Michigan Court of Appeals; Docket # 343654; Unpublished
Judges Cameron, Markey, and Borrello; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Assignments of Benefits—Validity and Enforceability
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order dismissing the plaintiff’s first party action to recover no-fault PIP benefits based on an assignment, and remanded for further proceedings. The Court of Appeals affirmed its prior holding in Jawad A Shah v State Farm Mut Auto Ins Co, 324 Mich App 182 (2010) that anti-assignment clauses such as the one in the plaintiff’s policy are invalid because they violate public policy. Therefore, the plaintiff, VHS of Michigan, Inc., should have been allowed to amend its complaint to reflect the assignment it obtained from its patient in order to proceed with its action to recover no-fault PIP benefits.
VHS’s patient, Harold Hogan, was injured in a motor vehicle collision and filed a third party automobile negligence action against the driver who caused the collision, as well as a first party action to recover no-fault PIP benefits against his own no-fault insurer, State Farm Mutual Automobile Insurance Company. VHS joined the suit and filed its own complaint against State Farm “on the basis of an alleged statutory cause of action available under the no-fault act, an assignment of rights for PIP benefits executed by Hogan, and on the basis of its purported status as a third-party beneficiary under the Hogan-State Farm contract of insurance.” Shortly thereafter, the Michigan Supreme Court released its decision in Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich 191 (2017), prompting State Farm to move for summary disposition on the grounds that VHS no longer possessed a statutory cause of action against it, and had failed to actually attach the assignment to its intervening complaint. The trial court granted State Farm’s motion because, “although Covenant noted that healthcare providers could pursue benefits under an assignment of rights, the anti-assignment clause in the State Farm policy was plain and unambiguous, precluding VHS’s action predicated on the assignment.” The trial court also denied VHS’s motion to amend its complaint and attach the assignment.
The Court of Appeals reversed the trial court’s summary disposition order in favor of State Farm, relying on its previous holding in Shah that antiassignment clauses such as the one in Hogan’s policy are invalid because they violate public policy. VHS should have been allowed to amend its complaint to reflect the valid assignment it received from Hogan.
Here, the trial court denied the motion to amend because the court found that the assignment was unenforceable due to the anti-assignment clause in the insurance policy, rendering an amendment to attach the assignment futile. In view of our ruling today that the anti-assignment clause is unenforceable under Shah and Henry Ford, we remand the case to the trial court to address anew VHS’s motion for leave to amend the complaint as viewed in the proper context. See Shah, 324 Mich App at 209 (“[B]ecause the antiassignment clause was not enforceable . . ., the trial court erred by granting defendant’s motion for summary disposition without properly applying the law in determining whether an amendment of the pleadings would be futile.”).
As a collateral matter, the Court of Appeals also held that VHS could not sue as a third-party beneficiary to Hogan’s contract, because only intended—not incidental—third-party beneficiaries can sue for breach of contract. Here, VHS was an incidental beneficiary of the policy, and was not expressly designated as a class of healthcare providers intended to be a third-party beneficiary under the policy.
