Michigan Court of Appeals Strengthens Rights of Medical Providers Under No-Fault Act

Two recent published opinions by the Michigan Court of Appeals reaffirm the right of medical providers to bring their no-fault benefits claims to court, even when the patient settles or becomes non-cooperative.Covenant Medical Center, Inc. v. State Farm Mutual Automobile Insurance Company ensures that no-fault benefits claims aren’t resolved without medical providers’ approval by an injured party’s settlement.

In 2011, State Farm insured Jack Stockford, who was injured in a car accident. In 2012, Covenant Medical treated Stockford for his injuries and thereafter billed State Farm $43,484.80. In April 2013, Stockford entered a written agreement with State Farm to release State Farm from liability “regarding all past and present claims incurred through January 10, 2013” as a result of the 2011 accident.

Covenant Medical thereafter filed suit, alleging State Farm had unreasonably refused to pay the $43,484.80. State Farm moved for summary judgment, contending that Covenant Medical’s claims were barred by the settlement payments from State Farm to Stockford. The trial court concluded that the release barred Covenant Medical’s claims and granted summary judgment.

On appeal, Covenant Medical argued that since it provided written notice to State Farm regarding the medical services provided to Stockford, it was entitled to pursue the $43,484.80 and related costs and penalties. The Michigan Court of Appeals agreed. The court reasoned that the plain language of Michigan’s “no-fault act” (MCL 500.3112) dictates that if the insurer has written notice of a third party’s claim, the insurer then cannot discharge liability to the third party merely by settling with the insured. This type of payment is in bad faith because the insurer knows of and attempts to terminate the third party’s right without providing notice. The statute instead requires that the insurer apply to the circuit court for an order directing how no-fault benefits should be distributed. Since this process was not followed, State Farm’s payment to Stockford did not discharge liability to Covenant Medical. The court therefore reversed the motion granting summary judgment to State Farm and remanded the case.

In the second case, Chiropractors Rehab Group, P.C. v. State Farm Mutual Auto Ins. Co., the court rejected the argument that a medical provider’s claim expires when the patient becomes uncooperative.

This case also addresses actions by health care providers seeking reimbursement for medical expenses under Michigan’s “no-fault act.” In its motion for summary judgement, State Farm argued that the injured parties were not eligible for payment of personal injury protection (PIP) benefits, and therefore the health care providers were precluded from seeking the benefits. The motions were denied, and State Farm appealed.

The Michigan no-fault law compels injured parties to attend “independent medical examinations” for the successful preservation of their claims. State Farm argued that a patient’s failure to appear renders the patient ineligible to receive no-fault benefits. The court agreed that a patient must be eligible, but it disagreed with State Farm’s claim that a failure to appear for a medical examination could automatically renounce the medical provider’s claim. The court concluded that since a medical provider can still prove an injured party’s eligibility prior to trial, the courts cannot dismiss cases based only on the patient’s non-cooperation.

Together, these cases send a powerful message. Although the claims derive from the policy-holder’s injury, that party’s subsequent settlement or non-cooperation does not always discharge the insurance provider’s obligations to medical providers.

The Neumann Law Group represents accident victims throughout Michigan from offices in Traverse City and Grand Rapids. Call us at (231) 463-0122 or at (616) 717-5666 for a free consultation.