JURIST Guest Columnist David Christensen of Christensen Law discusses Michigan’s legislation regarding no-fault regulations, and holding insurance companies to their lawful responsibilities …

The legal climate for Michigan medical providers has gotten bleak recently. Auto insurance companies have developed a practice of challenging almost every claim for no-fault benefits, throwing doctors’ fees and hospital charges into question. But there is still hope. Recent Michigan Court of Appeals cases have offered a one-two punch in favor of medical provider claims.

The Michigan No-Fault Act (MCL 500.3112) is designed to make sure motor vehicle accident victims can receive the medical care they need. To back up that guarantee, the law says:

Personal protection insurance benefits are payable to or for the benefit of an injured person or, in case of his death, to or for the benefit of his dependents. Payment by an insurer in good faith of personal protection insurance benefits, to or for the benefit of a person who it believes is entitled to the benefits, discharges the insurer’s liability to the extent of the payments unless the insurer has been notified in writing of the claim of some other person …

MCL 500.3112 (emphasis added). Michigan courts have long held that this gives medical provider an independent, derivative claim for no-fault benefits directly from auto insurance providers.

In recent years, those insurance companies have stepped up their opposition to medical provider claims, contesting cases where the person was clearly injured as the result of an auto accident, and claiming that the medical provider’s charges were not reasonable or necessary. They have even tried to enter settlements with injured motorists and then claim that settlement cut off the medical provider’s claim in a separate lawsuit as well.

Then recently, the Michigan Court of Appeals released two published cases, Covenant Medical Center, Inc. v. State Farm Mutual Automobile Insurance Company [PDF] and Chiropractors Rehabilitation Group, P.C. v. State Farm Mutual Automobile Insurance Company [PDF], which together reaffirm medical provider’s right to bring their no-fault benefit claims to court, even in light of a settlement by the patient.

Covenant Medical Center, Inc. v. State Farm Mutual Automobile Insurance Company

Covenant stands for medical providers’ claims when a patient settles for too little to cover the provider’s bill, assuming the medical provider had given the insurance company written notice of its claims ahead of time.

In 2011 Jack Stockford was injured in a motor vehicle accident. He was treated by Covenant Medical Center in 2012. In July, August and October 2012, the hospital sent written notice of a total of $43,000 in medical bills to the responsible insurance provider, State Farm. In 2013 Stockford settled his claim for little more than the outstanding medical bill, agreeing to indemnify State Farm from claims by medical providers including Covenant Medical Center.

When Covenant Medical Center sued anyway, the court found that MCL 500.3112 protected its claim. Because Covenant Medical Center had sent its written notice of claim before the settlement was reached, it could still seek payment of reasonable medical expenses under the No-fault Act. The court ruled:

However, the plain text of the statute provides that if the insurer has notice in writing of a third party’s claim, then the insurer cannot discharge its liability to the third party simply by settling with its insured. Such a payment is not in good faith because the insurer is aware of a third party’s right and seeks to extinguish it without providing notice to the affected third party.

The court ruled that if State Farm had wanted to include Covenant Medical Center’s claim in the settlement, it should have asked the trial court to apportion the funds.

Covenant promises medical providers’ control over their own litigation and no-fault benefit claims by making sure their lawsuits are not resolved without their approval by an injured motorist’s settlement. While insurance providers have already begun filing “Covenant motions” to apportion settlements, such motions still give medical provider attorneys an opportunity to object and preserve their doctors’ claims.

Chiropractors Rehabilitation Group, P.C. v. State Farm Mutual Automobile Insurance Company

In Chiropractors Rehab Group, the court rejected the idea that a medical provider’s claim dies when its patient becomes uncooperative. Michigan no-fault law requires injured parties to attend “independent medical examinations” in order to preserve their claims. Insurance providers like State Farm have claimed that this requirement extends to a medical provider’s claim. They argue failure to appear makes a patient ineligible to receive no-fault benefits, and any medical provider claim requires an eligible patient.

The court agreed that a patient must be eligible, but disagreed that his or her failure to appear for an examination could automatically negate a medical provider’s claim. It said:

State Farm may reasonably suspend claims by the injured parties due to a failure to submit to MEs [medical examinations], and a suspension of benefits is not an ‘irrevocable denial’ of benefits; the eligibility for PIP [personal injury protection] benefits is simply suspended until compliance with the ME.

Automatic termination of a medical provider’s claim would deprive the courts of their authority to compel patient cooperation through court orders, subpoenas and contempt of court proceedings, to preserve the treatment facility’s interest. The court ruled that because a medical provider could still establish an injured party’s eligibility before trial, the courts could not dismiss cases based solely on the patient’s lack of cooperation.

Taken together, Covenant and Chiropractors Rehab Group send a clear message to auto insurance companies and medical provider attorneys: doctors’ and hospitals’ right to payment of no-fault benefits is truly independent and must be litigated as such. Even though the claims are derived from the policy-holder’s injury, that person’s later settlement or lack of cooperation does not automatically relieve the insurance provider of its obligations to treatment facilities or doctors. With these decisions, the court has given medical providers the green light to take their cases forward and has delivered a one-two punch to insurance companies trying to dodge their responsibilities under the law.

David Christensen, is a personal injury attorney at Christensen Law. He has more than 25 years of experience helping victims of auto accidents obtain medical benefits and secure treatment options that allow them to focus on their healing and recovery. Christensen Law is located in Southfield, Michigan.

Suggested citation: David Christensen, Michigan Courts Defend Medical Provider Claims, JURIST – Professional Commentary, Dec. 23, 2015, http://jurist.org/hotline/2015/12/david-christensen-medical-providers.php