No-Fault Health Care Provider Actions Shattered

By Rachael M. Sedlacek posted 06-07-2017 09:04


Last year, Covenant motions in no-fault health care provider cases were all the rage. After the court of appeals decision in Covenant Medical Center, Inc v State Farm Mutual Auto Insurance Company, no-fault insurers couldn’t use a global release from the injured claimant to extinguish liability to providers that treated the claimant and gave the insurer notice. This led to parties filing motions in circuit court to figure out how to allocate settlement proceeds.

Fast forward to date. Not only are Covenant motions a thing of the past, so are direct actions by health care providers. On May 25, the Michigan Supreme Court held that a health care provider does not have an independent right of action against a no-fault insurer to recover no-fault benefits incurred by an insured. MCL 500.3112, which plaintiffs relied on as the basis for health care provider standing, merely allows insurers to pay providers directly on behalf of the insured. As a result, the MSC reversed the court of appeals decision in Covenant and overruled over two decades of court of appeals opinions recognizing a provider’s direct right of action.

The result, although unwelcome for some, is not surprising to several no-fault experts. I asked Bob Logeman, Dan Siefer, and Adrienne Logeman to weigh in on the decision. Here are some of the things they said:

  • This decision was expected based on a textual reading of MCL 500.3112. Many plaintiffs firms with a lot of first-party cases prepped clients for this outcome.
  • Any pending provider suits without assignments will be summarily dismissed. Providers will have to work with the injured party’s counsel to secure payment.
  • Provider suits in which the providers do have an assignment will probably continue as they had in the past—except the suit will proceed based on the assignment.
  • An assignment to a provider cannot be for future benefits. To avoid this, a patient may have to execute several assignments at various stages of treatment, and the assignments can cover only past or present services.
  • Health care providers with assignments need to put no-fault insurers on notice as soon as possible—otherwise they might lose their rights under MCL 500.3112.
  • It is an open question as to what will happen if a health care provider accepts an assignment in lieu of full payment from the insured. Is that payment still recoverable under the No-Fault Act if the insured person is no longer obligated to the provider?
  • Certain no-fault policies prohibit assignment without the insurer’s consent. Some argue that constricting assignment is against public policy—particularly after a loss occurs. This issue may become especially important now that health care providers cannot bring direct actions.

Bob, Dan, and Adrienne are working on updates to the provider litigation sections of Michigan No-Fault Automobile Cases. We’ll let you know when the revised chapters are posted.

1 comment



08-07-2017 17:07

Michigan No-Fault Automobile Cases has been updated.  For an overview, see 4.7.