Dameron Hospital Association v. State Farm Mutual Automobile Insurance Company

Filing 78

ORDER signed by Judge Garland E. Burrell, Jr on 10/9/12 ORDERING Plaintiff's motion for partial summary judgment 30 is DENIED, and Defendant's motion for summary judgment 22 is GRANTED. Judgment shall be entered in favor of State Farm. CASE CLOSED.(Matson, R)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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DAMERON HOSPITAL ASSOCIATION, a
California Non-Profit
Association,
Plaintiff,

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v.

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STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,

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Defendant.
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2:10-cv-03396-GEB-JFM
ORDER ON CROSS-MOTIONS FOR
SUMMARY JUDGMENT

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Pending are cross-motions for summary judgment on Plaintiff

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Dameron Hospital Association (“Dameron”)’s complaint. A tentative ruling

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was filed on September 10, 2012, granting summary judgment sua sponte in

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favor of Defendant State Farm Mutual Automobile Insurance Company

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(“State

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Conditions of Admission forms did not assign a patient’s automobile

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insurance benefits as Dameron argued. (ECF No. 72.) Both parties filed

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responses to the tentative ruling. (ECF Nos. 74-75, 77.) The September

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10, 2012 tentative ruling is not adopted; instead, the following order

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issues.

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Farm”)

since

certain

language

contained

in

the

relevant

I. BACKGROUND

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Dameron alleges in its Complaint that it provided emergency

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medical treatment to three individuals who were involved in automobile

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accidents and had automobile insurance coverage through State Farm.
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Dameron alleges each individual assigned his or her automobile insurance

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benefits to Dameron as a condition of admission; Dameron notified State

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Farm of the assignments; and State Farm refused to pay Dameron. Dameron

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seeks money damages from State Farm in the amount of $44,714 plus

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interest and declaratory relief concerning State Farm’s alleged failure

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to honor the assignments of benefits. Dameron also seeks an injunction

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against State Farm under California’s Unfair Competition Law (“UCL”),

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California

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concerning State Farm’s failure to honor the assignments.

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Business

and

Professions

Code

section

17200

et

seq.,

Dameron seeks partial summary judgment on its failure to honor

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assignments

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Dameron’s claims, arguing, inter alia, the three automobile insurance

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policies at issue expressly prohibit the insureds from assigning their

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benefits without State Farm’s written consent, and State Farm did not

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provide written consent to the purported assignments.

claim.

State

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Farm

seeks

summary

judgment

on

both

of

II. LEGAL STANDARD

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When deciding cross-motions for summary judgment, each motion

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is evaluated on its own merits, “taking care in each instance to draw

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all reasonable inferences against the party whose motion is under

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consideration.” B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587,

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592 (6th Cir. 2001); Bryan v. McPherson, 630 F.3d 805, 823 (9th Cir.

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2010) (stating “all reasonable inferences must be drawn in favor of the

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non-moving party”).

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Concerning Plaintiff’s motion, as the party who “bear[s] the

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burden of proof at trial, ‘it must come forward with evidence which

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would

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uncontroverted at trial.’” C.A.R. Transp. Brokerage Co., Inc. v. Darden

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Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quoting Houghton v.

entitle

it

to

a

directed

2

verdict

if

the

evidence

went

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South,

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[Plaintiff] has the initial burden of establishing the absence of a

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genuine issue of fact on each issue material to its case.” Id. (citation

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omitted). “Once [Plaintiff] comes forward with sufficient evidence, ‘the

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burden then moves to [Defendant], who must present significant probative

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evidence tending to support its claim or defense.’” Id. (quoting Intel

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Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir.

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1991)).

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965

F.2d

1532,

1536

(9th

Cir.

1992)).

“In

such

a

case,

When the defendant is the moving party and is seeking summary
judgment on one or more of a plaintiff’s claims, the defendant

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has both the initial burden of production and the
ultimate burden of persuasion on [the motion]. In
order to carry its burden of production, the
[defendant] must either produce evidence negating
an
essential
element
of
the
[plaintiff’s]
claim . . . or show that the [plaintiff] does not
have enough evidence of an essential element to
carry its ultimate burden of persuasion at trial.
In order to carry its ultimate burden of persuasion
on the motion, the [defendant] must persuade the
court that there is no genuine issue of material
fact.

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Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099,

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1102 (9th Cir. 2000) (citations omitted).

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III. UNCONTROVERTED FACTS
A.

