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 Virginia delegate asked whether a person treated by a chiropractor could assign medical benefits payable under an automobile insurance policy to that chiropractor. The delegate also asked whether the insurer could enforce a policy term barring that assignment. The Attorney General answered that the described assignment is enforceable and that a clause limiting or prohibiting it is unenforceable so long as the assignment does not materially alter the insurer's risk or obligation.

A valid assignment requires the policyholder to give up control of the assigned benefit and any right to revoke the assignment. The opinion says an assignment of a contractual right may fail if it materially changes the obligor's duty, is forbidden by statute, conflicts with public policy, or is validly barred by contract. For the benefits in this request, the cost of the chiropractor's services stays the same whether the insurer pays the patient or the chiropractor. The opinion also says Virginia law recognizes assignments of contractual rights, including payments under certain insurance contracts.

The timing of the assignment matters. A transfer of an insurance policy before a loss can change the insurer's risk, so courts have enforced clauses barring those transfers. An assignment of benefits after the loss transfers an existing claim for payment. The opinion says such assignments usually remain valid despite a policy clause barring assignments, because they do not materially increase the insurer's risk or obligation and public policy favors transfer of an established claim.

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.

Check the current law and the policy's terms before relying on this opinion for a present claim.

Common questions

Can I direct my auto insurer to pay my chiropractor?
The opinion says a policyholder may assign covered automobile medical benefits to a chiropractor who provided the covered treatment. It addresses the assignment of benefits payable after a loss, subject to the assignment not materially altering the insurer's risk or obligation.

What makes the assignment valid?
The policyholder must not retain control over the assigned benefit or a right to revoke the assignment. The opinion also sets out other possible limits on assignment of contractual rights, including a material change to the insurer's duty.

Why does the cost of treatment matter?
The opinion says the insurer's obligation is not materially increased when the cost of the services remains the same whether payment goes to the insured or the chiropractor.

Does a policy clause that forbids assignments change the answer?
For the post-loss medical-benefits assignment described in the request, the Attorney General says the clause is unenforceable so long as the assignment does not materially alter the insurer's risk or obligation. The opinion distinguishes transfers of an insurance policy before a loss, for which courts have enforced anti-assignment clauses.

Does this opinion decide assignments under health insurance policies?
The request and response concern medical benefits payable under automobile insurance policies. The opinion does not analyze health insurance coverage or resolve a health policy's assignment terms.

Background and statutory framework

The opinion first states the general rule that a person assigning a claim must surrender control and the right to revoke. It then considers whether assigning the described automobile medical benefits materially changes the insurer's duty, is barred by law, conflicts with public policy, or is validly barred by contract. The opinion finds no material increase in the insurer's obligation: the cost of covered services is the same regardless of who receives payment. It also says Virginia law recognizes assignments of contractual rights, including certain insurance payments.

On policy restrictions, the opinion distinguishes an assignment of the policy before a loss from an assignment of benefits after a loss. The latter is a transfer of a claim for payment, and the opinion says public policy favors the ability to transfer that claim. Its conclusion is limited by the condition that the assignment not materially alter the insurer's risk or obligation.

Citations

• Va. Code § 2.2-505

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