ADULT FOSTER CARE FACILITY LAWFULLY ARRANGED FOR SERVICES TO BE PROVIDED SO INSURER HAD TO PAY FOR THE SERVICES

Benjamin Goldstein

In the unpublished Michigan Court of Appeals decision, Jawad A. Shah, M.D. P.C. et al v State Farm Mutual Automobile Ins Co, the Court found that during the claimant’s stay following a motor vehicle accident, the provider, Insight Healing Center, did not qualify as an Adult Care Facility according to section 400.704 of Michigan’s Adult Foster Care Licensing Act (“AFCLA”). The Court found that Insight did not provide “supervision, personal care, and protection in addition to room and board” for the claimant, and therefore the Court held the services arranged by Insight were lawfully rendered and compensable by Defendant State Farm.

The claimant, Michael Stone, was struck by a vehicle driven by a person insured by State Farm. Stone was subsequently admitted to Insight for rehabilitation and therapy for two years, incurring $787,000 in expenses. State Farm resisted payment for these services claiming that Insight lacked the required AFCLA licensure. State Farm argued that according to MCL 400.704(7), because the statutory definition of “foster care” was “[t]he provision of supervision, personal care, and protection in addition to room and board,” Insight required licensure pursuant to MCL 700.704(1) prior to qualifying as a lawful provider and collecting payment for services under Michigan’s No-Fault Act. Insight argued that it did not “provide” Stone with “board,” “supervision,” or “personal care” and instead contracted with separate commercial entities and independent contractors for the provision of such services, allowing its residents to select their own providers. State Farm did not refute this evidence, but argued that “the utilization of staffing agencies” did not excuse Insight from complying with the licensing requirement.

On appeal, the Court agreed with Insight’s interpretation of MCL 400.704(7). The Court stated that when reasonably interpreted in the context of the AFCLA, licensing was required only if the “establishment” itself provided “supervision, personal care, and protection in addition to room and board[.]” The Court held Insight itself did not provide those services, and thus was not required to be licensed. Further, Insight’s business model of incorporating the use of independent contractors was not improper.

The Court also noted that the Department of Licensing and Regulatory Affairs (LARA) was charged with enforcing MCL 400.709 and LARA had determined that Insight was not required to be licensed during the time Stone was receiving services there and the Court deferred to LARA’s interpretation of the statutes. In addition, a prior claim against Insight that it was illegally operating an unlicensed facility resulted in an investigation, the outcome of which was a determination that Insight did not fall under the authority of the licensing act and therefore did not require a license. Finally, the Court found that Insight reasonably relied upon LARA’s interpretation of the statute it was charged with interpreting, and upon LARA’s determination that Insight was not required to be licensed during the time of Stone’s stay. Applying a new interpretation of the statute divorced from LARA’s, or applying the 2019 amended definition of a “foster care,” would result in unfairness to Insight and deprive Insight of its legitimate expectations of payments for the services it arranged to be provided.

Justice Brock Swartzle authored a dissent stating that the definition of “provide” is to supply or make available, and that the statutory language was broad enough to encompass the provision of the services whether via an employee or an independent contractor. Justice Swartzle concluded that because Insight provided every component of adult-foster-care to Stone at its facility (ie. Supervision, personal care, protection, and room and board), albeit through independent contractors, and because Insight was not licensed by LARA, the treatment was precluded as not lawfully rendered under MCL 500.3157(1) and the treatment charges were not reimbursable.