The Patient Accounts and Corresponding Automobile Insurance

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Coverage at Issue

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This case concerns the following Dameron patient accounts and

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corresponding State Farm policy numbers: Michael G., Dameron account

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number *****0549 ($4,764.00), State Farm policy number 1147-196-55

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(“Insured One”); Irma P., Dameron account number *****6610 ($37,768.39),

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State Farm policy number 1843-27S-05A (“Insured Two”); and Dep N.,

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Dameron account number *****5185 ($2,181.46), State Farm policy number
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112 9678-C25-55B (“Insured Three,” and collectively, “Insureds”). (State

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Farm’s Separate Statement of Undisputed Material Facts in Support of

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Mot. for Summ. J., ECF No. 24 (“State Farm’s SUF”) # 17-18, 29-30 & 45-

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46; Dameron’s Separate Statement of Undisputed Material Facts in Support

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of its Mot. for Summ. J., ECF No. 30-1 (“Dameron’s SUF”) # 3.)

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“Insured One . . . was involved in an automobile accident on

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April

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$50,000/$100,000” on that date. (State Farm’s SUF # 17-18.) Insured One

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“was taken by ambulance . . . to Dameron.” Id. # 21.“[He] was diagnosed

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with a concussion . . . [and] Dameron noted that [he] had ‘mild

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intoxication clinically.’” (State Farm’s Statement of Additional Facts

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in Support of Opp’n to Dameron’s Mot. for Summ. J. (“State Farm’s Add’l

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Facts”) # 17-18.) “On April 15, 2010, State Farm settled Insured One’s

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uninsured motorist claim for $25,000, inclusive of any and all liens[,]”

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and “issued the settlement draft of $25,000 [on the same day], made

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payable to Insured One and his attorney . . . .” (State Farm’s SUF # 27-

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28.)

29,

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2009”

and

had

“uninsured

motorist

coverage

of

“Insured Two . . . was involved in an automobile accident on

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August

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$30,000/$60,000.” Id. # 29-30. Insured Two was taken by ambulance to

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Dameron,

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concussion unknown loss of consciousness (unknown LOC), ADDITIONAL:

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Cervical strain (whiplash), Hand contusion/ABRASION, Scalp laceration.

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Subarachnoid hemorrhage–traumatic.’” Id. # 34 & 37. “On February 16,

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2010, State Farm issued [a] settlement draft in the amount of $30,000,

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made payable to Insured Two and her attorney, in settlement of Insured

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Two’s uninsured motorist claim.” Id. # 43.

6,

2008”

where

she

and

“was

had

“uninsured

diagnosed

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4

as

motorist

follows:

‘Head

coverage

injury

of

with

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“Insured Three . . . was involved in an automobile accident on

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April 22, 2006.” Id. # 45. Insured Three had “uninsured motorist

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coverage of $250,000/$500,000” and “medical payments coverage of $5,000

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per person.” Id. # 46-47. Insured Three complained of pain to her neck,

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chest, and back, and was taken by ambulance to Dameron. Id. # 48-49. In

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2007, State Farm paid Insured Three’s medical payments coverage limit of

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$5,000.00 and an additional $5,000.00 as settlement for her uninsured

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motorist claim to Insured Three and her attorney. Id. # 60-62.

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B.

Conditions of Admission Forms
At

Dameron,

each

insured

was

presented

a

Conditions

of

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Admission form. Id. # 22, 35, 50. Insureds One and Two signed the form.

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Id. # 23, 36. Insured Three did not sign the form. (Dameron’s Conditions

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of Admission form, page 2, attached as Bates No. 23 to Dameron’s

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Separately Bound Evidence in Supp. of its Mot. for Summ. J. (“Dameron’s

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Evid.”), ECF No. 30-2, page 25.) “Dameron’s admitting staff member noted

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on the . . . form that Insured Three was ‘unable’ to sign [it].” (State

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Farm’s SUF #51.) “Insured Three’s emergency room record from Dameron

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stated that she is non-English speaking.” Id. # 52.

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Dameron’s

person

most

knowledgeable

concerning

Dameron’s

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policies and procedures used by admitting staff to obtain signatures on

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its Conditions of Admission forms, Craig Haupt, testified as follows

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concerning the timing of when hospital staff presents patients with the

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Conditions of Admission form for signature:

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Q.
Now, what are the policies and procedures
of the clerks who obtain signatures on the
Conditions of Admission forms to follow in the
obtaining of that signature?

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A.
Well, once medical staff clears that the
patient is stable enough to sign it, they would
present it to the patient for signature.

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. . . .

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[O]nce the clerk is told that the patient is able
to sign it, then they would present it for
signature.

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. . . .

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Doesn’t have to be a doctor; it could it could be
the nurse; it could be the triage nurse. Or if the
patient is not emergent and goes straight to the
window, it could be at that time.

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. . . .
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The procedure, if a patient is stable, they will
present it to the patient for signature.

