Since the time of the 2019 Amendments to the No-Fault Act, health care providers have possessed a direct cause of action under Section 3112 to seek recovery of bills incurred for services provided to a no-fault claimant. Providers, however, often obtain an assignment from the insured, creating a clear delineation between claims to be pursued by the insured and claims to be pursued by the provider. Such was the case in Synergy Spine & Orthopedic Surgery Ctr v State Farm Mut Ins Co, __ Mich App __ (2024), where an insured underwent several surgeries performed by the plaintiff provider and assigned that provider the rights to pursue benefits for the surgical facility fees. The insured retained the rights to pursue benefits related to the surgeons’ fees, however.
Through separate lawsuits, both the insured and plaintiff provider sued State Farm to recover no-fault benefits. The insured’s lawsuit proceeded to trial first and the jury reached a no-cause-of-action verdict. While the jury concluded that the insured had sustained accidental bodily injury arising out of a motor vehicle accident, and that allowable expenses had been incurred, it also concluded that all allowable expenses incurred by the insured as a result of those accident injuries had been paid by State Farm.
The plaintiff provider, in its own case, then sought to rely on this verdict through the doctrines of res judicata and collateral estoppel, seeking to bar State Farm from “relitigating” the questions affirmatively answered by the jury in the claimant’s lawsuit. The plaintiff provider maintained that the only remaining issue for a jury to decide was whether its medical services were reasonable and customary.
State Farm responded by arguing that the jury verdict in the insured’s lawsuit implicitly concluded that the surgeries at issue were not allowable expenses and therefore precluded the plaintiff provider from pursuing reimbursement for the facility costs. The trial court treated these arguments as competing motions for summary disposition and ruled in State Farm’s favor, finding the plaintiff provider was bound by the jury verdict in the claimant’s case under the doctrine of collateral estoppel.
The Court of Appeals reversed the trial court’s ruling, relying heavily on its prior opinion in Mecosta Co Med Ctr v Metro Group Prop & Cas Ins Co, 509 Mich 276, 282; 983 NW2d 401 (2022). As articulated in the Mecosta opinion, neither res judicata (claim preclusion) nor collateral estoppel (issue preclusion) allow a party to be bound to a judgment from an action to which they were not a party, or otherwise in privity with the party, to whom the judgment applies.
The plaintiff provider was never a party to the insured’s case, as it had opted to litigate those claims assigned to it through a separate action. Nor was it in privity with the insured at the time of the verdict, since it had received an assignment, which effectively severed privity at the time of assignment.
However, since State Farm was a party to both actions and had a full and fair opportunity to litigate the issues affirmatively answered by the jury, the Court of Appeals agreed with the plaintiff provider that collateral estoppel would preclude State Farm from relitigating the issues of: (1) whether the claimant suffered bodily injury arising from the subject accident; and (2) whether allowable expenses were incurred. The Court of Appeals disagreed with plaintiff provider, which argued that the triable issues were limited to whether its bills were reasonable and customary, finding that plaintiff provider still had the burden of proving a causal connection between the accident injuries and its services. The mere fact that the insured sustained a bodily injury from her accident and incurred allowable expenses did not create any inference that the expenses incurred by plaintiff provider for its services were compensable as allowable expenses.
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Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com