Vhs Huron Valley Sinai Hospital v. Sentinel Insurance Company ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
VHS HURON VALLEY SINAI HOSPITAL, FOR PUBLICATION
doing business as DMC SURGERY HOSPITAL, January 23, 2018
Plaintiff-Appellee,
v No. 328005
Wayne Circuit Court
SENTINEL INSURANCE COMPANY, LC No. 14-009084-NF
Defendant-Appellant.
ON REMAND
Before: FORT HOOD, P.J., and GLEICHER and O’BRIEN, JJ.
GLEICHER, J. (dissenting).
A release is a contract. We interpret contracts according to their plain and unambiguous
terms. We do not add or ignore words. We disdain interpretative methodologies premised on
“reasonableness.” “A fundamental tenet of our jurisprudence is that unambiguous contracts are
not open to judicial construction and must be enforced as written.” Rory v Cont’l Ins Co, 473
Mich. 457, 468; 703 NW2d 23 (2005) (emphasis in original).
Given these well-settled rules, the majority’s conclusion that the plain words of the
parties’ release do not mean what they say, and instead must be viewed against the backdrop of
“the record and the procedural posture of this case as a whole,” is nothing short of remarkable.
Contrary to Rory and every rule of contract interpretation, the majority has rewritten the parties’
release.
This is not a hard case, and its resolution should be as simple as the rule set out in Rory.
Charles Herndon, Jr. sustained personal injuries in an accident with an uninsured vehicle.
Plaintiff Huron Valley, a hospital, provided Herndon with healthcare services related to the
accident. Herndon filed a first-party lawsuit against Sentinel seeking uninsured motorist (UIM)
benefits, but failed to include in his lawsuit a claim for no-fault personal injury protection (PIP)
benefits. Herndon and Sentinel settled Herndon’s UIM claim. Huron Valley then sued Sentinel
for payment of Herndon’s medical expenses. Sentinel contended that its liability for Herndon’s
medical expenses should have been litigated in Herndon’s UIM case, and that res judicata barred
the suit. The circuit court denied Sentinel’s summary disposition motion on this ground.
Sentinel and Huron Valley settled their dispute by entering into a release. The parties agreed that
-1-
Sentinel would pay Huron Valley $61,712.18, plus costs and interest, “if Sentinel’s position
regarding res judicata/release is ultimately rejected by the Michigan Court of Appeals or
Supreme Court.”
At least two other paragraphs of the release addressed (and repeated) that the sole issue to
be presented on appeal was “regarding res judcata/release.” The 2015 release made no mention
of Huron Valley’s standing (or alleged lack thereof). Nor did the release reference a health care
provider’s statutory right to sue.
We decided Sentinel’s appeal in Huron Valley’s favor in October 2016. Not surprisingly,
our decision focused exclusively on the doctrine of res judicata; after all, that was the only issue
that the parties agreed to present to us. We held that because Huron Valley and Herndon were
not in privity, res judicata did not apply. We did not consider Huron Valley’s standing to sue,
because the issue was never raised. We did not evaluate whether healthcare providers possess a
statutory cause of action against insurers, because consistent with the release it signed, Sentinel
argued only that Huron Valley’s claim for PIP benefits could have been resolved in Herndon’s
UIM action, implicating res judicata principles. Displeased with our rejection of this argument,
Sentinel applied for leave to appeal in the Supreme Court.
In May 2017, the Supreme Court decided Covenant Med Ctr, Inc v State Farm Mut Ins
Co, 500 Mich. 191; 895 NW2d 490 (2017), holding that healthcare providers lack standing to
maintain direct causes of action against insurers to recover PIP benefits. Sentinel now contends
that despite the plain and unambiguous language of the release, it is not liable to Huron Valley
because the hospital had no cause of action in the first place.
Sentinel’s argument would be compelling, if it had made it in the trial court, or settled the
underlying case with a release reserving that issue for appeal. Instead, Sentinel elected to sign a
release that carved out for appeal only a single, specific and narrow question: whether the
doctrine of res judicata barred Huron Valley’s claim. In other words, Sentinel waived any
argument that Huron Valley lacked standing. It deliberately elected to forgo this appellate claim.
If Sentinel suspected that a standing argument had legal legs, it should have identified “standing”
in the release as an issue to be presented to an appellate court.
