Michigan Court of Appeals; Docket #359372; Published
Judges Kelly, Murray, and Swartzle; Per Curiam
Official Michigan Reporter Citation: Forthcoming; Link to Opinion
Assignments of Benefits—Validity and Enforceability
Intervention by Service Providers and Third Party Payors in PIP Claims
Medical Provider Standing (Post-Covenant)
In this unanimous, published, per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Centria Home Rehabilitation, LLC’s (“Centria”) action for unpaid No-Fault PIP benefits against Defendant Philadelphia Indemnity Insurance Company (“Philadelphia”). Centria provided treatment to Nicholas Randall—Philadelphia’s insured—but Philadelphia paid only a fraction of Centria’s charges. Centria obtained an assignment from Randall and filed suit over the unpaid balance, but Philadelphia moved for summary disposition, invoking McGill v Auto Ass’n of Mich, 207 Mich App 402 (1995) and LaMothe v Auto Club Ins Ass’n, 214 Mich App 577 (1996). Philadelphia argued that because it had an obligation to defend and indemnify Randall if Centria ever sued him over his unpaid balance, Randall (or his assignee, standing in his shoes) had not suffered any injury as a result of Philadelphia’s refusal to pay Centria’s full charges, and therefore had no cause of action. The Court of Appeals disagreed, distinguishing McGill and LaMothe based on (1) the fact that those cases did not involve assignments and (2) the fact that in neither of those cases did the healthcare providers, themselves, actually take issue with the partial payments. The Court of Appeals also noted that “the implications of a ruling in defendant’s favor are fraught with peril and uncertainty,” and that to agree with defendant’s position “would be contrary to the purpose of the no-fault act, which is to ‘provid[e] assured, adequate, and prompt recovery for economic loss arising from motor vehicle accidents.’ ” Thus, the Court held that in cases such as this, insureds or their assignee providers can pursue unpaid balances from insurers in litigation, which is vastly preferable to providers suing their patients to settle “reasonable charge” disputes.
Nicholas Randall required 24-hour attendant care as a result of injuries he sustained in a motor vehicle accident. He received attendant care from Centria, and he assigned to Centria his right to pursue PIP benefits related to his care. From 2018 to 2021, Centria submitted bills to Philadelphia—Randall’s No-Fault insurer—totaling more than $600,000, but Philadelphia disputed the reasonableness of Centria’s charges, and paid only $446,335.68. Centria filed suit to recover the balance, but Philadelphia moved for summary disposition based on McGill and LaMothe. Philadelphia argued that those cases stand for the proposition that an insured cannot sue his or her insurer for not paying a provider’s full charges unless the provider first sues the insured (patient) to recover the balance. Accordingly, Philadelphia argued that Randall did not have a cause of action against it for not paying Centria’s full charges, because Centria had not yet sued him for the balance. And because Randall did not have a cause of action against Philadelphia, Centria—as his assignee, standing in his shoes—also did not have a cause of action against Philadelphia. Ultimately, the trial court was persuaded by these arguments and granted Philadelphia’s motion.
The Court of Appeals reversed the trial court’s summary disposition order, distinguishing McGill and LaMothe based on two important points: (1) neither of those cases featured a provider proceeding against its patient’s insurer on the basis of an assignment, and (2) in neither of those cases did the providers, themselves, actually challenge the partial payments. In this case, Centria did challenge the partial payments by filing suit against Philadelphia, and thus McGill and LaMothe were not on point and not binding.
Turning then to the issue in the case, the Court of Appeals held that Centria could sue Philadelphia without first having to pursue the balance from Randall. The Court based its reasoning on what it determined was in the clear best interest of justice and efficiency:
“In Auto-Owners Ins Co v Compass Healthcare PLC, 326 Mich App 595, 608-609; 928 NW2d 726 (2018), we held that a health care provider may not seek reimbursement against the insured under a contractual liability theory. To do so would be ‘contrary to the purpose of the no-fault act, and its implications would allow medical providers to circumvent the protective nature of the act.’ Id. at 611. Thus, under Compass Healthcare, the only circumstance in which a health care provider could pursue an insured would be under the no-fault act, which itself would require a dispute over whether the charges were reasonable.
