Author(s): James L. Borin, Simeon R. Orlowski

Volume XXII, No. 16 May 19, 2010

LAW FAX MICHIGAN LAW – BLUE | INDIANA LAW – RED www.garanlucow.com Garan Lucow Miller, P.C. 1111 West Long Lake Road, Suite 300 Troy, Michigan 48098 248.641.7600 From the Co-Editors James L. Borin & Simeon R. Orlowski

MEDICAL PROVIDER BARRED BY RES JUDICATA FROM RE-LITIGATING COVERAGE UNDER NO-FAULT POLICY CONTRIBUTOR – SARAH L. WALBURN

On April 27, 2010, in the case of TBCI v State Farm (Docket No. 288853) the Michigan Court of Appeals addressed the issue of whether plaintiff, a healthcare provider, could litigate coverage that had already been determined in another lawsuit. It held that, under the doctrine of res judicata, plaintiff’s claim is barred.

The background of this case reveals that on February 6, 2006, Eric Afful was allegedly injured in a motor vehicle accident. As a result, he underwent medical treatment with plaintiff, as well as claimed to have received attendant care services. However, State Farm, Mr. Afful’s noGARAN LUCOW MILLER, P.C.

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fault insurer, sued Mr. Afful in a separate suit in Wayne County Circuit Court asserting that the attendant care claims he submitted were fraudulent.

On May 15, 2008, the underlying case went to trial and the jury found that Mr. Afful’s attendant care claims were, indeed, fraudulent. As such, his claims for no-fault benefits were barred under the exclusionary clause of the subject policy, which reads: There is no coverage under this policy if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy. (Emphasis added).

In the present matter, which was pending during the trial in the underlying case, State Farm refused to pay for plaintiff’s services, totaling approximately $35,000. After the judgment was rendered in the underlying case, State Farm moved for summary disposition arguing that the underlying judgment barred plaintiff’s claim under the doctrine of res judicata. State Farm argued that once the jury found that Mr. Afful had committed fraud, coverage no longer existed under the policy. Plaintiff responded that its claim was an “independent cause of action.” The “independent cause of action” as claimed by plaintiff was one for “services”, which was not adjudicated in the underlying case.

The Michigan Court of Appeals agreed with State Farm and held that plaintiff’s claim was barred by res judicata. Res judicata bars a subsequent action between the same parties when the evidence or essential facts are identical. It is applicable when three elements are met:

1. The first action was decided on its merits; 2. The second action was or could have been resolved in the first action, and; 3. Both of the actions involve the same parties or their privies. The Court determined that the first two prongs were easily met as there was a final judgment in the underlying case and because the essential evidence presented in the underlying case could have been used to resolve the present case. The third element was satisfied because plaintiff, by seeking coverage under the policy with State Farm, stands in the shoes of Mr. Afful. Therefore, plaintiff did not have an “independent cause of action”, but instead was a “privy” of Mr. Afful. A “privy” is a person so identified in interest with another that he represents the same legal right.

Based upon the foregoing analysis, the Court held that plaintiff was simply attempting to re-litigate the same issues as in the underlying case to obtain coverage. As such, the plaintiff’s claim of appeal failed. This case is important because providers previously have been permitted to maintain independent causes of action for no-fault benefits. However, this case holds that, in some instances, providers do not have an independent cause of action and will, in fact, be barred by res judicata. Upcoming Seminars ANNUAL TROY BREAKFAST SEMINAR Thursday, September 23, 2010 at the Troy Marriott. Agenda to follow at a later date.

******************** RACE AND REMEMBER

Garan Lucow Miller, P.C. is sponsoring a new event that will take place in downtown Detroit, specifically a 5k run (approximately 3 miles) and walk (2 miles with 1 mile option), called Hospice of Michigan’s 2010 Race and Remember.

This event will take place on Saturday, June 12th, 2010, along the beautiful Detroit Riverfront starting at Rivard Plaza, next door to our Detroit office.

The event honors loved ones who have received hospice care and to raise money for Hospice of Michigan’s Open Access Program.

If you would like to participate either by running or walking in this event, you may register online at http://www.active.com/donate/raceandremember/garan

Garan Lucow Miller’s team name is “GARAN’S GAZELLES”. Please resister as a team member.

Once registered, please contact Eileen Carty at ecarty@garanlucow.com, as Garan Lucow Miller, will provide parking/refreshments to all participants.

SAVE THE DATE

The 3rd Annual Cherry- Roubaix Race, sponsored by Garan Lucow Miller, P.C., will be held on Saturday and Sunday, August 28th and 29th, 2010, through the historic streets in the heart of Traverse City.

Mark your calendars to join us at this exciting event. If you have any questions or would like additional information on this race, please go to www.cherry-roubaix.com or contact Peter Worden, in our Traverse City office at: (231) 941-1611.

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SAVE THE DATE

Event: Garan Lucow Miller’s Annual Golf Outing Date: Tuesday, August 24, 2010 Venue: Forest Akers West Golf Course on the campus of MSU Banquet dinner to be on campus at the University Club

Garan Lucow Miller, P.C., a full-service law firm since 1948, providing quality representation to a national clientele from the Great Lakes Region, is pleased to announce that it has opened an office in Merrillville, Indiana, to further facilitate your claim and litigation needs in Indiana and Illinois. Garan Lucow Miller, P.C.

8401 Virginia Street Merrillville, Indiana 46410 Phone: 219.756.7901 Fax: 219.756.7902 Toll Free: 877.804.2801