Parrish Chiropractic Centers, P.C. v. Progressive Cas. Ins. Co.

• Citation: 874 P.2d 1049
• Decision Date: 16 May 1994
• Docket Number: No. 93SC302,93SC302
• Parties: PARRISH CHIROPRACTIC CENTERS, P.C., Petitioner, v. PROGRESSIVE CASUALTY INSURANCE COMPANY, Respondent.
• Court: Colorado Supreme Court

Page 1049

874 P.2d 1049

PARRISH CHIROPRACTIC CENTERS, P.C., Petitioner, v. PROGRESSIVE CASUALTY INSURANCE COMPANY, Respondent.

No. 93SC302.

Supreme Court of Colorado,

En Banc.

May 16, 1994.

Ozer, Sokolow & Mullen, P.C., Robert C. Ozer, Renee C. Ozer, Colorado Springs, for petitioner.

White & Steele, P.C., Frederick W. Klann, George A. Codding, III, Denver, for respondent.

James D. King & Associates, P.C., James D. King, Richard S. Hays, Denver, for amicus curiae Provenant Health Partners.

Justice MULLARKEY delivered the Opinion of the Court.

We granted certiorari to review the opinion of the court of appeals in Parrish Chiropractic Centers, P.C. v. Progressive Casualty Ins. Co., 857 P.2d 540 (Colo.App.1993) (Parrish I ). In that opinion, the court of appeals held that a clause in an insurance policy prohibiting the assignment of an "interest in the policy" can be invoked to prohibit the assignment of payment directly to a health-care provider after a loss has occurred. Id. at 541. It further held that a private provider of chiropractic services which provided treatment to a patient insured under a No-Fault policy is not a third-party beneficiary of the No-Fault policy and thus is not entitled to recover in a direct action to enforce the terms of that policy. Id. at 542. For the reasons stated below, we affirm.

I

The facts relevant to our disposition of this action are not in dispute. Defendant-respondent Progressive Casualty Insurance Company (Progressive) issues insurance policies pursuant to the Colorado Auto Accident Reparations Act (No-Fault Act), §§ 10-4-701 to -725, 4A C.R.S. (1987 & 1993 Supp.), to provide personal injury protection (PIP) benefits to persons injured in automobile accidents. Each PIP policy issued by Progressive contains a provision stating: "Interest in this policy may not be assigned without our written consent." (Emphasis in original.)

Plaintiff-petitioner Parrish Chiropractic Centers, P.C. (Parrish) provides treatment to many patients who hold PIP policies issued by Progressive and who have been injured in automobile accidents. When patients come to Parrish for treatment, they are required to execute an agreement with Parrish entitled "Assignment, Lien, Release and Power of Attorney" prior to receiving any chiropractic treatment. ¹ In that agreement, patients purport to assign to Parrish their right to Until recently, Progressive routinely honored such assignments by paying benefits under its PIP policies directly to Parrish. This case arose as a result of Progressive's decision to begin paying PIP benefits, as a matter of policy, directly to its insureds who received treatment from Parrish, rather than honoring Parrish's requests for payment. ² The reason cited by Progressive for its change in payment policy is the fact that

receive benefits under their respective PIP policies.

according to experience and economic studies, treatment with Parrish took considerably longer and was considerably more expensive on the average than with other chiropractors, and because allowing an assignment diminished the insurer's and insured's ability to control the frequency and costs of treatment and increased Progressive's administrative costs in dealing with the provider as well as the insured.

After Progressive refused a request from Parrish for payment for treatment rendered to several of Progressive's insureds, Parrish brought this action to recover its unreimbursed chiropractic fees. Parrish alleged that although Progressive did pay out PIP benefits directly to the insureds in question, those individuals did not apply the benefits to their chiropractic bills. Parrish claimed, inter alia, that the assignment of rights executed by its patients entitled it to direct payment from Progressive. Parrish also sought payment from Progressive under the theory that it was a third-party beneficiary to the PIP contracts between its patients and Progressive. ³

Progressive denied all claims, arguing that the purported assignments of benefits violated the express terms of its standard PIP policy and, consequently, were void ab initio. Progressive also contended that Parrish was not an intended third-party beneficiary of such policies but rather merely received an unintentional, incidental advantage from the policy.

The trial court agreed with Progressive and granted its motion for partial summary judgment. ⁴ It concluded that the assignments to Parrish were invalid as a matter of law in light of the express provision in Progressive's policies prohibiting assignment of any "interest in the policy" without its consent. The trial court further found that recognition of such assignments by the patients/insureds would "materially change Progressive's obligation under the insurance contracts." Finally, it found that Parrish was not a third-party beneficiary of the insurance contract between Progressive and its insureds because the policies contain "absolutely no expression of intent to confer any benefit upon Parrish." The court of appeals affirmed the trial court's judgment. Parrish I, 857 P.2d at 542.

