Loyola University Medical Center v. Med Care HMO

• Decision Date: 09 March 1989
• Docket Number: No. 88-1459,88-1459
• Citation: Loyola University Medical Center v. Med Care HMO, 535 N.E.2d 1125, 180 Ill.App.3d 471, 129 Ill.Dec. 360 (Ill. App. 1989)
• Parties: , 129 Ill.Dec. 360, 52 Ed. Law Rep. 676 LOYOLA UNIVERSITY MEDICAL CENTER, Plaintiff-Appellee, v. MED CARE HMO, Defendant-Appellant.
• Court: Appellate Court of Illinois

Page 1125

535 N.E.2d 1125

180 Ill.App.3d 471, 129 Ill.Dec. 360,

52 Ed. Law Rep. 676

LOYOLA UNIVERSITY MEDICAL CENTER, Plaintiff-Appellee, v. MED CARE HMO, Defendant-Appellant.

No. 88-1459.

Appellate Court of Illinois First District, Fourth Division.

March 9, 1989.

Jenner & Block, Chicago (Russ M. Strobel, Cathy Houston McNeil, Mark A. Dupont, of counsel), for defendant-appellant.

Hayt, Hayt & Landau, Evanston (Raymond E. Clutts, of counsel), for plaintiff-appellee.

Justice LINN delivered the opinion of the court:

This is a permissive interlocutory appeal pursuant to Supreme Court Rule 308 (Ill.Rev.Stat.1987, ch. 110A, par. 308). Loyola University Medical Center brought suit to recover from Med Care HMO the amounts it expended for providing medical services to the child of a Med Care enrollee. Counts I and II of Loyola's complaint seeks compensatory damages for its usual and customary charges for services rendered. Count III asserts a claim for attorney fees and exemplary damages pursuant to section 155 of the Illinois Insurance Code. Ill.Rev.Stat.1987, ch. 73, par. 767.

Med Care moved for dismissal of Count III on the ground that Loyola had no standing to raise a section 155 claim because only an insured can make such claim. The trial court denied the motion but certified certain issues pertinent to this question. This court has granted review of the certified issues.

Background

Loyola is a not-for-profit, Illinois corporation which owns and operates Foster G. McGaw Hospital. Shonta Hicks' infant daughter was treated there from birth on October 27, 1986 through February 18, 1987. During oral argument, Loyola's attorney represented that the baby girl was born prematurely and accordingly transferred to McGaw because of that hospital's neonatal facilities, which the health care providers in Med Care's pool did not have available. ¹

During the course of Baby Girl Hicks' admission, Shonta Hicks executed a form entitled "Admitting Authorization Record". One of the provisions of the form states as follows:

"Payment Guarantee/Assignment Of Insurance Benefits For and in consideration of hospital care to the above patient, I/we agree to pay the established rates of Foster G. McGaw Hospital and its physicians for all services, facilities, and supplies rendered hereunder."

"I hereby authorize insurance payment(s) to be made directly to the physician or physician of the Loyola Medical Center involved in the patient's care and to the hospital for services rendered, but the hospital payment shall not exceed the hospital's regular charge for this period of hospitalization. I understand that I am financially responsible for all hospital and physician charges not covered by my insurance plan."

According to Loyola's complaint, Med Care confirmed Baby Girl Hicks' eligibility for coverage and quoted the benefits to which the infant was entitled under Med Care's subscription certificate. The hospital treated the premature infant and participated in certain quality review procedures required by law.

Loyola produced monthly interim billings, which it sent to Med Care, and produced a final summation of itemized charges of $121,486.55. Med Care paid only $27,384.53. Med Care refused to pay the balance, which is the subject of Counts I and II of the complaint. Count I alleges breach of contract based on the assignment and Count II alleges detrimental reliance/estoppel. Count III seeks statutory damages for Med Care's allegedly vexatious and unreasonable refusal to reimburse Loyola for its services.

Med Care moved to dismiss Count III on the ground that Loyola lacked standing as a non-insured and that, to the extent Loyola claimed to be an assignee of Hicks', the assignment was void because Med Care's general policy required advance written approval before policy benefits could be assigned.

In denying the motion to dismiss, the trial court certified these questions for review:

"a. Whether the language contained in LOYOLA's 'Payment Guarantee/Assignment of Insurance Benefits' is sufficiently unambiguous, as a matter of law, to constitute a valid assignment of all contractual rights to reimbursement for those services rendered by LOYOLA UNIVERSITY MEDICAL CENTER to Baby Girl Hicks during the entire course of Baby Girl Hicks' admission, absent any other contradictory evidence regarding Shonta Hicks' intent to assign benefits."

