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Maple Manor Rehab Center of Novi, Inc, et al v Travelers Cas & Surety Co (COA – UNP 7/21/2022; RB #4451)

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Michigan Court of Appeals; Docket #355775; Unpublished
Judges Markey, Boonstra, and Riordan; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


STATUTORY INDEXING:
Allowable Expenses: Reasonable Necessity Requirement [§3107(1)(a)]
Allowable Expenses: Reasonable Charge Requirement [§3107(1)(a)]
Allowable Expenses: Incurred Expense Requirement [§3107(1)(a)]
One-Year Back Rule Limitation [§3145(1)]

TOPICAL INDEXING:
Evidentiary Issues
Intervention by Service Providers and Third Party Payors in PIP Claims


SUMMARY:
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed in part, and reversed in part, the trial court’s order granting Plaintiffs Maple Manor Rehab Center of Novi, Inc. (“Maple Manor Rehab”) and Maple Manor Neuro Center, Inc.’s (“Maple Manor Neuro”) motion for summary disposition, and denying Defendant Travelers Casualty & Surety Company’s (“Travelers”) motion for summary disposition. The Court of Appeals held, first, that a “hold-harmless agreement” entered into by the plaintiffs and their assignor, James Bourdage, did not render the charges Bourdage incurred for the treatment he received from the plaintiffs “un-incurred,” such that the plaintiffs would not be able to seek reimbursement from Travelers pursuant to the assignment they obtained from Bourdage. The Court of Appeals held, second, that the plaintiffs could seek benefits dating back as far as March 4, 2015—even though they were not substituted for Bourdage as the plaintiffs in this case until after September 14, 2018—because Bourdage and Travelers had entered into a prior litigation agreement in which they explicitly agreed that Bourdage could pursue benefits dating back to March 4, 2015. The Court of Appeals held, third, that Maple Manor Neuro, an entity created by Maple Manor Rehab to perform Maple Manor Rehab’s billing and accounting, could be a co-assignee of Bourdage’s right to pursue PIP benefits related to the treatment he received from Maple Manor Rehab. The Court of Appeals held, fourth, that the trial court erred in granting summary disposition in the plaintiffs’ favor on the issue of “reasonable charges,” despite evidence that the plaintiffs and Travelers negotiated the rate for Bourdage’s care and explicitly agreed on a specific amount. This evidence, alone, did not establish that the agreed upon rate was, in fact, “reasonable”; moreover, the Court held that Travelers did not have sufficient opportunity to address this issue in response the plaintiffs’ motion. The Court of Appeals held, fifth, that the trial court did not abuse its discretion by denying Travelers’ motion to exclude evidence related to the agreement it entered into with the plaintiffs to pay for Bourdage’s care at a negotiated rate, because Travelers failed to offer a compelling basis for why such evidence should be excluded.

James Bourdage suffered catastrophic injuries and was left in a permanent vegetative state as a result of a motor vehicle accident that occurred in July 2014. In April 2015, Bourdage was transferred to Maple Manor Rehab, which subsequently hired a billing consultant, Susan Taylor, to negotiate a reasonable rate for Bourdage’s care with Travelers, the no-fault insurer responsible for Bourdage’s PIP benefits related to the accident. Taylor and Amy Driscoll, a claims adjuster for Travelers, agreed to a specific rate for Bourdage’s care, and Travelers paid the plaintiffs at that rate for approximately seven months, until October 31, 2015, when it stopped paying for Bourdage’s care altogether.

In March of 2016, Bourdage filed a complaint against Travelers, and in November 2017 both parties entered into a stipulated order of dismissal without prejudice, “in light of a then-upcoming trial date, to allow time to complete necessary discovery and to allow for a meaningful facilitation.” The stipulation provided that Bourdage could refile his complaint within one week of the dismissal, and that Bourdage could pursue all expenses dating back to March 4, 2015. Then, in September of 2018, Bourdage, Travelers, Maple Manor Rehab, and Maple Manor Neuro entered into a litigation agreement “according to which Bourdage would assign his right to collect no-fault benefits to [Maple Manor Rehab and Maple Manor Neuro], [Maple Manor Rehab and Maple Manor Neuro] and Bourdage would execute a “Hold-Harmless Agreement,” and [Maple Manor Rehab and Maple Manor Neuro] would then substitute for Bourdage in the pending litigation.” The trial court granted the parties’ motion to substitute, after which Travelers moved for summary disposition regarding multiple issues. First, Travelers argued that Maple Manor Neuro did not have a right of recovery because it was merely an accounting operation for Maple Manor Rehab. Second, Travelers argued that Bourdage “un-incurred” the charges for his care at Maple Manor Rehab by virtue of the “hold-harmless agreement” he and the plaintiffs entered into. Third, Travelers argued that the plaintiffs could only seek benefits dating back to September 14, 2017—one year prior to the date of their assignment. And fourth, Travelers argued that the trial court should preclude any evidence related to its agreement regarding the rate for Bourdage’s care.

