An Insurer’s Response to an Assignment of Benefits by a Claimant

Claim representatives sometimes receive a demand for direct payment made by a healthcare provider. The provider bases the demand upon an assignment of benefits from a claimant made at the time of medical treatment. In Ohio, any claim for direct payment based on an assignment of benefits before liability and a settlement is established is not valid.

Ohio does not have a specific statutory provision for perfecting a medical or hospital lien against third parties. In contrast, 41 other states allow a medical provider to perfect a lien by filing a written notice of the name and address of the patient, the claimed at-fault party, the liability carrier, the name and address of the hospital, and the amount of the lien with the clerk of courts. Because there is no similar statutory lien in Ohio, this leaves contract theory as the only possibility for an assignment of benefits.

This Ohio Supreme Court makes it clear that, in the majority of cases, a claimant cannot assign benefits from a future settlement to a medical provider. In W. Broad Chiropractic v. Am. Family Ins., 122 Ohio St.3d 497, 2009-Ohio-3506, a claimant/patient assigned her rights against the claimed at-fault driver to a chiropractor in exchange for treatment, but the driver’s insurer ignored the assignment when issuing settlement proceeds to the claimant/patient. The chiropractor then sued the insurance company for payment. The Court held a person injured in an accident can only assign future proceeds of a settlement if both liability and a present right to settlement proceeds exist at the time of the attempted assignment. Because these conditions were not present in the case, the chiropractor had no cause of action against the insurer.

These two preconditions are likely missing when most treatment is received, i.e., at the emergency room and treatment following up on that visit. Instead, it would be a very rare circumstance, likely involving very long-term medical treatment, where a claimant both established liability and agreed to a settlement before making an assignment of benefits to a medical provider. The net result is that the majority of claimed assignments are likely not valid and the insurer can disburse the entirety of the settlement to claimant or claimant’s attorney, allowing them to satisfy any outstanding medical liens.

The information in this post is for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post is legal advice nor is it a substitute for legal counsel.

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