Shaw v. State Farm Fire and Casualty Company, Case No. 5D07-3136 (Fla. App. 5/7/2010)
| Decision Date | 07 May 2010 |
| Docket Number | Case No. 5D07-3136. |
| Parties | DAVID SHAW, DAVID G. SHAW D.C., P.A., ETC., ET AL., Appellants, v. STATE FARM FIRE AND CASUALTY COMPANY, ET AL., Appellees. |
| Court | Florida District Court of Appeals |
Appeal from the Circuit Court for Seminole County, James E.C. Perry, Judge.
Christopher V. Carlyle and Shannon McLin Carlyle, of The Carlyle Appellate Law Firm, The Villages, for Appellant.
Kenneth P. Hazouri of DeBeaubien, Knight, Simmons, Mantzaris & Neal, L.L.P., Orlando, and Betsy E. Gallagher and Amy L. Miles, of Kubicki Draper, P.A., Tampa, for Appellees.
ON MOTION FOR REHEARING EN BANC.
The court has elected to consider this case en banc. We withdraw the prior panel opinion and substitute the following opinion.
State Farm Fire and Casualty Company ["State Farm"] issued an automobile insurance policy containing an examination under oath ["EUO"] provision to its insured, Renard St. Louis ["St. Louis"]. The policy contains a clause providing that "any person or organization making claim or seeking payment . . . must, at our option, submit to an examination under oath, provide a statement under oath, or do both, as reasonably often as we require." After St. Louis was involved in a motor vehicle accident, he received medical care from Appellants, David Shaw, David G. Shaw, D.C., P.A., d/b/a Central Florida Chiropractic Center, DC Services, LLC, DC Supply, LLC, and Charles Machler [collectively, "Shaw"]. At the time of treatment, St. Louis assigned his no-fault benefits under the State Farm policy, to the extent of the services provided, to Shaw.1
When Shaw sought payment from State Farm under the assignments for the services rendered to St. Louis, State Farm demanded that Shaw appear for an EUO. Shaw refused to submit to the EUO and State Farm refused payment. Shaw subsequently filed suit seeking a declaratory judgment that, as assignees of the right to payment, they are not required to attend an EUO. The trial court entered judgment in favor of State Farm. We reverse.
The issue before the court is whether an EUO clause in an automobile insurance policy is binding on an assignee of the right to payment of no-fault benefits. It is undisputed that a provision in an insurance policy that requires the insured to submit to an EUO qualifies as a condition precedent to recovery of policy benefits. See Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300 (Fla. 4th DCA 1995); see also Starling v. Allstate Floridian Ins. Co., 956 So. 2d 511, 513 (Fla. 5th DCA 2007); Fassi v. Amer. Fire & Cas. Co., 700 So. 2d 51 (Fla. 5th DCA 1997). The question that arises in this case is whether an insurer can include in the policy a provision that extends the duty to submit to an EUO to assignees of the insured's right to insurance proceeds.
Under Florida law, the assignment of a contract right does not entail the transfer of any duty to the assignee, unless the assignee assents to assume the duty. See Dependable Ins. Co. v. Landers, 421 So. 2d 175, 179 (Fla. 5th DCA 1982). Assignment of a right to payment under a contract does not eliminate the duty of compliance with contract conditions, but a third-party assignee is not liable for performance of any duty under a contract, unless he was a party to the agreement or has become a party by subsequent agreement. Absent such an event, which is in the nature of a novation, the duty of performance of the conditions to the right of payment remains with the assignor.2 In other words, the assignee of a contract right owes no duty of performance to the obligor.3
What that means in the context of this case is that Shaw, as the assignee of the right of the insured to payment under the State Farm insurance contract, had no duty to perform any covenant under the insurance contract because he never agreed to do so. An obligor cannot unilaterally attach conditions to the obligee's right of assignment and cannot bind the assignee to any performance under the contract unless the assignee has agreed. The assignments in this case are straightforward transfers of the right to receive payment that contain no language of assumption of any duty by the assignee healthcare providers:
I hereby authorize and direct you, my insurance company and/or my attorney, to pay directly to DAVID G. SHAW, DC PA d/b/a CENTRAL FLORIDA CHIROPRACTIC CENTER ("Assignee"), such sums as may be due and owing Assignee for the services rendered to me, both by reason of accident or illness, and by reason of any other bills that are due Assignee, and to withhold such sums from any disability benefits, medical payment benefits, No-Fault benefits, or any other insurance benefits obligated to reimburse me or from any settlement, judgment or verdict on my behalf as may be necessary to adequately protect said Assignee. In the event that I do not have insurance coverage, I understand that I remain personally responsible for payment of services rendered. I hereby further give an irrevocable lien to said assignee against any and all insurance benefits named herein and any and all proceeds of any settlement, judgment or verdict which may be paid to me as a result of the injuries or illness for which I have been treated by the Assignee. This is to act as an assignment of my rights and benefits to the extent of the Assignee's services provided.
