Bolz v. State Farm Mut. Ins. Co.

• Citation: 274 Kan. 420,52 P.3d 898
• Decision Date: 23 August 2002
• Docket Number: No. 86,880.,86,880.
• Parties: TIMOTHY BOLZ, D.C., Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: Kansas Supreme Court

274 Kan. 420

52 P.3d 898

TIMOTHY BOLZ, D.C., Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

No. 86,880.

Supreme Court of Kansas.

Opinion filed August 23, 2002.

Judy Pope Edwards, of Dickson & Pope, P.A., of Topeka, argued the cause, and James M. Crowl, of the same firm, was with her on the brief for appellant.

William A. Larson, of Gehrt & Roberts, Chartered, of Topeka, argued the cause, and Timothy A. Shultz, of the same firm, was with him on the brief for appellee.

The opinion of the court was delivered by

LOCKETT, J.:

Medical practitioner Dr. Timothy Bolz filed a breach of contract action, based on an insured's assignment of her right to receive payment for medical services rendered under an automobile insurance policy. The insurer had claimed its contract prohibited its insured from assigning the claim. The district court granted summary judgment to the insurer. Dr. Bolz appealed, claiming that Kansas statutes and Kansas public policy require that the right to receive payment for necessary medical treatment be assignable and that the language of the insurance policy was ambiguous.

The parties stipulated that Georgia Emerson was involved in an automobile collision on July 1, 1997. Emerson was insured by State Farm Mutual Automobile Insurance Company (State Farm) on the date of the collision. The insurance policy provided Emerson with personal injury protection (PIP) benefits as required by K.S.A. 40-3107. It is important to note that State Farm does not repair automobiles or provide medical services, and its policy did not require the insured to use specified individuals or companies to perform these services.

Emerson sought treatment from Dr. Bolz, a chiropractor, for injuries she sustained in the collision. On July 26, 1997, Emerson signed an "Irrevocable Assignment, Lien and Authorization" form which assigned to Dr. Bolz her right to receive the PIP benefits under the policy. On August 6, 1997, Dr. Bolz forwarded the document of assignment to State Farm and demanded payment in the amount of $3,359, the cost of the medical expenses incurred by Emerson.

The insurance policy, under the section entitled "Conditions," contained the following standard language regarding policy changes: "b. Change of Interest. No change of interest in this policy is effective unless we consent in writing."

Emerson did not obtain written consent from State Farm to assign to Dr. Bolz her claim for reimbursement for medical services. When State Farm refused to pay Dr. Bolz for the medical services rendered to its insured, Dr. Bolz brought this action based on the assignment.

The district court determined that the change in interest clause was unambiguous and enforceable against Dr. Bolz. In his memorandum decision and order, the district judge stated:

"While the policy clearly prohibits assignments without consent, the Court must determine if non-assignability clauses are valid when used in an insurance contract. In St. Francis Regional Medical Center v. Blue Cross Blue Shield of Kansas, 810 F. Supp. 1209 (D. Kan. 1986), the Kansas Federal District Court held that a non-assignability clause in an insurance policy in general was valid and enforceable and not against public policy. The St. Francis Court held that `Kansas courts have repeatedly recognized that the freedom to contract is an important public policy.'

"In a case directly on point, the Colorado Supreme court rejected the `argument that a non-assignability clause in an insurance policy is unenforceable as a matter of law against post-loss assignment of policy benefits.' Parrish Chiropractic Centers, P.C. v. Progressive Casualty Insurance Company, 874 P.2d 1049, 1054 (Colorado 1994). In the Parrish Chiropractic case, the insurance policy contained a clause which stated, `Interest in this policy may not be assigned without our written consent.' The insurance company did not provide its written consent to its insured to assign the proceeds of the coverage to the chiropractic clinic. The Court held that the provision was enforceable and because written consent was not provided the assignment was invalid.

"There is a clear prohibition in the State Farm policy of Georgia Emerson precluding assignments without written consent of Defendant. No consent was provided, therefore the assignment to Bolz Chiropractic Clinic, P.A., is void and unenforceable."

Dr. Bolz appealed. The case was transferred from the Court of Appeals on our own motion pursuant to K.S.A. 20-3018(c).

Since this appeal arises from summary judgment on stipulated facts, this court's review is de novo. Veatch v. Beck, 252 Kan. 1081, 1082, 850 P.2d 923 (1993); Mark Twain Kansas City Bank v. Kroh Bros. Dev. Co., 250 Kan 754, 762, 863 P.2d 355 (1992). Summary judgment is appropriate when all of the evidence shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Deisher v. Kansas Dept. of Transportation, 264 Kan. 762, 767, 958 P.2d 656 (1998); Kerns v. G.A.C., Inc., 255 Kan. 264, 268, 875 P.2d 949 (1994).

