The Minnesota Court of Appeals recently held that a patient’s assignment of a no-fault insurance claim to a medical provider is invalid and unenforceable if the applicable automobile insurance policy forbids such an assignment and if the patient makes the assignment before the medical provider bills the patient for medical services. That case, Stand Up Multipositional Advantage MRI, P.A. v. American Family Ins. Co., — N.W.2d —, No. A15-0843 (Minn. App. Apr. 25, 2016), is straightforward.
Stand Up Multipositional Advantage MRI, P.A. (SUMA), is an MRI clinic. Before accepting a patient, SUMA requires him or her to sign an assignment and lien agreement. Under the agreement, the patient agrees to assign all rights to payment to SUMA. American Family’s auto policies include a provisions that forbids assignments of any interest in its policies without its consent.
Three of SUMA’s former patients were injured in automobile accidents and had received MRIs from SUMA. Before receiving treatment, they signed SUMA’s assignment agreement. After American Family denied reimbursement of their expenses, the former patients sought reimbursement directly in no-fault arbitration, received an arbitration award, and received payment from American Family.
SUMA commenced a lawsuit to recover damages from American Family for its alleged failure to make payment directly to SUMA pursuant to assignment agreements. The district court upheld the assignment clauses and entered judgment in favor of SUMA. American Family appealed.
The Minnesota Court of Appeals reversed. As a matter of first impression, the cout applied the majority rule from other jurisdictions that forbids pre-loss assignment of insurance claims. The panel then looked to the No-Fault Act to determine when a “loss” occurs.
The No-Fault Act provides, “Loss accrues not when injury occurs, but as … medical … expense is incurred.” Minn. Stat. § 65B.54, subd. 1. A line of Minnesota cases have interpreted this clause to mean a person insured by an automobile insurance policy “incurred a medical-expense loss at the moment she was billed for medical services.” State Farm Mut. Auto. Ins. Co. v. Lennartson, 872 N.W.2d 524, 530 (Minn. 2015); see also Stout v. AMCO Ins. Co., 645 N.W.2d 108, 113 (Minn. 2002) (“an injured person incurs medical expense [under the No–Fault Act] as he or she receives bills for medical treatment.”). Applying this statute and cases, the panel concluded that SUMA’s agreements constituted an impermissible pre-loss assignment under the No-Fault Act because all of SUMA’s patients executed the assignment prior to receiving care. Accordingly, a patient’s assignment of a no-fault insurance claim to a medical provider is invalid and unenforceable if the applicable automobile insurance policy forbids such an assignment and if the patient makes the assignment before the medical provider bills the patient for medical services.
This holding has broad implications for medical providers and no-fault insurers. An assignment of a no-fault claim will only be valid before receipt of a medical bill if the applicable insurance policy does not include an anti-assignment provision. If the policy does include an anti-assignment provision, the assignment will only be valid if entered after the patient receives the bill for services.