Tennessee Supreme Court Rules for Insurer in Assignment of Benefits Case

The Tennessee Supreme Court affirmed a lower court’s decision that a chiropractic patient’s assignment of benefits was not an effective assignment of his insurance proceeds from a third party’s insurance company.

The case stems from a 2011 automobile accident that injured defendant Prentice Delon Hyler, who was treated by Action Chiropractic Clinic in Nashville. According to the case summary, Hyler signed an “Assignment of Rights” document to the clinic stating that it would be the beneficiary of, among other things, “medical expense benefits allowable” by various insurance policies. Hyler named Erie Insurance Exchange, the insurance company for the other driver involved in the accident, as the insurance company on the assignment.

Hyler incurred $5,010 in clinic fees for his treatment and subsequently received an $8,510 settlement from Erie Insurance Exchange. Upon reaching a settlement agreement, Hyler released Erie from any other claims related to the accident and accepted a settlement check from Erie. The insurer notified Hyler that it “does not pay medical providers or reimburse health insurance carriers directly” and that Hyler would be responsible for handling any balance or reimbursements out of the settlement check.

Action Chiropractor then sued Erie Insurance and Hyler for breach of contract and non-payment of insurance benefits to recover the $5,010 for chiropractic services.

Erie’s motion for summary judgement, granted by a Davidson County court, stated that Hyler “had no vested rights against Erie to assign” and written consent would have been required by Erie prior to any assignment. The judgement also stated that no contractual privity existed between Action Chiropractic and Erie. The Court of Appeals affirmed the trial court’s ruling.

The Tennessee Supreme Court agreed the assignment in the case was ineffective.

“If Defendant Hyler had named his own insurance policy, any payment to [Hyler] under that policy in fact would be for [his] medical treatment,” wrote Justice Jeffrey S. Bivins. “However a payment from [Erie] to [Hyler] would be for the purpose of settling a legal claim against Erie’s insured.”