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

Supreme Court of Michigan

May 25, 2017

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

          Argued December 7, 2016

          Chief Justice: Stephen J. Markman, Brian K. Zahra, Bridget M. McCormack, David F. Viviano, Richard H. Bernstein, Joan L. Larsen, Kurtis T. Wilder.

         SYLLABUS

         Covenant Medical Center, Inc., brought suit in the Saginaw Circuit Court against State Farm Mutual Automobile Insurance Company to recover payment under the no-fault act, MCL 500.3101 et seq., for medical services it provided to State Farm's insured, Jack Stockford, following an automobile accident in which Stockford was injured. Covenant sent bills totaling $43, 484.80 to State Farm for healthcare services it provided to Stockford. State Farm denied payment on November 15, 2012. In the meantime, Stockford had filed suit against State Farm for no-fault benefits, including personal protection insurance (PIP) benefits. Without Covenant's knowledge, Stockford and State Farm settled Stockford's claim for $59, 000 shortly before Covenant initiated its action against State Farm. As part of the settlement, Stockford released State Farm from liability for all allowable no-fault expenses and any claims accrued through January 10, 2013. State Farm moved for summary disposition under MCR 2.116(C)(7) (dismissal due to release) and MCR 2.116(C)(8) (failure to state a claim). The court, Robert L. Kaczmarek, J., granted State Farm's motion under MCR 2.116(C)(7), explaining that Covenant's claim was dependent on State Farm's obligation to pay no-fault benefits to Stockford, an obligation that was extinguished by the settlement between Stockford and State Farm. Covenant appealed by right in the Court of Appeals, and in a published per curiam opinion, the Court of Appeals, M. J. Kelly, P.J., and Murray and Shapiro, JJ., reversed the circuit court's decision. 313 Mich.App. 50 (2015). According to the Court, the settlement with Stockford did not discharge State Farm's liability to Covenant because State Farm had notice of Covenant's claim for no-fault benefits for the benefit of Stockford. Because State Farm had notice of Covenant's claim, State Farm's settlement with Stockford was not a good-faith payment of no-fault benefits it owed. The Court of Appeals concluded that the circumstances of this case were addressed in MCL 500.3112, which required State Farm to seek a court order directing the proper allocation of benefits when, in addition to a first-party claim for benefits, there was also a third-party claim for payment of no-fault benefits. The Supreme Court granted State Farm's application for leave to appeal. 499 Mich. 941 (2016).

         In an opinion by Justice Zahra, joined by Chief Justice Markman and Justices McCormack, Viviano, and Larsen, the Supreme Court held:

         The plain language of the no-fault act, MCL 500.3101 et seq., governs the administration of Michigan's no-fault laws regarding claims and benefits involving automobile accidents. Only two sections of the no-fault act mention healthcare providers, MCL 500.3157 and MCL 500.3158, and neither of those sections confers on a healthcare provider a right to sue for reimbursement of the costs of providing medical care to an injured person. Those sections address, respectively, the charges a healthcare provider may assess for treatment of an insured and the requirement that a healthcare provider make an insured's medical records and treatment information available to the insurer. Two additional relevant provisions, MCL 500.3105 and MCL 500.3107, address, respectively, an insurer's obligation to pay personal protection insurance (PIP) benefits and the allowable expenses for which PIP benefits must be paid. Nothing in the language of those two provisions authorizes a healthcare provider to bring a direct action against an insurer for payment of PIP benefits. Nor does the language appearing in MCL 500.3107(1)(a), which makes benefits payable for allowable expenses consisting of all reasonable charges incurred, create a right of action on behalf of healthcare providers because healthcare providers do not incur the charges or become liable for them; charges for healthcare are incurred most commonly by patients, who are the ones that become liable for paying those charges. Furthermore, although MCL 500.3112 allows no-fault insurers to directly pay PIP benefits to a healthcare provider for expenses incurred by an insured, MCL 500.3112 does not entitle a healthcare provider to bring a direct action against an insurer for payment of PIP benefits. That statutory provision simply allows a no-fault insurer to satisfy its obligation to an insured by direct payment to the injured person or direct payment to the healthcare provider for the benefit of an injured person. MCL 500.3112 also provides that a no-fault insurer's payment made in good faith either to or for the benefit of an insured satisfies its obligation to the insured to the extent of the payment if the insurer did not previously receive written notice of a third-party's claim for benefits. The remainder of MCL 500.3112 addresses an interested party's right to apply to the circuit court for an order awarding and apportioning payment to entitled persons, and it authorizes the circuit court to designate payees and make an equitable apportionment among those payees, including dependents and survivors of the injured person. Finally, no language appearing in MCL 500.3114 or MCL 500.3115 contemplates a statutory cause of action for healthcare providers against a no-fault insurer. MCL 500.3114 and MCL 500.3115 concern the priority of insurers from which an injured person is entitled to receive benefits when multiple insurers are involved. In short, under the language of the no-fault act, a healthcare provider does not possess a statutory cause of action against a no-fault insurer for the payment of no-fault benefits.

