Jawad a Shah Md Pc v. State Farm Mutual Automobile Insurance Co

STATE OF MICHIGAN
COURT OF APPEALS
JAWAD A. SHAH, M.D., PC, INTEGRATED FOR PUBLICATION
HOSPITAL SPECIALISTS, PC, INSIGHT May 8, 2018
ANESTHESIA, PLLC, and STERLING 9:00 a.m.
ANESTHESIA, PLLC,
Plaintiffs-Appellants,
v No. 340370
Genesee Circuit Court
STATE FARM MUTUAL AUTOMOBILE LC No. 17-108637-NF
INSURANCE COMPANY,
Defendant-Appellee.
Before: BORRELLO, P.J., and SHAPIRO and TUKEL, JJ.
BORRELLO, P.J.
In this suit seeking recovery of medical expenses under the no-fault act, MCL 500.3101
et seq., plaintiffs, Jawad A. Shah, M.D., PC, Integrated Hospital Specialists, PC, Insight
Anesthesia, PLLC, and Sterling Anesthesia, PLLC, appeal as of right the trial court’s order
granting summary disposition in favor of defendant, State Farm Mutual Automobile Insurance
Company, and denying plaintiffs’ motion for leave to amend their complaint as futile. For the
reasons set forth in this opinion, we reverse the trial court’s order and remand this matter for
further proceedings consistent with this opinion.
I. BACKGROUND
This case encompasses various providers of medical and related healthcare services
attempting to recover from a no-fault insurer for services rendered to the insured, George
Hensley. According to plaintiffs’ initial complaint filed on February 24, 2017, Hensley was
injured on November 30, 2014, in a motor vehicle accident and was insured by defendant.
Plaintiffs submitted claims for services rendered to Hensley, but defendant refused to pay these
claims. In their complaint, plaintiffs sought a judgment of approximately $82,000, plus interest
and reasonable attorney fees. Defendant answered the complaint and filed its affirmative
defenses on April 21, 2017, denying liability.
On May 25, 2017, our Supreme Court issued its opinion in Covenant Med Ctr, Inc v State
Farm Mut Auto Ins Co, 500 Mich. 191; 895 NW2d 490 (2017). In Covenant, our Supreme Court
held “that healthcare providers do not possess a statutory cause of action against no-fault insurers
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for recovery of personal protection insurance benefits under the no-fault act,” expressly
overruling a body of caselaw from this Court that had concluded to the contrary. Id. at 196. In
explaining its holding, the Covenant Court rejected the notion that a medical provider had
independent standing to bring a claim against an insurer to recover no-fault benefits. Id. at 195.
However, the Court clarified 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.” Id. at 217 n 40.
On July 20, 2017, defendant moved for summary disposition pursuant to MCR
2.116(C)(8). Defendant argued that dismissal was required for failure to state a claim because
plaintiff’s no-fault claim was “in direct contravention of the Michigan Supreme Court’s decision
in Covenant.”
Apparently anticipating defendant’s motion, plaintiffs had obtained an assignment of
rights from Hensley on July 11, 20171 to pursue payment of no-fault benefits for healthcare
services “already provided” by plaintiffs.2 Plaintiffs relied on this assignment to then file a
1
We note that there are four assignments attached to plaintiff’s brief in opposition to defendant’s
motion for summary disposition and that two of those assignments explicitly designate plaintiffs
Jawad A. Shah, M.D., PC, and Integrated Hospital Specialists, PC, as assignees. However, the
names of the designated assignees in the other two assignments do not match the names of the
remaining two plaintiffs. Nonetheless, in the trial court, defendant conceded in its reply brief in
support of its summary disposition motion that Hensley had executed an assignment to each
plaintiff. Thus, as will be further explained below, it appears that the parties assumed that all
plaintiffs received assignments of rights from Hensley and that the parties essentially disputed
only (1) whether these assignments were valid in light of the anti-assignment clause in Hensley’s
insurance policy and (2) whether an amended complaint based on such an assignment would
relate back to the date of the original complaint. For purposes of this opinion, we assume
without deciding that the assignments effectively assigned the stated rights to plaintiffs in this
case as long as such assignments were not barred by the anti-assignment clause. The only issue
with respect to the validity of the assignments that was actually raised and decided in the trial
court was the effect of the anti-assignment clause. Therefore, we limit our review accordingly to
this issue. See Allen v Keating, 205 Mich. App. 560, 564; 517 NW2d 830 (1994).
2
The assignment of rights forms provided in pertinent part that Hensley was assigning
all rights, privileges and remedies to payment for health care services, products or
accommodations (“Services”) provided by Assignee to Assignor to which
Assignor is or may be entitled under MCL 500.3101, et seq, the No Fault Act.
This Assignment is for the right to payment of Assignee’s charges, only, and not
for the right to payment of any other No Fault insurance benefits.
The Assignment as set forth above is for all services already provided to
Assignor by Assignee prior to or at the time of Assignor’s execution of this
agreement. Specifically, this Assignment does not include an Assignment of any
future No Fault benefits.
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response to the summary disposition motion and a motion for leave to amend the complaint to
reflect that the suit was being pursued through the assignment of rights obtained from Hensley.
