Northland Radiology Inc v. Farmers Insurance Exchange ( 2019 )

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
NORTHLAND RADIOLOGY, INC, UNPUBLISHED
February 12, 2019
Plaintiff-Appellee,
v No. 339952
Oakland Circuit Court
FARMERS INSURANCE EXCHANGE, LC No. 2016-155258-AV
Defendant-Appellant.
Before: JANSEN, P.J., and BECKERING and O’BRIEN, JJ.
PER CURIAM.
In this no-fault action, MCL 500.3101 et seq., defendant Farmers Insurance Exchange
appeals as of right the Oakland Circuit Court’s opinion and order affirming the judgment of jury
verdict in favor of plaintiff, Northland Radiology, Inc., entered by the 46th District Court. The
district court also denied defendant’s motion for a judgment notwithstanding the verdict (JNOV)
and ordered defendant pay plaintiff’s attorney fees in the amount of $48,945 pursuant to MCL
500.3148. We reverse the circuit court’s opinion and order refusing to retroactively apply
Covenant, vacate the jury’s verdict and the district court’s judgment with respect to damages,
vacate the order awarding attorney’s fees to plaintiff, and remand to the circuit court for further
proceedings consistent with this opinion.
I. RELEVANT FACTUAL BACKGROUND
This case arises out of defendant’s refusal to make no-fault insurance payments for
medical services provided by plaintiff to Donald Jones. On December 10, 2014, Jones was
struck by an automobile in a hit-and-run. As an uninsured pedestrian, Jones sought no-fault PIP
benefits through the Michigan Assigned Claims Plan, which assigned his claims to defendant.
Relevant to this case, Jones sought payment for MRIs of his lumbar spine and thoracic spine
performed by plaintiff. However, defendant refused to pay, and deemed the services provided by
plaintiff to be duplicate and unnecessary, as MRIs of Jones had been taken by another provider
shortly after the accident. Further, defendant believed that the information it had received about
the accident was inconsistent with information provided by Jones.
Plaintiff filed suit against defendant on July 17, 2015, in the 46th District Court, seeking
to recover reasonable charges for reasonably necessary medical services under MCL
500.3107(1)(a). Plaintiff further alleged that defendant had unreasonably withheld or delayed
payment in breach of its statutory obligations, and sought penalty interest and attorney fees
pursuant to MCL 500.3142 and MCL 500.3148, respectively.1 The case proceeded to a jury trial,
where the jury found in favor of plaintiff. On July 27, 2016, the district court signed a judgment
in the amount of $6,080, exclusive of costs, interest, and fees. Defendant moved for JNOV,
argued, and that motion was denied in an order dated September 7, 2016. On that same day, the
district court also signed a second order, awarding plaintiff attorney fees under MCL 500.3148 in
the amount of $48,945.
In anticipation of our Supreme Court’s decision in Covenant Medical Center, Inc. v
State Farm Mutual Automobile Insurance Company, 500 Mich. 191; 895 NW2d 490 (2017),
defendant appealed to the Oakland Circuit Court, arguing that plaintiff had no statutory action
against no-fault insurers, that the release signed by Jones barred plaintiff’s claim, and that there
was no basis to award attorney fees because defendant’s refusal to pay for Jones’ MRI was
reasonable. The trial court heard arguments on May 17, 2017, and took the matter under
advisement. On that same day, our Supreme Court released its opinion in Covenant, concluding
that medical providers do not possess a statutory cause of action against no-fault insurers.
Regardless, on June 23, 2017, the Oakland Circuit Court issued an opinion and order affirming
the district court’s judgment in favor of plaintiff, stating:
This court finds that the district court did not err and properly determined
the issues under the prevailing law at the time based on the Court of Appeals
ruling in [Covenant Medical Center, Inc. v State Farm Mutual Automobile
Insurance Company, 313 Mich. App. 50; 880 NW2d 294 (2015)]. The JNOV was
properly decided on procedural grounds. There was no abuse of discretion by the
trial court in finding unreasonable and refusal to pay or unreasonable delay in
making payments under MCL 500.3148(1).
This court finds that defendant/appellant failed to secure the benefit of the
Supreme Court’s Covenant ruling because it failed to properly preserve the issue
prior to trial. Additionally, this court finds that under the facts and circumstances
presented in this case, the Supreme Court’s Covenant decision should not be
applied retroactively. This court finds that a retroactive application in this case
would not frustrate the purpose of the new rule, but would undermine the
administration of justice.
1
In a separate action not presently before this Court, Jones and several other medical providers
brought suit against defendant in the Wayne Circuit Court. Jones ultimately signed a release of
no-fault claim which resolved all disputes concerning benefits for $10,000. Defendant’s liability
was later discharged based on settlement in an order dated April 25, 2016. All of Jones’ medical
providers, with the exception of plaintiff, were bound by that settlement and barred from
asserting any further claims against defendant.
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Defendant moved for reconsideration, and that motion was denied.
