February 23, 2010

The Alaska Supeme Court Rules That Personal Injury Claims Are Not Assignable

In a recent decision, Mat-Su Regional Medical Center, LLC v. Burkhead, the Alaska Supreme Court held that a patient could not assign their personal injury claim for recovery of her medical expenses to her health-care provider.

In Burkhead, a patient received medical services at a hospital after an automobile accident. During her treatment, she signed two “Consent: Authorization, Assignment, and Acknowledgment” forms in which she ostensibly assigned to the hospital “all rights to or claims for payment against third parties” for the reasonable value of medical services rendered. The hospital subsequently attempted to intervene in the patient’s personal injury lawsuit and filed its own suit against the tortfeasor. In both cases, the hospital sought to recover the expenses it incurred in treating the patient from the tortfeasor directly and pursuant to the patient’s purported assignment.

The Alaska Supreme Court held that the patient’s purported assignment of her personal injury claim to the hospital was not valid. The court explained that

the assignment of personal injury claims is socially problematic given the potential for overreaching when injured assignees bargain away some or all of their rights under the equivalent of at least economic, if not physical or mental, duress. Any benefits potentially derived by expanding the remedies available to mandatory providers of emergency services would seem to be outweighed by the risk that the routine collection of such assignments from emergency room patients would increase the potential for duress and decrease the likelihood of a fully informed assignment.

Id. at 5. As such, and because health-care providers had the ability under Alaska law to file a lien against any recovery by the patient from the tortfeasor, the court refused to recognize the assignment of the patient’s personal injury claim to the hospital:

Given that our legislature has provided an effective, albeit limited, lien remedy, the social ramifications of allowing such assignments, and health care providers' continued ability to collect from their own patients as creditors, we think it should be for the legislature to decide whether to recognize assignments of patients' personal injury claims.
Id. at 6.

The Alaska Supreme Court’s decision may have unintended consequences for the subrogation rights of insurers and health-care providers in Alaska. Litigants may attempt to rely on Burkhead to argue that unless a statute expressly assigns all or part of a personal injury claim to the insurer, employer or other entity, any contractual assignment of that right will not be valid.

The Burkhead ruling may also have an impact in legal malpractice cases. The Alaska Supreme Court has not squarely held that a legal malpractice claim may be assigned. It, however, did not disapprove of the practice in Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 286 (Alaska 1980) and Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin, 828 P.2d 745, 758 (Alaska 1992) superseded by statute on a different issue as stated in Petrolane Inc. v. Robles, 154 P.3d 1014 (Alaska 2007).

In holding that a patient could not assign her personal injury claim to a health-care provider, the Burkhead court, however, noted that it has “long recognized a ‘general rule of non-assignability of claims for personal injury’ under Alaska law” and that [t]he majority of jurisdictions around the country have similarly declined to recognize the validity of assignments of tort claims for personal injury….” The court’s general disapproval of assignment of personal injury claims could support the argument that the assignment of a legal malpractice claims is not valid, given that a legal malpractice claim is a type of personal injury claim.