Plaintiffs argued that it was necessary to amend the complaint to allow the action to proceed
pursuant to their respective assignments because the Covenant decision had extinguished their
ability to pursue an independent, direct action against defendant under these circumstances.
Again showing foresight in anticipating defendant’s next tactical decision, plaintiffs also
preemptively argued that if the trial court were to determine that a contractual provision within
defendant’s policy prevented assignments, then such a provision should not be enforced for one
of two reasons. First, plaintiffs argued that defendant would have to show that Hensley was a
named insured under the policy (rather than, for example, a passenger entitled to benefits under
someone else’s policy) for the anti-assignment clause to be enforced against him. Second,
plaintiffs argued that the anti-assignment clause was voidable as against public policy where the
assignment was obtained after the loss occurred. Furthermore, in an effort to avoid problems
with the one-year-back rule of MCL 500.3145(1), plaintiffs also argued that the amended
complaint should relate back to the date of the original complaint because the amendment to
accommodate the assignments was intended to support the previously filed no-fault claim that
arose from the same transaction or occurrence, namely Hensley’s injuries sustained in the
November 20, 2014 accident. Plaintiffs did not contend that Covenant was inapplicable to their
suit.
On September 7, 2017, defendant filed a reply in support of its summary disposition
motion. As plaintiffs anticipated, defendant argued that an anti-assignment clause in the policy
rendered any assignment of rights from Hensley void. Accordingly, defendant argued that
plaintiffs’ claims should be dismissed because the anti-assignment clause must be enforced as
written and was not against public policy. Defendant also argued that the one-year-back rule of
MCL 500.3145(1) would bar the assigned claims, or a portion of the assigned claims, even if the
assignments were considered valid. Defendant explained that plaintiffs could not obtain any
greater rights than those held by Hensley at the time of the assignments. Had Hensley brought
suit on the date of the assignments, he could not have obtained damages for any expenses
incurred more than a year before that date. Defendant argued that plaintiffs stood in the shoes of
Hensley after the assignments and could not obtain any greater rights than this. Defendant also
asserted that Hensley had his own lawsuit that had already been resolved and was no longer
pending. Defendant further argued that the relation-back doctrine would not apply because the
assignment did not exist on the date plaintiffs originally filed their complaint. Defendant
contended that plaintiffs were not really seeking an amendment that could relate back to the
original complaint pursuant to MCR 2.118(D) but were actually attempting to supplement their
complaint pursuant to MCR 2.118(E) in order to allege a subsequently acquired assignment.
Defendant explained that supplemental pleadings never relate back to the date of the original
pleading. Finally, defendant explained that Hensley was indeed a named insured, and it provided
a copy of the declarations page as support.
On the same day, defendant also filed a response to plaintiffs’ motion for leave to amend
their complaint. Defendant raised the same arguments made in its reply brief and argued that for
these reasons, any amendment was futile because the cause of action that plaintiff was
attempting to add was legally insufficient on its face.
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A hearing on the motions was held on September 11, 2017. The parties’ oral arguments
reiterated the arguments made in their written submissions. The trial court ruled as follows:
All right, the Court read both of the motions and the briefs, as well as the
second motion, which is the motion for leave to file an amended complaint. As I
said they interrelate and the circumstances are that Shah was a provider or
plaintiffs were health providers – health services care providers for the insured
George Hensley. And apparently only after the covenant [sic, Covenant decision]
did an assignment take place and the policy language of the State Farm policy,
which Mr. Hensley purchased precludes the assignment without approval of State
Farm, which did not occur. So actually (inaudible) did not acquire any rights by
virtue of the assignment.
And in addition, as pointed out by defense counsel, if it had been granted
it would have been a supplemental pleading and the date would be barred under
the statute of limitations. You may submit an order if you don’t have one here
today.
The trial court clarified that it was granting defendant’s motion for summary disposition, denying
leave to file an amended complaint as futile, and dismissing the case with prejudice. The trial
court entered an order3 granting summary disposition pursuant to MCR 2.116(C)(8) and
dismissing the case with prejudice “for the reasons stated on the record.”
This appeal followed.
II. ANALYSIS
A. RETROACTIVITY OF COVENANT DECISION
Plaintiffs first argue that our Supreme Court’s decision in Covenant should not apply
retroactively but should instead be given prospective effect only.
Whether a judicial decision applies retroactively is a question that this Court reviews de
novo. W A Foote Mem Hosp v Mich Assigned Claims Plan, 321 Mich. App. 159, 168; ___ NW2d
___ (2017). However, plaintiffs never challenged the retroactive application of Covenant or the
applicability of Covenant to this case in the trial court. In fact, plaintiffs appeared to concede in
the trial court that Covenant was retroactively applicable and was consequently controlling in
this case. Therefore, we must first address whether plaintiffs preserved their argument that
Covenant should apply prospectively only and not retroactively to the instant case.
“Michigan generally follows the ‘raise or waive’ rule of appellate review.” Walters v
Nadell, 481 Mich. 377, 387; 751 NW2d 431 (2008) (citation omitted). Accordingly, “[f]or an
3
This order appears to be missing from the lower court file, however a true copy of this order
was provided to this Court on appeal.
