Michigan Court of Appeals; Docket # 340807; Unpublished
Judges Swartzle, Jansen, and O’Brien per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Medical Provider Standing (Post-Covenant)
CASE SUMMARY:
In this unanimous unpublished per curiam opinion, the Court of Appeals upheld the trial court’s grant of summary disposition denying Plaintiff Michigan Head and Spine, PC (“MHS”) an independent statutory cause of action against Defendant Esurance Property and Casualty Insurance Co. (“Esurance”), reversed the grant of summary disposition denying MHS’s motion to amend its complaint, and upheld the trial court’s summary disposition under the third-party-benefits theory. The Court of Appeals upheld the trial court’s summary disposition because the Michigan Supreme Court’s decision in Covenant Medical Center, Inc. v State Farm Mutual Auto Insurance Co., 500 Mich 191 (2017), abolished a medical provider’s independent cause of action against an insurance company under the no-fault scheme. The Court of Appeals reversed the denial to amend because the lower court abused its discretion by relying on a misunderstanding of the assignment-of-benefits theory. The Court upheld summary disposition based on third-party-benefits because MHS was not properly recognized as a potential third party.
17 patients received medical services from MHS after they were involved in an automobile accident. MHS submitted claims for payment to Esurance, but Esurance did not fully pay the claims. MHS then brought an action to receive the money owed to it from Esurance. In light of the Supreme Court’s decision in Covenant, Esurance moved for summary disposition. The lower court granted summary disposition for the independent cause of action and the third-party beneficiary theory. Further, it did not allow MHS to amend its complaint because the trial court did not believe plaintiff had a cause of action under the assignment-of-benefits theory after Covenant.
First, the Court upheld the trial court’s denial of a direct cause of action because medical providers lack a direct statutory cause of action. The Court reviewed Covenant and found that healthcare providers lack an independent statutory cause of action against no-fault insurers to recover PIP benefits. The Court also concluded that it had previously found the Covenant decision to apply retroactively to cases awaiting appeal. Because MHS was bringing an independent cause of action and MHS’s case was pending before the trial court when Covenant was decided, the Court found that summary disposition was appropriate.
“Covenant applies to bar plaintiff’s independent action against defendant for the recovery of PIP benefits owed to defendant’s insureds. Summary disposition was therefore appropriate on plaintiff’s independent statutory claim.”
Second, the Court of Appeals reversed the trial court’s denial of MHS’s motion to amend. The Court explained that denial of a request is in the trial court’s discretion and it can only be overturned for an abuse of discretion by the trial court. The Court then explained that a trial court necessarily abuses its discretion when it makes an error of law. The trial court reasoned that because MHS did not have a direct cause of action against Esurance, it could not amend its complaint. However, Covenant did not change the right of an individuals to assign their claims for benefits past or presently due. Further, the Court of Appeals had previously stated that anti-assignment clauses violate public policy and are therefore unenforceable. Thus, the trial court was incorrect in believing that MHS did not have a direct cause of action because under the assignment-of-benefits theory MHS could bring a direct action if the 17 patients had assigned their rights to it. Because MHS potentially had a direct cause of action, the trial court made an error of law, and its order denying the amendment of the pleadings was overturned by the Court of Appeals.
“In Covenant, 500 Mich. at 217 n. 40, our Supreme Court recognized that an insured may “assign his or her right to past or presently due benefits to a healthcare provider.” Thus, in the situation where a health-care provider’s independent statutory claim for PIP benefits is summarily dismissed, this Court has held that the provider should be granted leave to amend its complaint to assert a claim under an assignment-of-benefits theory.”
Third, the Court upheld the lower court’s order for summary disposition regarding the third-party beneficiary theory. The Court cited to Schmalfeldt v North Pointe Ins Co, 469 Mich 422, 427 (2003), which stated: “[t]he plain language of this statute reflects that not every person incidentally benefitted by a contractual promise has a right to sue for breach of that promise.” The Court explained that the contract itself will explain if a third-party is an intended third-party beneficiary and therefore able to bring an action. In this case, MHS failed to identify any language in the no-fault policy that would make it an intended beneficiary. Thus, the Court upheld the order for summary disposition because MHS was not described as an intended beneficiary.
“Here, plaintiff has not identified any language in the no-fault insurance policies that directly refers to plaintiff or that sufficiently describes a class of which plaintiff is a member. Thus, plaintiff has not shown that an issue of fact exists regarding whether it was an intended beneficiary of the PIP policies. Hence, the trial court correctly concluded that amendment of the complaint to assert a third-party-beneficiary theory was futile.”
Ultimately, the Court upheld the lower court’s orders for summary disposition regarding Plaintiff’s independent cause of action and its third-party beneficiary action. However, the Court overturned the lower court’s order denying Plaintiff to amend its pleading.
