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Dwayne Clay, M.D., P.C. t/a 1st Priority Physical Medicine v. Government Employees Insurance Company, No. 133, September Term, 1998.

[Contracts - Assignments - Automobile liability policy contained nonassignability clause. Insured assigned recovery under uninsured motorist coverage to health care provider. Held: Nonassignability clause is not contrary to public policy and is enforceable.]

Circuit Court for Calvert County Case # 4-C-98-651

IN THE COURT OF APPEALS OF MARYLAND No. 133 September Term, 1998 _________________________________________

DWAYNE CLAY, M.D., P.C. t/a 1st PRIORITY PHYSICAL MEDICINE v. GOVERNMENT EMPLOYEES INSURANCE COMPANY _________________________________________ Bell, C.J. Eldridge Rodowsky *Chasanow Raker Wilner Cathell, JJ. _________________________________________ Opinion by Rodowsky, J. _________________________________________ Filed: October 12, 1999 *Chasanow, J., now retired, participated in the hearing and conference of this case while an active member of this Court but did not participate in the decision and adoption of this opinion.

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 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.

-2.... "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 payment only out of the uninsured motorist benefits payable under Smith's policy. An

1

Neither Clay nor GEICO presented any evidence as to the purpose of this provision.

-3insured'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 antiassignment 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

For reasons which do not appear in the record, Clay did not assert that the assignment reached benefits payable under Smith's personal injury protection (PIP) coverage, if any. See Maryland Code (1997),

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