NEURODIAGNOSTICS, PSC, D/B/A LEXINGTON DIAGNOSTIC CENTER v. KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY AND NEURODIAGNOSTICS, PSC, D/B/A LEXINGTON DIAGNOSTIC CENTER v. STATE FARM MUTUAL AUTOMOBILE
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RENDERED:
OCTOBER 20, 2006; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-000735-DG
NEURODIAGNOSTICS, PSC,
D/B/A LEXINGTON DIAGNOSTIC
CENTER
v.
APPELLANT
ON DISCRETIONARY REVIEW FROM FAYETTE CIRCUIT COURT
HONORABLE THOMAS L. CLARK, JUDGE
ACTION NO. 05-XX-0001
KENTUCKY FARM BUREAU MUTUAL
INSURANCE COMPANY
APPELLEE
AND
NO. 2005-CA-001583-DG
NEURODIAGNOSTICS, PSC,
D/B/A LEXINGTON DIAGNOSTIC
CENTER
v.
APPELLANT
ON DISCRETIONARY REVIEW FROM FAYETTE CIRCUIT COURT
HONORABLE PAMELA R. GOODWINE, JUDGE
ACTION NO. 05-XX-00009
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
GUIDUGLI AND SCHRODER, JUDGES; MILLER,1 SPECIAL JUDGE.
GUIDUGLI, JUDGE:
This matter is before us upon an order
granting discretionary review.
The Fayette Circuit Court
affirmed the Fayette District Court’s order granting State Farm
Mutual Automobile Insurance Company and Kentucky Farm Bureau
Mutual Insurance Company’s motions to dismiss.
Because the
Fayette Circuit Court correctly determined that Lexington
Diagnostic Center did not have standing to assert its claims, we
affirm.
STATE FARM APPEAL
The facts of this case are undisputed.
Donald Hughes
(Hughes) was involved in a motor vehicle accident on March 6,
2003.
Hughes had an automobile policy issued by State Farm
Mutual Automobile Insurance Company (State Farm), which
contained the statutory minimum of $10,000.00 in personal injury
protection (PIP) benefits.
As a result of the motor vehicle
accident, State Farm mailed Hughes an application for no-fault
benefits along with a medical authorization form on April 3,
2003.
Hughes failed to respond to State Farm’s request to fill
out the application and the medical authorization form.
1
Retired Judge John D. Miller, sitting as Special Judge by assignment of the
Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution.
-2-
On April 7, 2003, Hughes received medical treatment
from Lexington Diagnostic Center (LDC).
LDC performed an MRI of
the cervical spine and an MRI of the lumbar spine, costing a
total of $2,394.00.
Before LDC performed the MRIs, Hughes
signed an “Agreement to Pay and Assignment of Benefits,” form
which contained the following language:
If this is a motor vehicle claim, I hereby
direct my reparation obligor (my motor
vehicle insurance company) State Farm to pay
LDC for today’s services, pursuant to KRS
304.39-241. Initial here. (initials)
I irrevocably assign LDC, its successors and
assigns, all benefits payable to me (or the
patient) from my insurance, workers’
compensation, auto insurance and/or attorney
for today’s services. This assignment does
not release me from my responsibility to pay
LDC as I have agreed.
Prior to providing the services on April 7, 2003, LDC spoke with
an employee of State Farm and was told that there was an open
PIP claim for Hughes with funds available.
After providing
Hughes with its medical services, LDC sent State Farm an invoice
along with Hughes’ “Agreement to Pay and Assignment of Benefits”
form on April 8, 2003.
After receiving this information from
LDC, State Farm once again sent Hughes a letter requesting him
to complete the application for benefits and the medical
authorization form.
Hughes again failed to respond to this
request as well as to another request made on May 13, 2003.
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Upon receiving information that Hughes was being
represented by an attorney, Ephraim Helton (Helton), to
represent him in an injury claim against the driver of the other
vehicle involved in the car accident, State Farm sent Helton a
letter dated June 11, 2003.
Additionally, State Farm sent
another application and requested that Helton’s client, Hughes,
complete the application for benefits and medical authorization
necessary to process a claim for automobile no-fault benefits.
Helton responded to State Farm in a letter dated July, 7, 2003,
which included the completed no-fault application form by
Hughes.
In the letter, Helton directed State Farm to initially
portion Hughes’ PIP benefits to satisfy his lost wages and use
the remaining PIP benefits to pay his outstanding medical
expenses.
LDC was not included in this directive.
Although the July 7, 2003, letter did not contain the
names of the medical providers, a letter dated August 5, 2003,
directed State Farm to use Hughes’ PIP benefits to pay another
medical provider, Dr. Tillie, for surgery and the remainder to
be paid to Hughes’ lost wages.
Again, LDC was not included in
this directive or any directive provided by Hughes or his
attorney.
As a result, State Farm notified LDC of Hughes’
directive and subsequently sent the outstanding medical bills to
Helton for further handling.
