Michigan Court of Appeals; Docket #258503; Unpublished
Judges Smolenski, Whitbeck, and O’Connell; 2-1 (Smolenski concurring in result only); per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Attorney Fee Liens
Medicare Benefits: Amount Owed by No-Fault Insurer in Medicare Reimbursement Cases
CASE SUMMARY:
In this 2-1 unpublished per curiam opinion, the Court of Appeals affirmed dismissal of a hospital’s claim that defendant law firm had converted money belonging to the hospital when it retained a portion of an injured person’s no-fault benefits as an attorney fee.
A pedestrian who was hit by a motor vehicle received medical treatment at plaintiff-hospital. The motor vehicle insurer initially denied no-fault benefits on the basis the pedestrian was allegedly attempting to commit suicide when the accident occurred. Therefore, the hospital billed Medicare, which paid about $100,000 of the approximately $240,000 bill. Thereafter, the pedestrian entered into a contingency fee arrangement with defendant law firm who obtained a settlement with the insurer. From the settlement proceeds, defendant reimbursed Medicare. Defendant also reimbursed plaintiff hospital approximately $105,000, but withheld about $35,000 in attorney fees. Plaintiff then filed this action for conversion. The trial court dismissed the action, finding that defendant could not have converted money belonging to plaintiff by retaining a portion of its client’s settlement as attorney fees because plaintiff had no legal claim to the proceeds. The trial court ruled the “no balance billing” rule under 42 USC 1395cc(a)(1)(A) precluded the hospital from seeking any funds from the injured person’s no fault carrier after having accepted the Medicare reimbursement.
In affirming, the Court of Appeals first noted that in order for an action for conversion of money to exist, the defendant must have a legal obligation to return money that was entrusted to its care. It also noted that although plaintiff had a legal right to collect the unpaid balance from the pedestrian, it failed to do so. In fact, it waited more than a year before it took steps to pursue its claim with the no-fault insurer and ultimately wrote the debt off. Therefore, because it never exercised its right to collect from the pedestrian, it never had possessory right to the money and because it never had a possessory right to the money, it could not maintain a conversion action against defendant. In this regard, the court stated:
“Although plaintiff’s unpaid medical expenses establish a legal right of payment from the patient and may establish an equitable right such as a lien in the insurance proceeds, nothing in the record demonstrated that plaintiff attempted to attach or enforce its lien against the proceeds or made any effort to pursue the patient. Instead, it sued the patient’s attorneys. The record demonstrates that plaintiff billed Medicare as the primary insurer and did not pursue the no fault insurer until over one year had passed since the date of the accident. Despite numerous procedural errors, its own lax approach to its insurance billing, and the fact that it had already ‘written off’ the discrepancy as bad debt, plaintiff sought to recover all its unpaid expenses. Such a recovery would ignore defendant’s legal efforts and sanction an inequitable windfall. While this renders tenuous any equitable claim in the insurance proceeds, a claim of absolute ownership is indefensible. The insurer paid the patient according to its insurance contract with him. Plaintiff has never argued that this money was paid to the patient as plaintiff’s agent or trustee, so the money was the patient’s, not plaintiff’s, and plaintiff fails to present any legal or factual reason to find otherwise. In sum, although plaintiff could have sought reimbursement from the patient, a cause of action is not money in hand, and it certainly cannot be evidence that defendant held plaintiff’s money. Because plaintiff failed to demonstrate that it ever had a possessory right to the specific money defendant held, the trial court correctly dismissed plaintiff’s conversion claim.”
