Can a Virginia driver assign medical benefits from their auto insurance policy to a chiropractor who treats them, and are 'no assignment' clauses in the policy enforceable?

Plain-English summary

A delegate asked the AG about a common medical billing arrangement: a person hurt in an auto accident gets chiropractic treatment, and they sign an "assignment of benefits" form telling the auto insurer to pay the chiropractor directly out of medical payments coverage. Two questions: is that assignment enforceable, and if the auto policy contains a clause prohibiting assignments, does that clause work?

The AG said the assignment is enforceable, and the no-assignment clause is not.

Virginia's general assignment rule comes from common law and statute. To make a valid assignment, the assignor must not retain control or the right to revoke. Kelly Health Care, Inc. v. Prudential Ins. Co. of Am., Inc., 226 Va. 376 (1983); Lataif v. Com. Indus. Const., Inc., 223 Va. 59 (1982). An assignment of a contractual right will be enforced unless it materially changes the obligor's duty, is forbidden by statute, is contrary to public policy, or is validly precluded by contract.

For automobile medical benefits assigned to a treating chiropractor:

• Material change? No. The cost of services stays the same regardless of whether the insured or the chiropractor receives the check.
• Forbidden by statute? No. The opinion notes that the Code expressly recognizes assignments of contractual rights, including payments under certain insurance contracts.
• Contrary to public policy? No. Because Virginia law affirmatively provides for these assignments, they can't be deemed against public policy.
• Validly precluded by contract? This is where the no-assignment clause comes in.

On contractual prohibitions: Virginia (and most jurisdictions) distinguishes between pre-loss assignments and post-loss assignments. Pre-loss assignments transfer a contractual relationship and can materially change the insurer's risk, so anti-assignment clauses for pre-loss transfers are generally enforceable. Post-loss assignments transfer a money claim (a chose in action) and do not increase the insurer's risk, so anti-assignment clauses are generally unenforceable as against public policy. Aetna Ins. Co. v. Aston, 123 Va. 327 (1918). The medical benefits assignment in the question is a post-loss assignment.

The opinion specifically distinguished health insurance, where some jurisdictions have upheld anti-assignment clauses (e.g., Parrish Chiropractic v. Progressive Cas. Ins. Co., 874 P.2d 1049 (Colo. 1994)), as raising different policy considerations not implicated here.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Insurance contract law and Virginia case law on assignment of benefits continue to develop, especially as health insurance, auto insurance, and provider network arrangements interact. Anyone relying on this opinion should check current case law and statutory text before acting on it.

Common questions

What is an "assignment of benefits"?
A form, usually signed at the start of medical treatment, in which the patient tells the insurer to pay the medical provider directly. The provider takes the patient's right to collect from the insurer in exchange for the convenience of not requiring the patient to pay up front and then wait for reimbursement.

What's the difference between a "pre-loss" and "post-loss" assignment?
A pre-loss assignment changes who the insured party is before any covered event happens. That's a fundamental change in the insurer's risk pool because the new insured might have a different risk profile. A post-loss assignment happens after the event: the loss has occurred, the amount owed under the policy is calculable, and the assignment just transfers the right to receive that money. The amount the insurer owes doesn't change.

Why does the distinction matter?
Because Virginia courts (and most courts) consider post-loss assignments to be transfers of a "chose in action" (a right to sue or collect on a debt), and public policy strongly favors the free alienability of choses in action. Allowing insurers to block post-loss assignments would let them control who collects on a debt the insurer already owes, which is generally disfavored.

What does "material increase in the insurer's risk or obligation" mean?
It means the assignment changes the amount the insurer is on the hook for, or changes the risk profile. Paying the chiropractor instead of the patient does not change how much the insurer owes (the bill for chiropractic services is the same either way). So no material increase.

Does this apply to health insurance too?
The AG specifically said it does not address health insurance. Health insurance cases sometimes uphold anti-assignment clauses (the opinion cites Parrish Chiropractic, a Colorado case). The reasoning is different and depends on managed care contracts, network arrangements, and other factors not present in straightforward auto med-pay coverage.

Can my auto insurer refuse to pay the chiropractor directly?
Based on this opinion, if you've executed a valid assignment of post-loss benefits to the chiropractor and the assignment doesn't materially increase the insurer's risk or obligation, the insurer should honor it even if the policy says no assignments allowed. A dispute would be resolved by the courts, of course.

Does Virginia law back up these assignments?
Yes. The opinion notes that the Code expressly recognizes assignments of contractual rights, including payments under certain insurance contracts. Because the law affirmatively provides for these assignments, the AG concluded they cannot be deemed against public policy.

Background and statutory framework

The opinion organized assignment doctrine into a series of layered questions:

1. Valid assignment? Under Virginia common law, the assignor must surrender all control and the right to revoke. Kelly Health Care, Inc., 226 Va. 376 (1983); Nusbaum & Co. v. Atlantic Realty, 206 Va. 673 (1966); Lataif, 223 Va. 59 (1982).