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issue to be preserved for appellate review, it must be raised, addressed, and decided by the lower
court.” Mouzon v Achievable Visions, 308 Mich. App. 415, 419; 864 NW2d 606 (2014)
(quotation marks and citation omitted). The failure to timely raise an issue typically waives
appellate review of that issue. Walters, 481 Mich. at 387. Our Supreme Court has explained the
rationale for the preservation requirements as follows:
The principal rationale for the rule is based in the nature of the adversarial
process and judicial efficiency. By limiting appellate review to those issues
raised and argued in the trial court, and holding all other issues waived, appellate
courts require litigants to raise and frame their arguments at a time when their
opponents may respond to them factually. This practice also avoids the untenable
result of permitting an unsuccessful litigant to prevail by avoiding its tactical
decisions that proved unsuccessful. Generally, a party may not remain silent in
the trial court, only to prevail on an issue that was not called to the trial court’s
attention. Trial courts are not the research assistants of the litigants; the parties
have a duty to fully present their legal arguments to the court for its resolution of
their dispute. [Walters, 481 Mich. at 388 (citations omitted).]
“Although this Court need not review issues raised for the first time on appeal, this Court
may overlook preservation requirements if the failure to consider the issue would result in
manifest injustice, if consideration is necessary for a proper determination of the case, or if the
issue involves a question of law and the facts necessary for its resolution have been presented.”
Smith v Foerster-Bolser Constr, Inc, 269 Mich. App. 424, 427; 711 NW2d 421 (2006) (citations
omitted). However, while an appellate court has the inherent power to review an unpreserved
claim of error, our Supreme Court has emphasized the fundamental principles that “such power
of review is to be exercised quite sparingly” and that the inherent power to review unpreserved
issues “is to be exercised only under what appear to be compelling circumstances to avoid a
miscarriage of justice or to accord a [criminal] defendant a fair trial.” Napier v Jacobs, 429
Mich. 222, 233; 414 NW2d 862 (1987) (quotation marks and citation omitted; alteration in
original).
In this case, plaintiffs assert that this issue is preserved for appellate review without
identifying a single place in the lower court record where they argued that Covenant should not
apply retroactively to the instant case. As previously noted, plaintiffs actually treated the
Covenant decision as the controlling law at all times following the issuance of that decision,
arguing that it was necessary to amend the original complaint because the Covenant decision had
extinguished plaintiffs’ independent cause of action against defendant that was not premised on
an assignment of rights from Hensley. On appeal, plaintiffs essentially argue they never
contested the application of Covenant in the trial court, their appellate challenge to the propriety
of that retroactive application is somehow automatically preserved because the Covenant
decision was actually applied retroactively in the trial court and because defendant responded to
plaintiffs’ arguments on appeal. 4 This argument ignores the fundamentals of appellate
4
We note that the primary thrust of defendant’s appellate argument in response to plaintiffs’
retroactivity argument is that plaintiffs failed to preserve this issue for appeal.
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preservation law requiring parties to first raise issues in the lower court to be addressed in that
forum. Walters, 481 Mich. at 387; Mouzon, 308 Mich. App. at 419. Therefore, plaintiffs have
waived appellate review of this issue. Walters, 481 Mich. at 387. Plaintiffs may not remain
silent in the trial court and then hope to obtain appellate relief on an issue that they did not call to
the trial court’s attention. Id. at 388; see also Hoffenblum v Hoffenblum, 308 Mich. App. 102,
117; 863 NW2d 352 (2014) (“A party may not claim as error on appeal an issue that the party
deemed proper in the trial court because doing so would permit the party to harbor error as an
appellate parachute.”) (quotation marks and citation omitted).
We further conclude that there is no apparent reason for us to exercise our discretion to
review this issue. It does not present a question that must be addressed in order to properly
resolve this case and no manifest injustice will result if we decline to review it; as explained
below, plaintiffs’ legal argument is unavailing because Covenant has already been determined to
be retroactive in published decisions of this Court. Moreover, a litigant in a civil case must
demonstrate more than a potential monetary loss to show a miscarriage of justice or manifest
injustice. See Napier, 429 Mich. at 234. Accordingly, we decline to review plaintiffs’ various
arguments that Covenant is inapplicable to the instant case and should be given prospective
application only. 5
Furthermore, as we alluded to, plaintiffs’ argument is without merit even if they had not
waived this issue for appellate review. This Court has already held in two recent published
decisions that Covenant applies retroactively. See W A Foote, 321 Mich. App. at 196; VHS Huron
Valley Sinai Hosp v Sentinel Ins Co, ___ Mich App ___, ___; ___ NW2d ___ (2018) (Docket
No. 328005); slip op at 4.6 We are bound by the holdings in WA Foote and VHS Huron Valley.
5
We acknowledge that decisions of our Supreme Court and this Court have applied the plain
error standard of review to certain unpreserved issues in the civil context. See, e.g., Wischmeyer
v Schanz, 449 Mich. 469, 483 & n 26; 536 NW2d 760 (1995); Kern v Blethen-Coluni, 240 Mich
App 333, 336; 612 NW2d 838 (2000). However, we do not decide today under what
circumstances the plain error standard of review should be applied in the civil context. In this
case, we simply conclude that there is no need to review plaintiffs’ unpreserved issue at all
because it was waived and no compelling circumstances exist to justify appellate review.
