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Covenant Medical Center v State Farm Mutual Automobile Ins Co (MSC - PUB; 5/25/2017; RB # 3642)


Michigan Supreme Court; Docket # 152758; Published
Justices Zahra, Markman, Viviano, McCormack and Larsen; Non-unanimous Opinion by Justice Zahra (with Justice Bernstein dissenting) (Justice Wilder not participating)
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


Personal Protection Insurance (PIP) Benefits Entitlement [§3105]
PIP Benefits Defined; Waiver of Work Loss Benefits [§3107]
Service Providers as Payees [§3112]
Providers Entitled to Charge Reasonable Amount for Services [§3157]
Obligations to Provide Earnings Verification and Medical Records [§3158]


Not Applicable


In this non-unanimous Opinion by Justice Zahra, the Michigan Supreme Court held that medical providers do not have a statutory cause of action against no-fault insurers for recovery of personal protection insurance benefits under the No-Fault Act.

In 2011, Jack Stockford was injured in an auto accident. Defendant State Farm was his no-fault insurer. Stockford’s injuries were treated by plaintiff Covenant Medical Center. Plaintiff then sent State Farm three bills totaling $43,484.80 for medical services it provided Stockford. It was undisputed that State Farm received the bills but denied coverage. Stockford filed suit in 2012 against State Farm for no-fault PIP benefits. Stockford later settled his case with State Farm for $59,000. As part of the settlement, Stockford executed a release that encompassed all allowable no-fault expenses, including medical bills, and “any and all past and present claims incurred through January 10, 2013[.]” Plaintiff then brought present suit against State Farm, seeking payment of its bills. Plaintiff asserted it learned of the settlement and release when State Farm answered its complaint in May 2013. State Farm moved for summary disposition, arguing plaintiff’s claim was derivative of Stockford’s claim, which was extinguished by the release and, as a result, plaintiff no longer possessed a claim against it. The trial court granted summary disposition to State Farm.

The Court of Appeals reversed, finding that because plaintiff provided written notice to State Farm pursuant to MCL 500.3112, indicating that it intended to pursue payment of the medical bills on its own, State Farm could not avoid liability through the settlement agreement with Stockford. The Court further rejected State Farm’s argument that the “hold harmless” provision in the settlement release limited plaintiff’s right to reimbursement, such that it could only recover payment for its services from the injured individual. The Court held that when services are rendered and the insured receives notice of the provider’s claim before the settlement occurred, then the settlement payment and release do not extinguish the provider’s rights.

The Michigan Supreme Court granted leave to consider in part “whether a healthcare possesses a statutory cause of action against a no-fault insurer to recover personal protection insurance benefits for allowable expenses incurred by an insured under the No-Fault Act.” In its May 2017 decision, the Supreme Court held that healthcare providers do not possess such a statutory cause of action and, therefore, reversed the Court of Appeals.

In so ruling, the Supreme Court first reviewed prior decisions of the Court of Appeals that have often been relied upon for the proposition that a healthcare provider may directly sue a no-fault insurer. The Supreme Court concluded that “[n]one of these cases decided whether healthcare providers possess a statutory cause of action against no-fault insurers” and “none of the cases cited by the Court of Appeals provides any textual analysis of the No-Fault Act to support this proposition.” The Supreme Court said it found prior Court of Appeals case law “unconvincing” and proceeded to analyze the language of the No-Fault Act.

The Supreme Court first noted that only two sections of the No-Fault Act – MCL 500.3157 and MCL 500.3158 – even mention healthcare providers. According to the Court, §3157 merely sets forth a limitation on the charges that may be assessed by a healthcare provider for treatment of an injured person. However, that a provider has the right to charge a reasonable amount for its products, services or accommodations in no way obligates an insurance carrier to directly reimburse the provider for those charges, the Court said. Meanwhile, the Court further noted that §3158(2) only requires that a healthcare provider make the injured person’s medical records and certain treatment information available to the insurer. Based on this, the Supreme Court found that neither §3157 or §3158, by their express terms or by implication, conferred on a healthcare provider a right to sue a no-fault insurer for reimbursement of the amounts it charged. As a result, the Court said that any such statutory right must be found in those sections of the No-Fault Act that do not explicitly refer to healthcare providers.