In such a dispute, even assuming the insurer indemnifies and defends the insured, what is the insured’s position supposed to be? Does the insured have any interest in the outcome, since the insurer will purportedly indemnify them? What would prevent the insured from simply admitting to the allegations in the complaint to short circuit the process and end the litigation to save everyone the time and expense? See Flowers v Wilson, unpublished per curiam opinion of the Court of Appeals, issued September 22, 2022 (Docket No. 354436 (Swartzle, J., concurring), at 3 (‘If the insured patient believes that the unpaid bill was for a necessary service reasonably priced, and that patient admits this in her answer to a provider’s lawsuit against her, will the insurer then accept the admission and cover the bill in full?’). Or would the insured be forced to adopt the insurer’s position in exchange for indemnification? What happens if the insurer refuses to offer indemnification?
It is evident that the implications of a ruling in defendant’s favor are fraught with peril and uncertainty. Moreover, the formalism insisted on by defendant would be contrary to the purpose of the no-fault act, which is to ‘provid[e] assured, adequate, and prompt recovery for economic loss arising from motor vehicle accidents.’ Adanalic v Harco Nat’l Ins Co, 309 Mich App 173, 197; 870 NW2d 731 (2015). By recognizing a health care provider’s ability to bring a claim against an insurer for the difference between what was billed and what was paid, claims concerning these amounts will be most efficiently litigated by the parties with the pecuniary interest at stake. On the other hand, by insisting that a health care provider sue its patient and have the insurer defend and indemnify, the interests in the litigation become misaligned and the costs and expenses to all parties only increase.”
In addition to its principal argument based on LaMothe and McGill, Philadelphia argued that Centria’s claims were barred because it submitted fraudulent billing statements. The Court of Appeals also disagreed with this argument, confirming that “[t]he no-fault act does not include fraud as a defense to PIP coverage . . . although an insurer may deny a particular claim if it concludes it is fraudulent.” Moreover, the Court of Appeals was uncertain whether Centria’s billing statements were, as a matter of law, the product of fraudulent intent.
“[D]efendant contends that plaintiff’s claim for PIP benefits is barred because plaintiff submitted fraudulent billing statements. This argument lacks merit. The no-fault act does not include fraud as a defense to PIP coverage, Meemic Ins Co v Fortson, 506 Mich 287, 303-304; 954 NW2d 115 (2020), although an insurer may deny a particular claim if it concludes the claim is fraudulent. Shelton v Auto Owners Ins Co, 318 Mich App 648, 655; 899 NW2d 744 (2017). However, we have consistently held that the element of intent required to show fraud is almost always a question for the jury and not appropriate for summary disposition. Shelton v Auto-Owners Ins Co, 318 Mich App 648, 658-660; 899 NW2d 744 (2017). It is not self-evident that the purported discrepancies in the statements provided by plaintiff, which form the basis of defendant’s fraud allegation, are the product of fraudulent intent.”
Lastly, Philadelphia argued that all claims after January 5, 2020—the date Centria obtained the assignment—were barred by the rule against assignments for future benefits in MCL 500.3143. The Court of Appeals noted, however, that before January 5, 2020, the Legislature amended MCL 500.3112 to give providers a direct cause of action against insurers, and thus Centria “had no need for an assignment to claim payment for services rendered after June 11, 2019.”
“Finally, defendant asserts that plaintiff’s claims for services provided after January 5, 2020—the date that Randall executed the assignment of rights to plaintiff—should be dismissed pursuant to MCL 500.3143, which provides that an assignment of rights to benefits payable in the future is void. However, the 2019 amendment to MCL 500.3112 provides that, after June 11, 2019, a healthcare provider ‘may make a claim and assert a direct cause of action against an insurer . . . to recover overdue benefits payable for charges for products, services, or accommodations provided to an injured person.’ MCL 500.3112. This amendment applies ‘to products, services, or accommodations provided after the effective date of this amendatory act.’ 2019 PA 21, enacting § 1. Thus, plaintiff had no need for an assignment to claim payment for services rendered after June 11, 2019.”