Opinion
354436
09-22-2022
TYNINA FLOWERS, Plaintiff-Appellee, v. KEVIN WILSON and CHERI MICHELLA PETRI, Defendants, and AUTO CLUB INSURANCE ASSOCIATION and MEMBERSELECT INSURANCE COMPANY, Defendants-Appellants.
UNPUBLISHED
Wayne Circuit Court LC No. 18-015328-NI
Before: Ronayne Krause, P.J., and Jansen and Swartzle, JJ.
Per Curiam
Tynina Flowers was injured in a car accident and sought personal protection insurance benefits from Auto Club Insurance Association and Memberselect Insurance Company (together "Auto Club") for her medical bills. Auto Club paid only what it considered a "reasonable" fee for Flowers's medical expenses, but promised to indemnify and defend Flowers if her medical providers sought further payment. Auto Club moved for summary disposition, arguing that its promise negated any potential harm to Flowers caused by the unpaid bills. The trial court disagreed and denied Auto Club's motion. We reverse.
Flowers received medical care for the injuries she received in the car accident underlying this case. Auto Club paid only the bills it deemed "reasonable," paying part of some bills and allegedly leaving others entirely unpaid. Flowers then sued Auto Club for the unpaid balance of her medical bills, and Auto Club moved for summary disposition. Auto Club argued that Flowers could not state a claim under the no-fault act, MCL 500.3101 et seq., because it agreed to "indemnify and defend" Flowers if any medical provider sued her for the unpaid bills. Flowers responded, arguing that whether Auto Club paid a "reasonable" fee presented a question of fact for the jury to decide. She additionally argued that she could be harmed by Auto Club's actions even if she was never sued because unpaid debts could be sold to collection agencies and negatively affect her credit rating. The trial court agreed, adopting Flowers's arguments and denying Auto Club's motion for summary disposition. This Court initially denied Auto Club's application for leave to appeal, Flowers v. Wilson, unpublished order of the Court of Appeals, entered December 9, 2020 (Docket No. 354436), but our Supreme Court remanded this case to us to consider as on leave granted, Flowers v. Wilson, 508 Mich. 943 (2021).
"We review de novo a trial court's decision to grant or deny a motion for summary disposition." Sherman v. City of St Joseph, 332 Mich.App. 626, 632; 957 N.W.2d 838 (2020) (citations omitted). This Court reviews a motion brought under MCR 2.116(C)(10) "by considering the pleadings, admissions, and other evidence submitted by the parties in the light most favorable to the nonmoving party." Patrick v. Turkelson, 322 Mich.App. 595, 605; 913 N.W.2d 369 (2018). "Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law." Sherman, 332 Mich.App. at 632. In contrast, "[a] motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of a claim by the pleadings alone." Smith v. Stolberg, 231 Mich.App. 256, 258; 586 N.W.2d 103 (1998) (citation omitted).
Under the no-fault act, "an insurer is liable only for those medical expenses that constitute a reasonable charge for a particular product or service." McGill v. Auto Assn of Mich, 207 Mich.App. 402, 405; 526 N.W.2d 12 (1994). Similarly, "medical care providers are prohibited by law from charging more than a reasonable fee." Id., citing MCL 500.3157.
Auto Club acknowledges that it has not paid all of Flowers's medical bills, but it nevertheless argues that it is entitled to summary disposition because Flowers cannot be harmed by that decision due to Auto Club's promise to indemnify and defend Flowers from any actions taken against her by medical providers regarding the unpaid bills. Auto Club has repeatedly asserted that this promise also requires it to protect Flowers's credit. Both parties extensively rely on McGill and LaMothe v. Auto Club Ins Ass'n, 214 Mich.App. 577; 543 N.W.2d 42 (1995), overruled in part on other grounds by Covenant Med Ctr, Inc v. State Farm Mut Auto Ins Co, 500 Mich. 191; 895 N.W.2d 490 (2017), in their briefs on appeal.
