Santiago v. Safeway Insurance Company

Court of Appeals of Georgia, decided June 28, 1990, rehearing denied July 20, 1990 (Pope, J.; Carley, C.J., McMurray, P.J., and Cooper, J., concurring; Sognier, J., concurring in judgment only; Deen, P.J., Banke, P.J., Birdsong and Beasley, JJ., concurring specially). The complete opinion — majority and special concurrence — appears below, transcribed from the reported decision; only print artifacts (page headers and footers) have been removed.

The full opinion

SANTIAGO v. SAFEWAY INSURANCE COMPANY. Court of Appeals of Georgia (Jun 28, 1990). Docket No. A90A0071.

Pope, Judge.

Plaintiff Dr. Lad Santiago provided health care to three patients injured in an automobile collision. Defendant Safeway Insurance Company was the no-fault carrier for the three injured parties. Safeway received notification that all three executed an agreement assigning their rights to insurance proceeds to Dr. Santiago. However, benefits were paid directly to the injured parties and Dr. Santiago was not paid. He filed suit against Safeway for the value of health care services provided to the insureds plus interest, and for punitive damages and expenses of litigation and attorney fees. The trial court granted summary judgment to Safeway and denied Dr. Santiago’s motion for partial summary judgment on the issue of whether the assignments of benefits entitled him to payment plus interest. Plaintiff Santiago appeals.

1. “[An insurance] policy may be assignable or not assignable, as provided by its terms.” OCGA § 33-24-17. In this case, the policy providing coverage contained language stating that the insured’s “rights and duties under this policy may not be assigned without our written consent.” Safeway did not consent to the assignments of benefits by the insureds to Dr. Santiago. However, the assignments did not assign the policy itself but only the benefits due the insureds after the loss had already occurred. The assignments did not in any way affect the risk insured by the policy. Cf. James v. Pa. Gen. Ins. Co., 167 Ga. App. 427 (306 S.E.2d 422) (1983) (in which this court announced a “risk-focused analysis” in resolving whether transfer of title to insured property affected the insurer’s liability).

“After [a] loss, the claim of the insured, like any other chose in action, could be assigned without in any way affecting the insurer’s liability. It has been held, rightly we think, that a condition in a policy of … insurance prohibiting an assignment or transfer of the same after loss, without the consent of the insurer, is null and void, as inconsistent with the covenant of indemnity and contrary to public policy… No right of the insurer being affected by the assignments of the policies, it would be a mere act of caprice or bad faith for it to take advantage of the stipulation that the transfers were subject to its consent, by withholding such consent in order to defeat the claim of the assignee. The assignments being perfectly valid without the consent of the insurer, and its rights being in no way affected thereby, the condition in question was superfluous, and the law will not tolerate its enforcement against the assignee.” (Citations omitted.) Georgia Co-Op. Fire Assn. v. Borchardt Co., 123 Ga. 181, 183-184 (51 S.E. 429) (1905). Interest in the proceeds of a policy of insurance after a loss to the insured has occurred may be assigned just as any other chose in action. Canal Ins. Co. v. Savannah Bank &c. Co., 181 Ga. App. 520 (4) (352 S.E.2d 835) (1987); Pacific Ins. Co. v. R. L. Kimsey Cotton Co., 114 Ga. App. 411 (3) (151 S.E.2d 541) (1966).

The law of other jurisdictions appears to recognize the right of an assignee of insurance benefits to bring an action to recover payment. “An assignment of the policy after loss, or in other words an assignment of the claim for the loss, is valid, and transfers to the assignee the right to the proceeds of the insurance… Such an assignment is valid, even though the policy provides that it shall be void if assigned, either before or after the loss, without the consent of insurer, for such an assignment relates to the cause of action and not to the policy… If insurer has notice of the assignment … and, if insurer thereafter pays the proceeds to insured or his creditors, it does not discharge itself from liability to the assignee.” 46 CJS, Insurance, § 1152 (1946). Interpreting Georgia law, the United States District Court for the Northern District of Georgia has held that a hospital, as assignee of benefits due under a policy of insurance, is entitled to maintain an action against a health insurance company for benefits due. See Hospital Auth. of Fulton County v. State Mut. Life Assur. Co. &c., No. 1:87-CV-2305-MHS, unpublished slip op. (N.D. Ga. Aug. 14, 1989). We agree that where the insurance company had notice of the assignment, the health care provider may maintain an action for benefits due under the policy.