The plaintiffs filed their own motion for summary disposition, arguing that there was no question Bourdage incurred the plaintiffs’ charges despite the “hold-harmless agreement”; that Travelers had waived the one-year-back rule when it stipulated to dismissal of Bourdage’s previous action; and that Travelers provided no basis for excluding evidence of the agreement it entered into regarding the rate for Bourdage’s care. Ultimately, the trial court granted summary disposition in the plaintiffs’ favor, not only as to the issues set forth above, but also as to the reasonableness of the plaintiffs’ charges.

The Court of Appeals affirmed the trial court’s summary disposition order as to the issue of whether Bourdage incurred the plaintiffs’ charges despite the “hold-harmless agreement.” Travelers argued that the agreement “effectively relieved Bourdage from liability and, therefore, caused debt that was indisputably incurred to become unincurred for purposes of MCL 500.3107(1)(a).” The Court of Appeals disagreed, holding that the agreement was merely a covenant not to sue, which in no way extinguished the cause of action Bourdage transferred to the plaintiffs nor resulted in Bourdage un-incurring the charges for his treatment.

“In this case, the Hold-Harmless Agreement identifies the actions pending in the Washtenaw Circuit Court concerning Bourdages’s medical expenses, and hints at the possibility of other actions. The agreement then states that ‘Maple Manor and all of its related entities shall seek recovery solely and exclusively from [Travelers]’ for these unpaid medical bills. Viewed in light of the Assignment of Rights, see In re Estate of Koch, 322 Mich App 383, 399; 912 NW2d 205 (2017), the Hold-Harmless Agreement does not extinguish the cause of action that Bourdage transferred to plaintiffs. J & J Farmer Leasing, 472 Mich at 357-358. The Hold-Harmless Agreement does not alter Bourdage’s assignment to plaintiffs of the right to recover no-fault benefits for medical debt indisputably incurred; nor does it alter Bourdage’s obligation to remit any award received through judgment, settlement, arbitration, or otherwise to the assignees. Through the Hold-Harmless Agreement, plaintiffs merely promised Bourdage that they would seek recovery of the medical expenses that Bourdage incurred solely and exclusively from Travelers, and that they would not seek to hold Bourdage liable. Accordingly, the Hold-Harmless Agreement was effectively a covenant not to sue. Id.

We conclude that the Hold-Harmless Agreement did not extinguish the cause of action that Bourdage transferred to plaintiffs, nor did it relieve Bourdage of the responsibility to remit to plaintiffs any award pertaining to the cost of medical services they provided to him. Accordingly, the trial court did not err by denying summary disposition to Travelers on the question of whether Bourdage “incurred” allowable expenses for purposes of MCL 500.3107(1)(a).”

The Court of Appeals next affirmed the trial court’s summary disposition order as to the issue of whether the plaintiffs could seek benefits dating back to March 4, 2015, as was agreed to by Bourdage and Travelers when they stipulated to dismiss Bourdage’s original action. Travelers argued that Bourdage assigned to the plaintiffs only the rights he possessed under the no-fault act, not the right to pursue benefits dating back to March 4, 2015 that he personally obtained from his agreement with Travelers. The Court of Appeals disagreed, holding that, “When plaintiffs substituted for Bourdage, they stepped into the same position as Bourdage, which included benefiting from the parties’ agreement regarding the one-year-back limitations date.”