We also recognize the general distinction between forfeiture and waiver, but, as our
Supreme Court has explained, the term “waiver” in the civil procedure context “is typically used
in the colloquial sense, encompassing inaction that would technically constitute forfeiture.”
Walters, 481 Mich. at 384 n 14. That is exactly what happened in this case: plaintiffs failed to
raise any argument in the trial court challenging the applicability of the Covenant decision to this
case, thereby waiving appellate review of any such challenge, and none of the reasons that would
justify exercising our discretion to disregard the preservation requirements exist.
6
We note that this Court declined in both W A Foote and VHS Huron Valley to decide whether
Covenant was to be given limited or full retroactive effect because that question was not
necessary to the resolution in either of those cases. See W A Foote, 321 Mich. App. at 174 n 9;
VHS Huron Valley, ___ Mich App at ___; slip op at 4. However, plaintiffs have not provided
any discussion or legal analysis addressing whether Covenant should receive limited or full
retroactive effect in the instant case. Therefore, any such argument is abandoned. See Wilson v
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See MCR 7.215(C)(2) (“A published opinion of the Court of Appeals has precedential effect
under the rule of stare decisis.”). And furthermore, whether an application for leave to appeal to
our Supreme Court has been filed in a case7 is irrelevant: “The filing of an application for leave
to appeal to the Supreme Court or a Supreme Court order granting leave to appeal does not
diminish the precedential effect of a published opinion of the Court of Appeals.” MCR
7.215(C)(2).
Therefore, even if this issue had not been waived for our review, Covenant is applicable
to the instant case, W A Foote, 321 Mich. App. at 196; VHS Huron Valley, ___ Mich App at ___;
slip op at 4; MCR 7.215(C)(2), and plaintiffs “do not possess a statutory cause of action” against
defendant as a no-fault insurer to recover personal protection insurance benefits under the no-
fault act, Covenant, 500 Mich. at 196.
B. ENFORCEABILITY OF CONTRACT PROVISION PROHIBITING ASSIGNMENT
Next, plaintiffs argue that the anti-assignment clause in the insurance policy is
unenforceable to prevent the assignment that occurred in this case.
Insurance policies are contracts, and are thus “subject to the same contract construction
principles that apply to any other species of contract.” Rory v Continental Ins Co, 473 Mich. 457,
461; 703 NW2d 23 (2005). “[Q]uestions involving the proper interpretation of a contract or the
legal effect of a contractual clause are . . . reviewed de novo.” Id. at 464. “In ascertaining the
meaning of a contract, we give the words used in the contract their plain and ordinary meaning
that would be apparent to a reader of the instrument.” Id. “[U]nambiguous contracts are not
open to judicial construction and must be enforced as written.” Id. at 468 (emphasis omitted).
“[T]he judiciary is without authority to modify unambiguous contracts or rebalance the
contractual equities struck by the contracting parties . . . .” Id. at 461.
However, our Supreme Court has also recognized that “courts are to enforce the
agreement as written absent some highly unusual circumstance such as a contract in violation of
law or public policy.” Id. at 469 (quotation marks and citation omitted; emphasis added). “A
mere judicial assessment of ‘reasonableness’ is an invalid basis upon which to refuse to enforce
contractual provisions,” and “[o]nly recognized traditional contract defenses may be used to
avoid the enforcement of the contract provision.” Id. at 470. With respect to determining
Taylor, 457 Mich. 232, 243; 577 NW2d 100 (1998) (“It is not sufficient for a party simply to
announce a position or assert an error and then leave it up to this Court to discover and
rationalize the basis for his claims, or unravel and elaborate for him his arguments, and then
search for authority either to sustain or reject his position.”) (quotation marks and citation
omitted); Houghton ex rel Johnson v Keller, 256 Mich. App. 336, 339-340; 662 NW2d 854 (2003)
(“An appellant’s failure to properly address the merits of his assertion of error constitutes
abandonment of the issue.”).
7
We note that an application for leave to appeal to our Supreme Court has been filed in both W A
Foote and VHS Huron Valley.
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whether a contractual provision violates public policy, our Supreme Court explained in Rory that
“the determination of Michigan’s public policy is not merely the equivalent of the personal
preferences of a majority of this Court; rather, such a policy must ultimately be clearly rooted in
the law.” Id. at 470-471 (quotation marks and citation omitted). “In ascertaining the parameters
of our public policy, we must look to policies that, in fact, have been adopted by the public
through our various legal processes, and are reflected in our state and federal constitutions, our
statutes, and the common law.” Id. at 471 (quotation marks and citation omitted).
“Under general contract law, rights can be assigned unless the assignment is clearly
restricted.” Burkhardt v Bailey, 260 Mich. App. 636, 653; 680 NW2d 453 (2004). Defendant
argues in this case that the present matter is one where Hensley’s ability to assign his rights is
prohibited by a specific contractual provision. The insurance policy states, “No assignment of
benefits or other transfer of rights is binding upon us [(i.e., defendant)] unless approved by us.”
