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Michigan Spine and Brain Surgeons, PLLC v Esurance Prop and Cas Ins Co (UNP – COA 10/28/2021; RB #4334)

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Michigan Court of Appeals; Docket #355581; Unpublished
Judges Shapiro, Borrello, and O’Brien; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Concurrence; Link to Dissent


STATUTORY INDEXING:
Not Applicable

TOPICAL INDEXING:
Collateral Estoppel and Res Judicata


SUMMARY:
In this 2-1 per curiam decision (Shapiro concurring, O’Brien dissenting), the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Michigan Spine and Brain Surgeons, PLLC’s (“Michigan Spine”) first-party action against Defendant Esurance Property and Casualty Insurance Company (“Esurance”) on the basis of res judicata. The Court of Appeals held that the moment Michigan Spine obtained an assignment from its patient/Esurance’s insured, Felicia Jones, it was no longer in privity with Jones, and thus a subsequent judgment against Jones in a separate first-party action between her and Esurance would not bar Michigan Spine’s action on the basis of res judicata.

Felicia Jones was injured in a motor vehicle collision and filed a first-party action against Esurance in the Wayne County Circuit Court on April 9, 2019. On October 31, 2019, Jones underwent a surgical operation for her collision-related injuries at Michigan Spine, thereafter assigning her right to pursue PIP benefits relating to the surgery to Michigan Spine on December 17, 2019. On January 17, 2020, while the Wayne County Circuit Court action was pending, Michigan Spine filed a separate first-party action against Esurance in the Oakland County Circuit Court on the basis of its assignment. Approximately six months later, the Wayne County Circuit Court dismissed Jones’s action against Esurance and ruled that Esurance was entitled to rescind Jones’s policy on the basis of fraud. Esurance then moved for summary disposition in the Oakland County Circuit Court action, arguing that Michigan Spine’s claim was barred by res judicata. The Oakland County Circuit Court agreed, and dismissed Michigan Spine’s action.

The Court of Appeals reversed the Oakland County Circuit Court’s summary disposition order, holding that Michigan Spine’s action was not barred by res judicata. The Court observed preliminarily that there are three elements to a res judicata claim, only the second and third of which were in dispute in this case: “(1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, or could have been, resolved in the first.” Michigan Spine argued that the second and third prongs were not satisfied because, “after it obtained the assignment from Jones, it was no longer in privity with Jones with respect to those billed charges,” and that, because Jones assigned her right to pursue benefits for those billed charges to Michigan Spine, Jones forfeited her right to pursue them, herself, in her separate Wayne County Circuit Court action. Thus, Michigan Spine argued, the matter in the Oakland County Circuit Court case could not have been decided in Jones’s separate Wayne County Circuit Court action, and res judicata did not apply.

Esurance relied primarily on the cases of TCBI, PC v State Farm Mut Auto Ins Co, 289 Mich App 39 (2010) and Med Team, Inc v Auto-Owners Ins Co, unpublished per curiam opinion of the Court of Appeals, issued February 25, 2020 (Docket No. 345449) in arguing that, because Michigan Spine, as an assignee, did not possess greater rights than Jones, herself, Michigan Spine could not pursue benefits under the same policy which the Wayne County Circuit Court ruled was rescinded with regard to Jones’ claims for benefits. Michigan Spine relied on the case of Mecosta Co Med Ctr v Metro Group Prop & Cas Ins Co, unpublished per curiam opinion of the Court of Appeals, issued March 24, 2020 (Docket No. 345868)—a case involving essentially identical facts and circumstances as those presented in this case—in which the Court of Appeals held that TCBI and, therefore, the doctrine of res judicata, did not apply specifically because of the fact that the plaintiff providers obtained their assignments before the judgment the no-fault insurer argued should have been preclusive effect, and because, the moment the assignments were obtained, the provider assignees and the patient assignor were no longer privies by virtue of the fact that the assigned rights could, from that point forward, only be pursued by the assignees. Thus, Michigan Spine argued in this case that, at the time of assignment—before the judgment the no-fault insurers argued should have been given preclusive effect—there was no longer privity between the assignees and the assignor, so a subsequent judgment against the assignor would not trigger res judicata.

The Court of Appeals reconciled Mecosta Co with TCBI and Med Team by highlighting the fact that “the result in Mecosta Co was due to this Court’s focus on the fact that the assignment was obtained before the judgment that the no-fault insurer argued should [have been] given preclusive effect,” which “was not part of this Court’s analysis in TCBI and Med Team.” Relying on Mecosta Co, the Court held that any privity between Michigan Spine and Jones was cut off at the moment of assignment—before Jones’s separate action was dismissed on the basis of fraud—and that Michigan Spine’s rights “[must be] measured at the time of assignment and cannot be diminished by the assignor’s subsequent actions or a subsequently issued judgment.” Thus, the Court of Appeals held that res judicata did not apply and that Michigan Spine could proceed with its first-party action.

“We conclude that these three cases are consistent with each other and that the result in Mecosta Co was due to this Court’s focus on the fact that the assignment was obtained before the judgment that the no-fault insurer argued should be given preclusive effect. That issue was not part of this Court’s analysis in TBCI or Med Team. Thus, as this Court recognized in Mecosta Co, and consistent with TBCI and Med Team, an assignee stands in the shoes of the assignor, possessing the same rights that the assignor had and being subject to the same defenses. However, as the Mecosta Co Court further clarified, the rights transferred by the assignor are measured at the time of the assignment and cannot be diminished by the assignor’s subsequent actions or a subsequently issued judgment. Mecosta Co, unpub op at 4-6; see also Aultman, Miller & Co, 115 Mich at 154; Saginaw Fin Corp, 256 Mich at 443-444. In this case, the issue presented and the relevant factual circumstances are identical to those presented in Mecosta Co. Accordingly, we adopt the analysis in Mecosta Co as our own to resolve the issue on appeal in the present case. Under this analysis, the trial court in this case erred by determining that res judicata applied and granting summary disposition because Michigan Spine obtained its assignment from Jones before the Wayne Circuit Court judgment was entered and Michigan Spine was therefore not bound by this subsequent Wayne Circuit Court judgment. Mecosta Co, unpub op at 4, 6. Accordingly, we reverse the judgment of the Oakland Circuit Court.”

Justice Shapiro concurred fully in the majority opinion, but “wr[o]te separately to note that regardless of the insured’s fraud regarding attendant care, plaintiff surgical group is entitled to payment for its services as it was an innocent third party,” and that, “[t]o rule otherwise would result in a substantial windfall to the insurer and deprive the surgical group, which has acted in good faith and taken no wrongful action, of its fees.”

Justice O’Brien dissented, arguing that a correct application of TCBI would have resulted in Michigan Spine’s action being barred by res judicata. It did not matter, in her opinion, that “because of the assignment Jones could not sue [Esurance] for the same past due medical bills as [Michigan Spine] was seeking here,” because “Michigan follows the broad ‘transactional approach’ to determining this issue.”

“Thus, regardless that [Michigan Spine] is seeking to recover for different medical bills (though from the same defendant) than Jones was in Wayne Circuit, because this case arises from the same operative facts—Jones’ injuries, the procurement of the insurance policy covering her vehicle, and the language of the policy and no-fault act—plaintiff’s entitlement to relief under the policy and no-fault law raised the same threshold issues as was resolved through the Wayne Circuit judgment.”


Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit SinasDramis.com.

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