The Michigan Supreme Court Issues Orders Addressing the Anti-Assignment Clauses in Automobile Insurance Policies and the Retroactive Application of Covenant

Sarah E. Nadeau

On October 25, 2019, the Michigan Supreme Court issued to Orders resolving long-pending appeals.  In W.A. Foote Memorial Hospital v Michigan Assigned Claims Plan, the Court, in lieu of granting leave to appeal, affirmed the holding of the Court of Appeals that Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich 191 (2017), applies retroactively.  The Court also vacated the part of the Court of Appeals’ judgment stating the Supreme Court’s decision in Spectrum Health Hosps v Farm Bureau Mut Ins Co of Mich, 492 Mich 503 (2012), “effectively repudiated” the application of the “threshold question” and “three-factor test” set forth in Pohutski v City of Allen Park, 465 Mich 675 (2002), in the context of judicial decisions of statutory interpretation.  The Court noted that the Covenant decision did not clearly establish a new principle of law and Covenant does not satisfy Pohutski’s threshold question such that the Covenant decision applies retroactively.

NOTE: Among the no-fault act’s reforms enacted earlier this year, medical providers were expressly afforded the right to file a direct cause of action against a no-fault insurer for services rendered.  That change took effect June 11, 2019, and applies to services provided after that date.

In Shah v State Farm Mutual Auto Ins Co, the Supreme Court denied the application for leave to appeal because it was not persuaded that the questions presented should be reviewed.  This decision left in place the Court of Appeals’ conclusion that enforcement of the anti-assignment clause in the instant case was unenforceable to prohibit the assignment that occurred – an assignment after the loss occurred of an accrued claim to payment – because such a prohibiting of assignment violates Michigan public policy that is part of our common law as set forth by our Supreme Court.