In both Reserve Life Ins. Co. v. Peavy, 94 Ga. App. 31 (93 S.E.2d 580) (1956), and Vulcan Life Ins. Co. v. Davenport, 191 Ga. App. 79 (380 S.E.2d 751) (1989), the insurance companies defended an action by the insured on the ground that the insured’s assignment to a health service provider vested the right to sue to recover benefits solely in the assignee. In both those cases the issue presented for review was whether the insured retained a right to maintain an action for insurance benefits if the insured had assigned the benefits to a health care provider. In both cases this court held that the insured still had standing to bring an action for payment of benefits. Thus, the statement contained in both those opinions that the assignment does not authorize the assignee to bring suit on the policy in its own name is dicta.

The Davenport opinion adopted the language of the earlier Peavy opinion, which recognized that a health care provider, which had been assigned benefits from an insurance policy, had a substantial interest in the benefits but that its interest could be asserted only in the name of the insured. However, Peavy was decided prior to the enactment of the Civil Practice Act. In support of its holding, the court in Peavy cited Jones v. Reed, 58 Ga. App. 72 (2a) (197 S.E. 665) (1938), which was governed by § 81-1307 of the 1933 Code of Georgia allowing the named party in a lawsuit to sue for the “use” of another unnamed party. That former Code section was repealed and replaced by the Georgia Civil Practice Act (Ga. L. 1966, p. 609 et seq.). Our current law allows an action to be brought in the name of the real party in interest which, in the case at hand, is the health care provider/assignee. See OCGA § 9-11-17 (a). To the extent the opinions in Davenport and Peavy are inconsistent with our holding in this case and the holding in Georgia Co-Op. Fire Assn. v. Borchardt Co., supra, they are disapproved.

2. “[A] debtor of the assignor, who has notice of the assignment, [pays] the debt to the assignor … at his own peril. ‘It is the established rule in the United States that an assignment for a valuable consideration, with notice to the debtor, imposes on him an equitable and moral obligation to pay the assignee.’ [Cit.]” Metropolitan Life Ins. Co. v. Morrow, 10 Ga. App. 433 (2) (73 S.E. 607) (1912). Here, Safeway had notice of the assignment but nevertheless paid all benefits to the insureds rather than the assignee, Dr. Santiago. Thus, Safeway is liable to the assignee and Dr. Santiago is entitled to partial summary judgment. See United States v. Mercury Motor Express, 294 F. Supp. 919 (S.D. Ga. 1968).

Judgment reversed. Carley, C. J., McMurray, P. J., and Cooper, J., concur. Sognier, J., concurs in judgment only. Deen, P. J., Banke, P. J., Birdsong and Beasley, JJ., concur specially.

Decided June 28, 1990 — Rehearing denied July 20, 1990 — Cert. applied for.

Beasley, Judge, concurring specially.

1. In this case, the insured’s assignee, who provided health care, sued to enforce his right to proceeds of the insured’s coverage. In Vulcan Life Ins. Co. v. Davenport, 191 Ga. App. 79 (380 S.E.2d 751) (1989), the insured sued to enforce both his and the assignee/providers’ recovery of the proceeds. In both cases the contract itself was not assigned, only the benefits due after the loss occurred, so that the assignments did not affect the risk insured by the policies. In both cases the insurer attempted to avoid payment of the proceeds on the ground that the party suing under the policy was not authorized to do so in its own name because of the assignments. Both cases reached the same result, i.e., allowing the plaintiffs to bring suit in their own names and directly recover the insurance benefits. Davenport allowed the action to be maintained by the insured, who had assigned some of the benefits under the policy to the health care provider, for the “use” of the assignee under the authority of Reserve Life Ins. Co. v. Peavy, 94 Ga. App. 31 (93 S.E.2d 580) (1956), which was governed by former Code Ann. § 81-1307. This decision permits the assignee/provider to sue in his own name for the benefits due as the real party in interest under OCGA § 9-11-17 (a), noting that the latter provision repealed the former. Since the “use” theory relied upon in Peavy was derived from the repealed statute, that portion of the quote in Division 6 of Davenport from Peavy indicating by dicta that only the insured could sue is properly disapproved. However, the result reached was not inconsistent with the holding in this case.

2. I cannot adopt as the law of Georgia the entire statement quoted from CJS, insofar as it equates an assignment of the policy with an assignment of the claim for loss. The two are distinct and different. Davenport and Santiago both involve only assignments of the right to benefits, that is the claim, not the policy contract itself.

I am authorized to state that Presiding Judge Deen, Presiding Judge Banke, and Judge Birdsong join in this special concurrence.

