Dwayne Clay, M.D., P.C. v. Government Employees Insurance

RODOWSKY, Judge. In this case a personal automobile liability insurer, in reliance on a nonassignability clause in the policy, refused to recognize a post-accident assignment, by the injured insured to a health care provider, of benefits payable under the policy’s uninsured motorist coverage in an amount equal to the provider’s charges for health care rendered as a result of the accident. The question presented is whether that application of the nonassignability clause is contrary to public policy. Within the framework of the arguments presented, we shall answer the question “No.” On November 11, 1995, Brenda R. Smith (Smith) was in an automobile accident in the District of Columbia.

At the time of the accident, Smith was insured by the respondent, Government Employees Insurance Company (GEICO). The driver of the car that struck Smith was uninsured at the time of the accident. Smith was treated for her injuries by the petitioner, Dwayne Clay, M.D., P.C. t/a 1st Priority Physical Medicine. In lieu of payment at the time of treatment Smith executed an “Assignment of Rights” form which did not identify Smith’s insurer.

In relevant part the assignment read: “For treatment provided, I hereby authorize the -Insurance Company to pay by check made out and mailed directly to: 1st PRIORITY PHYSICAL MEDICINE 645 SOLOMON’S ISLAND ROAD, NORTH SUITE 430 PRINCE FREDERICK, MD 20678 ²⁶⁰ for the medical expense benefits allowable, and otherwise payable to me under my current insurance policy, as payment toward the total charges for Professional Services rendered. This payment will not exceed my indebtedness to the above mentioned assignee, and I agree to pay, as per my financial arrangement. “THIS- IS A DIRECT ASSIGNMENT OF MY RIGHTS AND BENEFITS UNDER THIS POLICY AND INCLUDES ALL RIGHTS TO COLLECT BENEFITS DIRECTLY FROM THE PATIENT’S INSURANCE COMPANY.” Smith never pursued a personal injury claim against the tortfeasor, nor did she make a claim against GEICO under the uninsured motorist benefits portion of her automobile insurance policy. After repeated demands for payment, Clay filed a lawsuit against Smith for her treatment charges and obtained a judgment. Thereafter Smith filed for bankruptcy, scheduled her debt to Clay, and the judgment was discharged by the bankruptcy court.

Clay subsequently demanded payment from GEICO pursuant to the “Assignment of Rights” from Smith. GEICO refused Clay’s demand, in reliance on the nonassignability clause contained in its automobile insurance policy with Smith. That clause reads: “SECTION V—GENERAL CONDITIONS 4. ASSIGNMENT Assignment of interest under this policy will not bind us without our consent.” 1 Following GEICO’s refusal to pay, Clay, as assignee of the insured’s claim, filed suit against GEICO in the District Court of Maryland, sitting in Calvert County.

Clay sought ²⁶¹ payment only out of the uninsured motorist benefits payable under Smith’s policy. An insured’s claim against the insurer based on a policy’s uninsured motorist coverage is a contract claim. See Erie Ins. Co. v. Curtis, 330 Md. 160, 172 , 623 A.2d 184, 190 (1993); Reese v. State Farm Mut.

Auto. Ins. Co., 285 Md. 548, 553 , 403 A.2d 1229, 1232 (1979). 2 The District Court entered judgment in favor of GEICO, holding that “the anti-assignment clause between Brenda Smith and [GEICO] was valid, enforceable and not waived.” That court reasoned “that Brenda Smith had no contractual right to assign any interest she had under her policy to anyone else without GEICO’s consent. GEICO never gave that consent.

Such clauses are valid and enforceable in Maryland[. See ] Michaelson v. Sokolove, 169 Md. 529 [, 534, 182 A. 458, 460 ] (1936).” 3 Clay appealed to the Circuit Court for Calvert County, which affirmed. Clay then filed a petition for the writ of certiorari, which we granted. ²⁶² In this Court, Clay contends that a nonassignability clause in an automobile liability insurance policy should not be enforceable against a health care provider who treats the insured in return for an assignment of uninsured motorist benefits. Clay’s submission is that accident victims should receive necessary medical treatment, but that accident victims who lack adequate health insurance, or who are financially unable to pay, will not receive necessary medical treatment unless they are allowed to assign the benefits available under their automobile insurance policy.

On this reasoning Clay concludes that application of the nonassignability clause in GEICO’s policy to an assignment of uninsured motorist benefits to a health care provider is unenforceable because it is contrary to strong public policy. GEICO submits that, under Maryland law, parties to a contract may provide that rights under their contract cannot be assigned. Further, argues GEICO, there is no affront to public policy because the nonassignability clause neither eliminates nor reduces the uninsured motorist benefits; the clause simply limits to the insured the receipt of the benefits payable under the policy. In addition, if public policy requires recognizing assignments to health care providers of uninsured motorist benefits in the face of a nonassignability clause, GEICO sees no principled basis on which to limit the class of potential assignees, with the result that all of the benefits payable to the insured could be exhausted by assignments to other creditors.