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If a patient isn’t stable, at a time when the
patient becomes stable and the physician and/or
nurse or medical staff let the admitting clerk know
that the patient is stable, they will then give it
to them at that point.

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(Dep. of Craig Haupt, ECF No. 64, 106:22-107:2, 107:9-11, 107:16-19,

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110:11-17.)1 Mr. Haupt also testified that it is important to get

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signatures

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[patient’s] consent, and it’s important to get consent when we can.” Id.

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at 119:17-21.

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on

Conditions

of

Admission

because

that

form

“is

the

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Insured Two’s Conditions of Admission form indicates that it

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was signed at 12:48 p.m. on August 6, 2008. (Dameron’s Evid. Bates No.

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17.) Insured Two’s billing records include dates of service for medical

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treatment at Dameron from August 6, 2008 through August 9, 2008. Id.

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Bates Nos. 26-28. Insured Three’s Conditions of Admission form indicates

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it was presented to her for signature at 10:33 p.m. on April 22, 2006.

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Id. Bates No. 23. Insured Three’s billing records include dates of

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“Federal Rule 56(c)(3) provides that the court ‘may’ consider
materials in the record that were not specifically cited by either
party.” Ward v. Vilsak, No. 2:10-cv-00376 KJM KNJ PS, 2011 WL 6026124,
at *3 (E.D. Cal. Dec. 2, 2011).
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service for medical treatment at Dameron on April 22, 2006 and April 23,

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2006. Id. Bates No. 35.

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C.

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State Farm’s Change of Interest Clause
Each Insured’s State Farm automobile insurance policy contains

the following language:

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CONDITIONS

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1.

Policy Changes

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. . . .

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b.

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Change of Interest. No change of
interest in this policy is effective
unless
we
consent in
writing.
However, if you die, we will protect
as named insured, except under
death, dismemberment and loss of
sight, total disability and loss of
earnings coverages:

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(1)

your surviving spouse:

(2)

any person with proper custody
of your car, a newly acquired
car or a temporary substitute
car
until
a
legal
representative is qualified;
and then
the legal representative while
acting within the scope of his
or her duties.

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(3)
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Policy notice requirements are met
by mailing the notice to the
deceased named insured’s last known
address.

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(State Farm’s SUF # 1-3.)

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State

Farm

did

not

consent

in

writing

to

the Insureds’

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purported assignment of automobile insurance benefits to Dameron. Id. #

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4-6.

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IV. DISCUSSION

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Under California law, “[an] assignee [of money due under a

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contract] may recover from the debtor of the assignor with notice, upon
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allegation and proof that the debtor, after notice, paid the assignor.”

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St. Paul Fire & M. Ins. Co. v. James I. Barnes Const. Co., 59 Cal. 2d

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691, 692 (1963). However, “contracts may expressly provide that [they]

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are not to be assigned, or [they] may contain equivalent provisions; in

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either case [they] cannot be assigned.” 1 Witkin, Summary of Cal. Law

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(10th ed. 2005), Contracts § 713, p. 799 (citing Henkel Corp. v.

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Hartford Accident & Indem. Co., 29 Cal. 4th 934, 943 (2003)). Therefore,

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the issue to be decided is whether State Farm’s “Change of Interest”

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clause contained in each Insured’s policy precluded the purported

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assignment of insurance benefits to Dameron.
State

Farm

argues

that

the

“Change

of

Interest”

clause

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contained in each Insured’s policy “expressly prohibits [the] insured

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from assigning his [or her] benefits unless State Farm provides written

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consent.” (State Farm’s Mem. of P.&A. in Supp. of its Mot. for Summ. J.

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(“State Farm’s Mot.”) 1:14-16.) State Farm further argues: “[h]ere,

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there was no written consent . . . [; t]herefore, as a matter of

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contract, any claim by Dameron against State Farm based upon . . . an

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assignment . . . should not be given affect, and liability against State

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Farm should not be imposed.” Id. at 1:16-20.

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Dameron rejoins that “an insurer cannot escape liability for

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losses existing at the time of assignment by refusing to consent to the

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assignment[; a]t that point, the indemnity is owed and it is up to the

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insured to designate to whom the money is payable.”(Dameron’s Opp’n to

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State Farm’s Mot. for Summ. J. (“Dameron’s Opp’n”) 4:27-5:2 (citations

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and emphasis omitted).) Dameron further argues:

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at the time the patient(s) presented to Dameron,
the loss had already occurred[; t]he patient[s] had
already suffered injuries in a car accident. Money
was “due or to become due under the” insurance
policy. . . . Thus, the patient[s] w[ere] free to
(and did) assign applicable insurance proceeds to
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Dameron. It is not up to State Farm to debate the
assignment.

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Id. at 6:1-8.