What it decided

Dr. Lad Santiago treated three people injured in a car wreck. Each patient signed an assignment of their insurance benefits to him. Safeway, the no-fault carrier for all three, had notice of the assignments — and paid the patients anyway, leaving the doctor unpaid. Safeway’s policy said the insured’s “rights and duties under this policy may not be assigned without our written consent,” and Safeway never consented. The trial court gave the carrier summary judgment. The Court of Appeals reversed and held the doctor was entitled to partial summary judgment instead:

• A post-loss assignment does not need the carrier’s consent. The patients assigned “only the benefits due the insureds after the loss had already occurred,” not the policy itself, so the assignments “did not in any way affect the risk insured by the policy.” Quoting the Supreme Court’s 1905 Borchardt decision: a condition prohibiting assignment after loss without the insurer’s consent “is null and void, as inconsistent with the covenant of indemnity and contrary to public policy,” and withholding consent to defeat the assignee “would be a mere act of caprice or bad faith.”
• The assignee can sue in his own name. Under OCGA § 9-11-17 (a), the real party in interest brings the action — here, the health care provider holding the assignment. The court disapproved the contrary dicta in Reserve Life v. Peavy (1956) and Vulcan Life v. Davenport (1989), which rested on a Code section repealed by the Civil Practice Act.
• A carrier with notice pays the wrong party at its own peril. “A debtor of the assignor, who has notice of the assignment, [pays] the debt to the assignor … at his own peril.” Safeway had notice, paid the insureds anyway, and remained liable to Dr. Santiago in full.

Four judges concurred specially through Beasley, J.: same result, but with a caution that an assignment of the policy and an assignment of the claim “are distinct and different” — the treatise language the majority quoted goes too far insofar as it equates the two.

What it did NOT decide

• It did not make the policy itself assignable. The opinion opens with OCGA § 33-24-17 — a policy “may be assignable or not assignable, as provided by its terms” — and then holds only that these patients assigned “the benefits due the insureds after the loss had already occurred,” which “did not in any way affect the risk insured by the policy.” The contract, its conditions, and the duties that come with it stayed with the named insureds. For a transfer a Georgia court put on the other side of that line, see Williams v. Mayflower.
• The broadest sentence in it never commanded the court. Nine judges participated. Four joined Judge Pope’s opinion in full, one concurred in the judgment only, and four concurred specially to reject the treatise passage that treats an assignment of the policy and an assignment of the claim as the same act: “I cannot adopt as the law of Georgia the entire statement quoted from CJS … The two are distinct and different.” The result is solid. That piece of the reasoning is not.
• It did not decide how much was owed. Safeway had already paid the benefits, just to the wrong party, so nobody disputed that money was payable. Whether a provider’s charges are reasonable, covered, or inside the limits is not in this opinion. An assignee takes the claim as the policy leaves it, not as it was billed.
• It did not take the right to sue away from the insured. The court read Peavy and Davenport as holding that “the insured still had standing to bring an action for payment of benefits,” and disapproved only their dicta that the assignee could not sue in its own name.
• It did not say what notice takes. The holding is stated with a condition — “where the insurance company had notice of the assignment” — and Safeway’s notice was undisputed: it “received notification that all three executed an agreement.” What form notice must take, and how late it can arrive before the carrier has already paid, are not addressed.
• It is a no-fault auto medical-benefits case. The principle is older and wider — it comes from Georgia Co-operative Fire Ass’n v. Borchardt, a 1905 fire case — but Santiago construes no property policy, and it says nothing about what a contractor may do with a claim once it holds an assignment. That question belongs to who may adjust a claim in Georgia.

Why it matters to policyholders

This is the Georgia case behind assignments of benefits. After a fire or a burst pipe, mitigation and restoration companies routinely work under an assignment of claim proceeds, and carriers sometimes point to the policy’s anti-assignment clause as a reason not to honor it. Santiago answers that: the clause protects the carrier against pre-loss transfers that would change the risk it underwrote. Once the loss has happened, the claim is a chose in action — ordinary property the insured can sign over, consent or no consent. And the pays-twice rule has teeth: a carrier on notice of the assignment cannot discharge the debt by paying someone else.

The honest limits matter just as much. Santiago moves the right to collect, not the amount owed — an assignee stands in the insured’s shoes and takes only what the policy actually provides. The special concurrence’s line is real: nothing in the case lets anyone take over the policy itself; coverage, conditions, and duties stay with the named insured. And for a homeowner, the lesson cuts both ways: signing an assignment hands a contractor the right to be paid, and to sue, on that slice of your claim. Sometimes that is exactly the right move; it is a decision, not paperwork. Assignments also live alongside Georgia’s separate rules about who may adjust or negotiate a claim on a policyholder’s behalf, including the restrictions on residential roofing contractors — an assignment of proceeds is not a license to run the claim.

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