“Read in tandem, MCR 2.202 (B) and (D) suggest that ‘[a] substituted party steps into the same position of the original party.’ See Corbin v Blankenburg, 39 F3d 650, 654 (CA 6, 1994) (quotation marks and citation omitted). Nothing in MCR 2.202 indicates that a substituted party would not be subject to the same stipulations and orders to which the original party was subject. In the present case, the trial court’s November 15, 2017 order provided, among other things, ‘that the ‘refiled’ case shall have a ‘ ‘one year back’ limitation date of March 4, 2015.’ When the case was refiled with Bourdage as the plaintiff, Travelers acknowledged the stipulation and order when, in its defenses and affirmative defenses to the complaint, it stated that ‘some or all of [plaintiffs’] claims [are] precluded pursuant to MCL 500.3145, as [they] may pertain to any claims for reimbursement of benefits prior to March 7 [sic], 2015.’ When plaintiffs substituted for Bourdage, they stepped into the same position as Bourdage, which included benefiting from the parties’ agreement regarding the one-year-back limitations date. Travelers has provided no authority that would compel an outcome different than that indicated by the court rule.”

The Court of Appeals next affirmed the trial court’s order denying Travelers’ motion for summary disposition regarding its argument that Maple Manor Neuro could not pursue no-fault PIP benefits as Bourdage’s assignee, because it was merely an accounting outfit established by Maple Manor Rehab and did not, itself, provide any medical services to Bourdage. The Court of Appeals disagreed, holding that “[n]othing in the statute prohibits a healthcare provider from billing for [its] charges through a separate entity or prohibits either of those entities from being an assignee of Bourdage’s right to no-fault payments in satisfaction of its those charges.”

“There is no dispute that Maple Manor Neuro was incorporated for the sole purpose of providing accounting and billing services for patients treated at Maple Manor Rehab who were eligible for no-fault benefits, and that Maple Manor Neuro itself did not provide any healthcare services to Bourdage. There is also no dispute that Bourdage was treated by properly licensed healthcare professionals at Maple Manor Rehab, and that Maple Manor Rehab was properly licensed to provide the type of care and treatment Bourdage received. Because Maple Manor Rehab ‘lawfully render[ed] treatment’ to Bourdage, Maple Manor Rehab was entitled to ‘charge a reasonable amount for the products, services and accommodations rendered.’ MCL 500.3157(1). Nothing in the statute prohibits a healthcare provider from billing for those charges through a separate entity or prohibits either of those entities from being an assignee of Bourdage’s right to no-fault payments in satisfaction of those charges. Travelers has not argued that plaintiffs’ internal corporate structure violates the no-fault act or that Maple Manor Neuro was billing for something other than the treatment Maple Manor Rehab lawfully rendered to Bourdage. We find no error by the trial court requiring reversal. Barnard Mfg, 285 Mich App at 369.”

Despite these holdings, the Court of Appeals proceeded to reverse the trial court’s summary disposition order in part, specifically as to the trial court’s finding that the plaintiffs’ charges were reasonable as a matter of law. The plaintiffs argued that the fact that Travelers negotiated a specific price and then agreed to pay it rendered them “per se reasonable,” but the Court of Appeals disagreed, noting that the plaintiffs cited to “no authority supporting the proposition that such a negotiated price is dispositive of the price’s reasonableness or of the reasonable necessity of the services provided.” Furthermore, the Court noted that the issues of reasonable charges and reasonable necessity were not briefed by either party, nor a subject of the plaintiffs’ motion, and thus the trial court erred by ruling dispositively on an issue that Travelers did not know it would be considering and thus did not present evidence to support its position.

“Plaintiffs argue that the fact that the amounts charged for Bourdage’s care were negotiated with Travelers renders the services per se necessary and the amount charged per se reasonable. We disagree. Plaintiffs cite no authority supporting the proposition that such a negotiated price is dispositive of the price’s reasonableness or of the reasonable necessity of the services provided. . . . Nor was the issue significantly argued by the parties; in fact, in their response to Travelers’ motion for partial summary disposition, plaintiffs asked the trial court to grant summary disposition in their favor under MCR 2.116(I) as to the issue of liability, but requested that the trial court order a trial on the amount of damages. In other words, even though plaintiffs requested that the trial court find that Travelers was liable for reasonable and necessary expenses incurred by Bourdage, the trial court went beyond that request to also grant summary disposition as to the amount of damages.

