Life Rehab Services v. Allied Property & Cas. Ins., 05-CV-1279(PJS/RLE).

• Decision Date: 02 August 2007
• Docket Number: No. 05-CV-1279(PJS/RLE).,05-CV-1279(PJS/RLE).
• Citation: 616 F.Supp.2d 924
• Parties: LIFE REHAB SERVICES, INC., a Minnesota corporation; Medical Pain Management, a Minnesota corporation; Physicians' Diagnostics & Rehabilitation, a Minnesota corporation; and Medical Advanced Pain Specialists, a Minnesota corporation, on behalf of themselves and all others similarly situated, Plaintiffs, v. ALLIED PROPERTY & CASUALTY INSURANCE COMPANY; AMCO Insurance Company; Depositors Insurance Company; and Nationwide Insurance Company of America, Defendants.
• Court: U.S. District Court — District of Minnesota

616 F.Supp.2d 924

LIFE REHAB SERVICES, INC., a Minnesota corporation; Medical Pain Management, a Minnesota corporation; Physicians' Diagnostics & Rehabilitation, a Minnesota corporation; and Medical Advanced Pain Specialists, a Minnesota corporation, on behalf of themselves and all others similarly situated, Plaintiffs, v. ALLIED PROPERTY & CASUALTY INSURANCE COMPANY; AMCO Insurance Company; Depositors Insurance Company; and Nationwide Insurance Company of America, Defendants.

No. 05-CV-1279(PJS/RLE).

United States District Court, D. Minnesota.

August 2, 2007.

Jordan M. Lewis and Wood R. Foster, Jr., Siegel Brill Greupner Duffy & Foster, PA, Minneapolis, MN; David B. Ketroser; John J. Curi; and Neil P. Thompson, for plaintiffs.

Erin C. Skold, Leonard Street and Deinard, PA, for defendant Nationwide Insurance Company of America; Allen I. Saeks and Monica L. Davies, Leonard Street and Deinard, PA; and Edward K. Cottrell and John P. Marino, Fowler White Boggs Banker, for defendants.

ORDER

PATRICK J. SCHILTZ, District Judge.

This matter is before the Court on the parties' objections to the June 13, 2007 Report and Recommendation ("R & R") of Magistrate Judge Raymond L. Erickson. Judge Erickson makes two alternative recommendations: Pursuant to his independent analysis, Judge Erickson recommends granting defendants' motion for summary judgment. Alternatively, in the event that the Court adheres to its understanding of Minnesota law as stated in Alpine Glass, Inc. v. Illinois Farmers Insurance Co., No. 06-1148, 2006 WL 3486996 (D.Minn. Dec.4, 2006), Judge Erickson recommends denying defendants' motion. The Court has conducted a de novo review. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b).

One of many questions addressed in Alpine Glass—and the only question addressed in Judge Erickson's R & R in the present case—is whether an anti-assignment clause in an insurance policy bars an insured from assigning not only the right to coverage under the policy, but also the right to proceeds after a loss. No one disputes that, under Minnesota law, an anti-assignment clause may forbid both the assignment of coverage and the assignment of proceeds, as long as the anti-assignment clause is sufficiently clear.

In Alpine Glass, this Court adopted a portion of an R & R finding that an anti-assignment clause—which prohibited assignment of "[i]nterest in this policy"—was not sufficiently clear to bar the assignment of proceeds. In the present case, Judge Erickson found that the anti-assignment clause—which prohibits assignment of the insured's "rights and duties under this policy"—was sufficiently clear to bar the assignment of proceeds. Although it is a close question, the Court is persuaded by Judge Erickson's exhaustive research and painstakingly thorough dissection of Minnesota case law that the Minnesota courts would likely find that the anti-assignment clause at issue in the present case was sufficiently clear to bar the assignment of proceeds. Thus, the Court will adopt Judge Erickson's R & R and grant the defendants' motion for summary judgment.

In so doing, the Court recognizes that it necessarily implies that it may have been incorrect in concluding that the anti-assignment clause in Alpine Glass was not sufficiently clear to bar the assignment of proceeds. But as both Judge Erickson and the parties to this case have pointed out, that does not mean that result reached in Alpine Glass was incorrect. That case is distinguishable from the present case in several respects, including the language of the anti-assignment clause, the type of insurance involved, the governing statutory framework (which, in Alpine Glass, required the insurer to deal directly with the assignee), and the fact that the insurer in Alpine Glass had already made payments to the assignee (the question was simply whether it had paid enough). These distinctions are not unimportant, given that "[t]he primary purpose of clauses prohibiting the assignment of contract rights is to protect the contracting party from dealing with parties he has not chosen to do business with." Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn.2004). In light of the differences between Alpine Glass and the present case, nothing in this order should be construed to imply that this Court would—or would not—now reach a different result in Alpine Glass.

