W a Foote Memorial Hospital v. Farmers Insurance Exchange

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

WA FOOTE MEMORIAL HOSPITAL, doing UNPUBLISHED

business as ALLEGIANCE HEALTH, February 18, 2020

Plaintiff-Appellee,

v Nos. 338168; 340018

Jackson Circuit Court

FARMERS INSURANCE EXCHANGE, LC No. 15-002343-NF

Defendant-Appellant,

and

MICHIGAN AUTO INSURANCE PLACEMENT

FACILITY and JOHN DOE INSURANCE

COMPANY,

Defendants.

Before: SAWYER, P.J., and MARKEY and STEPHENS, JJ.

PER CURIAM.

In 2015, plaintiff filed the current action as a healthcare provider seeking payment of

personal protection insurance (PIP) benefits under the no-fault insurance act, MCL 500.3101 et

seq., for allowable expenses incurred in the treatment of nonparty Jessica Jacobs in 2014.

Following a jury trial and a verdict in plaintiff’s favor, the circuit court entered a judgment against

defendant in the amount of $62,617.34. The trial court also later entered an order for case

evaluation sanctions in plaintiff’s favor in the amount of $70,923.75. Defendant now appeals as

of right.1 Because plaintiff lacks an independent cause of action against defendant for PIP benefits

relating to services provided in 2014, in Docket No. 338168, we vacate the judgment in plaintiff’s

1

In Docket No. 338168, defendant appeals the judgment in plaintiff’s favor, and in Docket No.

340018, defendant appeals the order awarding sanctions; the appeals have been consolidated by

order of this Court. WA Foote Memorial Hosp v Farmers Ins Exch, unpublished order of the Court

of Appeals, entered October 18, 2017 (Docket Nos. 338168 & 340018).

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favor, and we remand for entry of judgment in favor of defendant. In the absence of a verdict in

plaintiff’s favor, we also vacate the award of case evaluation sanctions in Docket No. 340018.

On August 26, 2014, Jacobs deliberately and voluntarily jumped from the front passenger

seat of a moving vehicle while the vehicle was traveling between 45 and 55 miles per hour. After

jumping from the vehicle, Jacobs received medical treatment at Allegiance Health Hospital. She

incurred medical charges relating to her physical injuries in excess of $60,000 for treatment

provided from August 26, 2014, through August 28, 2014, and from September 3, 2014, through

September 4, 2014. Aside from treatment of her physical injuries, as a result of concerns that

Jacobs had attempted suicide when she jumped and that she might harm herself, Jacobs was

involuntarily hospitalized in the mental health unit of the hospital for several days.

In August 2015, plaintiff filed the current lawsuit. Notably, before trial, the parties entered

into a stipulation, agreeing that “the only issue for trial is whether the injuries Jessica Jacobs

sustained arising out of the August 26, 2014 motor vehicle accident were accidental as defined by

MCL 500.3105.” Following the parties’ proofs, the jury returned a verdict in plaintiff’s favor. As

a result, the trial court entered a judgment against defendant and later awarded case evaluation

sanctions to plaintiff.

On appeal, defendant argues that the judgment in plaintiff’s favor as well as the order of

case evaluation sanctions should be vacated and the case remanded for entry of judgment in favor

of defendant based on the Michigan Supreme Court’s recent decision in Covenant Med Ctr, Inc v

State Farm Mut Auto Ins Co, 500 Mich 191, 200; 895 NW2d 490 (2017), wherein the Court held

that a healthcare provider, such as plaintiff, “possesses no statutory cause of action against a no-

fault insurer for recovery of PIP benefits.” While acknowledging the Court’s holding in Covenant,

plaintiff argues that Covenant is inapplicable to this case because defendant waived any challenge

to plaintiff’s capacity to file suit by entering into a stipulation regarding the disputed issues for

trial. Alternatively, assuming that Covenant does apply, plaintiff argues that the judgment should

remain intact because plaintiff cured any defect by obtaining an assignment from Jacobs after trial.

At a minimum, plaintiff argues that it should be given the opportunity to amend its complaint to

plead an assignment theory based on Jacobs’s right to benefits. In our judgment, plaintiff’s waiver

and assignment arguments lack merit, and because Covenant applies, defendant is entitled to

judgment in its favor.