After not receiving payment from
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State Farm, LDC brought this action against State Farm on
February 12, 2004.
Claiming that LDC did not have standing to
assert its claim, State Farm filed a motion to dismiss.
The
Fayette District Court granted State Farm’s motion to dismiss.
On appeal, the Fayette Circuit Court affirmed the order of the
Fayette District Court.
This appeal followed.
FARM BUREAU APPEAL
Similar to the previous case, Jennifer McCord (McCord)
was involved in a motor vehicle accident on July 15, 2001, while
riding as a passenger in a vehicle operated by Tracey Burke
(Burke).
Because Burke did not have insurance to cover the
vehicle involved in the accident, PIP benefits were sought under
Kentucky Farm Bureau Mutual Insurance Company’s (Farm Bureau)
insurance policy with McCord’s grandmother, whom McCord was
living with at the time of the accident.
McCord was treated at
the University of Kentucky Hospital Emergency Department on the
date of the accident.
Additionally, McCord sought further
medical attention from St. Joseph Emergency Department on July
17, 2001, after complaining of neck, chest wall, and low back
pain.
McCord did not seek any further treatment for the
alleged injuries resulting from the accident until fifteen
months later on October 17, 2002, when she saw Dr. Patrick
Campbell (Dr. Campbell) with Skinner Chiropractic.
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After Dr.
Campbell ordered an MRI on McCord’s spine, McCord went to
Lexington Diagnostic Center (LDC).
LDC performed an MRI of
McCord’s lumbar spine on December 6, 2002, and an MRI of her
cervical spine on January 30, 2003.
in a $2,394.00 medical bill.
These procedures resulted
LDC submitted McCord’s medical
bill to Farm Bureau pursuant to an “Agreement to Pay and
Assignment of Benefits” that was executed by McCord prior to
receiving her MRIs.2
After Farm Bureau did not pay LDC for McCord’s medical
treatment, LDC filed suit on February 19, 2004, seeking the
outstanding payment of $2,394.00, plus interest and attorney’s
fees.
LDC claimed that McCord “assigned” her medical claims to
it; therefore, LDC was entitled to payment.
Farm Bureau filed a
motion to dismiss asserting that the assignment was not valid
and thus LDC lacked standing to assert its claim.
The motion to
dismiss was granted by the Fayette District Court and affirmed
by the Fayette Circuit Court.
This appeal followed.
Legal Analysis
On appeal, LDC contends that the Fayette Circuit Court
incorrectly determined that LDC lacked standing to bring an
action against State Farm and Farm Bureau.
LDC argues that as
an assignee, it had standing to bring an action against State
2
The “Agreement to Pay and Assignment of Benefits” form signed by McCord
provided the same language used in the “Agreement to Pay and Assignment of
Benefits” form in the State Farm case.
-6-
Farm and Farm Bureau pursuant to the “Agreement to Pay and the
Assignment of Benefits” form signed by both Hughes and McCord.
Specifically, LDC contends that Hughes and McCord assigned their
PIP benefits to LDC, thus giving LDC standing to bring action
against State Farm and Farm Bureau.
We disagree.
Because this case involves the assignability of an
insurance policy, we must determine whether Kentucky’s General
Assembly intended to provide insureds with the right to assign
his or her rights to benefits under KRS 304.39-241.
Because the
interpretation of a statute is a matter of law, our review of
the interpretation of KRS 304.39-241 is de novo without
deference to the interpretation adopted by the lower court.
Wheeler & Clevenger Oil Co., Inc. v. Washburn, 127 S.W.3d 609,
612 (Ky. 2004).
Additionally, in interpreting a statute, we
have a duty to ascertain and to give effect to the intent of the
General Assembly.
(Ky. 2000).
Commonwealth v. Harrelson, 14 S.W.3d 541, 546
Thus, “[w]e are not at liberty to add or subtract
from the legislative enactment or discover meaning not
reasonably ascertainable from the language used.”
Id.
Therefore, “a [s]tatute should be construed, if possible, so
that no part is meaningless or ineffectual.”
Keeton v. City of
Ashland, 883 S.W.2d 894, 896 (Ky.App. 1994) (quoting Brooks v.
Meyers, 279 S.W.2d 764, 766 (Ky. 1955)).
-7-
Prior to 1998, under the Motor Vehicle Reparations
Act, insurers were statutorily permitted to assign benefits for
future payments pursuant to KRS 304.39-240, “Assignment of
Benefits.”3
However, 304.39-240 was repealed in 1998 and KRS
304.39-241, entitled “Insured’s direction of payment of benefits
among the different elements of loss,” was enacted.
KRS 304.39-
241 provides that:
An insured may direct the payment of
benefits among the different elements of
loss, if the direction is provided in
writing to the reparation obligor. A
reparation obligor shall honor the written
direction of benefits provided by an insured
on a prospective basis.
When looking at the intent of Kentucky’s General
Assembly, we conclude that the purpose and intent of KRS 304.39241 differs greatly from that of KRS 304.39-240.
