Court Of Appeals Rejects Creative Standing Arguments By Provider Plaintiff

Charles A. Harrison, III

The Michigan Court of Appeals recent unpublished decision in Oaklawn Hospital v Auto Owners Insurance Company, et al, [1] contains a thorough analysis of several of the standing issues that have arisen in PIP provider lawsuits in the post-Covenant era, particularly with regard to hospitals. While the recent amendments to MCL 500.3112 vest medical providers with a direct statutory right to sue auto insurers for payment with regard to services rendered after June 11, 2019, the Court of Appeals unanimous opinion in Oaklawn is still of interest because it dealt with at length, but ultimately rejected, three common arguments advanced by hospitals in the many large-exposure cases still pending and yet-to-be-filed regarding expenses allegedly incurred by auto accident victims before the amendments took effect on June 11, 2019. Those common arguments are:

1. Standard hospital consent-to-treatment forms have language that validly assigns the patient’s right to sue his or her auto insurance carrier for PIP benefits.

2. This alleged assignment made at the time of admission to the hospital applies to all services provided during the entire admission without running afoul of Section 3143, which forbids the assignment of benefits payable in the future.

3. Agreements with PPOM/Cofinity (“Cofinity”), to which both the hospital and the insurance carrier are parties, create an independent contractual right of action separate from the No-Fault statute and any alleged assignments.

The Court rejected each of these arguments:

1. The specific language of the standard consent-to-treat form signed by the insured in Oaklawn, like most such hospital forms, merely authorized payment of benefits directly to Oaklawn and did not clearly reflect the intent of the signor to assign the right to pursue recovery directly from Auto Owners. It should be noted that the possibility exists that such forms were changed after the Covenant decision came down in May 2017, so one still needs to look at the specific language being relied upon.

2. The Court found that the patient-insured did not incur any allowable expenses (the pre-requisite for the accrual of payable benefits) for medical treatment by the mere act of signing a form requesting and providing consent to receive medical treatment as a general matter. The Court noted that the form also specified that the patient/insured reserved the right to refuse medical treatment. Since allowable expenses had not yet been incurred at the time of admission, the only right to benefits that would have been the subject of any assignment would be payable in the future, rendering the assignment void pursuant to the plain language of MCL 500.3143.

3. Plaintiff claimed that, even without a valid assignment, it still had standing to sue Auto Owners directly under a contract theory based on the fact that both it and Auto Owners were subject to agreements with Cofinity requiring that participating insurance carriers accept a given percentage of the provider’s fees as the payment amount. Auto Owners argued that it had no direct agreement with Cofinity, but only had one with Corvel, which had the agreement with Cofinity. The Plaintiff argued that it needed to see those agreements, but the Court said that was not necessary for a decision because Oaklawn’s agreement with Cofinity (which had been produced in the lower court) specifically reserved to the insurer the final determination as to whether the charges incurred for medical services were, in fact, reimbursable.

Oaklawn’s counsel was creative and resourceful in developing the arguments, requiring the Court to delve rather deeply into the facts and applicable law. Even though the Court chose not to designate Oaklawn as a published case, its reasoning will be useful in continuing the present trend of negative outcomes for attempts to turn standard hospital consent forms into valid assignments of the right to pursue recovery of PIP benefits for the entire hospital stay. The difficulties for one clever fallback argument based on Cofinity contracts are also made apparent.

[1] Unpublished opinion per curiam of the Michigan Court of Appeals, decided July 30, 2019 (Docket No 343189), available at:

http://publicdocs.courts.mi.gov/OPINIONS/FINAL/COA/20190730_C343189_35_343189.OPN.PDF