Vhs of Michigan Inc v. Allstate Insurance Company

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

VHS OF MICHIGAN, INC., doing business as UNPUBLISHED

DETROIT MEDICAL CENTER, March 10, 2026

11:20 AM

Plaintiff-Appellant,

v No. 372607

Wayne Circuit Court

ALLSTATE INSURANCE COMPANY, LC No. 23-006728-NF

Defendant-Appellee.

Before: MALDONADO, P.J., and M. J. KELLY and TREBILCOCK, JJ.

PER CURIAM.

In this action by a medical services provider against an insurer to recover payment for

services rendered, plaintiff, VHS of Michigan, Inc. (VHS), appeals as of right the trial court’s order

denying its motion for interest and attorney fees. For the reasons stated in this opinion, we vacate

and remand for further proceedings.

I. BASIC FACTS

On January 11, 2023, CAA, a fourteen-month-old child, was catastrophically injured after

the vehicle in which he was riding was struck in a head-on collision by a vehicle making a left-

hand turn. The day following the crash, CAA’s mother completed an application for no-fault

benefits with the Michigan Assigned Claims Plan. She represented in the application that her auto

insurance policy with Progressive Insurance had lapsed and that there was no other insurance in

CAA’s household. See MCL 500.3114(4) (stating in relevant party that “a person who suffers

accidental bodily injury arising from a motor vehicle accident while an occupant of a motor vehicle

who is not covered under a personal protection insurance policy as provided in subsection (1) shall

claim personal protection insurance benefits under the assigned claims plan . . . .”). CAA’s claim

was assigned to defendant, Allstate Insurance Company. Thereafter, VHS, which had provided

medical services to CAA following the crash, sought payment from Allstate for services rendered

from January 11, 2023 to March 7, 2023. The total claim was for $247,504.25.

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On May 25, 2023, VHS filed suit against Allstate, seeking payment of CAA’s medical

bills. Approximately one month later, CAA’s mother, acting on behalf of CAA, also filed suit

against Allstate, seeking payment for CAA’s expenses arising from the motor-vehicle crash. On

April 17, 2024, almost one year after VHS filed its claim, Allstate moved for declaratory relief and

disbursement under MCL 500.3112. Allstate argued that the claims in the two cases filed against

it exceeded the $250,000 statutory limit on the payment of personal protection insurance (PIP)

benefits. The trial court granted the motion and ordered Allstate to pay VHS $238,387.87.

Subsequently, VHS filed a motion seeking penalty interest under MCL 500.3142 and

attorney fees under MCL 500.3148. VHS contended that its claims against Allstate were

“overdue.” Allstate responded that the claims were reasonably in dispute because it had a duty to

determine whether CAA’s claims were subject to the statutory limit. Following a hearing on the

motion, the trial court denied VHS’s motion, reasoning that Allstate had made payment to VHS

“in accordance with this Court’s May 23, 2024 order regarding distribution pursuant to the MCL

500.3112 motion, and under those circumstances the payments were not delayed.” The trial court

reasoned that “the delay in payment can’t be deemed overdue or unreasonable, as [Allstate] in the

case was doing its due diligence as to the bill.” This appeal follows.

II. MOTION FOR INTEREST AND ATTORNEY FEES

A. STATUTE OF LIMITATIONS

VHS argues that the trial court erred by denying its request for interest and attorney fees.

We review for clear error the trial court’s factual findings related to whether an insurer was

provided with “reasonable proof of the fact and loss sustained” under MCL 500.3142(1). Williams

v AAA Mich, 250 Mich App 249, 265; 646 NW2d 476 (2002). The interpretation of MCL 500.3142

and its application to the facts of a case, however, is reviewed de novo. Bronson Health Care

Group, Inc v Titan Ins Co, 314 Mich App 577, 582; 887 NW2d 205 (2016). “Whether an insurer

acted reasonably when it delayed paying a claim presents a mixed question of law and fact.”

Beaumont Health v Mich Auto Ins Placement Facility, 347 Mich App 393, 402; 15 NW3d 293

(2023). Likewise, a court’s decision on a motion for attorney fees under MCL 500.3148(1) also

involves a mixed question of law and fact. Ross v Auto Club Group, 481 Mich 1, 7; 748 NW2d

552 (2008). Specifically, “[w]hat constitutes reasonableness is a question of law, but whether the

defendant’s denial of benefits is reasonable under the particular facts of the case is a question of

fact.” Id. “A finding is clearly erroneous when, although there is evidence to support it, the

reviewing court on the entire record is left with a definite and firm conviction that a mistake was

made.” Brown v Home-Owners Ins Co, 298 Mich App 678, 690; 828 NW2d 400 (2012) (quotation

marks and citation omitted).