More specifically, under Covenant, as a healthcare provider, plaintiff clearly has no

independent statutory cause of action against defendant for the recovery of PIP benefits for services

provided in 2014.2 Covenant, 500 Mich at 200. We note that the Supreme Court decided Covenant

2

With the recent enactment of 2019 PA 21, effective June 11, 2019, healthcare providers have

been afforded a direct, statutory cause of action against insurers for payment of overdue benefits

for services provided to an injured person. See MCL 500.3112 (“A health care provider listed in

section 3157 may make a claim and assert a direct cause of action against an insurer, or under the

assigned claims plan under sections 3171 to 3175 to recover overdue benefits payable for charges

for products, services, or accommodations provided to an injured person.”). However, pursuant

to an enacting section of 2019 PA 21, the direct cause of action afforded to healthcare providers

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on May 25, 2017, after the trial in this case. However, Covenant nevertheless applies to this case

because Covenant applies retroactively. See W A Foote Mem Hosp v Mich Assigned Claims Plan,

934 NW2d 44, 45 (Mich, 2019). In concluding that Covenant controls this case, we also note that

defendant did not raise its Covenant argument in the trial court. Nevertheless, as we have in several

post-Covenant cases, we exercise our discretion to review the Covenant question in this issue

because the question is one of law, and “with regard to cases pending when Covenant was decided,

a defendant should not be faulted for failing to challenge a healthcare provider’s statutory right to

bring a claim because pre-Covenant caselaw would have rendered any such argument futile.”

Bronson Healthcare Group, Inc v Mich Assigned Claims Plan, 323 Mich App 302, 306; 917 NW2d

682 (2018).

Turning to plaintiff’s waiver argument, contrary to plaintiff’s arguments on appeal,

defendant did not waive its ability to challenge plaintiff’s right to maintain a direct cause of action

by entering into a stipulation regarding the factual issue to be decided at trial. “A stipulation is an

agreement, admission, or concession made by the parties in a legal action with regard to a matter

related to the case.” VHS Huron Valley Sinai Hosp v Sentinel Ins Co, 322 Mich App 707, 716;

916 NW2d 218 (2018) (quotation marks and citation omitted). “This Court will construe a

stipulation using the same principles applicable to a contract,” meaning that unambiguous

language must be enforced as written. Id. By entering into a stipulation, a party may agree to

waive a right. See id. “A waiver is an intentional relinquishment or abandonment of a known

right.” Nexteer Auto Corp v Mando Am Corp, 314 Mich App 391, 395; 886 NW2d 906 (2016).

“The party alleged to have waived a right must have had both knowledge of the existing right and

the intention of forgoing it.” Reed Estate v Reed, 293 Mich App 168, 176; 810 NW2d 284 (2011)

(quotation marks and citation omitted). “[T]]o waive a right, the language of a stipulation must

show an intent to plainly relinquish that right.” Nexteer Auto Corp, 314 Mich App at 395-396.

In this case, before trial, the parties entered into a stipulation, agreeing to a number of facts

and identifying the disputed factual issue to be resolved at trial. Specifically, the stipulation states:

1. [Jacobs] sustained bodily injury arising out of a motor vehicle accident that

occurred on August 26, 2014.

2. If Jacobs qualifies for no fault benefits under MCL 500.3105 for bodily injury

she sustained as a result of the August 26, 2014 motor vehicle accident, then

[defendant] is an insurance carrier in the order of priority responsible to pay those

benefits.

3. [Plaintiff] incurred reasonable and customary charges in the amount of

$61,688.97 for treatment provided to Jacobs . . . .

in MCL 500.3112 “as amended by this amendatory act, applies to products, services, or

accommodations provided after the effective date of this amendatory act,” which is June 11, 2019.

2019 PA 21, enacting § 1 (emphasis added). Accordingly, these recent amendments do not apply

in this case to provide plaintiff a direct cause of action for pursuing benefits for services provided

by plaintiff in 2014. The current case is controlled by Covenant.

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* * *

4. That [defendant] received medical bills, itemized statements of charges, and

medical records from [plaintiff] documenting [plaintiff’s] charges on or before

March 8, 2016.

5. That if Jacobs qualifies for no fault benefits under MCL 500.3105 for bodily

injury she sustained as a result of the August 26, 2014 motor vehicle accident,

[defendant] is liable to pay [plaintiff] $57,370.74 representing medical charges

consistent with the agreed “Cofinity Participation Balance.”

6. That if Jacobs qualifies for no fault benefits under MCL 500.3105 for bodily

injury she sustained as a result of the August 26, 2014 motor vehicle accident,

[defendant] is also liable to pay [plaintiff] $6,186.61 representing 12% per annum

interest under MCL 500.3142 for the period April 8, 2016 through March 1, 2017.

7. That the only issue for trial is whether the injuries [Jacobs] sustained arising out

of the August 26, 2014 motor vehicle accident were accidental as defined by MCL

500.3105.

Fairly read, under the stipulations, the parties agreed that defendant’s liability was contingent on

Jacobs’s qualification for benefits—with the only contested factual issue regarding Jacobs’s

eligibility being whether her injuries were accidental. Notably missing from the stipulation is an

agreement that plaintiff was the proper party to litigate this issue; that plaintiff had standing to

pursue benefits; or “that defendant intended to clearly and unequivocally waive its legal position

with respect to plaintiff’s standing.” See VHS Huron Valley Sinai Hosp, 322 Mich App at 717-

719. In the absence of such a stipulation, we will not infer that defendant intended to abandon all

legal arguments regarding standing based on its agreement that the only factual issue to be litigated

at trial was whether Jacobs’s injuries were accidental. Cf. id.

