included an expectation of payment.  Conversely, recovery for unjust enrichment focuses primarily on general principles of equity and fairness, with the goal being to prevent the injustice of someone profiting from other unjustly. 

While unjust enrichment claims and recovery under the theory of quantum meruit are available, proceeding under these theories has its pitfalls and limitations.  Principally, where suit is brought on a quasi-contract or implied contract basis, much is left to the subjective whims of a court to decide what, if anything, is owed.  Most importantly, it is left to a court to determine the "value" of the services rendered, rather than what may have been actually expended.  On the other hand, when an express contract is involved, a court's review and interpretation of the contract is confined to the four corners of the document and, assuming the contract was competently drafted, it will set forth the specific remedies available to the facility.⁷ Additionally, some states limit recovery of attorney's fees and certain costs unless there is a specific provision in the contract allowing such recovery.⁸ In summary, a well-drafted and executed admission agreement is an important and essential tool in proving your case in court and getting the result you need, but if such an express contract does not exists or is otherwise unenforceable, the law does provide equitable alternatives that will provide a path to recovery nonetheless.
 

¹ “The belief is general in this country that Lord Mansfield made the law of quasi contracts, that until this time the action, due to fragmentary development, was limited in scope.”  Hummel, Sr. v. Hummel, 133 Ohio St. 520, 14 N.E.2d 923, 926 (1938) citing 45 Harvard Law Review, 133; Woodward on the The Law of Quasi Contracts, 2, Section 2.
² Heaberle v. St. Paul Fire & Marine Ins. Co., 769 S.W.2d 64 (Ky. App. 1989)
³ Black’s Law Dictionary 1573 (8th ed. 1999)
⁴ Realty Unlimited, Inc. v. Ball Homes, 2009 WL 50179 at *6 (Ky. Ct. App. Jan. 9, 2009) citing Guarantee Electric Co. v. Big Rivers Electric Corp., 669 RF.Supp.1371, 1380-81 (W.D.Ky. 1987)
⁵ Black’s Law Dictionary 1276 (8th ed. 1999)
⁶ Quadrille Bus. Sys. V. Ky. Cattlemen’s Assn., 242 S.W.3d 359, 366 (Ky. App. 2007)
⁷ Equitania Ins. Co. v. Slone & Garrett, P.S.C., 191 S.W.3d 552, 556 (Ky. 2006) citing Hoheimer v. Hoheimer, 30 S.W.3d 176 (Ky. 2000) (holding “The intention of the parties to a written instrument must be gathered from the four corners of that instrument.”)
⁸ Kentucky statutes only generally allow for recovery of attorney’s fees in collection actions if a written contract expressly provides for such recovery, the attorney is “not a regularly salaried employee,” and the fees do not exceed 15% of the balance owed.  See, e.g., KRS §§ 190.100(1)(d); 286.7-500; 286.3-215 and 286.3-750.