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Bates v Auto Club Group Ins. Co. (COA – UNP 3/26/2019; RB #3870)

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Michigan Court of Appeals; Docket # 340705; Unpublished
Judges O’Brien, Jansen, and Ronayne Krause; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


 STATUTORY INDEXING:
Not Applicable

TOPICAL INDEXING:
Assignments of Benefits—Validity and Enforceability
Medical Provider Standing (Post-Covenant)


SUMMARY:
In this unpublished majority per curiam decision, the Court of Appeals vacated the trial court’s judgement in favor of plaintiff medical provider, Keys of Life Specialized Care, Inc. (KOL), and remanded the case back to the trial court to allow KOL to amend its complaint to reflect a valid assignment of rights.

Edwin Bates Jr. filed a complaint against defendant Auto Club Group Insurance Company (Auto Club), seeking PIP benefits for medical treatment he received following a motor vehicle accident. KOL, one of Bates’ medical providers, moved to intervene, and filed its own complaint against Auto Club “for damages related to defendant’s failure to pay benefits.” After trial, before judgement was entered, the Michigan Supreme Court decided Covenant, in which medical providers were deemed to have no direct cause of action against no-fault insurers for recovery of PIP benefits. KOL moved for entry of judgement, arguing that it had an implied-in-fact contract with Bates, “whereby bates had assigned KOL his rights to sue defendant.” KOL later uncovered actual, written assignments that had been executed prior to the original filing date of Bates’ complaint. The trial court entered judgement in favor of KOL because, “not only was it clear during the litigation that the parties were operating as though an assignment existed, unlike in Covenant, KOL had produced actual, valid assignments.”

The Court of Appeals vacated the trial court’s judgement, and instead remanded the case back to the trial court to allow KOL to amend its complaint for further proceedings. The Court reasoned:

Based on Covenant, healthcare providers like KOL do not have an independent statutory cause of action against insurers like defendant. Because Covenant applies retroactively, KOL’s complaint—which only pleaded a direct cause of action against defendant—failed to state a claim on which relief could be granted. Defendant was therefore entitled to summary disposition under MCR 2.116(C)(8), and the trial court’s judgment to KOL is vacated.

Despite that KOL failed to state a claim on which relief could be granted, we hold that because KOL claims to have an assignment of right from Bates, it should be permitted to amend its complaint to pursue recovery under an assigned-claim theory.

KOL argued that a remand was unnecessary because the trial court constructively granted its motion to amend its complaint. The Court of Appeals disagreed with KOL’s argument, for two reasons:

First, and most problematic, there is no amended complaint—or even a proposed amended complaint—in the lower court record, which in itself belies the assertion that the trial court granted KOL’s motion to amend its complaint. Second, unlike in Cole, we cannot conclude that constructively granting KOL’s motion to amend its complaint would not prejudice defendant. KOL alleges that either there was an “implied-in-fact” assignment of rights from Bates to KOL, or that Bates assigned his rights to KOL in the written assignments provided on the day of the hearing on KOL’s motion for entry of judgment. If these theories of assignment were alleged in KOL’s complaint, defendant could have conducted discovery on the issues. But because these theories were never pleaded, defendant has never been given that opportunity. Moreover, as to the written assignments, defendant never had a chance to properly contest the validity of the assignments because they were presented the day that the trial court entered judgment. Thus, we cannot conclude that any “constructive grant” of KOL’s motion to amend its complaint did not prejudice defendant.

Justice Jansen dissented, arguing:

[KOL] produced the purported assignments to the trial court, and to defendant, for the first time on the date of the hearing for its motion to enter judgement. Where KOL has failed to move the trial court to amend its complaint, or to file supplemental pleadings, I am unwilling to step into the shoes of the litigants and pursue the proper procedural remedy for them on appeal.

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