Legal Actions that Medical Providers Can Take in Michigan
Medical care providers who are not promptly paid by auto no-fault insurance companies have several powerful legal remedies which allow them to recover their expenses.
Several years ago, the Michigan Court of Appeals issued two decisions that gave some powerful legal weapons to medical providers who are not promptly paid by auto no-fault insurance companies. These legal rights allow medical care providers to pursue claims against the no-fault insurer directly, and grant the providers significant enforcement power of their rights. The legal decisions granting these rights were a great victory for medical providers and their auto accident patients and will go a long way to making the playing field more level in no-fault insurance payment disputes.
Enforcement of Penalties Against No-Fault Insurers for Failure to Pay
The first of these rulings came in the case of Lakeland Neurocare Centers v State Farm Mutual Automobile Insurance Company, 250 Mich App 35 (2002). In this unanimous opinion, the Court held that the “penalty interest” provisions of Section 3142 of the No-Fault Act and the “penalty attorney fee”provisions of Section 3148 of the No-Fault Act may be enforced by medical providers against no-fault insurance companies who do not honor their payment obligations under the statute.
Section 3142 renders an insurer liable for 12-percent interest if payment is not made within 30 days after the insurer receives “reasonable proof of the fact and of the amount of loss sustained.” Section 3148 of the Act renders an insurer liable for paying the patient or provider’s attorney fees in pursuing a claim, if the insurer has “unreasonably refused to pay the claim or unreasonably delayed in making proper payment.”
The Court held that these two penalty provisions are enforceable not only by auto-accident patients, but also by the medical providers who render care to those patients. In so holding, the Court acknowledged that medical providers who treat auto-accident patients have a right to commence legal enforcement actions in their own name against no-fault insurance companies to recover payment for medical services rendered to patients insured by those companies.
If a medical provider can demonstrate that payment was overdue, the medical provider can recover 12-percent interest on the balance owing. Likewise, if the medical provider can establish that the payment was unreasonably delayed or denied the medical provider can recover actual attorney fees from the noncompliant insurer.
In reaching this important holding, the Court reasoned that giving enforcement powers to medical providers furthered the purposes and goals of the No-Fault Act to avoid medical-payment delays. Furthermore, such a ruling would shift the loss from providers to insurance companies and, in the process, protect no-fault patients. In this regard, the Court in Lakeland Neurocare Centers held:
The goal of the no-fault system was to provide victims of motor vehicle accidents assured, adequate, and prompt reparation for certain economic losses. The no-fault act does not, however, accomplish its purpose or goal by sanctioning actions of no-fault insurers that include unreasonable payment delays and denials of no-fault benefits which force the commencement of legal action by the injured person’s health care provider.
Moreover, the no-fault act may not be used by a no-fault insurer as a vehicle to shift the burden of the injured person’s economic loss to a health care provider or as a weapon against rightful payees to a payee’s unjustified economic detriment. . . . Failing to permit the attempted enforcement of the penalty provisions in situations involving unreasonable and unjustified payment behavior would reward that behavior while ignoring the cost exacted at the expense of a rightful no-fault benefit payee.
Finally, the enforcement of these penalty provisions against a recalcitrant no-fault insurer also serves to offer some protection against further economic loss faced by an injured person. The impermissible payment behavior of an insurer has an economic impact on the injured person, both directly and indirectly, usually in the form of damaged credit ratings, difficulties in securing health care services, harassment, and lawsuits initiated by health care providers for reimbursement. Permitting the imposition of these penalty provisions by health care providers provides a legitimate and enforceable incentive to no-fault insurers to perform their payment obligations, imposed by operation of law, in a reasonable and prompt manner.
A second similar decision was issued by the Court of Appeals in the case of Regents of the University of Michigan v State Farm Mutual Insurance Company and Travelers Insurance Company, 250 Mich App 719 (2002).
Advice for Health Care Providers
Medical providers who treat auto accident patients should be aware of these appellate decisions and should not hesitate to utilize them if an auto insurance company has not complied with its legal obligations under the Michigan no-fault law. Providers should immediately review their no-fault insurance accounts receivable and make an informed decision as to whether legal enforcement action should be undertaken in light of these cases.
In making this decision, however, it is important to remember that the No-Fault Act contains a short statute of limitations, which, in the case of claims brought by patients, typically will expire one year after the date a service is rendered. Providers should assume that this limitations period applies to them, and therefore, enforcement action should not be delayed.