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MCHENRY v. METROPOLITAN LIFE INS. CO.

December 2, 1983

MCHENRY HOSPITAL, PLAINTIFF,
v.
METROPOLITAN LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Will, District Judge.

MEMORANDUM OPINION

This case comes before us on the motion of defendant Metropolitan Life Insurance Company (Metropolitan) for summary judgment or to dismiss this action. For the reasons hereinafter stated, that motion is denied.

Laverne Cybul (the insured) executed an individual health insurance policy with Metropolitan the effective date of which was October 4, 1980. During the period of the policy, the insured was a patient at McHenry Hospital (the Hospital), the plaintiff in this action. The insured signed three separate form agreements authorizing Metropolitan to make direct payments to the Hospital for treatment provided in connection with hospital admissions on January 11, 1981, February 1, 1981 and April 22, 1981. Each authorization form provided:

  I HEREBY AUTHORIZE PAYMENT directly to the below
  named hospital of the hospital insurance benefits
  otherwise payable to me but not to exceed the
  balance due of the hospital's regular charges for
  this period of hospitalization. I understand I am
  financially responsible to the hospital for
  charges not covered by this authorization.
                         /s/ Lavern Cybul
                        ------------------

According to an uncontested affidavit of a claims official of Metropolitan, one of the Hospital's employees was informed during a phone call to the defendant on the date of the insured's first admission that, as a result of the fact that the insured's policy was less than two years old and therefore "contestable", payments under the policy could not be guaranteed. A form was subsequently sent to the Hospital indicating the "Non Guarantee" status of the policy.

When the Hospital, in February 1981, forwarded its "Hospital Insurance Form" to Metropolitan for the services rendered to the insured, Metropolitan responded with a letter that stated:

  We have received an assignment of benefits payable
  under this policy for your services.

  Since additional information is required there
  will be a short delay in processing this claim.
  Every effort will be made to conclude this matter
  as soon as possible. [Emphasis added.]

The "additional information" was gathered by means of a "routine contestable period investigation" during the course of which it was allegedly discovered that the insured's policy application contained material omissions concerning her prior medical history.

On April 29, 1981, subsequent to her third hospital admission, the insured received a letter from Metropolitan listing the allegedly omitted medical facts and stating that the defendant "must consider the policy to be void from the date of issue." The letter enclosed a check refunding the policy premiums paid which the insured subsequently negotiated. The Hospital was informed of Metropolitan's position by a letter received on May 21, 1981 which stated:

  Benefits payable under this policy have been
  assigned to you by the insured. However, we find
  that no benefits are available; and, therefore, we
  are unable to honor the assignment. Please write to
  us or get in touch with our local office if you
  would like more information on this matter.
  [Emphasis added.]

The hospital filed this removed action in the Circuit Court of Cook County to recover from Metropolitan the insured's medical expenses incurred in connection with the three admissions between January and April 1981. The complaint, which is in three counts, seeks recovery of the expenses based on the insured's alleged assignment to the Hospital, contained in the Authorization Form, of the contract right to policy benefits (Count I); recovery of those expenses on the theory that Metropolitan is estopped to cancel the policy as a result of the Hospital's detrimental reliance on the policy's existence and/or based on Metropolitan's breach of the duty of good faith and fair dealing, allegedly owed to the Hospital (Count II); recovery of additional damages pursuant to Ill.Rev.Stat. ch. 73, § 767 for Metropolitan's unreasonable delay in settling the Hospital's claim (Count III).

Metropolitan seeks summary judgment on Count I on the argument that as a matter of law there was no assignment to the Hospital of the insured's rights under the policy. Resolution of the question whether the insured's signature on the Hospital's Authorization Form amounts to an assignment of a portion of her contract rights with respect to the policy turns on disputed questions of material fact. The undisputed Illinois rule of law is that whether an assignment of contract rights has occurred is a function of the intent of the parties, Associated Metals & Minerals Corp. v. Isletmeleri, 6 Ill. App.2d 548, 553-54, 128 N.E.2d 595, 597 (1955), and does not depend upon any form of words, Reinhardt v. Security Insurance Co., 312 Ill. App. 1, 8, 38 N.E.2d 310, 313 ...


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