Kelly Health Care, Inc. v. Prudential Ins. Co.

226 Va. 376, 309 S.E.2d 305 (1983)

 

RULE:

The third party beneficiary doctrine is subject to the limitation that the third party must show that the parties to the contract clearly and definitely intended it to confer a benefit upon him. An incidental beneficiary has no standing to sue.

FACTS:

The health care facility first earned a default judgment against the insured, then pursued its claim against the insurer on the theory that the insurer was the insured's assignee. As proof of assignment, the health care facility relied upon two documents drafted by the insurer and signed by the insured that authorized the insurer to make payments on the insured's behalf.

ISSUE:

May a revocable assignment that is less than absolute give rise to third-party status such that the assignee is a third-party beneficiary to a contract between the assignor and another?

ANSWER:

No.

CONCLUSION:

The reviewing court upheld the grant of summary judgment. An assignment is a transfer, but a transfer is not necessarily an assignment. If the transfer is less than absolute, it is not an assignment; the obligee must have intended, at the time of the transfer, to dispossess himself of an identified interest, or some part thereof, and to vest indefeasible title in the transferee. Here, the documents appointed the insurer as the agent and granted it authority in the nature of a power of attorney to make such payments. As such, each was revocable, so neither was an assignment. Therefore, the health care facility could not bring the instant suit.

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