Court cites 'Covenant' when ruling for insurer

By Lee Dryden
BridgeTower Media Newswires

DETROIT - Many in the no-fault community predicted the Covenant v. State Farm decision would be a game changer.

Evidence of that was shown in a recent Michigan Court of Appeals opinion where that high-profile case was the determining factor.

In Eubanks v. State Farm Mutual Automobile Insurance Co., an appeals court panel ruled against intervening plaintiff medical providers after a car accident.

The panel cited the Michigan Supreme Court's May 25 decision in Covenant when ruling that the "intervening plaintiffs in this case have no statutory cause of action against defendant for recovery of personal protection insurance benefits under the no-fault act."

The July 18 unpublished per curiam Eubanks opinion was issued by Judges Kathleen Jansen, Jane M. Beckering and Michael F. Gadola.

'Eubanks' case

The Eubanks case stemmed from a July 2013 car accident. Plaintiff George Eubanks was a passenger in a car that was struck by a hit-and-run driver in Wayne County. The plaintiff allegedly sustained injuries during the crash, but did not have auto insurance, nor was the car in which he was a passenger insured, according to the opinion.

Eubanks applied for personal protection insurance (PIP) benefits with the Michigan Assigned Claims Plan, and the claim was assigned to State Farm. Eubanks and fellow passenger Patrick Garret later filed a complaint with the trial court seeking benefits from the defendant. The trial court allowed the medical providers to intervene to seek payment for services provided.

"After plaintiff failed to comply with discovery and failed to appear, the trial court entered an order dismissing plaintiff's claim with prejudice," the opinion stated. "Defendant thereafter moved for summary disposition of the claims of intervening plaintiffs, arguing that the claims of the intervening plaintiffs were derivative of plaintiff's claim and that the dismissal with prejudice of plaintiff's claim necessitated the dismissal of the claims of intervening plaintiffs.

"Following a hearing, the trial court denied the motion for summary disposition, concluding that the claims of intervening plaintiffs were not extinguished by the dismissal of plaintiff's claim."

On appeal, State Farm contended that the trial court erred. The insurer argued that "because plaintiff's claim for PIP benefits was dismissed with prejudice by the trial court, intervening plaintiffs' derivative claims are also precluded."

COA cites 'Covenant'

The Supreme Court provided conclusive guidance in the Covenant case, according to the appeals court panel.

The Covenant case involved whether medical care providers can be cut out of the payment process when a no-fault insurer reaches a settlement with an injured party.

State Farm argued that Covenant's $43,484.80 claim for treating an accident victim was barred by the injured party's settlement. The trial court agreed, but the Court of Appeals reversed in an October 2015 published opinion.

The appeals court ruled the provider cannot be disregarded - as long as the provider gives pre-settlement written notice of its claim.

But the high court concluded 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."

In Eubanks, the panel reversed the trial court and remanded the case.

"In accordance with Covenant Med Center, we hold that intervening plaintiffs in this case have no statutory cause of action against defendant for recovery of personal protection insurance benefits under the no-fault act. The trial court in this case therefore erred in denying defendant's motion for summary disposition."

Attorney reaction

James G. Gross, who represents State Farm in the Eubanks case, said, "Obviously, I had a positive response to the opinion."

"After losing so many of these cases in the Court of Appeals, the win was refreshing," he said.

The Covenant decision has "definitely" changed the landscape in such cases, Gross said.

"From the insurers' perspective, it will staunch the flow of multiple suits arising out of one injury. That situation was getting out of hand," said Gross, of James G. Gross PLC in Detroit. "From the providers' perspective, it eliminates one avenue for protecting their recovery, but does not leave them completely without recourse.

"Proper post-treatment assignments are one possibility, and we'll see some litigation about the viability of non-assignment provisions in policies. Intervention is another possibility. In any event, it will increase the level of communication between providers and the attorneys representing injured persons."

James W. Low, who represents medical providers in the Eubanks case, called it an "early case following Covenant, where a lot of the issues that have followed the Covenant decision were not decided."

"Both the bench and bar are looking for appellate guidance on quite a few issues that have been raised following the decision," said Low, managing attorney of The Dollar Law Firm PLLC in Southfield.

Low added that "the future of provider litigation in Michigan appears to be assignments."

"The first 20 minutes of oral argument in the Covenant case were focused on State Farm arguing that assignments were the remedy for providers if they no longer maintained a statutory right to a cause of action," he said. "It appears that the Michigan Supreme Court took notice of this argument, as they included in a footnote that the opinion was not intended to limit the right of the injured party to assign past benefits."

Gross added that "as a practical matter, if the injured person's claim is legitimate and the services satisfy the statutory requirements, the claims should be paid one way or the other."

"It's a positive to have all the interested parties in one forum, regardless how they get there (assignment, intervention, or informal participation). Legitimate providers have a place in the process. Now it's just a matter of working with one another," he said.

Published: Thu, Sep 07, 2017