Before we discuss the arguments of each party, it is necessary to define a chose in action. A chose in action is the right to bring an action to recover a debt, money, or thing. Black's Law Dictionary 234 (7th ed. 1999). It has long been recognized in Kansas that all choses in action, except torts, are assignable. See Alldritt v. Kansas Centennial Global Exposition, 189 Kan. 649, 657, 371 P.2d 181 (1962); National Bond & Investment Co. v. Midwest Finance Co., 156 Kan. 531, 535, 134 P.2d 639 (1943); McCrum v. Corby, 11 Kan. 464, 470 (1873); cf. Augusta Medical Complex, Inc. v. Blue Cross, 230 Kan. 361, 363-64, 634 P.2d 1123 (1981)

(where defendant nonprofit hospital service corporation's nonassignment clause was upheld as valid and enforceable despite court's recognition of the general rule that choses in action are fully assignable). Emerson's assignment of her right to be paid for the medical services rendered is a chose in action.

Dr. Bolz contends that State Farm's insurance policy's change of interest clause is ambiguous and, as now interpreted by State Farm, violates the public policy that choses in action are assignable. Additionally, Dr. Bolz asserts that the Kansas Legislature has codified the right of Kansas policyholders to assign both the benefits and claims arising from accident and health insurance contracts, citing K.S.A. 40-439 and K.S.A. 40-440. State Farm argues the public policy favoring free alienation of choses in action must be balanced against another public policy, the freedom of contract, and that the public policy of freedom of contract is superior to the free assignability of choses in action. To support this argument, State Farm relies upon St. Francis Reg. Med. Ctr. v. Blue Cross, 810 F. Supp. 1209 (D. Kan. 1992),aff'd49 F.3d 1460 (10th Cir. 1995), and Parrish Chiropractic v. Progressive Cas., 874 P.2d 1049 (Colo. 1994). Additionally, State Farm asserts that K.S.A. 40-439 and K.S.A. 40-440 do not apply to automobile insurance policies because those statutes pertain to life insurance policies and accident and health insurance policies. To support this assertion, State Farm notes that no restriction on non-assignability appears in the Kansas Automobile Injury Reparations Act (KAIRA), K.S.A. 40-3101 et seq., and concludes that if the legislature intended such a restriction it would have specifically provided for such in the KAIRA.

Public Policy

Public policy consists of the "principles and standards regarded by the legislature or by the courts as being of fundamental concern to the state and the whole of society." Black's Law Dictionary 1245 (7th ed. 1999). The declaration of public policy is primarily a legislative function. Noel v. Menniger Foundation, 175 Kan. 751, Syl. ¶ 4, 267 P.2d 934 (1954). Where the legislature declares the public policy and there is no constitutional impediment, the question of the wisdom, justice, or expediency of the legislation is for the legislature and not for the courts. State ex rel., v. Kansas Turnpike Authority, 176 Kan. 683, 695, 273 P.2d 198 (1954); see Coleman v. Safeway Stores, Inc., 242 Kan. 804, 808, 752 P.2d 645 (1988).

In McCrum, this court recognized that under the common law no chose in action was negotiable or even assignable. In equity, every chose in action, except a tort, was assignable, but it was assignable subject to all equities that might be set up against it. The McCrum court stated: "Under our statutes every chose in action is assignable, except a tort, the same as it was in equity; (Civil Code, § 26)." 11 Kan. at 470. This concept of assignability of choses in actions remains ingrained in the public policy of this state. See Augusta Medical, 230 Kan. at 364; Alldritt, 189 Kan. at 657. In addition to the public policy favoring assignability of choses in action, we note that restraints on the alienation of property are strictly construed against the party urging the restriction. See Metropolitan Life Ins. Co. v. Strnad, 255 Kan. 657, 669, 876 P.2d 1362 (1994); Wood v. Hatcher, 199 Kan. 238, 243, 428 P.2d 799 (1967).

Dr. Bolz points out that the assignment was post-loss. When Emerson assigned her claim arising under the policy to Dr. Bolz, the risk to State Farm was fixed because the loss had already occurred. To support his argument, Dr. Bolz cites to the Restatement (Second) of Contracts, § 322 (1979), which provides:

"(1) Unless the circumstances indicate the contrary, a contract term prohibiting assignment of `the contract' bars only the delegation to an assignee of the performance by the assignor of a duty or condition.

"(2) A contract term prohibiting assignment of rights under the contact, unless a different intention is manifested,

(a) does not forbid assignment of a right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation."

State Farm...