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Volume XXVIII, No. 28, October 25, 2016 

From the Law Offices of Garan Lucow Miller, P.C.

From the Editor: Sarah Nadeau

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 COURT OF APPEALS UPHOLDS DISMISSAL OF NO-FAULT

MEDICAL AND SERVICE PROVIDER CLAIMS WHERE INJURED PARTY’S CLAIM WAS DISMISSED WITH PREJUDICE AS A DISCOVERY SANCTION

 By Eric J. Smith

In the recent, published decision of Spine Specialists of MI v State Farm___NW2d___; 2016 Mich. App. LEXIS 327997 (Ct App, Oct. 13, 2016), the Court of Appeals considered whether State Farm must pay an expert witness fee to depose Dr. Radden, a neurosurgeon who also happened to be the sole owner of plaintiff, Spine Specialists of Michigan, P.C..   Dr. Radden had treated the underlying claimant, Garvin, with steroid injections, and Spine Specialists sought payment for those services from Garvin’s insurer State Farm.  State Farm denied Plaintiff’s claim for payment because it argued that the patient’s injuries did not arise from the motor vehicle accident, and further, that Dr. Radden’s services and bills were not reasonable or necessary.  Spine Specialists then filed suit.

During the course of discovery, Dr. Radden refused to be deposed without a pre-payment of $5,000 for three hours of testimony.  While the Circuit Court disagreed with the amount charged, it

In a recent decision designated for publication, Dawoud v State Farm, ___ Mich App ___; ____ NW2d ____ (2016), the Michigan Court of Appeals appears to have taken a step to clarify an all-too-often vague area of Michigan No-Fault law: Do provider claims survive the dismissal of the injured party’s claim where the dismissal is based upon a discovery violation?

 

Recent cases like Wyoming Chiropractic Health Clinic, PC v Auto-Owners Ins Co, 308 Mich App 389; 864 NW2d 598 (2014), have established that medical providers have judicial standing to bring their own claim against an insurer for PIP benefits. Based upon MCL 500.3112 the logic is that personal protection insurance benefits are payable to or for the benefit of an injured person. Because medical and service provider services are intended to benefit the injured person, Michigan’s higher courts have deemed providers to stand in the shoes of the injured person. Consequently, providers have judicial standing to bring claims against insurance carriers to recover unpaid benefits. The rights derive from the rights of the injured party, however.  Covenant Med Ctr v State Farm Mut Auto Ins Co, 313 Mich 50, 54; 880 NW2d 294 (2015).

 

Thus, Michigan law currently affirms that a provider claim is only as viable as the claim being brought by the injured person and seems to suggest that the dismissal of the injured person’s claim must necessarily have the same effect on the provider’s claim. There appears to be a consensus that the substantive dismissal of the injured party’s claim (a determination that the claimed injuries did not arise from a motor vehicle accident, for example), necessarily extinguishes the claims of the providers.

 

Nonetheless, trial courts faced with this issue have struggled with whether a procedural dismissal of the underlying injured party’s claim, i.e., a dismissal based upon the injured party’s failure to comply with discovery, for example, should necessarily extinguish the independent right of a service provider. Dawoud v State Farm, ___ Mich App ___; ____ NW2d ____ (2016), addressed this issue directly.  Dawoud involved a consolidated appeal by two service providers and two medical providers from the trial court’s grant of summary disposition in favor of the defendant, State Farm.  State Farm moved for dismissal of the providers’ claims based upon the dismissal of the injured party’s claims based upon a discovery violation.

 

In moving for dismissal at the trial court level, State Farm argued that MCR 2.313 authorized dismissal of an action based upon a party’s failure to abide by a court’s discovery order.  State Farm also argued that the dismissal of the underlying plaintiff’s case operated as an adverse adjudication on the merits pursuant to MCR 2.504 which bars the service providers from proceeding with their derivative claims. The providers responded by arguing that Michigan law permits providers to bring independent causes of action.  The trial court granted State Farm’s motion.

 

On appeal, the parties agreed that a substantive failure of the injured party’s claim is fatal to the providers’ claims because those claims directly derive from the injured party’s claims.  However, relying only upon the holding in Wyoming Chiropractic, the providers argued that a procedural dismissal should not have the same effect on the providers’ claims because the substantive validity of those claims was never determined.  The providers also argued that an injured individual may ultimately be precluded from pursuing a cause of action for PIP benefits based upon a failure to abide by a court order but that the preclusion does not invalidate the claim for benefits on substantive grounds.

 

The Court of Appeals rejected the providers’ arguments uniformly.  First, the Court noted that Wyoming Chiropractic only addressed a provider’s standing to bring a claim. Wyoming did not address whether provider claims survive a procedural dismissal of an injured party’s claim.  As the Court observed, the crux of the issue on appeal in Dawoud “boil[ed] down to the specific question of whether the dismissal of plaintiffs’ underlying claims with prejudice due to discovery violations should be treated differently than a “substantive dismissal” on the merits. The Court concluded that it should not.

 

The Court noted that MCR 2.313(B)(2)(c) authorizes the trial court to dismiss an action as a sanction for a party’s failure to abide by a court’s discovery order. The Court noted that pursuant to MCR 2.504(B)(3) an involuntary dismissal operates as an adjudication on the merits. Because the trial court’s order granting summary disposition to State Farm did not provide that the dismissal was not an adjudication on the merits and because the providers conceded that a substantive dismissal on the merits bars any derivative provider claims, the Court concluded that the providers’ claims did not survive the dismissal of the injured party’s claims.  State Farm’s motion was affirmed.

In practice, trial courts are exceedingly reluctant to dismiss with prejudice an injured party’s PIP action absent the most flagrant discovery abuses. This is particularly true when the claim also involves multiple intervening providers.  Counsel seeking dismissal of provider claims based upon a procedural dismissal of the injured party’s claim must take the necessary step to ensure that the dismissal operates as an adjudication on the merits pursuant to MCR 2.504(B)(3).

 

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RIVALRY SEMINAR

The Rivalry Seminar will take place on

Friday, October 28th,

at the Kellogg Hotel & Conference Center in East Lansing, Michigan.

This is a complimentary seminar for our clients.

Click HERE  for a seminar agenda.

 Please contact Eileen Carty to register at ecarty@garanlucow.com or 248-641-7600.

 

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RIVALRY TAILGATE

MSU   v   MICHIGAN

October 29, 2016

Garan Lucow Miller will host a tailgate on Saturday, October 29, 2016

at the Dem Hall Field on the campus of Michigan State, beginning at 9:00 a.m. 

Fun! Food! Drink!  If you wish to attend please contact Eileen Carty at ecarty@garanlucow.com or 248-641-7600.

The game begins at noon.

 

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WINDY CITY SEMINAR

The Windy City Seminar will take place on

Thursday, November 10, 2016

at the Chicago Marriott Schaumburg.

This is a complimentary seminar for our clients.  Click here for the Agenda.

Contact Eileen Carty to register at ecarty@garanlucow.com or 248-641-7600.