Despite plaintiffs’ newly-raised arguments to the contrary, the language of this provision is
perfectly clear.8 In order for any benefits or rights to be assigned to anyone other than the
insured, defendant must consent to the assignment. The assignments at issue attempt to do just
that, assigning the right to claim benefits held by Hensley to plaintiffs, and it is undisputed that
defendant did not consent to these assignments. The appellate courts of Michigan have
previously recognized the enforceability of anti-assignment clauses that are clear and
unambiguous. See Detroit Greyhound Employees Fed Credit Union v Aetna Life Ins Co, 381
Mich. 683, 689-690; 167 NW2d 274 (1969); Employers Mut Liability Ins Co of Wisconsin v Mich
Mut Auto Ins Co, 101 Mich. App. 697, 702; 300 NW2d 682 (1980). Thus, because the anti-
assignment clause is unambiguous, it must be enforced unless it violates the law or public policy.
Rory, 473 Mich. at 468-469.
Resolution of this issue turns on the application of our Supreme Court’s decision in
Roger Williams Ins Co v Carrington, 43 Mich. 252; 5 NW2d 303 (1880). In Roger Williams, an
insurance policy was issued covering livery stable property. Id. at 253. The property was
destroyed in a fire. Id. After the fire, the insured assigned the policy to secure a debt. Id. at
253-254. Our Supreme Court refused to enforce an anti-assignment clause in that matter,
explaining:
The assignment having been made after the loss did not require consent of
the company. The provision of the policy forfeiting it for an assignment without
the company’s consent is invalid, so far as it applies to the transfer of an accrued
cause of action. It is the absolute right of every person—secured in this state by
statute—to assign such claims, and such a right cannot be thus prevented. It
cannot concern the debtor, and it is against public policy. [Id. at 254.]
Here, the parties provide no authority, and we have found none, explicitly rejecting this
analysis in Roger Williams. Moreover, it has been deemed controlling on this point of law in at
8
Plaintiffs did not argue in the trial court that the anti-assignment clause was ambiguous, and
this argument is therefore waived for appellate review. Walters, 481 Mich. at 387.
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least two relatively recent9 opinions of the United States District Court for the Western District
of Michigan, 10 Century Indemnity Co v Aero-Motive Co, 318 F Supp 2d 530, 539 (WD Mich,
2003) (relying on Roger Williams while explaining that under Michigan law, “an anti-assignment
clause will not be enforced where a loss occurs before the assignment, because in that situation
the assignment of the claim under the policy is viewed no differently than any other assignment
of an accrued cause of action.”); Action Auto Stores, Inc v United Capitol Ins Co, 845 F Supp
417, 422-423 (WD Mich, 1993) (citing Roger Williams in support of the proposition that a
provision prohibiting assignment without consent of the insurer was invalid with respect to a
post-loss assignment).
Our Supreme Court in Roger Williams essentially held that an accrued cause of action
may be freely assigned after the loss and that an anti-assignment clause is not enforceable to
restrict such an assignment because such a clause violates public policy in that situation. Roger
Williams, 43 Mich. at 254. Here, there similarly was an accrued claim against his insurer that
was held by Hensley for payment of health care services that had already been provided by
plaintiffs before Hensley executed the assignment. Under Roger Williams, any contractual
prohibition against the assignment of that claim to plaintiffs was unenforceable because it was
against public policy. Id.
Therefore, we conclude that enforcement of the anti-assignment clause in the instant case
is unenforceable to prohibit the assignment that occurred here—an assignment after the loss
occurred of an accrued claim to payment—because such a prohibition of assignment violates
Michigan public policy that is part of our common law as set forth by our Supreme Court. Roger
Williams, 43 Mich. at 254; Rory, 473 Mich. at 469-471.
We note that, contrary to the arguments advanced by defendant, the conclusion that a
contractual provision is unenforceable due to violating public policy is not equivalent to a
judicial assessment of unreasonableness, nor is it in conflict with the principle that unambiguous
contracts must be enforced as written. Our Supreme Court has made clear that judicial notions
of reasonableness are not proper grounds on which to hold contractual provisions unenforceable.
Rory, 473 Mich. at 470. Our Supreme Court has also made clear that unambiguous contractual
provisions are “to be enforced as written unless the provision would violate law or public
policy.” Id. (emphasis added). Defendant’s arguments appear to incorrectly conflate the concept
of “reasonableness” with “public policy.” Our decision is not based on any determination that
the anti-assignment clause is somehow “unreasonable.” Rather, we have simply concluded that
enforcing the anti-assignment clause in this circumstance to prohibit an assignment of an accrued
claim after the loss has occurred is against Michigan public policy as stated by our Supreme
Court one hundred and thirty-eight years ago in Roger Williams. Finally, defendant takes issue
9
While we recognize that cases from 1993 and 2003 are not exactly recent in the ordinary sense,
they certainly are recent when compared to a case from 1880.
10
We recognize that lower federal court decisions are not binding on state courts, but they may
be considered persuasive. Abela v Gen Motors Corp, 469 Mich. 603, 607; 677 NW2d 325
(2004).
