NN Investors Life Ins. Co., Inc. v. Crossley, 45A03-9103-CV-82

• Decision Date: 29 October 1991
• Docket Number: No. 45A03-9103-CV-82,45A03-9103-CV-82
• Parties: NN INVESTORS LIFE INSURANCE COMPANY, INC., an Iowa Corporation, Appellant-Plaintiff Below, v. Lucille CROSSLEY, Donald Lee Finch, St. Mary Medical Center, University Neurosurgeons, Northwestern Memorial Hospital, Northwestern Medical Faculty Foundation, Inc., Nucleopath, Inc., Rehabilitation Institute of Chicago, Northwest Anesthesia, Inc., the Methodist Hospital of Gary, Inc., St. Catherine Hospital of East Chicago, Indiana, Inc., Paul R. Meyer, Jr., M.D., O.H. Lee-Johnson, M.D., and Robert M. Vanecko, M.D., Appellees-Defendants Below.
• Court: Indiana Appellate Court

Page 307

580 N.E.2d 307

NN INVESTORS LIFE INSURANCE COMPANY, INC., an Iowa

Corporation, Appellant-Plaintiff Below, v. Lucille CROSSLEY, Donald Lee Finch, St. Mary Medical Center,

University Neurosurgeons, Northwestern Memorial Hospital,

Northwestern Medical Faculty Foundation, Inc., Nucleopath,

Inc., Rehabilitation Institute of Chicago, Northwest

Anesthesia, Inc., the Methodist Hospital of Gary, Inc., St.

Catherine Hospital of East Chicago, Indiana, Inc., Paul R.

Meyer, Jr., M.D., O.H. Lee-Johnson, M.D., and Robert M.

Vanecko, M.D., Appellees-Defendants Below.

No. 45A03-9103-CV-82.

Court of Appeals of Indiana,

Third District.

Oct. 29, 1991.

J. Robert Geiman, David J. Novotny, Douglas J. Varga, Peterson & Ross, Chicago, Ill., Randall J. Nye, Beckman, Kelly & Smith, Hammond, for appellant-plaintiff.

R. Lawrence Steele, Jill M. Madajczyk, Hodges, Davis, Gruenberg Compton & Sayers, P.C., Merrillville, for appellees-defendants.

STATON, Judge.

NN Investors brings this interlocutory appeal of the denial of its motion for summary judgment, raising two issues for our review:

I. Whether a health care provider is a third-party beneficiary of an insurance contract such that it may recover benefits under the contract even after the policy has been rescinded by the insurer due to the insured's material misrepresentation.

II. Whether a health care provider may assert a counterclaim based upon the theory of estoppel to recover fees under an insurance policy for services rendered to an insured.

We reverse.

On February 19, 1983, Lucille Crossley applied for a policy of group catastrophic health insurance from NN Investors ("NN"). The policy provided coverage for Crossley and her eligible dependents, including her husband, Donald Lee Finch. In August of 1983, Crossley shot Finch, rendering him a quadriplegic. As a result, Finch received treatment at numerous health care facilities, including The Methodist Hospital of Gary, Inc. ("Methodist").

At some time after Finch's injury, NN discovered that Crossley had materially misrepresented medical information on the insurance application. NN filed this action seeking rescission of the policy. It named Crossley, Finch and a number of medical providers (including Methodist) in its complaint.

On March 2, 1989, the trial court granted NN's motion for summary judgment finding that Crossley had made material misrepresentations, rendering the policy voidable. The order sought only to adjudicate the allegations relating to Crossley and Finch contained in the complaint, and expressly left open the issues relating to the remaining defendants. After it was granted summary judgment, NN filed a motion for summary judgment on the counterclaims of Methodist, Northwestern Memorial Hospital, Rehabilitation Institute of Chicago, and St. Catherine Hospital of East Chicago, Indiana, Inc. The motion was denied, and NN brought this interlocutory appeal. Judgment was later granted in favor of NN and against Northwestern Memorial Hospital and Rehabilitation Institute of Chicago. St. Catherine Hospital of East Chicago, Indiana, Inc. has not responded to NN's brief. Thus, Methodist is the only defendant who has actively contested NN's allegations on appeal.

On appeal from a denial of summary judgment, we apply the same standard as applied by the trial court. Frost v. Phenix (1989), Ind.App., 539 N.E.2d 45, 47. We must determine whether there is any issue of material fact and whether the trial court correctly applied the law. Id. We view the facts in the light most favorable to the non-moving party and resolve all doubts against the movant. Id. Summary judgment is appropriate only where there is no dispute as to any material fact and the moving party is entitled to summary judgment as a matter of law. Id.

I. Third-Party Beneficiary

NN argues that Methodist, as an assignee of rights under the contract, is not entitled to recover under the contract, as the trial court has determined that its assignors, Crossley and Finch, have no rights under the contract due to Crossley's material misrepresentations on the insurance application. It relies upon the general rule that an assignee has no greater rights than the assignor. See, e.g., Carrier Agency v. Top Quality Bldg. Prod. (1988), Ind.App., 519 N.E.2d 739, 743, transfer denied. While not quarrelling with the validity of that rule, Methodist argues that independent of its rights as an assignee, it was a third-party beneficiary to the insurance contract. Thus, it cites the rule that once a third-party beneficiary has accepted the benefits of a contract, the contract may not be rescinded, revoked or modified to the detriment of the third-party beneficiary. See, e.g., American Underwriters Group v. Williamson (1986), Ind.App., 496 N.E.2d 807, 811. The issue becomes whether Methodist was a third-party beneficiary of the insurance contract.

We outlined the law on third-party beneficiaries in Mogensen v. Martz (1982), Ind.App., 441 N.E.2d 34:

Third party beneficiaries may directly enforce a contract in Indiana. A third party beneficiary contract requires first, that the intent to benefit the third party be clear, second, that the contract impose a duty on one of the contracting parties in favor of the third party, and third, that the performance of the terms necessarily render to the third party a direct benefit intended by the parties to the contract.

Id. at 35 (citations omitted).

Methodist's argument must fail. Methodist argues that since it received an assignment from Finch, and the proceeds from...