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Under California law, “parties to a contract may make an

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agreement restricting the assignability of rights created thereunder so

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long as they do not violate statutory provisions or general rules of

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policy.” Thomas v. Thomas, 192 Cal. App. 2d 771, 779 (1961)(citations

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omitted).

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nonassignment clauses - there is [a] strong policy in favor of the free

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transferability of all types of property, and the prohibition does not

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apply where all that remains to do under the contract is the payment of

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money.” Id. (internal citations omitted). The California Supreme Court

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applied these principles in the context of the assignment of insurance

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benefits in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.

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4th 934 (2003). Both Dameron and State Farm cite Henkel in support of

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their arguments.

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“The

courts,

of

course,

have

placed

certain

limits

on

In Henkel, “[P]laintiff Henkel . . . acquired the metallic

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chemical

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liabilities.” Id. at 938. Subsequently, a lawsuit was filed against

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Henkel “alleg[ing] injuries arising from exposure to metallic chemicals

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[over a seventeen year period]. Henkel tendered its defense to defendant

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insurers, whose policies had insured Amchem No. 1 during portions of

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[the alleged period of exposure] . . . .” Id. at 939. Henkel argued it

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acquired Amchem No. 1's liability benefits by assignment. Id. at 941-

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943. The California Supreme Court held:

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product

line

of

[Amchem

No.

1]

and

assumed

all

[w]hether or not Amchem No. 1 assigned any benefits
under the liability policies . . . , any such
assignment would be invalid because it lacked the
insurer’s consent. . . . [I]n this case there is no
dispute that each of the policies contained clauses
providing that there could be no ‘[a]ssignment of
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related

1
2

interest under the policy’ without the insurer’s
consent endorsed on the policy. Such clauses are
generally valid and enforceable.

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Id. at 943-44. Henkel argued insurer consent was not required because

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the “event giving rise to liability[,]” i.e. exposure to the metallic

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chemicals, occurred prior to the purported assignment. Id. at 944. The

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Court

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squarely rejected [Henkel’s] theory . . . , holding
instead that an assignment without the insurer's
consent may be allowed only “(1) when at the time
of the assignment the benefit has been reduced to a
claim for money due or to become due, or (2) when
at the time of the assignment the insurer has
breached a duty to the insured, and the assignment
is of a cause of action to recover damages for that
breach.”

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2 Couch on Insurance (3d ed. 2011) § 34:2 (quoting Henkel, 29 Cal. 4th

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at 983, 945)); see also Fluor Corp. v. Sup. Ct., 146 Cal. Rptr. 3d 527,

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537 (2012)(“Henkel rejected the view that . . . policy benefits can be

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assigned without consent once the event giving rise to [coverage under

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the policy] has occurred.”)

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In this case, each Insured’s policy states: “No change of

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interest in this policy is effective unless we consent in writing[,]”

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and it is undisputed that State Farm did not consent in writing to each

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Insured’s purported assignment of insurance benefits to Dameron. This

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policy language is similar to the anti-assignment clause at issue in

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Henkel. See Henkel, 29 Cal. 4th at 943; see also Star Windshield Repair,

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Inc.

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2009)(recognizing policy language identical to that contained in State

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Farms’ policies as an “anti-assignment clause”).

v.

Western

Nat’l

Ins.

Co.,

768

N.W.2d

346,

347

n.1

(Minn.

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Further, at the time of the alleged assignments, Dameron’s

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claim for benefits “had not been reduced to a sum of money due or to

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become due under the policy.” Henkel, 29 Cal. 4th at 944 (emphasis
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added). Dameron presents its Conditions of Admission form to patients as

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soon as they are cleared as “stable” by medical staff. At that point,

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the full nature and extent of the patients’ medical treatment to be

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provided by Dameron, and the cost of that treatment, is unknown. For

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example, Insured Two and Insured Three’s medical and billing records

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evince that they each received hundreds of dollars of medical treatment

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after they signed the Conditions of Admission forms.

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For the stated reasons, “whether or not [each subject Insured]

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assigned any benefits . . . to [Dameron], any such assignment would be

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invalid because it lacked [State Farm’s written] consent.” Henkel, 29

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Cal. 4th at 943. Therefore, summary judgment is granted in favor of

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State Farm on Dameron’s failure to honor assignment of benefits claim.

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Summary judgment is also granted on Dameron’s UCL claim since it is

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premised on the existence of valid assignments.

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IV. CONCLUSION

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Plaintiff’s motion for partial summary judgment (ECF No. 30)

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is DENIED, and Defendant’s motion for summary judgment (ECF No. 22) is

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GRANTED. Judgment shall be entered in favor of State Farm.

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Dated:

October 9, 2012

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GARLAND E. BURRELL, JR.
Senior United States District Judge

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