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Uncertain Times for No-Fault Provider Litigation

By Rachael M. Sedlacek posted 07-11-2016 10:46

  

At this year’s No-Fault Summit, everyone was talking about Covenant Medical Center, Inc v State Farm Mutual Auto Insurance Company. In Covenant, the insured settled with the no-fault insurer and signed a release purporting to cover all claims incurred through a certain date. One of the insured’s medical providers later sued the no-fault insurer based on noticed claims for treatment provided to the insured before the release was signed. The court of appeals held that the no-fault insurer was on the hook for the medical provider’s bills because it failed to comply with MCL 500.3112. You can read a more detailed summary of Covenant in chapter 4 of Michigan No-Fault Automobile Cases.

Summit presenters on both sides offered advice on how to avoid Covenant-type problems. Bob Logeman focused on narrowing the release. He advised plaintiffs’ lawyers to attach to the release an itemization of the specific medical bills being released and the periods of treatment. On the defense side, Ron Sangster suggested sending a letter to the plaintiff’s providers asking them to waive a certain amount from the settlement funds. If you can’t get a waiver from a medical provider, Ron recommended withholding a designated amount from the settlement for one year. If the medical provider doesn’t make a claim within that year, the money could be tendered to the plaintiff’s counsel.

Many at the Summit also wondered whether Covenant will be the pivotal case in provider suits. It appears it may be. On May 27, 2016, the Michigan Supreme Court granted leave to appeal in the case. The parties are to address the scope and application of MCL 500.3112 and whether a medical provider has “an independent or derivative claim against a no-fault insurer for no-fault benefits.” If the court axes the independent medical provider claim, is that the death knell for provider litigation? Not necessarily. Bob reminded Summit attendees that they could still pursue a provider claim by obtaining an assignment from the injured party. Just make sure the assignment is for services already rendered (the No-Fault Act prohibits future assignments).  

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