Facts
- William Green was covered under a group health insurance policy issued by Prudential; his wife, Joan Green, was a covered dependent who received nursing services from Kelly Health Care, Inc.
- Green signed two provider-drafted documents addressing payment for Kelly’s services.
- A “Payment Agreement for Contracted Services” stated nursing services “may be paid directly” to Kelly by Prudential and that Green remained fully responsible for any amounts not paid by Prudential within a specified period; the parties stipulated there was no evidence this document was delivered to Prudential.
- An “Authorization of Benefits to Kelly Health Care” stated Green authorized payment directly to Kelly of nursing service benefits, “if any, otherwise payable to me”; it was not delivered to Prudential until months after services began.
- Kelly billed Prudential and demanded direct payment; Prudential refused to pay Kelly directly.
- Kelly sued both Prudential and Green; the trial court entered default judgment against Green and granted summary judgment to Prudential, concluding the documents were an authorization rather than an assignment and that Kelly was not a third-party beneficiary.
- Kelly appealed the judgment in favor of Prudential.
Issues
- Whether the documents signed by the insured constituted an assignment of benefits under the health policy, permitting the provider to sue the insurer in its own name.
- Whether, absent an assignment, the provider could sue the insurer as an intended third-party beneficiary of the health insurance contract.
Decision
- The Supreme Court of Virginia affirmed summary judgment for Prudential.
- The court held the writings did not effect an assignment of the insured’s rights; they were, at most, a revocable authorization or direction for payment.
- The court held the provider was not an intended third-party beneficiary of the insurance contract; any benefit to the provider was incidental.
- Because no assignment occurred, the statutory rule permitting suit by an assignee of a non-negotiable chose in action did not apply.
Legal Principles
- An assignee may sue on a non-negotiable chose in action only if there is an actual assignment; a statute authorizing suit by an assignee is inapplicable where the transfer is not an assignment.
- An assignment requires clear intent to transfer an identified interest and to divest the transferor of that interest; a transfer that is less than absolute does not qualify.
- A revocable power or authorization to receive or collect proceeds is not an assignment of contractual rights.
- Language authorizing an insurer to pay a provider directly, especially when benefits remain “otherwise payable” to the insured and the insured retains responsibility for unpaid charges, indicates authorization rather than assignment.
- A third party may enforce a contract only when the contracting parties clearly intended to confer a direct, enforceable benefit; incidental beneficiaries lack standing to sue.
Conclusion
The court held that an insured’s direct-payment authorization to a health-care provider did not transfer the insured’s contractual rights to policy benefits, and the provider also lacked third-party-beneficiary status; therefore, the provider could not sue the insurer directly for payment.