Perhaps the release did not preserve a standing claim because the parties’ bargain
required Sentinel to waive the issue. Perhaps Sentinel’s counsel calculated incorrectly that the
Supreme Court would decide Covenant differently. We need not speculate, because our
Supreme Court has forcefully and effectively instructed that if a contract’s words are
unambiguous, we look no further to ascertain the parties’ intent. The words lend themselves to
but one interpretation in this case: Sentinel agreed to appeal on res judicata grounds, and waived
its potential standing argument.
The majority makes much of the fact that Sentinel raised the issue of standing in the trial
court by including it as an affirmative defense. This proves my point: Sentinel knew an
important legal issue existed that might entirely preclude Huron Valley’s claim. Yet Sentinel
deliberately decided to forego asserting a standing challenge when it signed a release plainly
limiting its appeal to “res judicata.” This is called a waiver.
-2-
The majority’s reliance on the absence of language in the release “indicating that
defendant intended to clearly and unequivocally waive its legal position with respect to
plaintiff’s standing” turns the law of contracts—and waiver—upside down. “[A]n unambiguous
contract reflects the parties’ intent as a matter of law.” In re Egbert R Smith Trust, 480 Mich. 19,
24; 745 NW2d 754 (2008). In other words, the parties to a contract are bound by what they say,
not by what they do not say. We do not rewrite unambiguous contracts by intuiting what a party
really meant to say, or speculating about subjective intent. We do not bail out parties who forget
to include a provision, or who make a bad prediction and elect to go in one direction rather than
another. “Courts have long held parties to agreements they make, regardless of the harshness of
the results.” Nexteer Auto Corp v Mando Am Corp, 314 Mich. App. 391, 396; 886 NW2d 906
(2016).1
The majority ignores the law and repudiates the plain language of the release. Instead of
holding Sentinel to the bargain it made, the majority tosses a lifeline, excusing Sentinel’s waiver
by hypothesizing that before the Supreme Court decided Covenant, Sentinel “may have
reasonably surmised that any challenges to plaintiff’s standing would have been rejected by the
trial court and the appellate courts.” This breathtaking and contrived exemption from the words
of the contract suggests that because Sentinel reasonably expected that a standing argument
would go nowhere, it could nevertheless preserve the claim without including it in the release.
Rory forcefully condemns such reasoning: “When a court abrogates unambiguous contractual
provisions based on its own independent assessment of ‘reasonableness,’ the court undermines
the parties’ freedom of contract.” Rory, 473 Mich. at 468-469. And although this Court has held
1
The majority cites Nexteer as authority for its holding that a waiver of a right requires language
reflecting a specific intent to waive the right. In Nexteer, 314 Mich. App. at 393, however, this
Court upheld the validity of a stipulation stating: “ ‘[a]n agreement to arbitrate this controversy
. . . exists [but] is not applicable.’ ” (Alterations in original.) One party, Mando, changed its
mind about arbitration, and sought to reassert the arbitration agreement. This Court held that the
stipulation’s language “that the arbitration provision ‘was not applicable’ ” constituted an
express and binding waiver. Id. at 395. We pointed out that:
Mando was aware of the arbitration clause in the nondisclosure agreement, and it
was aware of Nexteer’s general allegations in its complaint. It had the ability to
apply the language of the arbitration clause to the complaint in order to decide
whether it should pursue arbitration. After stipulating that the arbitration
provision did not apply, Mando may not now argue that the arbitration provision
does in fact apply. [Id. at 397.]
Nexteer assuredly does not stand for the proposition that a waiver may be enlarged by
reference to legal arguments not mentioned in the waiver. The majority’s groundbreaking
proposition that stipulated waiver language may be interpreted to mean more than it says
contravenes Nexteer, Rory, and countless other cases. That is why publication is required under
MCR 7.215(B)(3) (“A court opinion must be published if it . . . alters, modifies, or reverse an
existing rule of law.”).
-3-
that Covenant applies retroactively to cases awaiting review in which the issue was raised, this
Court has never extended the retroactivity rule to embrace cases that have been settled.
Sentinel made a choice. It settled the claims brought by Huron Valley. As part and
parcel of that settlement, Sentinel agreed in writing to limit its appeal to an argument regarding
res judicata, thereby foregoing any and all other legal claims. Having made its bed, Sentinel
must lie in it. Any other result violates bedrock principles of contract law and flies in the face of
decades of contract jurisprudence. I would hold that based on the clear and unambiguous
language of the release, Sentinel’s Covenant argument comes too late, and respectfully dissent.
/s/ Elizabeth L. Gleicher
-4-