First, the
change in the title of “Assignment of Benefits” to “Insured’s
direction of payment of benefits among the different elements of
loss” is evident that the General Assembly did not contemplate
that KRS 304.39-241 would provide for assignments.
3
Furthermore,
KRS 304.39-240, provided that:
An assignment of or agreement to assign any right to
benefits under this subtitle for loss accruing in the
future is unenforceable except as to benefits for:
(a) Work loss to secure payment of alimony,
maintenance, or child support; or
(b) Medical expense to the extent the benefits are
for the cost of products, services, or accommodations
provided or to be provided by the assignee.
-8-
the assignment language that was provided in KRS 304.39-240 was
deleted from the statute.
The language used in KRS 304.39-241
states that “an insured may direct the payment of benefits among
the different elements of loss.”
Because the assignment
language was omitted and replaced with the ability of the
insured to “direct the payment of benefits,” there was no
legislative intent to give a medical provider a mechanism by
which to bring a direct action based on an assignment.
Therefore, the assignment made to LDC pursuant to the “Agreement
to Pay and Assignment of Benefits” form is invalid.
Accordingly, the circuit court correctly determined that LDC
lacked standing to assert its claims against State Farm and Farm
Bureau based on the “Agreement to Pay and Assignment of Benefits
Form.”
Furthermore, LDC incorrectly relies on Phoenix
Healthcare of Kentucky, L.L.C. v. Kentucky Farm Bureau Mutual
Insurance Co., 120 S.W.3d 726 (Ky.App. 2003), to assert that a
medical provider can bring a direct action against an insurer
based on an assignment.
While Phoenix Healthcare involved a
patient who assigned her rights to receive PIP benefits to a
medical provider who performed an MRI after the patient was
involved in an automobile accident, it did not address whether
the assignment was valid.
Id.
The issue presented in Phoenix
Healthcare was whether the Motor Vehicle Reparations Act
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provided the exclusive remedy for an insurer’s late payment or
whether punitive damages could be provided under the Unfair
Claims Settlement Practices Act.
Id.
Thus, LDC’s reliance upon
Phoenix Healthcare is misplaced.
Furthermore, in the State Farm case, LDC contends that
the circuit court incorrectly determined that State Farm had no
obligation to pay LDC pursuant to KRS 304.39-210.
Specifically,
LDC asserts that the “Agreement to Pay and Assignment of
Benefits” form it supplied to State Farm was “reasonable proof”
of the fact that a medical expense had been incurred and the
amount of the loss, and thus State Farm was obligated to pay LDC
as soon as it received the bill in April 2003.
Therefore, LDC
contends that State Farm’s payment is overdue and in violation
of KRS 304.39-210(1).
We disagree.
KRS 304.39-241 provides that “[a]n insured may direct
the payment of benefits among the different elements of loss, if
the direction is provided in writing to the reparation obligor.”
KRS 304.39-210(1) further provides that, “[m]edical expense
benefits may be paid by the reparation obligor directly to
persons supplying products, services, or accommodations to the
claimant, if the claimant so designates.”
Additionally, KRS
304.39-210(1) states that, “[b]enefits are overdue if not paid
within thirty (30) days after the reparations obligor receives
reasonable proof of the fact and amount of loss
-10-
realized . . . .”
Thus, the question becomes whether State Farm
received “reasonable proof of the fact and amount of loss
realized” when LDC sent State Farm an invoice with the
“Agreement to Pay and Assignment of Benefits” form.
We believe
that these forms did not constitute “reasonable proof.”
As correctly determined by the circuit court,
“reasonable proof of the fact and amount of loss realized” was
not provided until Hughes submitted his PIP application.
Because State Farm had not received Hughes’ PIP application and
medical authorization form when LDC sent its invoice, State Farm
neither had an obligation nor the authority to pay LDC’s claim.
Furthermore, State Farm never received a directive from Hughes
to distribute his PIP benefits to LDC.
Additionally, if State
Farm had paid LDC’s bill prior to Hughes submitting his PIP
application and without the specific direction from Hughes,
State Farm would have risked being sued by Hughes.
Accordingly,
without receiving the directive provided by Hughes through the
PIP application and medical authorization form, State Farm had
no duty or obligation to pay LDC’s claim.
Thus, the Fayette
Circuit Court correctly determined that LDC had no standing to
assert its claim against State Farm.
For the foregoing reasons, we affirm the orders of the
Fayette Circuit Court.
-11-
ALL CONCUR.
BRIEFS FOR APPELLANT:
David Enlow
Tracey S. Enlow
Lexington, Kentucky
BRIEF FOR APPELLEE, KENTUCKY
FARM BUREAU MUTUAL INSURANCE
COMPANY:
Guy R. Colson
Christina L. Vessels
Lexington, Kentucky
BRIEF FOR APPELLEE, STATE FARM
MUTUAL AUTOMOBILE INSURANCE
COMPANY:
Douglas L. Hoots
Tyler Griffin Smith
Lexington, Kentucky
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