Michigan Court of Appeals; Docket #320288; Docket #322317; Published
Judges Wilder, Shapiro, and Ronayne Krause; Opinion by Wilder
Official Michigan Reporter Citation: 313 Mich App 113 (2015) Link to Opinion 
On 7/26/2016, the Michigan Supreme Court held the application to appeal the Court of Appeals decision in this case be held in ABEYANCEpending the Supreme Court's ruling in Covenant Medical Center, Inc v State Farm Mutual Auto Ins Co Link to Order
STATUTORY INDEXING:
Personal Protection Insurance (PIP) Entitlement [§3105]
PIP Benefits Defined; Waiver of Work Loss Benefits [§3107]
Payees of PIP Benefits [§3112]
Obligation of Claimant to Submit to Physician Examination [§3151]
Nonattendance as a Basis for PIP Benefit Cutoff [§3151]
Court Orders for Refusal to Submit to Insurer Examinations [§3153]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous published Opinion by Judge Wilder, the Court of Appeals issued several holdings:
1) plaintiff health-care provider had standing under MCL 500.3112 to bring a direct action against an insurer for PIP benefits;
2) plaintiff health-care provider’s entitlement to reimbursement was not necessarily dependent on the claimants’ eligibility for benefits; and
3) the failure of the claimants to submit to independent medical exams (IMEs) and examinations under oath (EUOs), coupled with State Farm’s issuance of a suspension without an irrevocable denial, was insufficient to render the claimants ineligible for PIP benefits.
In these consolidated cases, plaintiffs were injured in auto accidents and various health-care providers treated their injuries. Plaintiffs’ no-fault insurer, State Farm, asked them to submit to IMEs and EUOs. When plaintiffs did not participate in either, State Farm suspended their benefits. The health-care providers then filed this action against State Farm, seeking reimbursement for the services that had been rendered to plaintiffs. State Farm moved for summary disposition, claiming the providers did not have standing and were barred from seeking reimbursement because plaintiffs were ineligible for benefits due to their lack of cooperation with the IMEs and EOUs. The trial court denied State Farm’s motions for summary disposition.
The Court of Appeals first rejected State Farm’s claim that plaintiff did not have standing under §3112 to bring a direct reimbursement action for PIP benefits. In so finding, the court disagreed that, at this stage of the proceedings, a provider’s ability to seek PIP benefits depended on whether the injured party was actually eligible to receive benefits. In this regard, the court said:
“[A]ccording to State Farm, the [trial] courts should have focused on the undisputed fact that the injured parties failed to submit to the requested [I]MEs and EUOs. State Farm contends that this failure to cooperate conclusively established that the injured parties were prohibited from seeking no-fault coverage. We disagree.”
In reviewing the relevant caselaw, the Court of Appeals cited Roberts v Farmers Ins Exch, 275 Mich App 58 (2007). Applying Roberts to the failure of plaintiffs to submit to IMEs and EUOs, the court said:
“[P]ursuant to Roberts, State Farm may reasonably suspend claims by the injured parties due to a failure to submit to [I]MEs, and a suspension of benefits is not an ‘irrevocable denial’ of benefits; the eligibility for PIP benefits is simply suspended until compliance with the [I]ME. Likewise, we conclude that evidence that an injured party failed to submit to an [I]ME that later results in a suspension of the claim is not tantamount to dispositive evidence that an insured is not entitled to PIP benefits. … Here, it is apparent that an ‘irrevocable denial’ of benefits had not been issued by State Farm in either case …. Therefore, we conclude that the injured parties’ failure to submit to the [I]MEs and EUOs requested by State Farm did not demonstrate that there is no genuine issue of material fact as to whether plaintiffs, as the injured parties’ healthcare providers, were entitled to no-fault benefits as a matter of law, because the injured parties’ failure to comply does not conclusively establish the ineligibility of the injured parties and plaintiffs’ related inability to recover payment for PIP benefits from State Farm. State Farm remained statutorily obligated to pay benefits in a timely manner if the insured parties complied with the requirements of the no-fault act, which includes submitting to an [I]ME if requested, demonstrating that they are eligible for benefits under the policy, and providing ‘reasonable proof of the fact and of the amount of loss sustained.’”
In conclusion, the Court of Appeals held the trial court abused its discretion by not allowing State Farm to amend its affirmative defenses. The court said:
“In this case, the trial court denied State Farm’s motion to amend on the basis that it failed to make a legal argument or cite any caselaw indicating that justice required an amendment of State Farm’s affirmative defenses. As such, the trial court’s reasoning was equivalent to a finding that the amendment would be futile. … Therefore, to the extent that State Farm’s proposed amendment included an allegation that Johnson’s ineligibility for no-fault benefits barred plaintiff’s claims, State Farm should have been given leave to amend its answer. Such an affirmative defense, if proven, would, in fact, defeat plaintiffs’ claims. Therefore, the court abused its discretion when it failed to permit the proposed amendment to State Farm’s affirmative defenses.”