         Reversed and remanded for entry of summary disposition in defendant's favor.

         Justice Bernstein, dissenting, concluded that although the no-fault act does not expressly grant a healthcare provider a direct cause of action against a no-fault insurer for the payment of PIP benefits, MCL 500.3112 supports the existence of such a cause of action. The language of the no-fault act nowhere expressly defines "claimant" but provisions of the no-fault act, like MCL 500.3112, state which parties may receive no-fault benefits, and the right to receive benefits is necessary in order for a party to claim those benefits. MCL 500.3112 provides that PIP benefits are payable either to the injured person or to someone else for the benefit of the injured person; payment to a healthcare provider is payment for the benefit of the injured person. To conclude that injured persons are entitled to a claim for benefits and that healthcare providers are not is inconsistent with the language of MCL 500.3112. The language of the no-fault act does not expressly confer on any party the right to directly sue a no-fault insurer for no-fault benefits. If an express provision giving a party the right to sue an insurer is required, then no party-not even the injured person-is authorized to sue a no-fault insurer to compel payment of no-fault benefits. But to hold that an injured person is the only party entitled to make a claim to enforce his or her right to receive benefits renders surplusage the language in the no-fault act that permits payment to a third party.

          Justice Wilder did not participate in the disposition of this matter.

         BEFORE THE ENTIRE BENCH (except Wilder, J.)

          OPINION

          ZAHRA, J.

         This case presents the significant question of whether a healthcare provider possesses a statutory cause of action against a no-fault insurer to recover personal protection insurance benefits for allowable expenses incurred by an insured under the no-fault act, MCL 500.3101 et seq. Relying on several of its previous decisions, the Court of Appeals concluded that it is "well settled that a medical provider has independent standing to bring a claim against an insurer for the payment of no-fault benefits."[1] The insurer sought leave to appeal in this Court, and we granted the application to consider in part that conclusion, which this Court has never addressed.[2]

         A thorough review of the statutory no-fault scheme reveals no support for an independent action by a healthcare provider against a no-fault insurer. In arguing that healthcare providers may directly sue no-fault insurers, plaintiff primarily relies on MCL 500.3112, which provides, in pertinent part, that "[p]ersonal 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." While this provision undoubtedly allows no-fault insurers to directly pay healthcare providers for the benefit of an injured person, its terms do not grant healthcare providers a statutory cause of action against insurers to recover the costs of providing products, services, and accommodations to an injured person. Rather, MCL 500.3112 permits a no-fault insurer to discharge its liability to an injured person by paying a healthcare provider directly, on the injured person's behalf. And further, no other provision of the no-fault act can reasonably be construed as bestowing on a healthcare provider a statutory right to directly sue no-fault insurers for recovery of no-fault benefits. We therefore hold that healthcare providers do not possess a statutory cause of action against no-fault insurers for recovery of personal protection insurance benefits under the no-fault act. The Court of Appeals caselaw concluding to the contrary is overruled to the extent that it is inconsistent with this holding. We reverse the judgment of the Court of Appeals in this case and remand the case to the Saginaw Circuit Court for entry of an order granting summary disposition to defendant.

