Midtown Chiropractic v. Ill. Farmers Ins. Co.

• Decision Date: 30 July 2004
• Docket Number: No. 49A02-0312-CV-1047.,49A02-0312-CV-1047.
• Citation: 812 N.E.2d 851
• Parties: MIDTOWN CHIROPRACTIC, Appellant-Plaintiff, v. ILLINOIS FARMERS INSURANCE COMPANY, Appellee-Defendant.
• Court: Indiana Appellate Court

812 N.E.2d 851

MIDTOWN CHIROPRACTIC, Appellant-Plaintiff, v. ILLINOIS FARMERS INSURANCE COMPANY, Appellee-Defendant.

No. 49A02-0312-CV-1047.

Court of Appeals of Indiana.

July 30, 2004.

James F. McCarthy, III, Katz, Teller, Brant & Hild, Cincinnati, OH, Michael B. Langford, A. Jack Finklea, Scopelitis, Garvin, Light & Hanson, Indianapolis, IN, Attorneys for Appellant.

Laura S. Reed, Riley Bennett & Egloff, LLP, Indianapolis, IN, Attorney for Appellee.

OPINION

MAY, Judge.

Midtown Chiropractic appeals a summary judgment for Illinois Farmers Insurance Co. Midtown raises two issues on appeal, which we restate as:

1. Whether an assignment to a health care provider of an accident victim's right to proceeds from a claim for damages is a valid equitable assignment or an invalid assignment of a personal injury claim; and

2. Whether a health care provider may bring a direct action against an insurer when the insurer settles with the accident victim but does not honor the accident victim's assignment of his right to the settlement proceeds.

We reverse in part and remand.

FACTS

Midtown treated Timothy Sexton after he was injured in an automobile accident with a driver who was insured by Illinois Farmers. In exchange for Midtown's services, Sexton executed an Assignment of Rights to Receive Benefits and/or Proceeds of Settlement or Judgment in which he assigned to Midtown the right to be paid out of any settlement or proceeds for the injuries he suffered in the accident. In the assignment, Sexton directed that payments be made directly to Midtown before any payments were made to him. Midtown sent notice of the assignment to Illinois Farmers and asked that Midtown be included "as a named co-endorser on any disbursement check" Illinois Farmers might issue.¹ (App. at 13.)

On June 26, 2001, Sexton and Illinois Farmers entered into a settlement and Sexton executed a release of all his claims against Illinois Farmers and its insured. In exchange for the release, Illinois Farmers paid Sexton $9,000. Neither Illinois Farmers nor Sexton paid any proceeds to Midtown. The value of the treatment Midtown provided to Sexton was $3,010.

DISCUSSION AND DECISION

1. Assignment of Proceeds

Midtown characterizes Sexton's assignment as an "equitable assignment." Such an assignment is

a conveyance recognized by courts of equity where one has conveyed an expectant interest to another, and that the transfer is made binding upon the reliance or other consideration of the assignee as an executory contract. Or, stated differently, where the facts and circumstances are such that equity places a duty to convey upon the assignor, he will be estopped from denying the validity of the transfer.

Carr v. Dorenkamper, 556 N.E.2d 1333, 1336 (Ind.Ct.App.1990), trans. denied.

An equitable assignment may be made of choses in action, possibilities, expectancies, or of mere contingencies. Id. at 1337. No particular words or particular form of instrument is necessary to effect an equitable assignment; any language that shows the intention of the owner of a chose in action to transfer it so that it will become the property of the transferee, amounts to an equitable assignment. Id. at 1336. The doctrine of equitable assignment has a long and distinguished history in Indiana. E.g., Eissler v. Hoppel, 158 Ind. 82, 62 N.E. 692 (1902).

As a general proposition in Indiana, torts for personal injuries and for wrongs done to the person, reputation, or feelings of the injured party are unassignable. Allstate Ins. Co. v. Axsom, 696 N.E.2d 482, 485 (Ind.Ct.App.1998), trans. denied 706 N.E.2d 181 (Ind.1998). However, the types of torts that may not be assigned have become so narrow that non-assignability of tort actions is now the exception while assignability is the general rule. Id.; and see Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 340 (Ind.1991)

(tort-based choses in action are assignable if they arise out of injuries to personal property, but torts for personal injuries remain unassignable).

While Indiana courts have not yet addressed the specific question before us, a number of other jurisdictions have recognized a distinction between the assignment of a claim for personal injury and the assignment of the proceeds of such a claim. E.g., Charlotte-Mecklenburg Hosp. Auth. v. First of Georgia Ins. Co., 340 N.C. 88, 455 S.E.2d 655, 657 (1995),

reh'g denied

340 N.C. 364, 458 S.E.2d 186 (1995). The assignment of a claim gives the assignee control of the claim and promotes champerty.²

Id. Such a contract is against public policy and void. Id. The assignment of the proceeds of a claim does not give the assignee control of the case and there is no reason it should be invalid.³

Id. The Charlotte-Mecklenburg court accordingly held the plaintiff could enforce liens on its claims for medical expenses and that the assignment was valid. Id.

