Michigan Court of Appeals; Docket # 350979; For Publication
Judges Cavanagh, Jansen, and Shapiro; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Cancellation and Recission of Insurance Policies
In this forthcoming per curiam opinion, the Court of Appeals reversed the trial court’s decision to grant Defendant summary disposition on grounds that the Plaintiff healthcare provider was incorporated in violation of the Michigan Limited Liability Company Act (hereinafter MLLCA) because, consistent with Miller v. Allstate Ins. Co., 481 Mich. 601; 751 N.W.2d 463 (2008), Defendant lacked standing to challenge whether Plaintiff was properly incorporated or organized.
This case arose from a motor vehicle accident in which Hiba Abdulrazzaq was injured. Defendant was Abdulrazzaq’s no-fault insurer at the time of the accident. Plaintiff provided Abdulrazzaq’s medical treatment for injuries sustained in the accident. Abdulrazzaq executed an assignment of no-fault benefits in Plaintiff’s favor and ultimately filed an action against Defendant for nonpayment of medical services rendered to Abdulrazzaq. Defendant moved for summary disposition and argued that Plaintiff “had not lawfully rendered treatment to Abdulrazzaq” because Plaintiff’s articles of organization indicated that it was organized for the sole purpose of providing medical services by a licensed physician and – according to a Licensing and Regulatory Affairs report – two of Plaintiff’s members or managers were not licensed physicians, thereby violating the MLLCA’s requirement that all members and managers of a PLC be licensed to provide the same professional service as the corporate entity. In response, Plaintiff argued that the Defendant did not have standing to challenge whether Plaintiff was properly incorporated and organized and, further, all medical treatment provided to Abdulrazzaq was performed by licensed physicians. The trial court held that Defendant had standing to argue that Plaintiff had violated the MLLCA and ultimately concluded that Plaintiff failed to show its services were lawfully rendered. Thus, the Defendant’s motion for summary disposition was granted and Plaintiff appealed.
In its analysis, the Michigan Court of Appeals noted that under the no fault act, an insurer is required to pay benefits only for treatment lawfully rendered. The Court further noted that “because Plaintiff was formed to provide services in a learned profession, it was required to comply with Article 9 of the [MLLCA],” which provides that “if a PLC renders a professional service covered by the public health code, as plaintiff does, ‘then all members and managers of the company must be licensed or legally authorized in this state to render the same professional services.’” MCL 450.4904(2). Thus, the Court turned to Plaintiff’s argument that, under Miller, Defendant lacked statutory standing to make the argument that Plaintiff’s services were not lawfully rendered. In Miller, the Michigan Supreme Court declined to address whether a healthcare provider did not render treatment lawfully because it was incorporated improperly under the Business Corporation Act (hereinafter BCA) because it held that the insurer lacked statutory standing. In reaching its holding, the Michigan Supreme Court relied on a provision of the BCA that stated “[f]iling is conclusive evidence that all conditions precedent required to be performed under this act have been fulfilled and that the corporation has been formed under this act, except in an action or special proceeding by the attorney general,” thus precluding anyone except the attorney general from challenging an entity’s corporate status under the BCA. In response to Plaintiff’s argument, Defendant conversely argued that Miller did not apply to the case at hand because Defendant did not challenge Plaintiff’s corporate form, but rather argued Plaintiff was improperly organized in violation of the MLLCA. In analyzing this argument, the Michigan Court of Appeals concluded that “for purposes of statutory standing, this is a distinction without difference.” The Court went on to state that the MLLCA contained an identical provision to that relied on by the Michigan Supreme Court in Miller. Thus, the Court held that “although the alleged incorporation defect is different than the one alleged in Miller, Defendant lacks statutory standing for the reasons stated in that opinion. As in Miller, because defendant does not have standing to argue that Plaintiff is properly incorporated or organized under the MLLCA, we need not reach the substantive issue of whether the alleged violation of the MLLCA rendered the treatment to Abdulrazzaq unlawful.”