II

Contract rights generally are assignable, except where assignment is prohibited by contract or by operation of law or where the contract involves a matter of personal trust or confidence. Matson v. White, 122 Colo. 79, 83-84, 220 P.2d 864, 867 (1950); Scott v. Fox Bros. Enterprises, Inc., 667 P.2d 773, 774 (Colo.App.1983). Where the contract in question specifically prohibits the assignment of rights or interests under the contract without the consent of one or more of the contracting parties, any purported assignment without such consent will not be enforced. 16 George J. Couch, Couch on Insurance 2d § 63:159 (1983) ("If the insurer's consent is essential to the validity of an assignment, an assignee acquires no right in the absence of such consent."); 2A John Appleman & Jean Appleman, Insurance Law and Practice § 1193 (1966) (same); accord A distinction traditionally has been made, however, between an assignment of an insurance policy before a loss has occurred and the assignment of the benefits due to the insured after a loss. ⁵ 16 Couch on Insurance 2d §§ 63:2, 63:40 (1983 & 1993 Supp.) (collecting cases); 6B Appleman § 4269 (1979 & 1993 Supp.) (collecting cases). Non-assignment clauses are strictly enforced against attempted pre-loss transfers of the policy itself, because assignments before loss involve a transfer of a contractual relationship and, in most cases, would materially increase the risk to the insurer. 16 Couch on Insurance 2d § 63:40; see, e.g., Zimbelman v. Hartford Fire Ins. Co., 92 Colo. 536, 542-44, 22 P.2d 866, 868-69 (1933); Smith v. Buege, 182 W.Va. 204, 387 S.E.2d 109, 116 (1989). By contrast, assignments of post -loss benefits are usually found to be valid regardless of any non-assignment clause in the policy. See, e.g., Metropolitan Life Ins. Co. v. Lanigan, 74 Colo. 386, 388, 222 P. 402, 403 (1924); Lain v. Metropolitan Life Ins. Co., 388 Ill. 576, 58 N.E.2d 587, 588 (1944). This rule is explained by the fact that (1) post-loss assignments of the benefits due under the policy are viewed as transfers of a chose in action and public policy favors the free alienability of choses in action, and (2) such assignments would not materially increase the insurer's risk or obligation under the policy. See Kent General Hosp., Inc. v. Blue Cross & Blue Shield of Delaware, Inc., 442 A.2d 1368, 1370 (Del.1982); Santiago v. Safeway Ins. Co., 196 Ga.App. 480, 396 S.E.2d 506, 508 (1990), cert. denied (Oct. 18, 1990).

Paul v. Chromalytics Corp., 343 A.2d 622, 626 (Del.Super.Ct.1975).

Having set forth the general rules regarding non-assignment clauses in insurance policies, we now turn to an important exception to those rules. In recent years, several courts have concluded that non-assignment clauses in group health care contracts are enforceable against post-loss assignments to health care providers of the insured's right to receive benefits under the policy. See Parrish v. Rocky Mountain Hosp. & Med. Services Co., 754 P.2d 1180, 1182 (Colo.App.1988); St. Francis Regional Med. Center v. Blue Cross Blue Shield of Kansas, 810 F.Supp. 1209 (D.Kan.1992); Institute of Living v. Blue Cross & Blue Shield, No. CV-90-0382398S, 1991 WL 223871 (Conn.Super.Ct. Oct. 4, 1991); Kent General Hosp., Inc. v. Blue Cross & Blue Shield of Delaware, Inc., 442 A.2d 1368 (Del.1982); Augusta Medical Complex, Inc. v. Blue Cross of Kansas, Inc., 230 Kan. 361, 634 P.2d 1123 (1981); Obstetricians-Gynecologists, P.C. v. Blue Cross & Blue Shield of Nebraska, Inc., 219 Neb. 199, 361 N.W.2d 550 (1985); Riddle Memorial Hosp. v. Blue Cross of Greater Philadelphia, 63 Del.Cty.Rep. 361 (Pa.Common Pleas 1976); cf. Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1478-81 (9th Cir.1991) (holding that ERISA welfare payments are not assignable in the face of a non-assignment clause in the health benefit plan); Washington Hosp. Center Corp. v. Group Hospitalization and Med. Services, Inc., 758 F.Supp. 750, 753-55 (D.D.C.1991) (same); but see American Med. Int'l v. Arkansas Blue Cross & Blue Shield, 299 Ark. 514, 773 S.W.2d 831 (1989) (striking down non-assignment clause in group health care policy in view of statute which states that "all contracts, in writing, for the payment of money or property, or for both money and property, shall be assignable ") (emphasis added). The cases upholding non-assignment clauses conclude that the "strong policy of freedom of contract" and the fact that non-assignment clauses "are valuable tools in persuading health care providers to keep their health care costs down" override the general policy favoring the free alienability of choses in action. Rocky Mountain Hosp., 754 P.2d at 1182; see also St. Francis, 810 F.Supp. at 1218-20; Kent General, 442 A.2d at 1371-72; Obstetricians-Gynecologists, 361 N.W.2d at 555-56. Accordingly, purported assignments of benefits Parrish...