ORDER

Based on the foregoing, and on all of the files, records, and proceedings herein, the Court ADOPTS Judge Erickson's analysis and his recommendation that defendants' motion for summary judgment be granted. IT IS HEREBY ORDERED THAT:

1. Defendants' second motion for summary judgment [Docket No. 55] is GRANTED.

2. Plaintiffs' claim for breach of contract [Docket No. 1] is DISMISSED WITH PREJUDICE AND ON THE MERITS.

LET JUDGMENT BE ENTERED ACCORDINGLY.

REPORT AND RECOMMENDATION

RAYMOND L. ERICKSON, Chief United States Magistrate Judge.

I. Introduction

This matter came before the undersigned United States Magistrate Judge pursuant to a special assignment, made in accordance with the provisions of Title 28 U.S.C. § 636(b)(1)(B), upon the Defendants' Motion for Summary Judgment. A Hearing on the Motion was conducted, at which time, the Plaintiffs appeared by David B. Ketroser, and Wood R. Foster, Jr., Esqs., and the Defendants appeared by Allen I. Saeks, and Erin C. Skold, Esqs.

After the close of that Hearing, we invited the parties to address the District Court's recent decision, in Alpine Glass, Inc. v. Illinois Farmers Ins. Co., 2006 WL 3486996 (D.Minn., December 4, 2006)("Alpine Glass"), which neither of the parties had cited in their earlier submissions. See, Docket No. 69. Since the same critical legal issue—the assignability of rights and duties under an insurance policy—was decided in Alpine Glass, and confronts us here, and since the ruling, in Alpine Glass, was rendered by the same District Court as is assigned to this case, we wanted to be fully informed on that issue, and particularly, as to its impact on the Defendant's Motion for Summary Judgment.

Having closely reviewed the parties' original, and supplemental briefings, we conclude that, as the ruling of a Court of superior jurisdiction, Alpine Glass controls the disposition of the Defendants' Motion. See, e.g., Tenet v. Doe, 544 U.S. 1, 11, 125 S.Ct. 1230, 161 L.Ed.2d 82 (2005)("In a far closer case than this, we observed that if the `precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.'"), quoting Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989). Nonetheless, we respectfully hold the firm conviction that the legal interpretation in Alpine Glass, insofar as it addresses an agreement of contracting parties to prohibit the assignability of rights and duties under an insurance policy, does not accurately convey the import of the governing law of Minnesota.¹

Given the obvious tension between our obligation to follow precedent, until such time as it is modified by a Court of superior jurisdiction, and our obligation to follow the rule of law, as we responsibly perceive it, we have adopted the approach that was recently commended by the United States Supreme Court in Eberhart v. United States, 546 U.S. 12, 19, 126 S.Ct. 403, 407, 163 L.Ed.2d 14 (2005). There, the Court observed that the "prudent course" was not to "force[] the issue by upsetting what the [lower court] took to be [] settled precedents," nor to "bur[y] the issue by proceeding in a summary fashion," but rather, to facilitate review "[b]y adhering to its understanding of precedent, yet plainly expressing its doubts." Id. Here, our Report does not constitute a final adjudication but, nonetheless, we proceed with the "prudent course," out of deference to the District Court.²

For reasons which follow, were we to approach this issue as a matter of first impression, we would recommend that the Defendants' Motion for Summary Judgment be granted. However, if the District Court is not so persuaded, and concludes that its ruling, in Alpine Glass, is dispositive of the issues here presented, then the Defendants are not entitled to Judgment as a matter of law, and their Motion should be denied.

II. Factual and Procedural Background

The Defendants insure patients who are treated by the Plaintiffs. As a part of that treatment, the patients routinely sign "assignment of benefit" agreements, by which they assign to the Plaintiffs, among other health care providers, the right to receive payments, for the covered medical expenses, from the Defendants. The insurance policies in question contain an antiassignment provision, which reads as follows:

Your rights and duties under this policy may not be assigned without our written consent.³

Notwithstanding those assignments of claims, the Defendants have refused to deal directly with the Plaintiffs, and have paid the benefits due, under the policies, directly to the insureds, who must then deal with the Plaintiffs. On behalf of a putative class, the Plaintiffs seek a declaration that the anti-assignment provisions are ineffectual, and that the Defendants must directly interact with the Plaintiffs in resolving the claims for benefits that arise from the medical care provided to the Defendants' insureds, because those insureds have signed "assignment of benefit" agreements with the Plaintiffs.

Previously, the Defendants moved to dismiss the Plaintiffs' claims, arguing that, in view of the anti-assignment provisions in the pertinent insurance policies, the Plaintiffs did not have standing to allege that the Defendants must directly negotiate with the Plaintiffs. In their Memorandum in Response to the Defendants' Motion to Dismiss, the Plaintiffs voluntarily dismissed...