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with the continued validity of our Supreme Court’s holding in Roger Williams and its application
in the instant case. However, as our Supreme Court has instructed, we are bound to follow its
decisions “except where those decisions have clearly been overruled or superseded.” Associated
Builders & Contractors v City of Lansing, 499 Mich. 177, 191; 880 NW2d 765 (2016). There is
no indication that Roger Williams or its holding relating to anti-assignment clauses has been
clearly overruled or superseded. Thus, if the continued validity of Roger Williams is to be called
into question, it will have to be by our Supreme Court.
Plaintiffs also raise several additional grounds for arguing that the anti-assignment clause
is unenforceable to prevent the assignment at issue in this case. However, plaintiffs did not raise
these additional arguments below and they are thus waived for appellate review. Walters, 481
Mich. at 387. Nonetheless, based on our conclusion that the anti-assignment clause did not
prohibit the assignments at issue in this case, there is no further relief on this issue that we could
grant to plaintiffs, and these additional arguments are therefore moot. B P 7 v Bureau of State
Lottery, 231 Mich. App. 356, 359; 586 NW2d 117 (1998). We decline to address these arguments
because we generally do not decide moot issues. Id.
C. Effect of the assignments with respect to the one-year-back rule
Next, plaintiffs argue that the trial court should have granted their motion for leave to
amend the complaint to account for the assignments and that such an amendment should have
related back to the date of the original complaint. In light of our conclusion that the assignments
were not prohibited by the anti-assignment clause, the issue to be addressed on appeal becomes
determining the effect of the assignments at issue with respect to the one-year-back rule in MCL
500.3145(1). Clearly, we must address this question first before we can address the final, and
interrelated, questions of whether the trial court erred by granting defendant’s summary
disposition motion and denying plaintiffs’ motion for leave to amend the complaint.
MCL 500.3145(1) provides in pertinent part that “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.” The “one-year-back rule” in MCL 500.3145(1) “is designed to limit the amount of
benefits recoverable under the no-fault act to those losses occurring no more than one year
before an action is brought.” Joseph v Auto Club Ins Ass’n, 491 Mich. 200, 203; 815 NW2d 412
(2012).
The instant case presents an unusual situation with respect to the one-year-back rule
because plaintiffs began this case on February 24, 2017, as a direct lawsuit filed against
defendant insurer under pre-Covenant caselaw but sought to amend the complaint to bring the
action based on an assignment theory after the Covenant decision was issued. Plaintiffs obtained
the assignments from Hensley on July 11, 2017. Plaintiffs argue that they may amend their
complaint to account for the assignment-of-rights theory and that such an assignment should
relate back to the date of the original complaint, which would allow them to pursue benefits
incurred during the year preceding the date of February 24, 2017. Defendant, on the other hand,
argues that the date of the assignments—July 11, 2017—provides the pertinent reference date for
purposes of the one-year-back rule because plaintiffs’ motion actually sought leave to file a
supplemental pleading rather than an amended pleading.
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The rule regarding the relation back of amended pleadings is contained in MCR
2.118(D), which provides in pertinent part that an “amendment that adds a claim or defense
relates back to the date of the original pleading if the claim or defense asserted in the amended
pleading arose out of the conduct, transaction, or occurrence set forth, or attempted to be set
forth, in the original pleading.” However, while an amended pleading may relate back to the
date of the original pleading, “there is no provision for relating back as to supplemental
pleadings.” Grist v Upjohn Co, 1 Mich. App. 72, 84; 134 NW2d 358 (1965).11 Supplemental
pleadings are governed by MCR 2.118(E), which provides in pertinent part as follows:
On motion of a party the court may, on reasonable notice and on just
terms, permit the party to serve a supplemental pleading to state transactions or
events that have happened since the date of the pleading sought to be
supplemented, whether or not the original pleading is defective in its statement of
a claim for relief or a defense.
Further, the “relation-back doctrine does not apply to the addition of new parties.” Miller v
Chapman Contracting, 477 Mich. 102, 106; 730 NW2d 462 (2007) (quotation marks and citation
omitted).
In this case, after the Covenant decision was issued, plaintiffs sought to amend their
complaint to account for the assignments obtained from Hensley and allow plaintiffs to pursue an
action against defendant insurer. “An assignee stands in the position of the assignor, possessing
the same rights and being subject to the same defenses.” Burkhardt, 260 Mich. App. at 653.
Thus, plaintiffs could not obtain any greater rights from Hensley on the date of the
assignments—July 11, 2017—than Hensley himself possessed on that date. Had Hensley filed
an action directly against defendant on July 11, 2017, he would not have been permitted to
recover any benefits beyond the portion of the loss incurred one year before that date. MCL
500.3145(1). Accordingly, plaintiffs also could not obtain any right to recover benefits for losses
incurred more than one year before July 11, 2017, through an assignment of rights from Hensley.
Burkhardt, 260 Mich. App. at 653. Furthermore, the procurement of the assignments was an
event that occurred after the filing of the original complaint and provided the only means by
which plaintiffs could have standing to maintain a direct action against defendant insurer for
recovery of no-fault benefits in this case. Covenant, 500 Mich. at 195-196, 217 n 40. Therefore,
defendant’s motion for leave to amend actually sought leave to file a supplemental pleading.
