## Facts

- Henry and Dorothy Lentsch were injured in an auto collision caused by a driver insured by De Smet Insurance Company of South Dakota.
- The Lentsches received chiropractic treatment from A. Unruh Chiropractic Clinic, which sought payment through written assignments executed by each Lentsch.
- The assignments transferred to Unruh the proceeds of the Lentsches’ personal-injury claim recovery (up to the amount of unpaid chiropractic charges), rather than the personal-injury claims themselves.
- Unruh gave De Smet written notice of the assignments and instructed De Smet to pay Unruh directly to the extent of unpaid charges and to include Unruh as a payee on any settlement checks.
- A dispute arose within the Lentsch family over the necessity and cost of Dorothy’s continued treatment; Dorothy was incompetent to make medical or financial decisions.
- The Lentsches’ son later negotiated settlements with De Smet; Henry refused to settle if Unruh would be listed as a payee.
- De Smet settled with the Lentsches, obtained releases, and delivered settlement checks payable only to the Lentsches despite notice of the assignments.
- Unruh demanded payment for unpaid services; when both the Lentsches and De Smet refused, Unruh sued De Smet to recover the assigned portion of the settlement proceeds.

## Issues

1. Whether assignments limited to the proceeds of personal-injury claims (up to unpaid medical charges) are valid and enforceable under South Dakota law.
2. Whether an insurer with notice of such assignments can discharge its obligation by paying settlement proceeds solely to the injured parties and obtaining releases.
3. Whether a later settlement and release between the insurer and the injured parties can defeat the assignee’s right to the previously assigned proceeds.

## Decision

- The South Dakota Supreme Court affirmed judgment for Unruh.
- The court held the documents were valid assignments of proceeds, not prohibited assignments of personal-injury claims.
- Because De Smet had notice of the assignments, it remained obligated to protect Unruh’s assigned interest and paid the Lentsches at its peril.
- De Smet’s payment of the full settlement to the Lentsches and receipt of releases did not extinguish Unruh’s right to the assigned portion; De Smet remained liable to Unruh for the unpaid charges within the assignments’ scope.

## Legal Principles

- South Dakota distinguishes between impermissible assignments of personal-injury claims and permissible assignments of the proceeds of such claims.
- An assignment of anticipated recovery proceeds transfers a contractual right to a portion of any settlement or judgment, without transferring control of the underlying tort claim.
- After an obligor receives notice of an assignment, payment to the assignor does not discharge the obligor’s duty as to the assigned portion; the obligor remains liable to the assignee.
- An assignor’s subsequent release or settlement with the obligor cannot impair the assignee’s rights in the previously assigned portion of the proceeds.

## Conclusion

The court enforced a medical provider’s assignment of personal-injury claim proceeds and held that an insurer with notice cannot avoid liability to the assignee by paying the insured alone and taking a release; the assignee may recover the assigned amount directly from the insurer.


A. Unruh Chiropractic Clinic v. De Smet Ins. Co. of S.D., 2010 SD 36, 782 N.W.2d 367 (S.D. 2010)