Although Flowers and Auto Club each extensively rely on McGill, we are not bound by McGill because it was a standing decision that turned on the more onerous declaratory-judgment "case or actual controversy" requirement. See McGill, 207 Mich.App. at 407. In contrast, Flowers does not seek declaratory judgment so the normal, and more lenient, standing doctrine applies in this case. See Lansing Sch Ed Ass'n v. Lansing Bd of Ed, 487 Mich. 349, 372; 792 N.W.2d 686 (2010). That said, LaMothe is directly on point and controls the outcome in this case.
In LaMothe, the insurer paid only the medical expenses it deemed reasonable under the no-fault act so the insured sued his insurer for the unpaid balance. LaMothe, 214 Mich.App. at 579-580. The insurer promised to "fully defend and indemnify the insured from liability for necessary services priced in excess of what the insurer considers to be reasonable and customary." Id. at 583. The LaMothe Court concluded that this promise was legally enforceable "regardless of the period of limitation in the policy that controls presentment of claims to the insurer" and, therefore, the plaintiff was not harmed by the insurer's actions, which required dismissal of the plaintiff's case. Id. at 582-585 and 585 n 5.
This case is nearly identical to LaMothe, the only differences being that Flowers argues that the harm to her credit rating is a damage in and or itself (the LaMothe plaintiff argued that damaged credit caused anxiety, which this Court said was not recoverable, id. at 582-583) and Auto Club has allegedly left some medical bills completely unpaid. As for the credit issue, Auto Club has repeatedly represented to this court that its promise to indemnify and defend Flowers also obligates it to protect her credit. As explained in LaMothe, Auto Club's promise to indemnify and defend Flowers is legally enforceable and requires Auto Club to aid Flowers as promised in the future even if Auto Club no longer insures Flowers. This promise is also not limited to only those claims that Auto Club has partially paid. Rather, Auto Club has promised to indemnify and defend Flowers against any medical provider seeking unpaid bills. That promise applies equally to unpaid and partially-paid bills. Thus, just like in LaMothe, Flowers cannot state a claim because Auto Club's promise protects her from any harm resulting from Auto Club's decisions regarding which medical bills to pay. See id. at 583-585.
Reversed and remanded for proceedings consistent with this opinion. Auto Club, as the prevailing party, may tax costs under MCR 7.219.
Swartzle, J. (concurring).
I concur with the majority's opinion and judgment. I write separately to make clear that but-for the continuing viability of LaMothe v. Auto Club Ins Ass'n, 214 Mich.App. 577; 543 N.W.2d 42 (1995), overruled on other grounds by Covenant Med Ctr, Inc v. State Farm Mut Auto Ins Co, 500 Mich. 191; 895 N.W.2d 490 (2017), on the dispositive issue here, I would affirm.
As explained by the majority,
In LaMothe, the insurer paid only the medical expenses it deemed reasonable under the no-fault act so the insured sued his insurer for the unpaid balance. LaMothe, 214 Mich.App. at 579-580. The insurer promised to "fully defend and indemnify the insured from liability for necessary services priced in excess of what the insurer considers to be reasonable and customary." Id. at 583. The LaMothe Court concluded that this promise was legally enforceable "regardless of the period of limitation in the policy that controls presentment of claims to the insurer" and,
therefore, the plaintiff was not harmed by the insurer's actions, which required dismissal of the plaintiff's case. Id. at 582-585 and 585 n 5. [Maj op at .]Thus, under LaMothe, so long as the insurer promised to defend and indemnify the insured patient against the medical provider's attempts to obtain payment, the insured patient could not pursue a viable claim against the insurer related to any unpaid bill.
In arriving at this conclusion, both LaMothe and its predecessor, McGill v. Auto Ass'n of Mich, 207 Mich.App. 402; 526 N.W.2d 12 (1994), placed considerable emphasis on the statutory duty of an insurer to pay only "reasonable" charges under the state's no-fault act. MCL 500.3107. Based on this, the panels in the two cases concluded that it made sense that insurers would audit medical bills and pay only what the insurers considered were reasonable charges. And, following this line of reasoning, the panels further concluded that providers and patients could not expect that insurers would pay in full every charge for every service, regardless of the reasonableness of the charge or the necessity of the service.
