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An Assignment Gone Wrong - Why the Virginia Supreme Court Denied a Chiropractor's A&A

Blaszkow Legal, PLLC Sept. 22, 2017

The Virginia Supreme Court answered an interesting question last month: can a medical provider enforce an assignment signed by its patient against a tortfeasor’s liability insurance company? One Virginia chiropractor thought so, and filed suit.

Here are the facts: A Ms. Dodson was injured as a result of a motor vehicle accident caused by a Ms. Hutson. Ms. Hutson’s vehicle was insured by Erie. In the course of her recovery, Ms. Dodson sought and received medical treatment at the McKinley Chiropractic Center (“McKinley”). Ms. Dodson signed an “A&A”*(1), or authorization and authorization, granting McKinley the promise of repayment. The document assigned McKinley “all insurance and/or litigation proceeds to which Patient is now or may hereafter become entitled” and “any and all causes of action that Patient might have or that might exist in Patient’s favor against such insurance company” in order to satisfy Ms. Dodson’s chiropractic bill.

McKinley sent this assignment to Erie via fax after it was signed. Once treatment was completed, Ms. Dodson settled her case with the other motorist and signed a standard settlement release. Erie paid the money it had agreed to Ms. Dodson, and McKinley received nothing. McKinley then filed a suit against Erie for failing to honor the assignment. This case proceeded through the state legal system until it reached the Supreme Court of Virginia, which reversed the lower Courts with a simple decision: McKinley had no right to sue Erie.

The Court’s decision adhered to an old maxim of law - an injured party’s case is against the tortfeasor, or person who committed the tort (the injured party has no case against the insurance company until after judgment, not before). In this case, Erie was not the defendant, not only because it did not cause the accident injuring Ms. Dodson, but no suit was ever filed! Ms. Dodson reached an agreement with Erie to settle her claim, and in the language of the Court, “at no time did a right exist on which basis Dodson could have maintained an action against Erie, and in turn at no time did a right exists on which basis McKinley, as Dodson’s assignee, could maintain an action in its own name against Erie.”

The answer to what this means for assignments in general is unclear, but there is little doubt that medical providers will be reviewing their assignments much more carefully going forward!

For further reading, see: USAA v Nationwide, 218 Va. 861, 867, 241 S.E.2d 784, 788; also Va. Code, Ann. 8.01-5(B), and Erie Insurance v McKinley Chiropractic Center, PC (Va.App. 2017)

*(1) A&A is an Assignment and Authorization. This document, signed by the client, and countersigned by the Attorney, authorizes an Attorney to pay the medical provider out of the settlement or judgment proceeds of a case.