The trial court’s order in this case relieved plaintiffs of their burden to prove that their charges were reasonable and their services to Bourdage reasonably necessary. Plaintiffs assert that the trial court deemed the rate agreed-upon by plaintiffs and Travelers ‘reasonable.’ However, the record shows that the trial court did not find plaintiffs’ charged rate reasonable. Instead, the court concluded that Travelers had not presented any evidence that the rate was not reasonable. Moreover, there is no record evidence from which the trial court could have concluded that plaintiffs’ charges were reasonable, as plaintiffs had yet to present any such evidence.

Plaintiffs argue that insurers and providers can agree on “reasonable charges” and that ‘[a]greements of that nature are enforceable.’ They cite in support of these assertions Thomas v Mich Mut Ins Co, 138 Mich App 117; 358 NW2d 902 (1984), and Farm Bureau Gen Ins Co v Blue Cross Blue Shield of Mich, 314 Mich App 12, 25; 884 NW2d 853 (2015). However, neither of these cases involves a claimant seeking PIP benefits. Moreover, the trial court was not presented with evidence that Travelers had agreed that the rates charged and services provided were reasonable, or had somehow waived its right to challenge the reasonableness of charges and services incurred after it ceased paying for Bourdage’s care. . . .

Although the expenses incurred by Bourdage may indeed be reasonable and necessary under the no-fault act, we conclude that it was error for the trial court to grant summary disposition under MCR 2.116(I) without allowing the parties to present evidence and argument on this issue and without making an explicit determination of reasonableness and necessity. . . .

Lastly, the Court of Appeals affirmed the trial court’s denial of Travelers’ motion to exclude evidence related to its agreement to pay for Bourdage’s care at the rate it negotiated with the plaintiffs. The Court noted, simply, that Travelers failed to explain why such evidence should be excluded, and further rejected Travelers’ argument that such evidence should be excluded as a sanction for the plaintiffs’ alleged spoliation of evidence: specifically, the plaintiffs’ failure to secure Susan Taylor’s handwritten analysis of competitors’ rates that she used when determining an appropriate rate for Bourdage’s care initially, back in 2015.

“Moreover, the trial court also did not abuse its discretion by denying Travelers’ motion to exclude evidence. Travelers sought to exclude evidence of any agreement Travelers made to pay the rate negotiated by Maple Manor Rehab and Travelers, including Taylor’s report or testimony concerning her determination of an appropriate per diem rate. Travelers argues that Taylor was not qualified to make such a determination. But even assuming that Taylor was not qualified to determine a per diem rate, Travelers fail to explain why her testimony should be excluded, given that Travelers presumably ‘ma[de] its own determination regarding what is reasonable and pa[id] that amount to plaintiffs.’ See Spectrum Health Hosps, 333 Mich App at 483-484.

Travelers also sought to exclude, as a sanction for alleged spoliation of evidence, testimony and evidence about plaintiffs’ calculation of a per diem rate and any agreement between plaintiffs and Travelers about a per diem rate. . . .

Travelers argues that plaintiffs spoliated evidence by failing to preserve Taylor’s handwritten analysis of the various rates of rehabilitation facilities, compiled in 2015, and that the trial court abused its discretion by refusing to sanction plaintiffs by excluding any evidence that Travelers had ever negotiated or agreed to a per diem rate for Bourdage. We disagree. Even if plaintiffs had a duty to preserve Taylor’s comparative analysis, the trial court did not abuse its discretion by dismissing Travelers’ motion. Travelers has not shown how the failure to preserve the evidence benefited plaintiffs or prejudiced Travelers. The cases upon which Travelers relies to support its argument in favor of sanctions illustrate that spoliation sanctions are appropriate when the party that lost, destroyed, or failed to preserve the evidence benefits from the fact that the evidence is missing. . . .

In this case, although the comparative analysis may have been relevant to the reasonableness of plaintiffs’ per diem rate, it was not dispositive, see Spectrum Health Hosps, 333 Mich App at 480-481. Moreover, although Travelers argues that the loss of Taylor’s written analysis makes it impossible for it to challenge the information that plaintiffs used to induce them to first make payment, Travelers still had the opportunity to make its own determination of the reasonableness of plaintiffs’ proposed per diem rate, and is still permitted to challenge the reasonableness of that rate, whether by comparison to other similar facilities or otherwise. The loss of a written list of the precise facilities Taylor used to arrive at her determination is simply not very significant, and in light of these circumstances, the trial court’s denial of Travelers’ motion to exclude evidence did not fall outside the range of principled outcomes.”


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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