         I. FACTS AND PROCEDURAL HISTORY

         On June 20, 2011, Jack Stockford was injured in a motor vehicle accident. His no-fault insurer was defendant, State Farm Mutual Automobile Insurance Company. Stockford was treated on at least three occasions by plaintiff, Covenant Medical Center, a healthcare provider. Plaintiff sent defendant bills on July 3, August 2, and October 9, 2012, for medical services it provided to Stockford. It is undisputed that defendant received the bills, which totaled $43, 484.80. Defendant denied coverage on or about November 15, 2012, and refused to pay the bills.

         On June 4, 2012, Stockford filed suit against defendant for no-fault benefits, including personal protection insurance (PIP) benefits.[3] Stockford settled his case with defendant on April 2, 2013, for $59, 000. In connection with the settlement, Stockford executed a broad release, which encompassed all allowable no-fault expenses, including medical bills, and "any and all past and present claims incurred through January 10, 2013[.]"

         Plaintiff brought the instant suit against defendant on April 25, 2013, seeking payment of its billed expenses.[4] Plaintiff asserted that it learned of the settlement and release when defendant answered its complaint in May 2013. In September 2013, defendant moved for summary disposition under MCR 2.116(C)(7) (dismissal due to release) and MCR 2.116(C)(8) (failure to state a claim). Defendant maintained that plaintiff's claim for benefits was derivative of Stockford's claim, which was extinguished by the release. Therefore, defendant argued, plaintiff no longer possessed a claim against it.

         In an opinion dated May 15, 2014, the circuit court granted summary disposition to defendant pursuant to MCR 2.116(C)(7). The court agreed with defendant that Stockford's release was dispositive, holding that any claim plaintiff may have had against Stockford's insurer was "dependent on the insurer being obligated to pay benefits to the provider on behalf of its insured" and that the "release end[ed] the insurer's obligation to pay benefits to or on behalf of its insured under its contract of insurance."

         Plaintiff appealed by right in the Court of Appeals. In a published per curiam opinion, the panel reversed the circuit court's decision, concluding that defendant's liability to plaintiff could not be discharged by defendant's settlement with Stockford because defendant had received written notice of plaintiff's claim before the settlement, presumably from the bills that plaintiff mailed to defendant.[5] The panel opined that, in this situation, the settlement could not constitute a "good faith" payment covering the noticed third-party claim for purposes of MCL 500.3112. The panel reasoned in part:

[W]hile a provider's right to payment from the insurer is created by the right of the insured to benefits, an insured's agreement to release the insurer in exchange for a settlement does not release the insurer with respect to the provider's noticed claims unless the insurer complies with MCL 500.3112.[6]

         According to the panel, in order to discharge liability under these circumstances, MCL 500.3112 "requires that the insurer apply to the circuit court for an appropriate order directing how the no-fault benefits should be allocated."[7] The Court of Appeals therefore reversed the circuit court's order granting summary disposition in favor of defendant and remanded the case for further proceedings.

         Defendant applied for leave to appeal in this Court. As previously mentioned, this Court granted leave to consider in part "whether a healthcare provider has an independent or derivative claim against a no-fault insurer for no-fault benefits[.]"[8]

         II. STANDARD OF REVIEW AND RULES OF STATUTORY INTERPRETATION

         The circuit court granted summary disposition under MCR 2.116(C)(7), which applies when "[e]ntry of judgment, dismissal of the action, or other relief is appropriate because of release . . . ." This Court reviews de novo a court's decision to grant summary disposition.[9]