In Achrem v. Expressway Plaza Ltd. Partnership, 112 Nev. 737, 917 P.2d 447 (1996), reh'g denied, a plaintiff accident victim assigned the proceeds from his lawsuit to the lessor of a building his mother rented. The lessors counsel advised the plaintiffs lawyer of the assignment, but the plaintiffs attorney released the funds to the plaintiff. The lessor filed a complaint against the attorney and the Achrem court held the attorney improperly failed to comply with the assignment agreement.

The court noted the general common law rule that an assignment of the right to a personal injury action was prohibited, but also noted the distinction between the assignment of an action itself and the assignment of the proceeds of that action:

[T]he policy considerations underlying the prohibition against assignments of tort actions are not present in the assignment of the proceeds of an action. Specifically, when a tort action is assigned, the assignor loses the right to pursue the action. However, when the proceeds of an action are assigned, the assignor retains control of the action, and the assignee cannot pursue the action independently. Based on this reasoning, many courts allow assignment agreements that assign the proceeds of a tort action. For example, medical professionals can obtain a lien against a future personal injury award in exchange for medical services.

Id. at 448-49 (citations omitted).

The ability to assign portions of the proceeds of the suit allows an injured plaintiff to obtain an attorney through a contingency fee arrangement and allows the plaintiff to pursue the action without being burdened by medical bills associated with the accident. Id. at 449. The cost of health care may be considerable, and patients injured by the actions of others are often not in a position to pay for that care when they need and receive it. Those costs are frequently the major element of special damage in a tort case. Hernandez v. Suburban Hosp. Assn., Inc., 319 Md. 226, 572 A.2d 144, 148 (1990). If the assignment of those funds is not permitted, the health care provider may be forced to pursue its claim expeditiously against the patient, a likely effect of which will be to involve the patient in double litigation and put at risk the patients personal assets. Id. Enforcement of an assignment can avoid this problem. If a hospital has some assurance of payment from the proceeds of the tort action, it may forego immediate collection efforts and thus allow the patient a measure of financial stability. Id.

In In re Musser, 24 B.R. 913, 921-22 (W.D.Va.1982), the court characterized an assignment of potential proceeds to a hospital as akin to contingent fee agreements typically entered into in tort cases:⁴

The hospitals seek recoveries limited to the value of services actually supplied to the debtors. And the debtors retained complete control over their personal injury cases. The hospitals rights exist only in the proceeds, not in the debtors causes of action.... The equitable assignments in these cases may be analogized to an attorneys contingent fee contract. Neither transfers any part of the cause of action. Instead, each operates only on moneys, if and when, recovered from third parties. As the enforceability of attorneys contingent fee arrangements in personal injury claims is well established, the court has difficulty understanding why equitable assignments of personal injury proceeds should be declared unenforceable.

We accordingly hold, as a matter of first impression, an accident victim's assignment to a health care provider of the proceeds of a personal injury claim is a valid equitable assignment.⁵ Therefore, Sexton's assignment to Midtown of his right to payment from Illinois Farmers was a valid equitable assignment.⁶

2. Right to Enforce Assignment Against Insurer

Illinois Farmers argues even if the assignment is valid, Midtown cannot enforce it in a direct action against Illinois Farmers. An unqualified assignment generally operates to transfer to the assignee all of the right, title and interest of the assignor in the subject of the assignment. Hernandez, 572 A.2d at 148. In these circumstances, the assignment vests equitable title to the assigned funds in the assignee. Thus, the Hernandez court determined, upon delivery of the assignment all of the accident victims right, title and interest in any proceeds recovered from her tort action, up to the amount of the hospitals bill for services rendered, was equitably transferred to the hospital.

Equitable assignments of things to be acquired in the future, where they are enforceable in equity, attach to funds when the funds come into being. Methodist Hospital of Ind., Inc. v. Town & Country Mut. Ins. Co., 136 Ind.App. 184, 198, 197 N.E.2d 773, 779 (1964), reh'g denied 136 Ind.App. 184, 198 N.E.2d 873 (1964).⁷ In that decision we relied in part on Goldwater v. Nitzberg, 161 Misc. 847, 292 N.Y.S. 119, 120 (N.Y.Sup.Ct.1936), where an accident victim was treated at a hospital for his injuries and executed an assignment to the hospital of any money he might recover from the...