The fact that the stipulation does not mention plaintiff’s right to a direct cause of action or

state that plaintiff is the proper party to establish Jacobs’s qualification for benefits is particularly

notable given the procedural posture of the case and the existing state of the law when the

stipulation was signed. Cf. id. at 719-720 (concluding that procedural posture and existing state

of the law pre-Covenant supported determination that the insurer did not waive standing issue).

That is, given the long line of cases from this Court pre-Covenant, which held that a healthcare

provider had a direct cause of action against an insurer, there could be no reasonable dispute that

plaintiff could file a direct cause of action and defendant did not have a reasonable basis for

challenging plaintiff’s standing before trial. See id.; Bronson Healthcare Group, Inc, 323 Mich

App at 306. In these circumstances, to read the stipulation’s silence on plaintiff’s standing to

indicate that defendant was intentionally relinquishing or abandoning a “known right” would be

nonsensical. See Nexteer Auto Corp, 314 Mich App at 395. Indeed, post-Covenant, on analogous

facts, we have previously rejected the assertion that a defendant-insurer waived a Covenant

argument by entering into a stipulation that was silent on the question of the plaintiff-healthcare

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provider’s standing. See VHS Huron Valley Sinai Hosp, 322 Mich App 717-721.3 Likewise, in

this case, we cannot conclude that defendant clearly and unequivocally waived a legal standing

issue—that could not have been raised given the existing state of the law—merely because

defendant stipulated to the disputed factual issue for trial. See id. Plaintiff’s waiver argument is

without merit, and Covenant controls this case.

Finally, contrary to plaintiff’s arguments, the postjudgment assignment plaintiff obtained

from Jacobs did not cure the Covenant defects in this case, and a remand to allow plaintiff an

opportunity to add an assignment theory would be futile in light of the one-year-back rule and this

Court’s decision in Jawad A Shah, MD, PC v State Farm Mut Auto Ins Co, 324 Mich App 182;

920 NW2d 148 (2018). In particular, although Covenant held that a healthcare provider did not

have a direct cause of action, the Court also specifically stated that its decision was “not intended

to alter an insured’s ability to assign his or her right to past or presently due benefits to a healthcare

provider.” Covenant, 500 Mich at 217 n 40. “It is well established that an assignee stands in

the shoes of an assignor, acquiring the same rights and being subject to the same defenses as the

assignor.” Coventry Parkhomes Condo Ass’n v Fed Nat’l Mtg Ass’n, 298 Mich App 252, 256-

257; 827 NW2d 379 (2012). In the no-fault context, this means that a healthcare provider who

obtains an assignment from an insured individual “possesses whatever right [the insured] would

3

In contrast to VHS Huron Valley Sinai Hosp, plaintiff asserts that the Michigan Supreme Court

has rejected insurers’ attempts to avoid a stipulation based on Covenant. Plaintiff’s argument is

based on Monaco v Home-Owners Ins Co, 501 Mich 866 (2017), a Supreme Court order containing

no facts, no mention of Covenant, and no reasons for the denial of the motion for reconsideration.

Given the lack of information in this order, it is not binding and it is not dispositive of the issue

before this Court. See Dykes v William Beaumont Hosp, 246 Mich App 471, 483; 633 NW2d 440

(2001). Alternatively, plaintiff relies on Glen Lake-Crystal River Watershed Riparians v Glen

Lake Ass’n, 264 Mich App 523, 529; 695 NW2d 508 (2004), wherein this Court concluded that

the defendant “affirmatively acquiesced to [the] plaintiffs’ right to sue by entering into a

stipulation” agreeing to, among other things, “the issues to be decided at trial.” In these

circumstances, we concluded that the defendant could not challenge the plaintiffs’ standing on

appeal because “[i]t would be unfair to [the] plaintiffs and a waste of judicial resources to hold,

following trial proceedings to which the [defendant] consented, that there was no standing to bring

this action.” Id. Although at first glance there are similarities between Glen and the current case,

the present case is distinguishable because defendant had no reasonable basis for contesting

plaintiff’s standing before trial given the long line of cases from this Court holding that a healthcare

provider had a direct cause of action against an insurer. See VHS Huron Valley Sinai Hosp, 322

Mich App 719-720. In contrast, in Glen, 264 Mich App at 529, when concluding that the defendant

could not pursue its standing argument on appeal, this Court specifically noted that, based on

existing caselaw, the defendant had a “reasonable basis” to assert its standing challenge in the trial

court and yet it failed to raise the issue. Given this key distinction between the current case and

Glen, Glen may be read in harmony with the conclusion that defendant did not waive a right in

this case by failing to make an argument that had no reasonable basis in existing law. Neither

Monaco nor Glen support plaintiff’s position.