         This Court also reviews de novo questions of statutory interpretation.[10] The role of this Court in interpreting statutory language is to "ascertain the legislative intent that may reasonably be inferred from the words in a statute."[11] "The focus of our analysis must be the statute's express language, which offers the most reliable evidence of the Legislature's intent."[12] When the statutory language is clear and unambiguous, judicial construction is not permitted and the statute is enforced as written.[13] "[A] court may read nothing into an unambiguous statute that is not within the manifest intent of the Legislature as derived from the words of the statute itself."[14]

         III. ANALYSIS

         The Court of Appeals concluded that the release executed between Stockford and defendant did not release defendant from liability regarding plaintiff's claim. This conclusion was premised on the notion that a healthcare provider who provides services to a person injured in a motor vehicle accident possesses its own statutory claim against the injured person's no-fault insurer to compel payment for services rendered on behalf of the insured. The Court of Appeals panel in the instant case did not critically dissect the pertinent statutory provisions of the no-fault act to find support for this premise but instead followed previous decisions of the Court of Appeals, which it was bound to do.[15]Plaintiff urges us to likewise follow the long line of cases from the Court of Appeals recognizing that a healthcare provider may sue a no-fault insurer to recover PIP benefits under the no-fault act. We decline plaintiff's invitation, relying instead on the language of the no-fault act to conclude that a healthcare provider possesses no statutory cause of action against a no-fault insurer for recovery of PIP benefits.

         A. COURT OF APPEALS CASELAW

         The foundation of any opinion interpreting a statutory provision is the parsing of the words of the pertinent act or statute under review. This case is no exception. Nonetheless, we are presented with decades of Court of Appeals caselaw concluding that a healthcare provider may assert a direct cause of action against a no-fault insurer to recover no-fault benefits. Although this Court is not in any way bound by the opinions of the Court of Appeals, we nevertheless tread cautiously in considering whether to reject a long line of caselaw developed by our intermediate appellate court. That being said, the longevity of a line of Court of Appeals caselaw will not deter this Court from intervening when that caselaw clearly misinterprets the statutory scheme at issue. Correcting erroneous interpretations of statutes furthers the rule of law by conforming the caselaw of this state to the language of the law as enacted by the representatives of the people. And it is imperative that this Court aim to conform our caselaw to the text of the applicable statutes to ensure that those to whom the law applies may look to those statutes for a clear understanding of the law.[16] We therefore begin our analysis with a brief discussion of how this issue developed in the Court of Appeals.

         There are three cases on which the Court of Appeals has frequently relied when concluding that a healthcare provider may directly sue a no-fault insurer. The first is LaMothe v Auto Club Ins Ass'n, [17] in which the panel opined that it could "anticipate that health care services providers, as practical litigants, would bypass the insured and directly sue, pursuant to third-party beneficiary theories, the entity with prospects identical to their own for engendering jury sympathy-the insurer." Significantly, the LaMothe parties did not litigate whether the no-fault act permits such a direct cause of action because the insurer had agreed via contractual provision "to fully defend and indemnify the insured from liability . . . ."[18]

         The following year, in Munson Med Ctr v Auto Club Ins Ass'n, [19] the Court of Appeals stated that the defendant insurer's "obligation to pay" and the plaintiff healthcare provider's "right to be paid for the injureds' no-fault medical expenses arise pursuant to MCL 500.3105, 500.3107, and 500.3157 . . . ." But there was no indication that this "right" was in dispute; the central issue in the case concerned the meaning of "customary charges." Moreover, while the panel cited particular statutory provisions, it did not parse the language of those provisions or provide any meaningful analysis to support the implication that a healthcare provider possesses a direct cause of action against a no-fault insurer for PIP benefits.