2. Enforceable under Restatement criteria? Under Restatement (Second) of Contracts § 317(2), assignments will be enforced unless they (a) materially change the obligor's duty, (b) are forbidden by statute, (c) are contrary to public policy, or (d) are validly precluded by contract.

3. Statutory framework. The opinion states that the Code expressly recognizes assignments of contractual rights, including payments under certain insurance contracts, without giving specific section numbers.

4. Anti-assignment clauses. The pre-loss vs. post-loss distinction comes from Aetna Ins. Co. v. Aston, 123 Va. 327 (1918), and is supported by the treatise Couch on Insurance 3d §§ 35:7, 35:8. Pre-loss anti-assignment clauses are valid because the transfer materially changes risk; post-loss anti-assignment clauses are generally void as against public policy because they restrict alienability of an established money claim.

A Henrico Circuit Court case from 1983, Crothall Hosp. Servs., Inc. v. Barham, 1 Va. Cir. 403, applied the post-loss rule in a hospital services context.

Citations

• Restatement (Second) of Contracts § 317(2) (1981)
• Kelly Health Care, Inc. v. Prudential Ins. Co. of Am., Inc., 226 Va. 376, 379, 309 S.E.2d 305, 307 (1983)
• Nusbaum & Co. v. Atlantic Realty, 206 Va. 673, 681, 146 S.E.2d 205, 210 (1966)
• Lataif v. Com. Indus. Const., Inc., 223 Va. 59, 62, 286 S.E.2d 159, 160 (1982)
• Aetna Ins. Co. v. Aston, 123 Va. 327, 333, 96 S.E. 772, 774 (1918)
• Crothall Hosp. Servs., Inc. v. Barham, 1 Va. Cir. 403, 406-07 (Henrico Cir. 1983)
• Parrish Chiropractic v. Progressive Cas. Ins. Co., 874 P.2d 1049 (Colo. 1994)
• 3 Steven Pitt, Daniel Maldonado & Joshua D. Rogers, Couch on Insurance 3d §§ 35:7, 35:8 (2009)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2010/10-066-Janis.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

September 24, 2010

The Honorable Bill Janis
Member, House of Delegates
Post Office Box 3703
Glen Allen, Virginia 23058-3703

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

Dear Delegate Janis:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You ask whether assignments of medical benefits payable under automobile insurance policies are enforceable where the policyholder assigns these benefits to a chiropractor who provided treatment covered by the policy. You also inquire whether clauses in automobile insurance policies that seek to bar these kinds of assignments are enforceable.

Response

It is my opinion that assignments of medical benefits payable under automobile insurance policies where the policyholder assigns these benefits to a chiropractor who provided treatment covered by the policy are enforceable. It is further my opinion that provisions of insurance contracts seeking to limit or preclude this kind of assignment are unenforceable so long as the assignment does not materially alter the risk or obligation of the insurer.

Applicable Law and Discussion

Generally, to effect a valid assignment, the assignor must not retain any control over the fund, property or other chose in action assigned or retain any right to revoke the assignment. An assignment of a contractual right will be enforced unless it materially changes the duty of the obligor, is forbidden by statute, is contrary to public policy, or is validly precluded by contract.

With regard to your first inquiry, assignments of the benefits you describe do not materially increase the insurer's obligation, because the costs of services remain the same regardless of whether the insured or the chiropractor is paid. Moreover, such assignments are not forbidden by any statute or case in Virginia. The Code expressly recognizes assignments of contractual rights, including payments under certain insurance contracts. As such, because Virginia law provides for these assignments, they cannot be deemed inoperative on grounds of public policy. I therefore conclude that, unless the assignment is validly precluded by the insurance agreement itself, the assignment you describe is enforceable under Virginia law.

You next inquire whether a clause in an insurance contract prohibiting the assignment of benefits would be enforceable under Virginia law. A distinction traditionally has been made between an assignment of an insurance policy before a loss is sustained and an assignment of benefits after the loss occurs. Courts have enforced contractual provisions prohibiting pre-loss assignments because pre-loss assignments involve a transfer of a contractual relationship that in most cases would materially increase the risk to the insurer, are enforceable. By contrast, assignments of post-loss benefits usually are found to be valid regardless of any non-assignment clause in the policy. This rule is explained by the fact that (1) post-loss assignments of the benefits due under the policy are viewed as transfers of a chose in action and public policy favors the free alienability of choses in action, and (2) such assignments would not materially increase the insurer's risk or obligation under the policy.

Conclusion

Accordingly, it is my opinion that assignments of medical benefits payable under automobile insurance policies where the policyholder assigns these benefits to a chiropractor who provided treatment covered by the policy are enforceable. It is further my opinion that provisions of insurance contracts that seek to limit or to preclude this kind of assignment are unenforceable as long as the assignment does not materially alter the risk or obligation of the insurer.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General