"b. Whether Shonta Hicks' execution of the assignment of benefits prior to the point where Loyola had completed its course of treatment constitutes the transfer of a right to payment when a loss under the policy is imminently to be incurred, is not prevented by MED CARE HMO's general policy provision prohibiting an insured's assignment of benefits before a loss has occurred.

"c. Whether LOYOLA's status as an assignee of Shonta Hicks' subscription certificate benefits entitles it to assert a claim against MED CARE HMO, pursuant to Ill.Rev.Stat., (1985) ch. 73, § 767, for the damages sustained from MED CARE's alleged vexatious and unreasonable failure to settle LOYOLA's claim for services rendered to Baby Girl Hicks."

OPINION

Loyola asserts its status as an assignee of all the rights and benefits to which Med Care's enrollee, Shonta Hicks, was entitled. According to Loyola, the assignment gives it standing to assert a claim for damages stemming from Med Care's alleged vexatious and unreasonable denial of the balance of the claim under the insurance policy.

Med Care maintains that Hicks' assignment of benefits under the insurance policy was void and that in any event only an insured can assert a damages claim under section 155 of the Insurance Code.

Initially, we note that Loyola's claim for compensatory damages in counts I and II, as well as exemplary damages in count III, depends on the validity of the assignment.

I.

Regarding the first certified question set out above, we note that the crux of this initial issue is whether the language contained in Loyola's admitting form is "sufficiently unambiguous * * * to constitute a valid assignment of all contractual rights to reimbursement for those services rendered by [Loyola] * * * during the entire course of Baby Girl Hicks' admission."

By its terms the excerpted provision from the admitting form contemplates assignment of benefits, as indicated in the boldface heading "Payment Guarantee/Assignment of Benefits." The first paragraph under the heading concerns the insured's guarantee of payments in exchange for and consideration of Loyola's medical services. The second paragraph authorizes Shonta Hicks' insurance provider (Med Care) to pay Loyola directly for those services. It further stipulates that the insurance payments to Loyola shall not exceed its regular charges and that Hicks would remain responsible for all charges not covered by her insurance plan.

We find the provision to be an unqualified intention to transfer to Loyola all of Shonta Hicks' rights to reimbursement under the policy for covered services. Absent evidence tending to show a contradictory intention, the words appear sufficient to operate as a full assignment of the right to reimbursement. See Dr. Charles W. Smith III, Ltd. v. Connecticut General Life Insurance Co. (1984), 122 Ill.App.3d 725, 78 Ill.Dec. 485, 462 N.E.2d 604 (words which reflect an intent to transfer an actionable right to reimbursement for valuable consideration are sufficient to create an assignment); Robert S. Pinzur, Ltd. v. The Hartford (1987), 158 Ill.App.3d 871, 110 Ill.Dec. 961, 511 N.E.2d 1281 (no valid assignment created where no evidence of parties' intent to create assignment existed beyond direct payment authorization, which did not evidence patient's receipt of consideration and did not provide that patient would remain liable for amounts not covered); McHenry Hospital v. Metropolitan Life Ins. Co. (N.D.Ill.1983), 578 F.Supp. 122. In McHenry, the court noted that "mechanisms for direct payment to providers of health care should be encouraged and facilitated in the interest of insureds, the providers and the insurance industry as well. Treating these authorization forms as assignments would appear to accomplish this result and to be consistent with the Illinois law of assignments." 578 F.Supp. at 124-25.

Med Care does not raise any disputed factual issue regarding the intent of Hicks or Loyola pursuant to this agreement but asks us to find it invalid as a matter of law. In support, Med Care cites two cases from other jurisdictions in which courts held that a direct payment authorization did not constitute an assignment. (Presbyterian Hospital v. National Life & Accident Insurance Co. (Tex.Civ.App.1972), 480 S.W.2d 497; Piedmont Southern Life Ins. Co. v. Gunter (1963), 108 Ga.App. 236, 132 S.E.2d 527.) In light of the Illinois authorities cited above, however, we need not address the law of other jurisdictions.

The record contains no evidence that Hicks did not intend to assign her rights to payment from Med Care. The agreement between her and Loyola was supported by consideration. No contract element appears to be lacking. We conclude that the language of the "payments guarantee/assignment of benefits" is sufficiently unambiguous as to constitute a valid assignment under these circumstances, as a matter of law.

II.

Med Care nevertheless argues that any assignment of benefits was prohibited without its prior written consent. For this it cites a provision in the "Med Care Subscription Certificate for Medicaid Recipients of the State of Illinois." This document is subtitled "A Group Service Agreement Between the Illinois Department of Public Aid and Med Care Health Maintenance Organization." The language in question provides: "No interest in the Group Service Agreement, in this Certificate, or in any Identification Card issued pursuant thereto is assignable without prior written consent of MED CARE. * * *." The paragraph goes on to state that the identification card is not transferable...