W. Broad Chiropractic v. Am. Family Ins.

• Decision Date: 23 July 2009
• Docket Number: No. 2008-1489.,No. 2008-1396.,2008-1396.,2008-1489.
• Citation: 122 Ohio St.3d 497,2009 Ohio 3506,912 N.E.2d 1093
• Parties: WEST BROAD CHIROPRACTIC, Appellant, v. AMERICAN FAMILY INSURANCE, Appellee.
• Court: Ohio Supreme Court

912 N.E.2d 1093

122 Ohio St.3d 497

2009-Ohio-3506

WEST BROAD CHIROPRACTIC, Appellant, v. AMERICAN FAMILY INSURANCE, Appellee.

No. 2008-1396.

No. 2008-1489.

Supreme Court of Ohio.

Submitted April 21, 2009.

Decided July 23, 2009.

Katz, Teller, Brant & Hild and James F. McCarthy III, Cincinnati, for appellant.

Frost, Maddox & Norman Co., L.P.A., and Mark S. Maddox, Columbus, for appellee.

Boehm, Kurtz & Lowry and John P. Lowry, Cincinnati; and Montgomery, Rennie & Jonson and George D. Jonson, urging reversal for amici curiae Ohio State Chiropractic Association and Ohio Osteopathic Association.

Roetzel & Andress, Laura M. Faust, and Jerome G. Wyss, Akron, urging affirmance for amicus curiae Ohio Association of Civil Trial Attorneys.

LUNDBERG STRATTON, J.

{¶ 1} We must determine whether Kristy Norregard, who was injured in an automobile accident but who did not file suit or obtain a judgment against the tortfeasor, may assign her right to proceeds from a prospective settlement or judgment to appellant, West Broad Chiropractic ("West Broad"), in exchange for medical care she received from West Broad for injuries resulting from the accident.

{¶ 2} The Tenth District Court of Appeals refused to enforce the assignment of proceeds. The appellate court certified that its judgment was in conflict with the judgments of other appellate districts. We agreed and accepted the following two certified conflicts for review:

{¶ 3} "May a person who has been injured in an automobile accident but who has not yet established liability for the accident and a present right to settlement proceeds, but who may have that right in the future, even if the future existence of the proceeds is conditional, assign that right, in whole or in part, to another under Ohio law?"

{¶ 4} "Does R.C. 3929.06 preclude an assignee of prospective settlement proceeds from bringing a direct action against a third party insurer, who had prior notice of such written assignment, after the insurer distributed settlement proceeds in disregard of that written assignment?" W. Broad Chiropractic v. Am. Family Ins., 119 Ohio St.3d 1469, 2008-Ohio-4911, 894 N.E.2d 330.

{¶ 5} For the reasons that follow, we answer the first question in the negative. A person who has been injured in an accident but who has not yet established liability for the accident and a present right to settlement proceeds may not assign the right to future proceeds of a settlement if the right does not exist at the time of the assignment.

{¶ 6} We answer the second question in the affirmative. R.C. 3929.06 precludes an assignee of prospective settlement proceeds from bringing a direct action against a third-party insurer after the insurer distributed settlement proceeds.

{¶ 7} Consequently, we affirm the judgment of the court of appeals.

Facts and Procedural History

{¶ 8} Kristy Norregard was injured in an automobile accident on July 6, 2002. Three days later, she sought treatment for her injuries at West Broad Chiropractic. At that time, she executed a document entitled "Assignment of Right to Receive Benefits and/or Proceeds of Settlement or Judgment" to assign her right to receive from the tortfeasor's insurance company compensation for these injuries in exchange for her treatment. Payment was to be made directly to West Broad before any payment was made to Norregard.

{¶ 9} Almost two years later, on April 30, 2004, West Broad gave notice of the assignment to appellee, American Family Insurance ("AFI"), which was believed to have insured the driver of the automobile involved in the accident with Norregard. The notice requested that AFI name West Broad as a co-endorser on any disbursement check issued or to issue a separate check payable to West Broad directly. The notice did not identify the amount due West Broad.

{¶ 10} In January 2006 and prior to filing any lawsuit, Norregard settled her claim for injuries with AFI. AFI disbursed the settlement proceeds directly to Norregard.

{¶ 11} West Broad filed an action against AFI seeking a declaration that the assignment was valid and enforceable and that AFI was obligated to pay West Broad for the treatment provided to Norregard valued at $3830. The trial court held that the assignment was enforceable and entered judgment for West Broad.

{¶ 12} The Tenth District Court of Appeals reversed the judgment of the trial court, concluding that Norregard had no "right in being" when she made the assignment. W. Broad Chiropractic v. Am. Family Ins., Franklin App. No. 07AP-721, 2008-Ohio-2647, 2008 WL 2246653, ¶ 6. Instead, West Broad had only a possibility of future settlement proceeds from AFI. Id. Furthermore, the court determined that Norregard had no enforceable rights against AFI under R.C. 3929.06 until she obtained a judgment against the tortfeasor. Thus, the court concluded, the assignment was ineffective, and it remanded the cause with instructions to enter judgment in favor of AFI. Id at ¶ 18.