The Supreme Court continued by analyzing the language in MCL 500.3105 and MCL 500.3107, which plaintiff argued provided support for a healthcare provider’s direct cause of action. Pursuant to §3105(1): “[u]nder personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter.” Meanwhile, §3107 provides that PIP benefits are payable for certain costs, including “[a]llowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation,” and “[w]ork loss consisting of loss of income from work.”

Here, plaintiff argued that because benefits are payable for “reasonable charges” under §3107(1)(a), including charges incurred for services rendered by healthcare providers under §3157, the no-fault insurer must directly pay the provider for its reasonable charges. The Supreme Court disagreed, explaining that when §3105 and §3107 are examined together, they do nothing more than define the scope and nature of the requisite coverage, and do not identify to whom the insurer is liable or who has the right to assert a claim for benefits.

The Supreme Court continued by explaining that §3107(1)(a) provides that benefits are payable for “[a]llowable expenses consisting of all reasonable charges incurred …” and that, in the context of the no-fault statute, the Court has defined “incur” as “[t]o become liable or subject to, [especially] because of one’s own actions.” Accordingly, the Court said charges for healthcare services rendered are not “incurred” by a healthcare provider because a provider is not subject to charges for the products, services and accommodations it delivers to others. Nor do providers become “liable” for allowable expenses, the Court said.

Therefore, because a healthcare provider does not incur reasonable charges and is not liable for allowable expenses, the Supreme Court said it found unpersuasive plaintiff’s argument that §3107(1)(a) permits a provider to directly sue an insurer for reimbursement. Meanwhile, the Court noted that nothing in its opinion barred plaintiff from seeking reimbursement of the amount due directly from the person to whom medical services were provided.

The Supreme Court then proceeded to conduct a sentence-by-sentence analysis of §3112, which plaintiff relied upon in support of its position. The Court concluded that “[w]hile this section, which addresses to whom PIP benefits are payable, undoubtedly allows for the common practice of no-fault insurers directly paying healthcare providers, its text does not require direct payment of healthcare providers or give providers any right to directly sue a no-fault insurer.” With respect to the language of §3112 providing that PIP benefits “are payable to or for the benefit of an insured person,” the Supreme Court said:

“While this provision undoubtedly allows no-fault insurers to directly pay healthcare providers for the benefit of an injured person, its terms do not grant healthcare providers a statutory cause of action against insurers to recover the costs of providing products, services, and accommodations to an injured person. Rather, MCL 500.3112 permits a no-fault insurer to discharge its liability to an injured person by paying a healthcare provider directly, on the injured person’s behalf.”

The Supreme Court continued by noting there were textual clues in MCL 500.3114 and MCL 500.3115 that supported the conclusion that a healthcare provider does not possess a statutory cause of action against an insurer. These priority statutes define against whom a PIP claim may be made, and the Court noted that “[i]n both of these provisions, the Legislature specifically contemplates that the entitlement or claims belongs to the insured person who has ‘sustained accidental bodily injury.’”

According to the Supreme Court, the fact that a healthcare provider does not possess a statutory cause of action against a no-fault insurer does not mean the provider had no recourse. Rather, the provider may seek payment from the injured person for the provider’s reasonable charges, the Court said. Furthermore, the Court pointed out in a footnote that its holding was “not intended to alter an insured’s ability to assign his or her right to past or presently due benefits to a healthcare provider.”

The Supreme Court concluded:

“The Court of Appeals’ opinion in this case is premised on the notion that an injured person’s healthcare provider has an independent statutory right to bring an action against a no-fault insurer for payment of no-fault benefits. This premise is unfounded and not supported by the text of the No-Fault Act. A healthcare provider possesses no statutory cause of action under the No-Fault Act against a no-fault insurer for recovery of PIP benefits. Plaintiff therefore has no statutory entitlement to proceed with its action against defendant.”

In a dissenting opinion, Justice Bernstein noted the No-Fault Act “does not expressly grant healthcare providers the right to directly sue insurers for PIP benefits. But it does not expressly grant that right to any party, not even an insured party in a motor vehicle accident.” The justice said he believed the language of §3112 suggests that a healthcare provider does have a statutory cause of action, because it says PIP benefits are payable “for the benefit of an insured person.” Thus, the justice said, insurers may pay benefits directly to healthcare providers and, because healthcare providers can be paid directly, they have a right to claim benefits.

Michigan auto accident attorney Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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