December 08, 2016
On December 7, 2016, the Michigan Supreme Court heard oral argument in the Covenant Medical Center v State Farm Mutual Automobile Insurance Company appeal. One of Garan Lucow Miller’s preeminent Michigan No-Fault attorneys, Daniel Saylor, was in attendance at the argument having written an Amicus Curiae Brief on behalf of the Insurance Institute of Michigan.
For those who might not know the issues involved in the Covenant matter, the Court of Appeals issued a published decision in which it construed MCL 500.3112 in a way never construed before. The Court of Appeals held, in essence, that an insurer’s payment of settlement monies to an injured person, pursuant to a negotiated resolution and binding agreement for release of the injured person’s claims, leaves the insurer exposed, post-settlement, to litigation filed directly by the injured person’s healthcare providers. Covenant Medical Center, Inc v State Farm Auto Ins Co, 313 Mich App 50; 880 NW2d 294 (2015).
According to the Court of Appeals’ opinion, this post-settlement exposure exists if, at the time of settlement, the insurer was in possession of a provider’s bill for services rendered yet failed to notify the provider of the intended “payment” and obtain a circuit court order apportioning distribution of the settlement proceeds. As a consequence of the procedures required by the appellate court’s new construction of §3112, under which circuit court “apportionment hearings” now precede virtually any final settlement, resolution of even the most common no-fault insurance disputes efficiently and with a minimum of litigation has become an impossibility.
State Farm filed an Application for Leave to Appeal the Court of Appeals’ decision, which was granted by the Michigan Supreme Court.
Mr. Saylor reports that at the Michigan Supreme Court argument, there was little to no discussion about apportionment hearings with providers or other aspects of the Court of Appeals’ decision. Instead, the arguments focused on whether the long-accepted notion that providers could sue insurers directly actually has any legal support. It was Mr. Saylor’s impression that the majority of the Court did not think that the purpose of section 3112 was to extend providers with a right to sue. Instead, it seemed some of the Court believed providers do not have an “independent” or derivative right to sue no-fault insurers but rather they will need to have the injured person’s assignment of that person’s right to sue.
Mr. Saylor further reports that much attention was given to the opening phrase of section 3112, which speaks of benefits being “payable to or for the benefit of the injured person…” suggesting that a healthcare provider’s so-called statutory right to sue only “emanates” from the statute, or resides “in the penumbra” of the statute only. If this is true, the Supreme Court would arguably not be authorized to act in furtherance of what might be fair or beneficial to any party in the event that the Act, as properly construed, does not allow for it.
To be clear, no one will know how the Supreme Court will decide this case, or upon what issues, until the decision is released. We offer the above merely to alert you to the fact that the Michigan Supreme Court is moving forward and will be reaching a decision soon. Garan Lucow Miller is intimately involved in the appeal and will be providing you immediate updates as soon as any decision is reached by the Supreme Court. In the meantime, if you have any questions or concerns about how to proceed now, with provider suits currently pending, please feel free to contact any of the attorneys here at Garan Lucow Miller who will be happy to discuss these issues with you.
A NEW ATTORNEY AT GLM
Welcome to Cassandra L. Booms, who has joined GLM
in our Detroit office as our newest associate.