         Also frequently cited for the proposition that a healthcare provider may directly sue a no-fault insurer is Lakeland Neurocare Ctrs v State Farm Mut Auto Ins Co.[20] But as in LaMothe, the issue was neither presented nor decided in Lakeland because the defendant insurer in Lakeland "did not dispute that plaintiff had the legal right to commence this action for payment of medical services rendered to defendant's insured."[21] Instead, the litigated issue was whether the provider could recover penalty interest under MCL 500.3142 and attorney fees under MCL 500.3148.[22]

         None of these cases decided whether healthcare providers possess a statutory cause of action against no-fault insurers. Despite this, subsequent panels of the Court of Appeals have, in published and unpublished cases alike, consistently relied on one or more of the cases just discussed as if they had decided the issue, generally failing to engage in any statutory analysis of their own to ground a healthcare provider's cause of action in the text of the no-fault act. This is aptly illustrated by the cases cited by the Court of Appeals in the instant case for the proposition that "it is . . . well settled that a medical provider has independent standing to bring a claim against an insurer for the payment of no-fault benefits."[23] Like LaMothe, Munson, and Lakeland, none of the cases cited by the Court of Appeals provides any textual analysis of the no-fault act to support this proposition.[24]

         In sum, the Court of Appeals' decision in this case was premised on the notion that a healthcare provider possesses a statutory cause of action against a no-fault insurer for payment of no-fault benefits. The panel gleaned this notion not from the text of the no-fault act, but from previous decisions of the Court of Appeals that are likewise devoid of the statutory analysis necessary to support that premise. We find this caselaw unconvincing, and unlike the Court of Appeals panel, we are not bound by the conclusion that a healthcare provider possesses a right to bring a direct cause of action against a no-fault insurer to recover PIP benefits under the no-fault act. We instead rely on the language of the no-fault act itself to answer the question presented in this case.

         B. STATUTORY ANALYSIS

         It bears repeating that completely absent from the analysis in the Court of Appeals cases discussed earlier is a meaningful explanation of what language in the no-fault act creates a cause of action for healthcare providers against insurers. And indeed, the no-fault act does not, in any provision, explicitly confer on healthcare providers a direct cause of action against insurers. In fact, only two sections of the act, MCL 500.3157 and MCL 500.3158, even mention healthcare providers. MCL 500.3157 states:

A physician, hospital, clinic or other person or institution lawfully rendering treatment to an injured person for an accidental bodily injury covered by personal protection insurance, and a person or institution providing rehabilitative occupational training following the injury, may charge a reasonable amount for the products, services and accommodations rendered. The charge shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance.

         MCL 500.3158(2) states:

A physician, hospital, clinic or other medical institution providing, before or after an accidental bodily injury upon which a claim for personal protection insurance benefits is based, any product, service or accommodation in relation to that or any other injury, or in relation to a condition claimed to be connected with that or any other injury, if requested to do so by the insurer against whom the claim has been made, (a) shall furnish forthwith a written report of the history, condition, treatment and dates and costs of treatment of the injured person and (b) shall produce forthwith and permit inspection and copying of its records regarding the history, condition, treatment and dates and costs of treatment.

         The former provision, MCL 500.3157, merely sets forth a limitation on the charges that may be assessed by a healthcare provider for treatment of an injured person. That a provider has the right to charge a reasonable amount for its products, services, or accommodations in no way obligates an insurance carrier to directly reimburse the provider for those charges. The latter provision, MCL 500.3158(2), simply requires that a healthcare provider make the injured person's medical records and certain treatment information available to the insurer. Neither of these provisions, by their express terms or by implication, confers on a healthcare provider a right to sue a no-fault insurer for reimbursement of the amounts it charged for treatment. Therefore, any such statutory right must be found in the sections of the no-fault act that do not explicitly refer to healthcare providers.

         Plaintiff urges us to find support for a healthcare provider's direct cause of action in MCL 500.3105 and MCL 500.3107. MCL 500.3105(1) makes a no-fault insurer liable for the payment of PIP benefits. MCL 500.3105(1) states that "[u]nder personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter." MCL 500.3107 provides that "personal protection insurance benefits are payable for" certain costs, including "[a]llowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation, " MCL 500.3107(1)(a), and "[w]ork loss consisting of loss of income from work, " MCL 500.3107(1)(b). According to plaintiff, because benefits are payable for "reasonable ...


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