Michigan Court of Appeals; Docket # 333360; Published
Judges Boonstra, Ronayne Krause and Swartzle; Unanimous Opinion by Judge Boonstra (with Judge Ronayne Krause concurring)
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Link to Concurring Opinion
STATUTORY INDEXING:
One-Year Back Rule Limitation [§3145(1)]
Assigned Claims Facility Processing Procedures [§3172]
TOPICAL INDEXING:
Michigan Auto Insurance Placement Facility
CASE SUMMARY:
In this unanimous published Opinion by Judge Boonstra, the Court of Appeals held the Michigan Supreme Court’s decision in Covenant Medical Center, Inc v State Farm Mutual Automobile Ins Co, ___ Mich ___ (2017), applies both prospectively and retroactively. As a result, the Court concluded the trial court properly denied plaintiff-healthcare provider’s claim for payment of no-fault benefits that was filed directly against the Michigan Assigned Claims Plan and the Michigan Auto Insurance Placement Facility, albeit for different reasons.
Zoie Bonner was a passenger in her aunt’s vehicle when it rear-ended another vehicle. The day after the accident, Zoie sought medical treatment at plaintiff’s emergency department. For the next year, plaintiff tried to obtain no-fault insurance information from Zoie, but was unable to do so. Plaintiff then filed a claim with defendant-Michigan Assigned Claims Plan and defendant-Michigan Auto Insurance Placement Facility, seeking no-fault benefits on Zoie’s behalf. The aunt’s insurer was eventually identified, but denied plaintiff’s claim because the one-year limitations period had expired. When defendants did not assign the claim to a no-fault insurer for payment, plaintiff filed this action. The trial court granted summary disposition for defendants, finding that plaintiff failed to show it could not have identified applicable insurance at the time it submitted its application for no-fault benefits to defendants. Plaintiff appealed. While the appeal was pending, the Michigan Supreme Court decided Covenant, holding that healthcare providers do not have a direct cause of action against no-fault insurers for the payment of medical expenses.
The Court of Appeals affirmed summary disposition for defendants, holding that Covenant applies not just prospectively, but also retroactively.
At the outset, the Court of Appeals specifically said, “Covenant bars plaintiff’s claim if its holding is applicable to this case. The question then becomes whether Covenant applies only prospectively, or applies to cases pending on appeal when it was issued.” The Court further found that the prospective or retroactive issue was properly before it, rejecting plaintiff’s assertion that defendants waived or failed to raise the issue.
Concerning the question at hand, plaintiff urged the Court of Appeals to employ a “flexible approach,” which required determining the initial “threshold question,” which was whether the decision clearly established a new principle of law. According to plaintiff, a three-factor test for prospective application had to be employed: 1) the purpose to be served by the new rule, 2) the extent of reliance on the old rule and 3) the effect of retroactivity on the administration of justice.
Meanwhile, defendants argued a line of cases that recognized the general rule is that of retroactivity. Under this line of reasoning, a case should only be given prospect of application only in exigent circumstances, defendants maintained.
Addressing the issue presented, the Court of Appeals examined case law regarding when a published decision applies prospectively versus retroactively. The Court noted that in Spectrum Health Hospitals v Farm Bureau Mutual Ins Co of Michigan, 492 Mich 503 (2012) – the current state of the Michigan Supreme Court’s pronouncements on the issue – the Supreme Court overturned an earlier judicial interpretation of a provision of the No-Fault Act based on its conclusion that the earlier judicial decision was inconsistent with the plain meaning of the statute. The Spectrum Health Court held that its decision was retroactive without undertaking any analysis of the “threshold question” or the “three-factor test.”
The Court of Appeal continued by noting the Covenant decision itself did not contain the words “retroactive” or “prospective.” Thus, the Court accepted plaintiff’s position that the Supreme Court’s remand in Covenant for entry of summary disposition was not necessarily dispositive of the issue. The Court also noted that, since Covenant was decided, the Supreme Court had remanded at least two cases, in lieu of granting leave to appeal, for reconsideration in light of Covenant. While noting this was not dispositive, the Court of Appeals in the present case interpreted both of these actions as suggesting that the Supreme Court did not intend the rule of law announced in Covenant to be applied prospectively only.
Accordingly, the Court of Appeals concluded it must apply the Supreme Court’s pronouncement in Spectrum Health, where it stated: “The general principle is that a decision of a court of supreme jurisdiction overruling the former decision his is bad law, but that it never was the law.”
Therefore, the Court of Appeals held that Covenant must be applied retroactively. In so finding, the Court noted “the law” in this instance was the statutory text of MCL 500.3112, and that judicial decisions which misinterpreted existing statutory law were not, and never were, “the law.” The Court further stated that “judicial decisions of statutory interpretation must apply retroactively because retroactivity is the vehicle by which ‘the law’ remains ‘the law.’”
In conclusion, the Court of Appeals said it did not need to address the “threshold question” and “three-factor test” advanced by plaintiff. However, the Court said if it did, the result would be the same because it would not get past the threshold question. The Court explained:
“Covenant did not ‘clearly establish[] a new principle of law,’ …. Covenant merely recognized that the law as set forth in MCL 500.3112 is and always was the law. We particularly reach that conclusion under the circumstances of this case because the law at issue concerns the very existence of a right of action. In other words, we are not merely being asked to decide whether a judicial decision of statutory interpretation should be given retroactive effect; we are being asked to decide whether a judicial decision of statutory interpretation concerning the existence of a right of action should be given retroactive effect. We conclude that it would be particularly incongruous for us to decide that Covenant effected a change in the law such that it should not be applied retroactively, because we would effectively be creating law that does not otherwise exist, and thereby affording to plaintiff a right of action that the Legislature saw fit not to provide. In effect, we would not only be changing the law from that which the Legislature enacted, but in doing so we would be creating a cause of action that does not exist; for the reasons noted in this opinion, that is outside the proper role of the judiciary.”
In conclusion, the Court of Appeals held that Spectrum Health controlled this case and the application of Spectrum Health required Covenant to be applied retroactively. The Court noted that, even if it were to consider pre-Spectrum Health case law, the outcome would be the same.
Moreover, although the Court affirmed summary disposition for defendants, albeit for different reasons, the Court said it was “prudent and appropriate” to remand the case to the trial court with directions to allow plaintiff to move to amend its complaint. This way, the Court said, plaintiff could advance alternative theories of recovery, including the pursuit of benefits under an assignment theory, which the Supreme Court in Covenant said was not altered by its decision.
In a concurring opinion, Judge Ronayne Krause agreed that Covenant applies retroactively and that plaintiff had to be afforded an opportunity to amend its pleadings. “I am merely unpersuaded that there is any sufficient reason present in this matter for departing from the general rule that decisions from our Supreme Court should be given retroactive effect by default,” she wrote.
