Covenant Medical Center, Inc. v. State Farm Mutual Automobile Insurance Co.
Docket No. 152758
Trial Lawyers' Bottom Line: Healthcare provider cannot sue no-fault insurer directly for unpaid medical expenses; it must sue the patient-insured instead.
Jack Stockford was injured in a car accident and received treatment at Covenant Medical Center. His medical expenses totaledover $40,000. Covenant sent a bill for this amount to Stockford’s insurer, State Farm, who refused to pay. Stockford then sued State Farm for no-fault insurance benefits. They settled for $59,000. As a part of the settlement, Stockford released State Farm from liability for all allowable no-fault expenses, including medical bills and past claims.
Covenant sued State Farm in 2013 to receive payment for the billed medical expenses. State Farm answered Covenant’s complaint by citing the settlement and release. The circuit court granted State Farm summary disposition on the theory that Covenant’s claim was derivative of Stockford’s and thus extinguished by the release. The Court of Appeals reversed, holding that State Farm’s liability to Covenant could not have been dismissed by State Farm’s settlement with Stockford because State Farm had received written notice of Covenant’s claim before the settlement.
In a majority opinion by Justice Zahra, the Court recognized that a long line of cases from the Court of Appeals held that a healthcare provider can sue a no-fault insurer to recover Personal Protection Insurance (PIP) benefits. But the Court held that the statutory scheme did not comport with this reading. The Court looked to the No-Fault Act, MCL 500 et seq. and said that only two sections, MCL 500.3157 and MCL 500.3158, even mention healthcare providers. And neither of them grant a healthcare provider a right to sue a no-fault insurer for reimbursement of the amounts it charged for treatment.
Covenant had argued that because benefits are payable for “reasonable charges” under MCL 500.3107(1)(a), including charges incurred for services rendered by healthcare providers under MCL 500.3157, that no-fault insurers must pay the provider’s reasonable charges directly. But the Court said “these provisions do nothing more than define the scope and nature of the requisite coverage. They do not identify to whom the insurer is liable or who has the right to assert a claim for benefits.”
The Court then turned to Covenant’s argument under MCL 500.3112. The Court said this statute allows for no-fault insurers to pay healthcare providers directly, but does not require it. In sum, the Court found “no language that can be reasonably understood as creating a right for a healthcare provider to directly sue a no-fault insurer.”
The Court pointed out, however, that its conclusion did not leave a healthcare provider without recourse. “A provider that furnishes healthcare services to a person for injuries sustained in a motor vehicle accident may seek payment from the injured person for the provider’s reasonable charges.” The Court reversed the Court of Appeals.
Justice Wilder took no part in the case, but Justice Bernstein filed a dissent, where he conducted his own plain-language analysis and determined that the majority’s conclusion was not supported by the statute. Instead, he said that the majority’s interpretation rendered the language in MCL 500.3112, which permits payment of benefits to dependents “and to other parties for the benefit of the injured person,” surplusage. Justice Bernstein added, “it simply cannot be that the Legislature created a statutory scheme for the distribution of PIP benefits that no party could ever recover if an insurer denied coverage.
Full opinion here.