Allstate Insurance Co. v. Medical Lien Management, Inc.
348 P.3d 943
Colo.2015Background
- Medical Lien Management, Inc. (MLM) agreed with accident victim Fred Martinez to pay for medical treatment in exchange for a “Lien and Security Agreement” purporting to give MLM a lien on any proceeds from Martinez’s personal injury claim equal to MLM’s fees and costs.
- MLM sent Allstate (insurer of the tortfeasor) a “Notice of Lien or Assignment of Proceeds” instructing Allstate to pay MLM directly; MLM later paid $9,938 for Martinez’s care.
- Martinez settled his claim in 2008 and Allstate paid Martinez directly, not MLM; Martinez failed to reimburse MLM as required by the Agreement.
- MLM sued Martinez (contract, account stated, unjust enrichment) and Allstate (breach of assignment). District court dismissed the breach-of-assignment claim against Allstate under C.R.C.P. 12(b)(5), finding no effective assignment of Martinez’s proceeds.
- The court of appeals reversed, finding the Agreement evidenced a present transfer of Martinez’s future recovery (to the extent of MLM’s charges) and that Allstate had notice of the assignment.
- Colorado Supreme Court granted certiorari and reversed the court of appeals, holding the Agreement failed to assign either an existing contract right or a determinable portion of the future proceeds so as to be enforceable against Allstate.
Issues
| Issue | Plaintiff's Argument (MLM) | Defendant's Argument (Allstate) | Held |
|---|---|---|---|
| Whether the Lien and Security Agreement effected an assignment of Martinez’s future personal-injury recovery enforceable against the obligor (Allstate) | Agreement granted MLM a present transfer of rights to future proceeds equal to MLM’s fees and costs; Notice put Allstate on notice | Agreement did not assign an existing or determinable portion of proceeds; at most authorized direct payment or created a promise to assign | Reversed court of appeals: agreement did not effect an assignment enforceable against Allstate because it failed to identify an existing right or a determinable portion of proceeds |
| Whether proceeds of a personal-injury claim can be assigned before settlement/judgment so as to bind the obligor | Proceeds of litigation are assignable pre-judgment under certain authorities; assignment to MLM fits that theory | Even if pre-judgment proceeds can be assigned in some cases, the Agreement here did not identify a specific fund or determinable share and thus imposed unacceptable burden/risk on obligor | Court declined to resolve general assignability of pre-judgment proceeds but found the Agreement’s language too indefinite to bind Allstate |
| Whether a purported assignment that requires obligor to determine the assignee’s entitlement is permissible | MLM: any disputes can be resolved by interpleader or joining parties; obligor’s burden is manageable | Allstate: requiring insurer to calculate/verify indebtedness increases burden/risk and could expose insurer to bad-faith exposure to its insured | Held such an ill-defined assignment imposes an impermissible additional burden/risk on the obligor and is ineffective against the obligor |
| Whether MLM pleaded an enforceable contract to make a future assignment (equitable assignment/specific performance) | MLM disclaimed reliance on contract-to-assign theory before this Court | Allstate argued MLM did not plead an enforceable promise to assign or seek specific performance | Court noted MLM did not plead contract-to-assign or seek specific performance; declined to treat the Agreement as an enforceable future-assignment contract against Allstate |
Key Cases Cited
- Denver Post Corp. v. Ritter, 255 P.3d 1083 (Colo. 2011) (documents integral to complaint considered on Rule 12 motions)
- Condo v. Conners, 266 P.3d 1110 (Colo. 2011) (court may consult Restatement principles on assignment)
- Parrish Chiropractic Ctrs., P.C. v. Progressive Cas. Ins. Co., 874 P.2d 1049 (Colo. 1994) (non-assignment clauses in insurance policies enforceable when assignment would materially increase insurer’s burden)
- People v. Adams, 243 P.3d 256 (Colo. 2010) (assignments involving personal trust/confidence or personal service disallowed)
- Kruse v. McKenna, 178 P.3d 1198 (Colo. 2008) (discussion of assignability and descendibility)
- Micheletti v. Moidel, 32 P.2d 266 (Colo. 1934) (historical treatment of assignability of causes of action)
- Goodson v. American Standard Ins. Co. of Wisconsin, 89 P.3d 409 (Colo. 2004) (third-party bad-faith exposure when insurer acts unreasonably toward insured)