B. ANALYSIS

1. PENALTY INTEREST

The penalty-interest provision of the no-fault act “is intended to penalize an insurer that is

dilatory in paying a claim.” Williams, 250 Mich App at 265. “Penalty interest must be assessed

against a no-fault insurer if the insurer refused to pay benefits and is later determined to be liable,

irrespective of the insurer’s good faith in not promptly paying the benefits.” Id. “An overdue

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payment bears simple interest at the rate of 12% per annum.” MCL 500.3142(4). PIP “benefits

are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of

the amount of loss sustained.” MCL 500.3142(2). “[I]f reasonable proof is not supplied as to the

entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after

the proof is received by the insurer.” Id. However, for PIP benefits under MCL 500.3107(1)(a),

“if a bill for the product, service, accommodations, or training is not provided to the insurer within

90 days after the product, service, accommodations, or training is provided, the insurer has 60 days

in addition to 30 days provided under subsection (2) to pay before the benefits are overdue.” MCL

500.3142(3). “[A] claimant is not required to prove that the insurer acted arbitrarily or

unreasonably delayed in payment of benefits; an insurer is liable for penalty interest if it does not

pay the claim within 30 days after receiving reasonable proof of loss.” Bronson Health Care

Group, Inc, 314 Mich App at 583.

VHS argues that it is entitled to penalty interest under MCL 500.3142 because the

payments were due 30 days after it sent its bills to Allstate. The record reflects that VHS provided

billing statements to Allstate on March 1, 2023, March 23, 2023, April 24, 2023, May 5, 2023, and

February 27, 2024. The trial court, however, failed to make findings as to whether those billing

statements constituted reasonable proof of the fact and the amount of a claim in accordance with

MCL 3142(2). If, for example, the court had found that each statement provided constituted

reasonable proof of the fact and amount of the loss sustained, then the 30-day deadline for paying

each bill would have been triggered. Under that factual scenario, the bills would be considered

overdue on March 31, 2023, April 22, 2023, May 24, 2023, and June 4, 2023, respectively.

Further, if the court found that reasonable proof of the fact and the amount of loss sustained was

provided by the February 27, 2024 billing statement, then Allstate had 90 days to pay the claim

under MCL 500.3142(3). This deadline would have expired on May 27, 2024. Payment was not

issued until June 17, 2024. As such, if the court found the above billing statements to constitute

reasonable proof of the fact and of the amount of loss sustained, then the payments were overdue.

Under that factual scenario, VHS is entitled to penalty interest under MCL 500.3142.

Allstate, however, maintains that it did not receive reasonable proof for all of VHS’s claims

until it received an April 1, 2024 e-mail from VHS’s lawyer. If this e-mail constituted reasonable

proof of the claim, then the 90-day deadline under MCL 500.3142(3) would have expired on June

30, 2024. Under this factual scenario, because payment would be within 90 days of the receipt of

reasonable proof of the fact and of the amount of loss, then the payment would not have been

overdue and VHS would not be entitled to penalty interest.

Rather than resolving this factual dispute, the trial court erroneously focused on whether

Allstate had acted diligently in investigating VHS’s claim. The trial court reasoned that “the delay

in payment can’t be deemed overdue or unreasonable” because Allstate “was doing its due

diligence as to the bill.” Stated differently, the trial court concluded that the payment was not

overdue because Allstate’s actions were “reasonable.” Yet, under MCL 500.3142(2), insurers are

not relieved from their obligation to pay penalty interest by acting reasonably in investigating a

claim. Instead, a claim is overdue if it is “not paid within 30 days after an insurer receives

reasonable proof of the fact and of the amount of loss sustained.” MCL 500.3142(2). By

considering whether Allstate’s actions were reasonable, the trial court improperly read a

requirement into the statute that VHS needed to demonstrate that there was an unreasonable delay

in payment of benefits. Such a requirement impermissibly contravenes the language in the statute,

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which does not include a reasonableness requirement. See Bronson Health Care Group, Inc, 314

Mich App at 584 (“Courts cannot read a requirement into a statute that the Legislature has seen fit

to omit.”). Further, it is contrary to our caselaw, which provides that, when establishing that it is

entitled to penalty interest, a “claimant is not required to prove that the insurer acted arbitrarily or

unreasonably delayed in payment of benefits.” Id. at 583.

Accordingly, we vacate the trial court’s denial of interest under MCL 500.3142(2) and

remand for findings regarding when Allstate received “reasonable proof of the fact and of the

amount of loss sustained,” and, if appropriate, for a calculation of penalty interest.

2. ATTORNEY FEES

Under MCL 500.3148(1):

[A]n attorney is entitled to a reasonable fee for advising and representing a claimant

in an action for personal or property protection insurance benefits that are overdue.

The attorney’s fee is a charge against the insurer in addition to the benefits

recovered, if the court finds that the insurer unreasonably refused to pay the claim

or unreasonably delayed in making proper payment.

