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

Court of Appeals of Michigan

October 22, 2015

COVENANT MEDICAL CENTER, INC., Plaintiff-Appellant,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee

          Saginaw Circuit Court. LC No. 13-020416-NF.

         For COVENANT MEDICAL CENTER INC, Retired, PLAINTIFF-APPELLANT: CHRISTOPHER J SCHNEIDER, GRAND RAPIDS, MI.

         For STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Retired, DEFENDANT-APPELLEE: ANDREW D CONCANNON, SAGINAW, MI.

         Before: M. J. KELLY, P.J., and MURRAY and SHAPIRO, JJ.

          OPINION

          [313 Mich.App. 51] Per Curiam.

         Plaintiff, Covenant Medical Center, Inc., appeals by right the circuit court's order granting summary disposition to defendant, State Farm Mutual Automobile Insurance Company, under MCR 2.116(C)(7) (claim barred by release). For the reasons stated in this opinion, we reverse.

         In 2011, State Farm's insured, Jack Stockford, was injured in a motor vehicle accident. In 2012, Covenant Medical provided medical services to Stockford for the injuries he sustained. Covenant Medical billed State Farm $43,484.80 for those services, sending bills in July, August, and October 2012. In November 2012, State Farm responded to the bills in writing. Subsequently, on April 2, 2013, in exchange for payment of $59,000, Stockford entered into a written agreement with State Farm that purported to release State Farm from liability " regarding all past and present claims incurred through January 10, 2013," as a result of the 2011 accident.

         Thereafter, Covenant Medical filed the instant action, alleging that State Farm had unreasonably refused to pay $43,484.80 for the medical services rendered to Stockford. State Farm moved for summary [313 Mich.App. 52] disposition, arguing that Covenant Medical's claims were barred by the settlement payments from State Farm to Stockford and the release signed by him as part of that settlement. The trial court concluded that the release barred Covenant Medical's claims and granted summary disposition in favor of State Farm.

         On appeal, Covenant Medical argues that because it provided written notice to State Farm regarding the medical services provided to Stockford, it is entitled to pursue the $43,484.80, along with penalties, interests, and costs.[1] We agree.

         Resolution of the issue involves the application of MCL 500.3112. " The primary goal of statutory interpretation is to ascertain the legislative intent that may reasonably be inferred from the statutory language." Krohn v Home-Owners Ins Co, 490 Mich. 145, 156; 802 N.W.2d 281 (2011) (quotation marks and citations omitted). " Unless statutorily defined, every word or phrase of a statute should be accorded its plain and ordinary meaning, taking into account the context in which the words are used." Id. (citations omitted). " If the plain and ordinary meaning of the language of the statute is clear, judicial construction is inappropriate." Lakeland Neurocare Ctrs v State Farm Mut Auto Ins, 250 Mich.App. 35, 37; 645 N.W.2d 59 (2002). " When construing a statute, a court must read it as a whole." Klooster v City of Charlevoix, 488 Mich. 289, 296; 795 N.W.2d 578 (2011).

          MCL 500.3112 provides in pertinent part:

[313 Mich.App. 53] Personal protection insurance benefits are payable to or for the benefit of an injured person or, in the 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. If there is doubt about the proper person to receive the benefits or the proper apportionment among the persons entitled thereto, the insurer, the claimant or any other interested person may apply to the circuit court for an appropriate order. The court may designate the payees and make an equitable apportionment, taking into account the relationship of the payees to the injured person and other factors as the court considers appropriate. [Emphasis added.]

          MCL 500.3112 provides that if the insurer does not have notice in writing of any other claims to payment for a particular covered service, then a good-faith payment to its insured is a discharge of its liability for that service. 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. Instead, the statute requires that the insurer apply to the circuit court for an appropriate order directing how the no-fault benefits should be allocated. That was not done in this case. Accordingly, under the plain language of the statute, because State Farm had notice in writing of Covenant Medical's claim, State Farm's payment to Stockford did not discharge its liability to Covenant Medical.

         State Farm relies on Mich Head & Spine Institute, PC v State Farm Mut Auto Ins Co, 299 Mich.App. 442; [313 Mich.App. 54] 830 N.W.2d 781 (2013). However, the rule applied in that case does not apply here. The issue presented in Mich Head & Spine was " whether an insured's release bars a healthcare provider's claim for payment for medical services rendered to the insured after the release was executed." Id. at 448 (emphasis added). The circumstances presented in Mich Head & Spine did not implicate MCL 500.3112 while the instant case does. When the relevant services were rendered and the insurer ...


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