Fair enough. But what LaMothe and McGill both failed to recognize was that medical providers have been under a similar statutory duty to charge only "reasonable" fees for necessary services provided. See MCL 500.3157 (1994 and 1995) and MCL 500.3157(1) (current). Thus, both sides of the payment equation under the no-fault act-the provider and the insurer-have reciprocal statutory duties to charge and pay only "reasonable" fees. The panels in each case appeared to presume that the insurer was just fulfilling its statutory obligation, but there was no similar presumption that the provider was just fulfilling its statutory obligation as well. Moreover, in LaMothe, the majority expressly concluded that the insurer had, in fact, paid "those charges reasonably incurred for reasonably necessary products, services, and accommodations for plaintiff's care." 214 Mich.App. at 581-582. Yet, this was one of the key factual claims in dispute-i.e., whether the insurer had paid for reasonable charges-and the majority made an inappropriate finding of fact on a motion for summary disposition under MCR 2.116(C)(10).
Courts have cited and followed Lamothe and McGill since the mid-1990s. See, e.g., United States Fid & Guar Co v. Michigan Catastrophic Claims Ass'n, 484 Mich. 1, 18; 795 N.W.2d 101, 110 (2009); Bronson Methodist Hosp v. Auto-Owners Ins Co, 295 Mich.App. 431, 457; 814 N.W.2d 670 (2012). Although recent changes to the no-fault act permit a medical provider to sue an insurer directly, MCL 500.3112; Spectrum Health Hosps v. Mich. Assigned Claims Plan, 330 Mich.App. 21, 28 n 4; 944 N.W.2d 412 (2019), LaMothe and McGill continue to bar the insured patient from the courthouse. An insured patient is even limited in her ability to contract around LaMothe and McGill. See, e.g., MCL 500.3143 (dealing with an assignment related to future benefits); Bronson Health Care Group, Inc, v. USAA Cas Ins Co, 335 Mich.App. 25; 966 N.W.2d 393 (2020).
Thus, the insured patient remains caught in the middle between, on the one hand, providers who demand payment at the risk of lost services, lawsuits, or collection agencies, and, on the other hand, insurers who refuse payment.
To be clear-none of this is to say that the insurer is necessarily wrong in the instant case. Auto Club might well have paid every reasonable fee charged for every necessary service received by plaintiff. But we cannot know this at the pleading stage. MCR 2.116(C)(8). The better approach, in my opinion, would be to let the factual dispute about the reasonableness of bills play out in litigation, rather than to assume that (1) the insurer paid reasonable charges, but (2) the provider did not charge reasonable fees for necessary services.
As to an insurer's promise to defend and indemnify an insured patient-the key feature that short circuits the patient's suit against the insurer-the details of the promise are universally scant, at least as recounted in case law. So, for example, (1) if the insured patient is subsequently sued by a provider for an unpaid bill, will the insurer let the patient hire an attorney of her choice and still pay for the cost of that attorney? Or, will the insurer require that the patient use an attorney of its choosing? (2) If the insured patient believes that the unpaid bill was for a necessary service reasonably priced, and that patient admits this in her answer to a provider's lawsuit against her, will the insurer then accept the admission and cover the bill in full? (3) How will the insurer, in actuality, rehabilitate an insured patient's decimated credit score such that the patient's credit is no worse than what it was before significant medical bills went unpaid? Will the insurer, for example, fund a patient's lawsuit against a credit bureau under the Fair Credit Reporting Act or similar consumer-protection law? (4) And, as a final example, if the insured patient needs a particular service but its medical provider refuses to provide the service because of unpaid bills, will the insurer assist the insured (and pay any necessary expenses) in finding equivalent replacement services?
There are too many unanswered questions and missing details to leave enforceability of the promise on future application of judicial and promissory estoppel. Instead, if LaMothe and McGill were set aside, the insured patient could pursue her rights in the courthouse like any other party with a legal interest. This would leave open the option for the insurer to defend and indemnify the insured patient through a negotiated (rather than forced) settlement.
With the recent changes to this state's no-fault regime, 2019 PA 21, now would be an opportune time for our Supreme Court to consider whether LaMothe and McGill should remain binding precedent. Insured patients have a cognizable interest in having their medical bills paid, and they should have the opportunity to have their own day in court.
Until and unless this happens, however, lower courts remain bound by LaMothe and McGill. Given this, I concur in the majority's opinion and judgment.