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Chiro cannot sue carrier on patient's assignment.

Byline: Peter Vieth

A health care provider cannot use a patient's assignment of benefits to directly sue a tortfeasor's liability carrier, the Supreme Court of Virginia has ruled. The court said the liability insurer had no obligation to honor the injured claimant's assignment to his chiropractor.

The Sept. 14 decision answers a question raised in several recent cases where chiropractors sought court-ordered payment from insurance companies that covered drivers accused of causing injuries.

The court's published order is Erie Ins. Co. v. McKinley Chiropractic Center PC (VLW 017-6-072).

Auto accident claim

The appeal arose from a motor vehicle collision in Danville. Devonta Dodson claimed injury caused by Joann Hutson, who was insured by Erie Insurance Company.

Dodson sought treatment from McKinley and signed a form assigning to McKinley "all insurance and/or litigation proceeds" and "any and all causes of action" that the patient might have against an insurance company to satisfy the medical bills. The assignment language cited by the court appears in a standard assignment form posted on the website of the Unified Virginia Chiropractic Association.

Dodson was not represented by a lawyer, according a statement by McKinley's attorney at oral argument.

McKinley twice sent the assignment form to Erie. The insurance company nonetheless settled with Dodson for $7,300 and ignored the assignment. In the settlement, Dodson released both Hutson and Erie from all claims arising from the accident.

McKinley obtained a judgment against Erie in Danville General District Court. Erie appealed, but McKinley prevailed again before Circuit Judge Stacey W. Moreau. Another appeal brought the parties before the Supreme Court.

Benefit for plaintiffs' lawyers?

Roanoke attorney Kenneth J. Ries argued there was no legal precedent for a provider to assert a cause of action against a third-party's liability carrier based on a claimant's assignment.

"We submit that that cannot happen in Virginia; that has never happened in Virginia. There is no precedent for this to occur," Ries told the justices in June. "A claimant may not validly assign to a medical provider something the claimant doesn't have," Ries continued.

Ries argued the patient had no relationship with the carrier at the time he signed the assignment form. He pointed to a Virginia statute, s. 8.01-66.5, providing for lien notices against an injured party, the victim's attorney and a tortfeasor. That defined list closes the door on lien notices to any others, Ries said.

McKinley's lawyer, Stephen G. Bass of Danville, said enforcement of the assignment was proper since Erie essentially stood in the shoes of the tortfeasor.

"Erie suggests that McKinley should find his payment in Dodson's pocket, but then that begs us to answer the question: Why is the money in Dodson's pocket to begin with?" Bass said.

Bass argued the settlement money should have been regarded as "litigation proceeds."

"We think factually, by virtue of the insuring agreement relationship between Hudson and Erie, they're basically one and the same in the sense of the proceeds," Bass argued to the court. "Once they settled it, the money became proceeds."

"It's not about taking an assignment of a direct action that Dodson had against Erie," Bass continued. "It's based upon Erie's wrongful ignoring of the assignment and the lien of McKinley in paying all of the settlement proceeds - which were no longer entirely Dodson's - all to Dodson."

"The irony of this is, I suppose, this is going to be great for the plaintiff's bar, because it's going to force doctors and hospitals to drive all of their patients they're going to treat into the hands of an attorney," Bass said. "An attorney couldn't get by with in it in this case," he added. "They would be bound to honor these assignments."

No cause for claimant to assign

The Supreme Court held that McKinley did not have a right to sue Erie, because Dodson never had a right to sue Erie.

Under Virginia law, an injured party possesses no right to recover tort damages from the tortfeasor's insurer until reducing his claim to a judgment against the tortfeasor, the court said. Because Dodson never obtained a judgment against Hutson, no right against Erie could have "sprung into existence," the two-page order read.

"Moreover, Dodson then relinquished all existing and future rights to recover tort damages from Hutson or Erie when he agreed to release them both from any claim in connection with the motor vehicle collision," the court said.

The court reversed Moreau's ruling and entered final judgment for Erie.

Contacted after the court's ruling, Ries said he was not authorized to comment on behalf of Erie. Bass did not respond to a request for comment as of press time.

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Title Annotation:Erie Insurance Co. v. McKinley Chiropractic Center; Virginia
Author:Vieth, Peter
Publication:Virginia Lawyers Weekly
Date:Sep 20, 2017
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