Assignments of Benefits—Validity and Enforceability
In this majority published opinion (Swartzle dissenting), the Court of Appeals vacated the trial court’s order denying defendant Farm Bureau General Insurance Company of Michigan’s (Farm Bureau) motion for summary disposition, in which the trial court held that an anti-assignment provision in a settlement agreement was invalid pursuant to the Court of Appeals’ prior holding in Jawad A Shah, MD, PC v State Farm Mut Auto Ins Co, 324 Mich App 182 (2018). The Court of Appeals held that there was a distinction between the anti-assignment provision in the policy at issue in Shah and a similar provision in the settlement agreement with Farm Bureau at issue in this case. Moreover, because the provision’s inclusion in the settlement agreement did not implicate the same public policy concerns contemplated by the Court in Shah, the Court of Appeals held that Shah’s holding does not extend to anti-assignment provisions such as the one in the settlement agreement in this case.
Terry Tracy was injured in a motor vehicle collision, and reached a settlement in her subsequent lawsuit against Farm Bureau for unpaid PIP benefits. The settlement agreement did not in any way limit Tracy’s rights to seek additional PIP benefits in the future—in fact it anticipated she would accrue additional claims to such benefits in the future—but it did expressly provide that Tracy “would ‘not assign any of her rights to medical benefits to medical providers in the future without the express written consent of [defendant]’ with respect to any claim for benefits arising from the motor vehicle accident that occurred on October 19, 2015, in Orion Township.” Tracy then received medical services from the plaintiff in this case, Michigan Ambulatory Surgical Center (MASC) and assigned to MASC her right to benefits for the treatment MASC rendered, in contravention of her settlement agreement with Farm Bureau. Thereafter, MASC filed suit against Farm Bureau to recover Tracy’s newly accrued PIP benefits, and Farm Bureau moved for summary disposition, arguing that Tracy’s assignment to MASC was barred by the settlement agreement. MASC argued in response that contractual provisions barring the assignments to benefits were held to be violative of public policy, and therefore unenforceable, by the Court of Appeals in Shah. Ultimately, the trial court agreed with MASC and denied Farm Bureau’s motion.
The Court of Appeals vacated the trial court’s order denying Farm Bureau’s motion, and clarified at the outset of its analysis that “the issue in this case is whether the trial court committed error requiring reversal when it concluded that the anti-assignment provision in the settlement agreement was invalid pursuant to our holding in Shah.” In Shah, the Court held that the anti-assignment provision in the plaintiff’s no-fault policy was unenforceable because it violated public policy. In reaching its holding, the Court relied on the following language from the Michigan Supreme Court in Roger Williams Ins Co v Carrington, 43 Mich 252, 254 (1880):
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.
In this case, the Court noted that “the [Shah and Roger Williams] courts concluded that public policy compelled a judicial redrafting of the terms of the respective insurance policies because doing so would not increase an insurer’s liability,” but that the same could not be said in this case. While judicially redrafting the terms of the settlement agreement would not increase Farm Bureau’s liability for Tracy’s newly accrued claims under the terms of her policy, it would increase Farm Bureau’s liability under the settlement agreement. Thus, the Court held that Shah’s analysis and holding simply did not apply to the facts presented in this case. Moreover, the Court held that, in this case, “public policy favors freedom to contract and encourages settlement between litigants.”
We decline to extend Shah to the facts before us because, here, public policy favors freedom to contract and encourages settlement between litigants—two goals that will be inhibited by rendering the anti-assignment provision before us unenforceable. See Wilkie v Auto-Owners Ins Co, 469 Mich 41, 52; 664 NW2d 776 (2003) (“The notion, that free men and women may reach agreements regarding their affairs without government interference and that courts will enforce those agreements, is ancient and irrefutable.”); Empire Indus v N Assur Co, 342 Mich 425, 429; 70 NW2d 769 (1955) (“Compromise settlements are favored by the law.”). Moreover, under general contract law, although contractual restrictions against assignability are strictly construed, an assignment may be precluded by agreement. Stenke v Masland Development, 152 Mich App 562, 575; 394 NW2d 418 (1986), citing Miller v Pond, 214 Mich 186, 190; 183 NW 24 (1921). See also Kaczmarck v La Perriere, 337 Mich 500, 504-506; 60 NW2d 327 (1953) (there is no prohibition against requiring consent to effectuate an assignment); Restatement Contracts 2d, § 317(2) (“A contractual right can be assigned unless . . . assignment is validly precluded by contract.”).
The majority opinion in Shah did not analyze MCL 500.3143, but it was briefly discussed in Shah’s partial concurring opinion:
The no-fault act itself speaks to the issue of assignment. It provides, “An agreement for assignment of a right to benefits payable in the future is void.” MCL 500.3143 (emphasis added). Notably, the Legislature elected not to void assignment of past-due benefits. By not including past-due benefits in this statutory prohibition, the Legislature, under the doctrine of expressio unius est exclusio alterius, made clear its intent to adhere to the fundamental principle that assignments of past-due benefits are effective and proper. [Shah, 324 Mich App at 216 (SHAPIRO, J., concurring in part and dissenting in part).]
It is a misapplication of the expressio unius maxim to conclude that the Legislature must have intended by implication to render invalid all anti-assignment provisions. The maxim expressio unius est exclusio alterius (the expression of one thing is the exclusion of another), “has force only when the items expressed are members of an associated group or series, justifying the inference that items not mentioned were excluded by deliberate choice, not inadvertence.” Esurance Prop & Cas Ins Co v Michigan Assigned Claims Plan, ___Mich App ___, ___; ___ NW2d ___ (2019) (Docket No. 344715), quoting Barnhart v Peabody Coal Co, 537 US 149, 168; 123 S Ct 748; 154 L Ed 2d 653 (2003) (internal quotation marks omitted). Rather, the more appropriate canon of construction is casus omissus pro omisso habendus est (nothing is to be added to what the text states or reasonably implies), which prohibits courts from supplying provisions omitted by the Legislature. See Scalia & Garner, Reading Law: The Interpretation of Legal Texts (St. Paul: Thomson/West, 2012), p 93. Thus, although MCL 500.3143 prohibits the assignment of future benefits, it is silent regarding agreements not to assign benefits. The reasonable implication of the Legislature’s omission regarding agreements not to assign benefits—as in the case before us—is that parties are free to contract according to their wishes.
Justice Swartzle, dissenting, argued that stare decisis compelled the Court to follow Shah, as he could “find no legitimate basis for distinguishing this case from this Court’s earlier published decision in [Shah].”
As all rather thin reeds must do, this one collapses upon inspection. In Shah, while setting aside the anti-assignment clause did not increase the insurer’s liability under the insurance policy, it certainly did increase the risk that the insurer would be exposed to future litigation by unanticipated assignees. Thus, in Shah, the insurer did not get the full benefit of its bargain with the insured, as the insurer presumably put some value on the anti-assignment clause in the insurance policy and factored that value into the price of the policy. Similarly, were the majority to follow Shah here, setting aside the anti-assignment clause would not increase defendant’s liability under the insurance policy (as the majority recognizes), but it certainly would increase the risk that defendant would be exposed to future litigation by unanticipated assignees—as this lawsuit aptly demonstrates. Thus, here (and tracking Shah), defendant would not get the full benefit of its bargain with Tracy, as defendant presumably put some value on the anti-assignment clause in the settlement agreement and factored that value into the consideration paid. From both a contractual and an economic perspective, the two scenarios are identical with respect to the risk of increased liability to the insurer. Simply put, the majority’s distinction is without a difference.