MCR 2.118(E). Courts “are not bound by a party’s choice of labels because this would
effectively elevate form over substance.” Adams v Adams, 276 Mich. App. 704, 715; 742 NW2d
399 (2007).
Because plaintiffs actually sought to file a supplemental pleading, it could not relate back
to the date of the original pleading. MCR 2.118(D) and (E); Grist, 1 Mich. App. at 84. Through
the assignment, plaintiffs only obtained the rights Hensley actually held at the time of the
11
Although the Grist Court was discussing GCR 1963, 118.5, this former court rule was
substantively the same as the current court rule addressing supplemental pleadings, which is
MCR 2.118(E).
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execution of the assignment, Burkhardt, 260 Mich. App. at 653, and plaintiffs cannot rely on the
relation-back doctrine to essentially gain the potential for a greater right to recovery than they
actually received. As our Supreme Court explained in Jones v Chambers, 353 Mich. 674, 681-
682; 91 NW2d 889 (1958):12
The assignment created nothing. It simply passed to plaintiffs’ insurer rights
already in existence, if any. If plaintiffs’ insured had no rights, then plaintiffs’
insurer acquired none by virtue of the assignment. To rule otherwise would be to
give such an assignment some strange alchemistic power to transform a dross and
worthless cause of action into the pure gold from which a judgment might be
wrought. [Quotation marks omitted.]
Therefore, through the assignments in this case, plaintiffs did not obtain the right to
pursue no-fault benefits for any portion of the loss incurred more than one year before July 11,
2017, because that is the pertinent point of reference for purposes of the one-year-back rule. A
supplemental pleading predicated on the July 11, 2017 assignments could not relate back to the
date of the original pleading.
D. APPLICATION
We now turn to the trial court’s final ruling granting summary disposition in favor of
defendant and denying plaintiffs’ motion for leave to amend.
“This Court reviews de novo the trial court’s decision to grant or deny summary
disposition.” Rory, 473 Mich. at 464. The trial court granted summary disposition pursuant to
MCR 2.116(C)(8).
A motion under MCR 2.116(C)(8) tests the legal sufficiency of the
complaint. All well-pleaded factual allegations are accepted as true and construed
in a light most favorable to the nonmovant. A motion under MCR 2.116(C)(8)
may be granted only where the claims alleged are “so clearly unenforceable as a
matter of law that no factual development could possibly justify recovery.” When
deciding a motion brought under this section, a court considers only the pleadings.
[Maiden v Rozwood, 461 Mich. 109, 119-120; 597 NW2d 817 (1999) (citations
omitted).]
However, we note that the trial court clearly considered material outside the pleadings,
contrary to the proper procedure for considering a motion under MCR 2.116(C)(8). The
insurance policy that contained the anti-assignment clause was crucial to the trial court’s
decision that plaintiffs could not maintain any claim against defendant predicated on assignments
from Hensley; this insurance policy was attached to defendant’s reply brief in support of its
12
Although the language from Jones that we have quoted was a quotation attributed to the circuit
court judge in that case, our Supreme Court explicitly adopted this reasoning. Jones, 353 Mich.
at 682.
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motion for summary disposition and defendant’s response to plaintiffs’ motion for leave to
amend the complaint. Furthermore, the assignments on which plaintiffs relied were attached to
plaintiffs’ brief in opposition to the motion for summary disposition, as well as plaintiffs’ brief in
support of their motion for leave to amend the complaint. While a written instrument that forms
the basis for a claim or defense and that is attached to or referred to in a pleading may be treated
as “part of the pleading for all purposes,” MCR 2.113(F), neither the assignments nor the
insurance policy were attached to or referred to in a pleading, MCR 2.110(A) (defining the term
“pleading” to include only a complaint, cross-claim, counterclaim, third-party complaint, an
answer to any of the aforementioned pleadings, or a reply to an answer).
Thus, we treat the motion as having been brought and decided under MCR 2.116(C)(10)
because it necessarily involved considering material outside the pleadings.13 Cf. Hughes v
Region VII Area Agency on Aging, 277 Mich. App. 268, 273; 744 NW2d 10 (2007) (“[W]here, as
here, the trial court considered material outside the pleadings, this Court will construe the motion
as having been granted pursuant to MCR 2.116(C)(10).”).
A motion under MCR 2.116(C)(10) tests the factual sufficiency of the
complaint. In evaluating a motion for summary disposition brought under this
subsection, a trial court considers affidavits, pleadings, depositions, admissions,
and other evidence submitted by the parties, in the light most favorable to the
party opposing the motion. Where the proffered evidence fails to establish a
genuine issue regarding any material fact, the moving party is entitled to
judgment as a matter of law. [Maiden, 461 Mich. at 120 (citations omitted).]
“The grant or denial of leave to amend pleadings is within the trial court’s discretion.”