Defendant filed its application for leave to appeal in this Court on August 31, 2017. This
Court granted defendant’s application for leave to appeal in an order dated February 15, 2018,
but limited the appeal to the issues raised in the application and supporting brief. See Northland
Radiology, Inc. v Farmers Insurance Exchange, unpublished order of the Court of Appeals,
entered February 15, 2018 (Docket No. 339952).2
II. RETROACTIVITY OF COVENANT
Defendant first argues on appeal to this Court that the district court judgment in favor of
plaintiff cannot be sustained under law, and the circuit court erred by finding otherwise. We
agree.
“[Q]uestions concerning the retroactivity of earlier judicial decisions are for this Court to
decide de novo as matters of law.” Lincoln v Gen Motors Corp., 461 Mich. 483, 490; 607 NW2d
73 (2000).
Pursuant to MCL 500.3112, no-fault “insurance benefits are payable to or for the benefit
of an injured person, or, in case of his death, to or for the benefit of his dependents.” In
Covenant, our Supreme Court held that “healthcare providers do not possess a statutory cause of
action against no-fault insurers for recovery of [PIP] benefits under the no-fault act.” Covenant,
500 Mich. at 196. Accordingly, this Court has consistently held that “as a healthcare provider,
plaintiff has no independent statutory claim against defendant[ ].” Bronson Healthcare Group,
Inc. v Mich Assigned Claims Plan, 323 Mich. App. 302, 305; 917 NW2d 682 (2018).
Further, in W. A. Foote Memorial Hospital v Michigan Assigned Claims Plan, 321 Mich
App 159, 179; 909 NW2d 38 (2017), this Court held that the rule announced by our Supreme
Court in Covenant is to be applied retroactively to “all cases still open on direct review and as to
all events, regardless of whether such events predate or postedate [the] announcement of the
rule.” This Court clarified in Bronson that Covenant was to be applied even in cases where the
issue of standing or legal capacity was never raised before the trial court, reasoning that “we
have previously rejected preservation arguments relating to Covenant and exercised our
discretion to review Covenant arguments that were not raised before, addressed and decided by,
the trial court.” Bronson Healthcare Group, Inc., 323 Mich. App. at 305-306, citing W A Foote,
321 Mich. App. at 173-174. This Court went on to explain that,
[s]pecifically, we have recognized that a defense of “failure to state a claim on
which relief can be granted” cannot be waived, we have emphasized our
discretion to consider unpreserved questions of law, and we have acknowledged
that, with regard to cases pending when Covenant was decided, a defendant
2
Because this Court limited the appeal to “issues raised in the application and supporting brief,”
any issues raised by defendant in its brief on appeal that were not raised in its application for
leave to appeal are not considered or addressed herein.
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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., 323 Mich. App. at 306.]
Turning now to this case, plaintiff is a healthcare provider who brought a statutory cause
of action against defendant, a no-fault insurer, based on defendant’s failure to pay or
unreasonable delay in paying for provided services under the no-fault act. In its complaint,
plaintiff alleged that it was owed PIP benefits from defendant under the no-fault act. Plaintiff
did not bring its claims on behalf of Jones, nor has there been any evidence that Jones executed a
valid assignment of rights to payment for services under the no-fault act. Accordingly, plaintiff
has no legal claim to recover PIP benefits from defendant. Defendant was entitled to JNOV, and
the circuit court erroneously affirmed the judgment in favor of plaintiff entered by the district
court. We therefore reverse, vacate the jury’s verdict, and vacate the district court’s judgment
with respect to damages.
III. ATTORNEY FEES
Defendant also argues that the circuit court erroneously affirmed the district court’s
award of attorney fees to plaintiff. We agree.
This Court reviews a trial court’s decision to grant attorney fees and costs for an abuse of
discretion, which occurs “when the trial court’s decision is outside the range of reasonable and
principled outcomes.” Ronnisch Constr Group, Inc. v Lofts on the Nine, LLC, 499 Mich. 544,
551-552; 886 NW2d 113 (2016).
Under the no-fault act, and pursuant to MCR 500.3148(1):
An attorney is entitled to a reasonable fee for advising and representing a claimant
in an action for personal or property protection insurance benefits which are
overdue. The attorney’s fee shall be 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.
Fees are generally awarded under the no-fault statute to those parties who have prevailed on the
merits of their underlying claims. Speicher v Columbia Twp, 497 Mich. 125, 132-133; 860
NW2d 51 (2014).
Put simply, because plaintiff should not have prevailed on its claim, as discussed supra, it
was not entitled to attorney fees under the no-fault statute. Accordingly, we vacate the award of
attorney fees to plaintiff.
IV. CONCLUSION
We reverse the circuit court’s opinion and order refusing to retroactively apply Covenant,
vacate the jury’s verdict and the district court’s judgment with respect to damages, vacate the
order awarding attorney’s fees to plaintiff, and remand to the circuit court for further proceedings
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consistent with this opinion. We do not retain jurisdiction.
/s/ Kathleen Jansen
/s/ Jane M. Beckering
/s/ Colleen A. O’Brien
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