The purpose of the attorney-fee provision of the no-fault act is to

ensure prompt payment to the insured. Accordingly, an insurer’s refusal or delay

places a burden on the insurer to justify its refusal or delay. The insurer can meet

this burden by showing that the refusal or delay is the product of a legitimate

question of statutory construction, constitutional law, or factual uncertainty. [Ross,

481 Mich at 11.]

“Therefore, whether a claimant’s benefits qualify as overdue and whether an insurer unreasonably

refused to pay or unreasonably delayed in making payment determine if a claimant’s attorney may

receive attorney fees.” Moore v Secura Ins, 482 Mich 507, 511; 759 NW2d 833 (2008).

Under MCL 500.3148(1), the two prerequisites for the award of attorney fees are that (1)

“the benefits must be overdue,” and (2) “the trial court must find that the insurer unreasonably

refused to pay the claim or unreasonably delayed in making proper payment.” Id. at 517 (quotation

marks omitted). “If a claimant establishes the first prerequisite, a rebuttable presumption arises

regarding the second.” Brown, 298 Mich App at 692. When the presumption is established, “the

insurer bears the burden of showing that the withholding was based on a legitimate question of

statutory construction, constitutional law, or factual uncertainty.” Nahshal v Fremont Ins Co, 324

Mich App 696, 720; 922 NW2d 662 (2018) (quotation marks and citation omitted). The

determinative factor “is not whether the insurer ultimately is held responsible for benefits, but

whether its initial refusal to pay was unreasonable.” Moore, 482 Mich at 522. Here, the trial court

found that Allstate’s delay was reasonable considering that VHS’s bill was for nearly the entire

amount of the $250,000 cap.

However, we cannot fully evaluate this finding because, as noted above, the trial court

failed to determine when VHS submitted its reasonable proof of loss. Assuming that the billing

statements provided reasonable proof of VHS’s claim and that the payments were overdue, Allstate

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would then have the burden of establishing that it withheld payment “based on a legitimate

question of statutory construction, constitutional law, or factual uncertainty.” Nahshal, 324 Mich

App 720 (quotation marks and citation omitted). Assuming arguendo that the billing statements

constituted reasonable proof of VHS’s claim, the payments would have been overdue as of March

31, 2023, April 22, 2023, May 24, 2023, June 4, 2023, and February 27, 2024. Though it is unclear

when Allstate became aware of CAA’s claims, it had, at minimum, been informed of CAA’s claims

by June 29, 2023, when his mother, acting on his behalf, sued Allstate. Accordingly, for at least

some of VHS’s claims, at the time that Allstate initially refused to pay, Allstate had been aware of

competing claims under the same statutory limit. If Allstate had immediately paid all of VHS’s

claims, it could have left CAA without recourse for a portion of his claim in light of the statutory

limit. Allstate ultimately sought the trial court’s assistance in apportioning payment to the

competing claimants. Therefore, for at least some of the payments, Allstate had rebutted the

presumption by demonstrating that there was a legitimate factual uncertainty as to how much each

claimant was entitled to under the statutory limit. See Ross, 481 Mich at 11. That is, the trial

court’s finding that it would not have been prudent for Allstate to issue VHS a check for “such a

large bill that is almost the amount of the cap,” without further diligence was not clearly erroneous.

However, further factual finding related to when the claims became overdue is necessary to fully

evaluate VHS’s request for attorney fees. Consequently, a remand for findings regarding the

timeline as to VHS’s reasonable proof of loss and which claims were subject to factual uncertainty

at the time that Allstate initially refused to pay is in order.

VHS’s contention that this factual uncertainty is simply an issue of priority between

insurers is misplaced. Because the no-fault act is “designed to provide sure and speedy recovery

of certain economic losses resulting from motor vehicle accidents,” “whenever a priority question

arises between two insurers, the preferred method of resolution is for one of the insurers to pay the

claim and sue the other in an action of [equitable] subrogation.” Esurance Prop & Cas Ins Co v

Mich Assigned Claims Plan, 507 Mich 498, 517; 968 NW2d 482 (2021). This case involves a

dispute as to amounts to which the claimants were entitled, not a dispute as to which insurer was

required to pay. Both VHS and CAA sought payment from the same insurer. Furthermore, it

would be contrary to the purpose of the no-fault act to apply this rule to priority disputes between

claimants because, though it might cause the insurers to “pay promptly,” it would cause the

claimants to face continued litigation with the other claimants instead of ensuring a “sure and

speedy recovery.” Id.

Vacated and remanded for further consideration of when Allstate received “reasonable

proof of the fact and of the amount of loss sustained,” and which of VHS’s claims were subject to

factual uncertainty at the time Allstate initially refused to pay. We do not retain jurisdiction. No

taxable costs are awarded. MCR 7.219(A).

/s/ Allie Greenleaf Maldonado

/s/ Michael J. Kelly

/s/ Christopher M. Trebilcock

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