American Medical Intern., Inc. v. Arkansas Blue Cross and Blue Shield, 88-259

• Decision Date: 17 July 1989
• Docket Number: No. 88-259,88-259
• Citation: 773 S.W.2d 831,299 Ark. 514
• Parties: AMERICAN MEDICAL INTERNATIONAL, INC., and St. Mary's Hospital, Appellants, v. ARKANSAS BLUE CROSS AND BLUE SHIELD, a Mutual Insurance Co., Appellee.
• Court: Arkansas Supreme Court

Page 831

773 S.W.2d 831

299 Ark. 514

AMERICAN MEDICAL INTERNATIONAL, INC., and St. Mary's Hospital, Appellants, v. ARKANSAS BLUE CROSS AND BLUE SHIELD, a Mutual Insurance Co., Appellee.

No. 88-259.

Supreme Court of Arkansas.

July 17, 1989.

Charles R. Nestrud, Janie W. McFarlin, Little Rock, for appellants.

Robert Cabe, Little Rock, Gordon & Gordon, Morrilton, for appellee.

HOLT, Chief Justice.

Appellant St. Mary's Hospital is a wholly owned subsidiary of separate appellant American Medical International ("AMI"). In 1987, St. Mary's and AMI brought suit against appellee Arkansas Blue Cross and Blue Shield ("ABCBS") seeking a declaratory judgment as to whether ABCBS could refuse to honor patient assignments of insurance benefits to medical care providers such as St. Mary's. Summary judgment was entered in favor of ABCBS premised on a right to disallow assignments. St. Mary's brings this appeal. We reverse.

St. Mary's Hospital admitted several patients in 1987 who were insured by ABCBS and who were in need of the hospital's services. Apparently, the admission forms provided by St. Mary's and completed by its patients contain provisions whereby the patients authorize direct payment to the hospital of any indemnity insurance benefits otherwise payable to the insureds for services provided by the hospital. Other provisions purport to actually assign the benefits for application to the patients' bills. On the other hand, the insurance contracts or policies written by ABCBS and executed by its insureds apparently contain provisions whereby indemnities or proceeds payable under the policies may be assigned only upon approval by ABCBS.

Acting pursuant the language in its admissions forms, St. Mary's, as purported assignee of the right to its patients' insurance benefits, sought payment from ABCBS. ABCBS refused to honor the assignments for two reasons. First, the assignments had not been approved as required in ABCBS's contracts with its insureds. Second, in its pleadings, answers to interrogatories, and admissions of fact, ABCBS conceded a practice whereby patient assignments of insurance benefits by its insureds were not honored if the assignee hospital did not have a "provider contract" with ABCBS. The terms of the provider contracts are not relevant to this appeal; suffice it to say, St. Mary's has no such contract with ABCBS. Suit followed upon ABCBS's refusal to honor the assignments.

The public policy issues concerning an insured's interest in freely assigning the right to payment versus ABCBS's freedom of contract and its right to include provisions against assignment were raised below but never reached. Both parties moved for summary judgment arguing that the result in this case was controlled by certain of our code provisions.

St. Mary's maintained below that Ark.Code Ann. § 4-58-102 (1987) governed the outcome. That section provides:

All bonds, bills, notes, agreements, and contracts, in writing, for the payment of money or property, or for both money and property, shall be assignable.

St. Mary's further argued that, as a defense, ABCBS would rely on Ark.Code Ann. § 23-85-114(b)(2) (1987), part of the Arkansas Insurance Code, which provides:

The following [provision] may be included with [foregoing provisions in a policy of insurance] at the option of the insurer:

Subject to any written direction of the insured in the application or otherwise, all or a portion of any indemnities provided by this policy on account of hospital, nursing, medical, or surgical services may, at the insurer's option and unless the insured requests otherwise in writing not later than the time of filing proofs of such loss, be paid directly to the hospital or person rendering such services; but it is not required that the service be rendered by a particular hospital or person.

St. Mary's position in its motion for summary judgment was that the assignment statute, section 4-58-102, controlled the assignability of insurance proceeds and that Ark.Code Ann. § 23-85-114(b)(2) did not operate to repeal, amend or alter the law in this regard. ABCBS, in its own motion for summary judgment, responded that section 23-85-114(b)(2) in fact amended the law on assignability, at least in the field of insurance. ABCBS also relied upon Ark.Code Ann. § 23-79-124 (1987), which in subsection (a) provides:

A policy may be assignable or not assignable, as provided by its terms.

At the hearing on the cross-motions for summary judgment, ABCBS cited Ark.Code Ann. § 23-86-112 (1987) as further support. That section provides:

Any group disability policy may, on request by the group policyholder, provide that all or any portion of any indemnities provided by any policy on account of hospital, nursing, medical, or surgical services may, at the insurer's option, be paid directly to the hospital or person rendering such services; but the policy may not require that the service be rendered by a particular hospital or person.

In ruling upon the underlying issue of whether ABCBS could lawfully refuse to honor patient assignments, the chancellor sought to determine whether: (1) the code provisions cited by ABCBS give an insurer the option of paying either the provider or the insured; (2) if so, do those provisions conflict with the general law on assignability; and (3) in that event, do the insurance code provisions repeal the law on assignability to the extent the laws conflict?

In his decree, the chancellor ruled there was an irreconcilable conflict between the insurance code provisions and the general law on assignablity (no mention was made of section 23-79-124). He further concluded the insurance code provisions repealed...