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Auto-Owners Ins Co v Compass Healthcare PLC; (COA-PUB; 12/18/2018; RB # 3830)

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Michigan Court of Appeals; Docket No. 339799
Judges Boonstra, Jansen, and Gadola; Unanimous; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


STATUTORY INDEXING:
One-Year Back Rule Limitation [§3145(1)]
General / Miscellaneous

TOPICAL INDEXING:


CASE SUMMARY:
In this unanimous per curiam opinion, the Court of Appeals held that a medical provider has a direct cause of action against a patient injured in an auto accident for payment of the unpaid portion of its charges, even after an audit conducted by the patient’s no-fault insurer deems the charges unreasonable.  However, in order to contest the reasonableness of the amount paid or pursue the remaining balance of its bill, a provider must file a lawsuit against its patient within 1 year, in accordance with §3145 of the Michigan No-Fault Automobile Insurance Act (“the No-Fault Act”).  

Plaintiff Caleb Casanova (“Casanova”) sustained injuries in a motor vehicle accident for which he sought and received medical treatment from Defendants Compass Healthcare (“Compass Health”) and Lansing Neurosurgery on July 4, 2014. Shortly thereafter, Compass Health submitted a bill for its services to Casanova’s no-fault insurer, Plaintiff Home-Owners Insurance Company (“Home-Owners”), for $1,859, but Home-Owners paid only $1,076.14. Over the course of the next several months, Compass Health sent a series of invoices directly to Casanova for the unpaid balance of its bill. In response, Home-Owners sent several letters instructing Compass Health to deal directly with Home-Owners if it wished to dispute the reasonableness of Home-Owners’ partial payment and to cease and desist from any further collection efforts directed at Casanova.  In the months that followed, Compass Health continued to send invoices directly to Casanova, and Casanova and Home-Owners filed the action that gave rise to this appeal.

Through their lawsuit, Plaintiffs sought a declaratory ruling as to whether Defendants could “balance bill” Casanova under the No-Fault Act; an injunction, precluding Defendants from taking any further action to collect their unpaid balance from Casanova; and damages and sanctions against Defendants for alleged violations of the Michigan Regulation of Collection Practices Act (“MRCPA”).   The parties filed cross-motions for summary disposition, and the trial court issued a written opinion granting summary disposition and awarding costs and fees in favor of Plaintiffs.  In its opinion, the trial court concluded that a no-fault insurer is required by law to audit a medical provider’s charges for reasonableness and that a provider can only challenge an insurer’s reasonableness determination by pursuing a dispute against the insurer, subject to the one-year-back provision set forth in §3145 of the No-Fault Act.  Further, the trial court held that the invoices Defendants sent directly to Casanova constituted a willful violation of the relevant provisions of the MRCPA for which Defendants were liable to Plaintiffs for damages, attorney fees and costs.

Two days after the trial court issued its opinion, the Michigan Supreme Court issued its decision in Covenant Medical Center, Inc v State Farm Mutual Auto Insurance Company, 500 Mich 191 (2017), and Defendants moved for reconsideration of the trial court’s decision in reliance on the Covenant holding.  Specifically, Defendants argued the Covenant Court’s ruling that medical providers have no statutory cause of action against no-fault insurers but can seek payment from their patients for their reasonable charges precluded a finding in favor of Plaintiffs in this case.  In light of the Covenant decision, the trial court acknowledged that it had erred in concluding that a provider must dispute a determination regarding the reasonableness of its charges with a no-fault insurer, rather than its patient.  However, it reaffirmed its previous ruling that a provider has no contractual right to seek payment of a “balance bill” from its patient after an insurer has conducted an audit and unilaterally deemed the provider’s charges unreasonable under the No-Fault Act.  On that basis, the trial court denied Defendants’ motion for reconsideration, and Defendants appealed.

On appeal, Defendants argued, inter alia, that the trial court erred in concluding that a medical provider has no contractual right to seek payment from its patient for the unpaid portion of its bill after an insurer has conducted its reasonableness determination. As they did before the trial court, Defendants argued that a provider can seek payment of a “balance bill” from its patient directly under a contractual liability theory, even after an insurer’s audit deems the charges unreasonable. The Court of Appeals rejected this argument, however, and held that any claim a medical provider may possess for payment of services rendered to a patient injured in an auto accident arises under the No-Fault Act, not under an implied contract with the patient.  As such, the Court reasoned that a provider cannot seek payment of a “balance bill” directly from its patient.  Rather, in order to seek full payment of charges for services rendered to a patient injured in an auto accident, a provider must file a trial court action and establish the reasonableness of its charges, by a preponderance of the evidence, in accordance with the relevant provisions of the No-Fault Act.  Since Defendants failed to do so in this case, the Court concluded that summary disposition in Plaintiffs’ favor on that issue was appropriate.

Next, Defendants argued that the trial court had erred in concluding that a provider’s claim against its patient for payment of auto accident-related medical services is subject to the one-year limitation on recovery set forth in §3145 of the No-Fault Act – i.e., the “one-year-back rule.”  Specifically, as they did before the trial court, Defendants asserted that a provider’s claim against its patient for payment of services rendered to that patient arises under contract law and is subject to the six-year statute of limitations that governs any contract claim.  In rejecting this argument, the Court reiterated its conclusion that any claim for payment of services rendered to an auto accident patient “would still fall squarely within the parameters of the No-Fault Act” and be subject to “the one-year-back rule found in MCL 500.3145.”  On this basis, the Court concluded that any claim that Defendants “may have had against Casanova” for payment of their unpaid charges is now barred because they did not file a lawsuit against him on or before August 13, 2015 – one year from the date on which Home-Owners made partial payment for Defendants’ charges.

Finally, Defendants argued that the trial court erred in finding that Plaintiffs Auto-Owners and Home-Owners were entitled to attorney’s fees and costs under the MRCPA where only Casanova brought a claim under that statute.  On this point, the Court of Appeals agreed with Defendants, finding the “[o]nly Casanova sought relief under the MRCPA” and “[t]herefore, only Casanova is entitled damages and reasonable attorney’s costs and fees under MCL 445.257(2).  Accordingly, the Court of Appeals reversed the trial court’s award of reasonable attorney’s fees and costs under MCL 445.257(2) but affirmed all other aspects of the trial court’s decision.

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