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have to collect past due or presently due benefits from [the insurer].” Prof Rehab Assoc v State

Farm Mut Auto Ins Co, 228 Mich App 167, 177; 577 NW2d 909 (1998).

In this case, plaintiff obtained an assignment from Jacobs after trial, following the Supreme

Court’s decision in Covenant.4 Specifically, on June 8, 2017, Jacobs signed a document, assigning

to plaintiff her right to no-fault benefits, her right to seek payment of those benefits, and her right

to bring a lawsuit for payment of those benefits. The assignment also stated that if plaintiff had

filed a lawsuit to recover payment of Jacobs’s bills, the assignment “is retroactive to the date

[plaintiff] filed the pending litigation or made the claim.”

Plaintiff now claims that the assignment cures any Covenant defect or that, at a minimum,

plaintiff should be given the opportunity to amend its complaint to add an assignment theory.

However, as argued by defendant, the flaw in plaintiff’s argument is that Jacobs could only assign

to plaintiff the rights she possessed as of the date of the assignment—namely June 8, 2017. See

Shah, 324 Mich App at 205. In light of the one-year-back rule, MCL 500.3145(2),5 Jacobs’s rights

on June 8, 2017, did not include the ability to pursue the medical expenses sought by plaintiff for

treatment provided in August and September of 2014. See Shah, 324 Mich App at 202-205.

Because Jacobs did not possess rights to recover benefits beyond those allowed by MCL 500.3145,

she could not assign such rights to plaintiff, and thus plaintiff could not obtain the right to recover

benefits for losses incurred more than a year before June 8, 2017. See Shah, 324 Mich App at 202-

205. Moreover, contrary to plaintiff’s attempt to retroactively cure the Covenant defect, the

addition of an assignment theory does not relate back to the commencement of the action. Id.

Accordingly, Jacobs’s assignment—which was ineffective to convey the rights to plaintiff’s

claims—did not retroactively cure the Covenant defect in this case, and the fact remains that

plaintiff’s complaint failed to state a claim on which relief can be granted. See Bronson Healthcare

Group, Inc, 323 Mich App at 305. Further, on the facts of this case, plaintiff need not be given an

opportunity to amend its pleadings to add an assignment theory for recovery of PIP benefits

because any such claim would be futile given that Jacobs’s assignment in June 2017 did not, and

could not, convey the right to obtain benefits for the medical expenses incurred in August and

September 2014.6 See Lane v KinderCare Learning Centers, Inc, 231 Mich App 689, 697; 588

4

Contrary to defendant’s assertions on appeal, a copy of the assignment is contained in the lower

court file, and we consider it part of our review. See MCR 7.109(A); MCR 7.210(A)(1).

5

Under MCL 500.3145(2), in an action for PIP benefits, “the claimant may not recover benefits

for any portion of the loss incurred more than 1 year before the date on which the action was

commenced.”

6

On appeal, plaintiff also offers the cursory assertion that it should be given the opportunity to

amend its complaint to add a contract claim against defendant based on a “cofinity” agreement

between plaintiff and defendant. However, plaintiff does not explain its contract theory in any

detail, and there is nothing in the record to support the bald assertion that defendant could somehow

be liable for Jacobs’s medical expenses based on the cofinity agreement with plaintiff. Given

plaintiff’s insufficient briefing, we consider the issue abandoned. See Dunn v Bennett, 303 Mich

App 767, 775; 846 NW2d 75 (2013).

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NW2d 715 (1998) (“An amendment is futile if it merely . . . adds allegations that still fail to state

a claim.”).

In sum, Covenant controls this case. Plaintiff’s waiver arguments are without merit, and

Jacobs’s postjudgment assignment does not alter the applicability of Covenant. We therefore

vacate the judgment in plaintiff’s favor and remand for entry of judgment in favor of defendant in

light of Covenant.7 Having vacated the judgment, we also conclude that plaintiff is not entitled to

case evaluation sanctions. See MCR 2.403(O). Consequently, we also vacate the order for case

evaluation sanctions.

Vacated and remanded for entry of judgment in favor of defendant. Defendant may tax

costs. We do not retain jurisdiction.

/s/ David H. Sawyer

/s/ Jane E. Markey

/s/ Cynthia Diane Stephens

7

Given our conclusion that Covenant resolves this case, we need not reach defendant’s additional

arguments on appeal, including the applicability of MCR 2.314 to a plaintiff proceeding on an

assignment theory, the burden of proof under MCL 500.3105(4), and the trial court’s exclusion of

other-acts evidence under MRE 404(b) relating to Jacobs’s intent.

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