{¶ 13} The appellate court certified that its judgment was in conflict with judgments of the courts of appeals in the First, Ninth, Eleventh, and Twelfth Districts. We determined that a conflict does exist on both issues. We accepted West Broad's discretionary appeal on the same issues and consolidated the cases. W. Broad, 119 Ohio St.3d 1469, 2008-Ohio-4911, 894 N.E.2d 330.

Assignment of Settlement Proceeds

{¶ 14} An assignment is a transfer to another of all or part of one's property in exchange for valuable consideration. Hsu v. Parker (1996), 116 Ohio App.3d 629, 632, 688 N.E.2d 1099. A vested right in the assigned property is required to confer a complete and present right on the assignee. Christmas v. Griswold (1858), 8 Ohio St. 558, 563-564.

{¶ 15} When Norregard entered into the agreement with West Broad, she had a cause of action against the tortfeasor that had accrued at the time of the accident. See Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 2006-Ohio-6551, 861 N.E.2d 121; Cincinnati v. Hafer (1892), 49 Ohio St. 60, 65, 30 N.E. 197. However, Norregard had not filed a claim based on that cause of action. She had not established liability or the right to damages. No settlement proceeds existed at the time of the assignment.

{¶ 16} Nevertheless, Norregard executed a document that purported to assign to West Broad her "right to receive or collect any check or monies offered for compensation to [her] by any person for any injury for which [she] received treatment from West Broad Chiropractic." Because no settlement proceeds existed at the time of the assignment and Norregard then had no right to any funds, she had no rights to assign. Thus, we hold that the agreement could not operate as an assignment because Norregard had no right in any settlement proceeds to transfer to West Broad.

{¶ 17} West Broad contends that Norregard's expectation of a settlement was assignable even though it was contingent upon proving liability and damages. West Broad, however, relies on cases in which the expected interest was based upon real property or contingent estates of inheritance of a property interest that was in existence. See Moore v. Foresman (1962), 172 Ohio St. 559, 565, 18 O.O.2d 123, 179 N.E.2d 349; Hite v. Hite (1929), 120 Ohio St. 253, 260-261, 166 N.E. 193. In this case, Norregard had not asserted a claim against the tortfeasor and had not established liability or the right to damages. The right to proceeds of a future settlement was unresolved. Consequently, Norregard's right to any settlement proceeds was merely a possibility at the time she executed the assignment to West Broad.

{¶ 18} In Pennsylvania Co. v. Thatcher (1908), 78 Ohio St. 175, 85 N.E. 55, syllabus, the court held that an equitable assignment in the prospective proceeds of a settlement could not be enforced by the assignee against the tortfeasor in a suit at law. In Thatcher, the victim of a railroad accident attempted to assign to his attorney the proceeds of his claim, although no cause of action had been filed. The court acknowledged that the assignee may have a right to recover from the assignor; however, the assignment was not legally binding in a suit for money damages against a third party who had not agreed to the terms of the assignment. Id. at 189, 85 N.E. 55.

{¶ 19} Thatcher rejected the notion that notice of an assignment could legally obligate an unrelated third party in the absence of a contractual or other relationship between the parties, particularly when the notice assigned "a portion of whatever may be paid in suit or settlement." Id., 78 Ohio St. at 175, 85 N.E. 55. The court held that a notice so indefinite was insufficient to reach the funds in the hands of a third-party tortfeasor. Id. at paragraph two of the syllabus. Thatcher also reasoned that giving effect to such an assignment would introduce the interests of a third party who had not been involved in the accident into settlement negotiations and may compromise a settlement between the injured person and the tortfeasor. Id. at 191, 85 N.E. 55. In addition, an assignment occurs only when the fund or property to be transferred exists. However, there are no settlement proceeds until the tortfeasor simultaneously pays funds in exchange for a release. Id.

{¶ 20} We find the legal reasoning of Thatcher still persuasive a century later. Consistent with Thatcher, because Norregard had no present right to any settlement funds at the time of the assignment, she had no rights to assign. West Broad had a contract that may be enforceable against Norregard, but it is not legally binding upon AFI.

{¶ 21} The conflict cases relied on public policy reasons to justify upholding such assignments. Some districts believed that such assignments would encourage settlement and avoid litigation. See Roselawn Chiropractic Ctr., Inc. v. Allstate Ins. Co., 160 Ohio App.3d 297, 2005-Ohio-1327, 827 N.E.2d 331, ¶ 16; Cartwright Chiropractic v. Allstate Ins. Co., Butler App. No....