(Emphasis added.) There is simply no good faith argument to be made that, by taking the assignment of insurance proceeds to the extent of medical services rendered and seeking to collect the assigned policy proceeds, Shaw undertook any duty of performance under the State Farm policy. In exchange for services provided, Shaw took the right to be paid "such sums as may be due and owing" under its patient's insurance policy for the services Shaw rendered.
Another important principle of the law of assignments is that: "As a general rule, the assignee of a non-negotiable instrument takes it with all the rights of the assignor, and subject to all the equities and defenses of the debtor connected with or growing out of the obligation that the obligor had against the assignor at the time of the assignment." Law Office of David J. Stern, P.A. v. Sec. Nat. Servicing Corp., 969 So. 2d 962, 968 (Fla. 2007) (quoting State v. Family Bank of Hallandale, 667 So. 2d 257, 259 (Fla. 1st DCA 1995)). However, the notion that, because an assignee "steps into the shoes of the assignor and takes the assignment subject to all defenses of the obligor," the assignee assumes the obligations of the assignor, simply misapplies the rule. The rule means that the right of the assignee under the contract is no better than its assignor's rights. If the assignor is entitled to be paid, the assignee is entitled to be paid, but if the assignor is not entitled to be paid because of some failure of performance on the part of the assignor, then the assignee is not entitled to be paid either. By accepting an assignment of a right to be paid, the assignee does not obligate itself to perform any covenant under the contract. Moreover, as the rule quoted above plainly says, the defenses available to the obligor are fixed as of the time of the assignment, no subsequent duty on the part of the assignee arises because of the assignment.
The ability to assign contractual rights, including the right to payment, is an important commercial mechanism to facilitate transactions and to secure the payment of obligations, but this device would be completely thwarted if the obligor could impose conditions on the exercise of such rights acquired through assignment. There is a reason why there is a vast body of case law on whether a particular right is or is not assignable, but none recognizing the obligor's right to condition payment of sums due and owing under the contract to the subsequent performance of some contractual duty in the underlying contract.
Here, St. Louis has agreed that whatever monies he is entitled to receive from his automobile insurance policy on account of the care he has been given is payable to Shaw. If no monies are due and owing because of the failure of St. Louis to perform some covenant under the policy, including the examination under oath, then Shaw has no claim against State Farm, precisely because it is subject to State Farm's defenses against the insured. But State Farm may not include in the insurance contract any requirement of performance on the part of the assignee that conditions the right to payment. To the extent that State Farm's policy may have such a provision, it is simply unenforceable. It does not matter whether it is the requirement to submit to an examination under oath, to pay a fee, to accept a discount or anything else. Shaw did not undertake any duty of performance, and State Farm cannot unilaterally impose an obligation on the assignee by putting it in the policy.
This very issue has already been considered and decided by the Third District Court of Appeal in Marlin Diagnostics v. State Farm Mutual Automobile Insurance Co., 897 So. 2d 469 (Fla. 3d DCA 2004). In Marlin, the Third District reviewed a judgment of dismissal based on the lower court's determination that State Farm had the right to require a personal injury protection ["PIP"] medical provider to submit to an EUO when that provider had accepted from State Farm's insured an assignment of benefits. The policy in Marlin provided that "a person who suffers a bodily injury and makes a claim under the policy shall `answer questions under oath' . . . ." 897 So. 2d at 469. The trial court determined that State Farm had the right to require the appellant to submit to an EUO after accepting the assignment of the insured's benefits.
The Marlin court reversed, holding that when an insured assigns his benefits to a healthcare provider, the obligation to attend an EUO remains with the insured. The obligation to attend an EUO does not shift to the healthcare provider merely because the insured made an...
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