Opinion ID: 2337711
Heading Depth: 1
Heading Rank: 1

Heading: the case against state farm.

Text: LDC filed the first case against State Farm Mutual Automobile Insurance Company. State Farm issued an automobile insurance policy to Donald Hughes. The policy contained, in part, mandatory no-fault (also known as personal injury protection, (PIP)) coverage of $10,000 in BRB. Hughes claimed that he was injured in an automobile accident and asserted a claim to recover his no-fault benefits. KRS 304.39-241 provides that [a]n insured may direct the payment of benefits among the different elements of loss, [2] 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. Under KRS 304.39-241, Hughes directed that his no-fault benefits be distributed initially to satisfy his lost wages; and he directed that any remaining funds be paid toward his outstanding medical expenses. After Hughes's initial directive, he sent a modified directive by which he requested that State Farm pay benefits to a specific healthcare provider for surgery. The letter further directed that after payment of the surgical bill, the remaining benefits should be apportioned for satisfaction of lost wages. Once State Farm paid the surgical bill and lost wages, it had paid out the full $10,000 of no-fault benefits. There was no money left to pay medical expenses from other medical providers, including two bills that LDC submitted to State Farm for medical services rendered to Hughes after his automobile accident. One bill was in the amount of $1,152; and the other was in the amount of $1,242, for a total of $2,394. LDC submitted the bills to State Farm before Hughes asserted his claim to State Farm for his no-fault benefits and provided his written direction for payment of those benefits. At the time LDC rendered the medical services to Hughes, it requested that he sign a form entitled, Agreement to Pay and Assignment of Benefits. The form stated, in part, as follows: I understand that LDC will attempt to collect funds for the benefit of the patient or me. However, in the event the insurance (except workers' compensation) delays payment for longer than 45 days, LDC will expect payment from me, even if I have insurance coverage or if any other person or entity will ultimately pay for the patient's services. I understand that I am ultimately responsible for this bill. . . . . 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 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. Hughes initialed the blank in the provision pertaining to KRS 304.39-241 and signed the form. LDC relied on the direction and the assignment in filing suit against State Farm for payment of Hughes's outstanding medical expenses from his no-fault benefits. State Farm filed a motion for summary judgment or, in the alternative, to dismiss. In its motion, State Farm requested that the district court dismiss or grant summary judgment in its favor because (1) State Farm paid its policy limits as directed by Hughes, the insured; (2) the assignment of benefits was not enforceable against State Farm; (3) State Farm was not a party to the assignment of benefits; (4) LDC has no standing under the MVRA to pursue a claim; and (5) regardless, KRS 304.39-241, which pertains to the direction of payment of benefits, overrides any rights that might otherwise be available under the assignment. About two months after State Farm's motion for summary judgment/motion to dismiss, LDC filed a motion for summary judgment. The district court granted State Farm's motion to dismiss. LDC appealed, and the circuit court affirmed the district court's order of dismissal. The Court of Appeals granted discretionary review and held that, under the circumstances, LDC simply lacked standing to assert a claim by attempted assignment against State Farm.