PT Today, Inc v Comm’r of Office of Fin & Ins Servs, 270 Mich. App. 110, 142; 715 NW2d 398
(2006). A trial court’s decision on whether to permit a party to serve a supplemental pleading is
also discretionary. See MCR 2.118(E) (providing in pertinent part that the court “may, on
reasonable notice and on just terms, permit the party to serve a supplemental pleading”); In re
Estate of Weber, 257 Mich. App. 558, 562; 669 NW2d 288 (2003) (“[T]he term ‘may’
presupposes discretion and does not mandate an action.”). “[A] motion to amend should
ordinarily be denied only for particularized reasons, including undue delay, bad faith or dilatory
motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice
to the opposing party, or futility.” PT Today, Inc, 270 Mich. App. at 143. “The trial court must
specify its reasons for denying leave to amend, and the failure to do so requires reversal unless
the amendment would be futile.” Id. “[A]mendment is generally a matter of right rather than
grace.” Id.
“This Court will not reverse a trial court’s decision regarding leave to amend unless it
constituted an abuse of that discretion that resulted in injustice.” Id. at 142. “[A]n abuse of
13
Moreover, neither party has argued in the trial court or on appeal that the trial court
erroneously considered material outside the pleadings in treating the summary disposition as a
motion under MCR 2.116(C)(8). Therefore, any potential appellate challenge on this ground is
abandoned. Houghton, 256 Mich. App. at 339-340.
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discretion occurs only when the trial court’s decision is outside the range of reasonable and
principled outcomes.” In re Kostin, 278 Mich. App. 47, 51; 748 NW2d 583 (2008). “A trial court
necessarily abuses its discretion when it makes an error of law.” Ronnisch Constr Group, Inc v
Lofts on the Nine, LLC, 499 Mich. 544, 552; 886 NW2d 113 (2016); see also Kidder v Ptacin,
284 Mich. App. 166, 170; 771 NW2d 806 (2009) (“A court by definition abuses its discretion
when it makes an error of law.”) (quotation marks and citation omitted).
In this case, the trial court granted defendant’s motion for summary disposition and
denied plaintiffs’ motion for leave to amend their complaint because the trial court concluded
that the anti-assignment clause prohibited any assignment from Hensley and that any claims
based on such an assignment would be time barred nonetheless.
“If a trial court grants summary disposition pursuant to MCR 2.116(C)(8), (C)(9), or
(C)(10), the court must give the parties an opportunity to amend their pleadings pursuant to MCR
2.118, unless the amendment would be futile.” Yudashkin v Linzmeyer, 247 Mich. App. 642, 651;
637 NW2d 257 (2001) (quotation marks and citation omitted); see also MCR 2.116(I)(5) (“If the
grounds asserted are based on subrule (C)(8), (9), or (10), the court shall give the parties an
opportunity to amend their pleadings as provided by MCR 2.118, unless the evidence then before
the court shows that amendment would not be justified.”). “An amendment is futile if it merely
restates the allegations already made or adds allegations that still fail to state a claim.”
Yudashkin, 247 Mich. App. at 651 (quotation marks and citation omitted). Under MCR
2.118(A)(2), a party may amend a pleading by leave of the court and such “[l]eave shall be freely
given when justice so requires.”
Here, as previously discussed, the anti-assignment clause was unenforceable to the extent
that it prohibited the particular assignments at issue, and the one-year-back rule did not bar all of
plaintiffs’ claims but only those that were based on services provided more than one year before
the date of the assignment. Accordingly, the trial court’s decision was based on a misapplication
of the law, and the trial court necessarily abused its discretion in denying plaintiffs the
opportunity to serve its supplemental pleading. Ronnisch, 499 Mich. at 552. Similarly, because
the anti-assignment clause was not enforceable and the one-year-back rule did not bar all of
plaintiffs’ claims, the trial court erred by granting defendant’s motion for summary disposition
without properly applying the law in determining whether an amendment to the pleadings would
be futile. Rory, 473 Mich. at 464; Yudashkin, 247 Mich. App. at 651.
Defendant’s remaining argument related to the jurisdictional minimum for the amount in
controversy constitutes an argument that an alternate ground for affirming the trial court’s ruling
exists. This argument was not presented to the trial court. As an error-correcting court, W A
Foote, 321 Mich. App. at 181, this Court’s review is generally limited to matters actually decided
by the lower court, Allen v Keating, 205 Mich. App. 560, 564; 517 NW2d 830 (1994). We
acknowledge that this Court may affirm the grant of summary disposition on an alternate ground
that was not decided by the trial court when the issue was presented to the trial court. Adell
Broad v Apex Media Sales, 269 Mich. App. 6, 12; 708 NW2d 778 (2005). However, it is apparent
that the trial court’s ruling in the instant case was based on an erroneous application of the
pertinent legal principles since the trial court determined that the anti-assignment clause was
enforceable in this case, contrary to Michigan public policy, and that the one-year-back rule
would bar all of plaintiffs’ claims even if the assignments had been treated as valid. Thus, we
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conclude that it would be better for any additional matters relating to plaintiffs’ proposed
supplemental complaint to be addressed in the first instance by the trial court under the proper
legal framework.
We reverse the order of the trial court and remand for further proceedings consistent with
this opinion. We do not retain jurisdiction. We decline to award taxable costs under MCR
7.219(A).
/s/ Stephen L. Borrello
/s/ Jonathan Tukel
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