Michigan Court of Appeals; Docket #357225; Published
Judges Gleicher, Servitto, and Yates; Authored by Judge Gleicher
Official Michigan Reporter Citation: Forthcoming; Link to Opinion
One-Year-Back Rule Limitation – Tolling Under 2019 Amendments [§3145(3)]
In this unanimous, published decision authored by Judge Gleicher, the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Encompass Healthcare, PLLC’s (“Encompass”) action for unpaid no-fault PIP benefits against Defendant Citizens Insurance Company (“Citizens”). The Court of Appeals held that Citizens’ Explanation of Review (“EOR”) documents—in which it explained that it was issuing only partial payments on Encompass's charges—did not constitute “formal denial[s]” for purposes of MCL 500.3145(3). In so holding, the Court defined “formal denial” to mean an “explicit and unequivocal expression of finality.”
From June of 2018 to October of 2018, Encompass rendered treatment to Ronald Mannor for injuries he sustained in a motor vehicle collision in December of 2017. In May of 2019, Mannor assigned to Encompass his right to pursue no-fault PIP benefits related to the treatment he received during that period. Encompass, in turn, sought reimbursement for Mannor’s treatment from Citizens—the priority no-fault insurer—in the amount of $921,828.44. Citizens paid only $177,655.25, however, explaining in EORs accompanying the partial payments that it was not paying the full amounts claimed. In November of 2019, Encompass filed a lawsuit against Citizens to recover the balance between what was claimed and what was paid, and Citizens moved for summary disposition, arguing that Encompass’s claims were barred by the one-year-back rule. Encompass argued, in response, that because Citizens never issued a “formal denial” of its claims, the one-year-back rule remained tolled as a result of MCL 500.3145(3), which was added to MCL 500.3145 as part of the 2019 amendments to the no-fault act. The trial court ultimately granted Citizens’ motion, finding that the EORs which accompanied the partial payments constituted “formal denial[s].”
The Court of Appeals reversed the trial court’s summary disposition order, holding that the EORs did not constitute “formal denial[s]” based on the definitions of “formal denial” found in Judge Kelly’s dissent in McNeel v Farm Bureau Gen Ins Co of Mich, 289 Mich App 76 (2010), as well as in Smitham v State Farm Fire & Cas Co, 297 Mich App 537 (2012). In McNeel, Judge Kelly stated that ‘a ‘formal denial’ must be explicit and direct,’ and in Smitham, the Court wrote, ‘[A] formal denial such as is necessary to end tolling must be explicit and unequivocally impress upon the insured the need to pursue further relief in court[,] . . . [and] an insurer may end the tolling period by explicitly indicating that the insurer is denying all liability in excess of what it has paid.’ In this case, while the EORs at issue contained comments regarding why Citizens was paying reduced amounts, they “included no language clearly stating that the claims were denied, at least not with the finality and clarity required to end the tolling period.” Accordingly, the Court held that the EORs “did not provide the explicit and unequivocal expression of finality required to constitute formal denials,” and that, as a result, the one-year-back rule was tolled through the date Encompass filed its lawsuit.
“The EORs included no language clearly stating that the claims were denied, at least not with the finality and clarity required to end the tolling period. The EORs essentially stated only the amount of each claim that was ‘[a]llowed’ versus ‘[r]educ[ed],’ with little additional detail. While the EORs provided ‘[c]omments’ for most bills, most simply read, ‘Professional Review Completed by [various medical personnel abbreviations].’ A limited number requested that Encompass submit additional documentation regarding a claim or claims4 (e.g., ‘Please send an updated signed specific Dr. order that should include the to and from dates of service for the IV infusion medications and supplies for a review consideration. Thank you, Professional Review Completed, SE, RN’). Given the nature of the comments requesting additional information, Encompass could not reasonably infer that the EORs were denials. For EORs lacking a request for more information, Citizens argues that Encompass should have assumed that Citizens had issued a formal and final denial. But no information ever ‘explicitly indicat[ed] that the insurer [wa]s denying all liability in excess of what it ha[d] paid.’ Smitham, 297 Mich App at 549 (emphasis added). A direct and forthright denial of coverage puts the claimant on notice that the clock is ticking. Relying on inferred denials invites disagreements and litigation, undermining one of the goals of the no-fault act.
Most of Citizens’ EORs included the following disclaimer:
This bill has been evaluated against the prevailing billing practices for healthcare providers within your geographic area. The reimbursement rate may therefore be different than the amount billed.
Please be advised that this bill may have been adjusted pursuant to the provisions of any applicable statute or any applicable policy of insurance. Based upon the adjustment of the bill pursuant to any applicable statute or any applicable policy of insurance, the payment for this bill may different that the amount billed.
This general disclaimer was merely included as boilerplate and did not afford Encompass with an explicit and unequivocal denial of benefits. Given the generality of these statements, like that of the information relating to the amounts approved and any reductions made, Citizens’ EORs simply lacked the clarity to unequivocally convey a need for Encompass to seek redress in court and make them formal denials under MCL 500.3145(3).”