Michigan Court of Appeals; Docket #362094; Published
Judges Gleicher, Hood, and Maldonado; Authored by Judge Hood
Official Michigan Reporter Citation: Forthcoming; Link to Opinion
Statutory Right of Service Providers to Assert Direct Causes of Action Against Insurers [§3112]
Appealing Utilization Reviews [§3157a]
In this unanimous, published decision authored by Judge Hood, the Court of Appeals affirmed the trial court’s denial of Defendant Auto Club Group Insurance Company’s (“Auto Club”) motion for summary disposition, in which it sought dismissal of Plaintiff True Care Physical Therapy, PLLC’s (“True Care”) action for no-fault PIP benefits. The Court of Appeals held that when an insurer bases a refusal to pay PIP benefits on a utilization review, the affected provider is not required to appeal the utilization review to the Department of Insurance and Financial Services (“DIFS”) before filing a direct cause of action against the insurer.
Rozarta Vukaj was injured in a motor vehicle accident in 2018, after which she received physical therapy from True Care on more than 137 occasions over a two-year period. Each appointment cost between $655 and $925 and was paid for by Auto Club, Vukaj’s no-fault insurer. In 2021, Auto Club conducted a utilization review of True Care’s treatment of Vukaj based on guidelines from the American College of Occupational and Environmental Medicine, which recommended that persons with injuries such as Vukaj receive no more than 10 sessions of physical therapy over an eight-week period. Auto Club refused to pay for Vukaj’s treatment thereafter, writing in its explanations of benefits to True Care, ‘[a]n insurer’s denial of a provider’s bill on the basis that the provider overutilized or otherwise rendered or ordered inappropriate treatment . . . may be appealed to the Department of Insurance and Financial Services pursuant to Utilization Review Rule 500.65.’
Rather than appeal the utilization review to DIFS, True Care filed a direct cause of action against Auto Club under MCL 500.3112. In response, Auto Club moved for summary disposition, arguing that Auto Club was required, and failed, to exhaust its administrative remedies—i.e., appealing the utilization review to DIFS—before filing suit. The trial court rejected Auto Club’s argument, finding (1) that under the plain language of MCL 500.3112, an administrative appeal is not required as a precondition to filing suit, (2) that under the plain language of the relevant DIFS’ rules, appealing a utilization review is discretionary, and (3) that requiring an administrative appeal as a precondition to filing suit would effectively shorten the one-year time period in which a provider can file suit for unpaid PIP benefits under MCL 500.3145.
The Court of Appeals affirmed the trial court’s summary disposition order, holding that “the plain language of the no-fault act demonstrates that the Legislature intended alternate pathways for determining whether care was appropriate.” The Court noted that the language in MCL 500.3112 is unambiguous and contains no requirement that an insurer appeal a utilization review before asserting a direct cause of action against an insurer. The Court also noted that MCL 500.3157a and the relevant DIFS rules all use the word ‘may’ to describe the choice persons and providers have to appeal utilization reviews: MCL 500.3157a, for instance, provides, “ If an insurer or the association created under section 3104 determines that a physician, hospital, clinic, or other person overutilized . . . the physician, hospital, clinic, or other person may appeal the determination to the department.”
“Because the plain language of the operative statutes and regulations permit an administrative appeal rather than require it, True Care was not required to appeal the utilization review decision to the DIFS to satisfy administrative exhaustion requirements. Cf. Papas v Mich Gaming Control Bd, 257 Mich App 647, 657; 669 NW2d 326 (2003). Generally, when an administrative scheme of relief exists, an individual must exhaust those remedies before the circuit court has
jurisdiction. . . . ‘[I]f the Legislature has expressed an intent to make an administrative tribunal’s jurisdiction exclusive, then the circuit court cannot exercise jurisdiction over those same areas.’ Citizens for Common Sense in Gov’t, 243 Mich App at 50. The phrase “exclusive jurisdiction” does not need to appear in a statute for a statute to vest jurisdiction exclusively in an administrative agency. Papas, 257 Mich App at 657. But the Legislature must use language that establishes its intent to grant the agency exclusive jurisdiction, thereby divesting courts of jurisdiction until all administrative proceedings are complete. Id.
Here, the Legislature did not use language expressing an intent to grant the DIFS exclusive jurisdiction. Indeed, the language it chose expresses an intent to give the circuit court jurisdiction. See MCL 500.3112. MCL 500.3112 explicitly affords providers with an unqualified cause of action that is not preconditioned on an administrative appeal. The administrative appeal provided by MCL 500.3157a uses permissive language, not mandatory language. Each of the cases on which Auto Club relies involve explicit or readily-discernable intent to give an agency exclusive jurisdiction. See Papas, 257 Mich App at 657. That is not the case here.”