Because of the limited arguments advanced by the parties, we have no need in this case to review general contract law on assignments. GEICO has not argued that the assignment executed by Smith would be ineffective to transfer to Clay an interest in uninsured motorist benefits, absent the policy’s nonassignability clause. Clay has not argued that, even if the nonassignability clause is valid and enforceable, operation of the clause, as drafted, would not reach a post-accident assignment of Smith’s anticipated uninsured motorist benefits. In other words, the sole issue in this case, as argued, is whether the nonassignability clause is unenforceable on public policy ²⁶³ grounds when applied to an assignment of uninsured motorist benefits to a health care provider under the circumstances here.

The approach of Maryland courts to arguments, such as that advanced by Clay, that are based upon public policy was stated in Maryland-National Capital Park & Planning Commission v. Washington National Arena, 282 Md. 588 , 386 A.2d 1216 (1978), where we said: “Fearing the disruptive effect that invocation of the highly elusive public policy principle would likely exert on the stability of commercial and contractual relations, Maryland courts have been hesitant to strike down voluntary bargains on public policy grounds, doing so only in those cases where the challenged agreement is patently offensive to the public good, that is, where ‘the common sense of the entire community would ... pronounce it’ invalid. This reluctance on the part of the judiciary to nullify contractual arrangements on public policy grounds also serves to protect the public interest in having individuals exercise broad powers to structure their own affairs by making legally enforceable promises, a concept which lies at the heart of the freedom of contract principle.” Id. at 606 , 386 A.2d at 1228-29 (citations omitted). See also Wolf v. Ford, 335 Md. 525, 532 , 644 A.2d 522, 526 (1994); Anne Arundel County v. Hartford Accident & Indem. Co., 329 Md. 677, 686-87 , 621 A.2d 427, 431 (1993); Finci v. American Cas.

Co., 323 Md. 358, 376 , 593 A.2d 1069, 1077-78 (1991). This Court has also quoted with approval the following passage from Patton v. United States, 281 U.S. 276, 306 , 50 S.Ct. 253, 261 , 74 L.Ed. 854, 867 (1930): “The truth is that the theory of public policy embodies a doctrine of vague and variable quality, and, unless deducible in the given circumstances from constitutional or statutory provisions, should be accepted as the basis of a judicial determination, if at all, only with the utmost circumspection. The public policy of one generation may not, under changed conditions, be the public policy of another.” ²⁶⁴ See Anne Arundel County v. Hartford Accident & Indem. Co., 329 Md. at 687 , 621 A.2d at 432 ; Find 323 Md. at 376 , 593 A.2d at 1078 ; First Nat’l Bank v. Fidelity & Deposit Co., 283 Md. 228, 239 , 389 A.2d 359, 365 (1978). “ ‘[Declaration of public policy is normally the function of the legislative branch.’ ” Anne Arundel County v. Hartford Accident & Indem.

Co., 329 Md. at 688 , 621 A.2d at 432 (quoting Adler v. American Standard Corp., 291 Md. 31, 45 , 432 A.2d 464, 472 (1981)). Consequently, “[t]he lesser the relationship ... between a statute and a contractual provision, the greater is the reluctance of this Court to invalidate the provision on the basis of the public policy embraced in statute.” Finci, 323 Md. at 378 , 593 A.2d at 1079 . The General Assembly first recognized the importance of uninsured motorist coverage in 1972 when it required insurers to offer the option of buying such coverage. See Chapter 73 of the Acts of 1972.

In 1975 the General Assembly required all insurers issuing, selling, or delivering automobile insurance policies in Maryland to provide uninsured motorist coverage in at least the amounts required under the compulsory automobile liability insurance statute. See Chapter 562 of the Acts of 1975. Currently, Md.Code (1997), §§ 19-509 through 19-511 of the Insurance Article (IA), address uninsured motorist coverage. It is described in § 19-509(c): “(c) Coverage required.—In addition to any other coverage required by this subtitle, each motor vehicle liability insurance policy issued, sold, or delivered in the State after July 1, 1975, shall contain coverage for damages, subject to the policy limits, that: “(1) the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained in a motor vehicle accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle; and “(2) a surviving relative of the insured ... is entitled to recover from the owner or operator of an uninsured motor vehicle because the insured died as the result of a motor ²⁶⁵ vehicle accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle.” Maryland’s mandated uninsured motorist coverage embodies a public policy “ ‘to assure financial compensation to the innocent victims of motor vehicle accidents who are unable to recover from financially irresponsible uninsured motorists.’ ” Lee v. Wheeler, 310 Md. 233, 238 , 528 A.2d 912, 915 (1987) (quoting Pennsylvania Nat’l Mut.

Cas. Ins. Co. v. Gartelman, 288 Md. 151, 157 , 416 A.2d 734, 737 (1980)). See also Nationwide Mut.

Ins. Co. v. Webb, 291 Md. 721, 737 , 436 A.2d 465, 474 (1981) (“The courts have repeatedly stated that the purpose of uninsured motorist statutes is ‘that each insured under such coverage have available the full statutory minimum to exactly the same extent as would have been available had the tortfeasor complied with the minimum requirements of the financial responsibility [l]aw.’ ” (quoting Webb v. State Farm, Mut. Auto. Ins.

Co., 479 S.W.2d 148, 152 (Mo.Ct.App.1972))). The uninsured motorist statutory plan is remedial in nature and “dictates a liberal construction in order to effectuate its purpose of assuring recovery for innocent victims of motor vehicle accidents.” State Farm Mut. Auto. Ins.

Co. v. Maryland Auto.