Michigan Court of Appeals; Docket #354436; Unpublished
Judges Ronayne Krause, Jansen, and Swartzle; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Concurrence
In this unanimous, unpublished, per curiam decision (Swartzle, concurring), the Court of Appeals reversed the trial court’s denial of Defendant Auto Club Insurance Association’s motion for summary disposition, in which it sought dismissal of Plaintiff Tynina Flowers’s first-party action against it. The Court of Appeals held that Flowers could not sue Auto Club for her leftover balance with her medical providers—after Auto Club paid only the portions of the providers’ charges which it unilaterally deemed “reasonable”—because Auto Club promised to indemnify and defend Flowers if her providers sued her for the balance in the future.
Tynina Flowers was injured in a motor vehicle accident, after which she presented the charges she incurred for her accident-related medical treatments to Auto Club, the insurer with priority responsibility for her claim. Auto Club paid only a fraction of Flowers’s charges—and apparently left some bills unpaid, altogether—after unilaterally determining the “reasonable charges” for the treatments Flowers had received. It then promised Flowers that it would defend and indemnify her if her medical providers sued her for the leftover balance. Flowers then filed the underlying suit to recover her leftover balance, and Auto Club moved for summary disposition, arguing that Flowers could not be harmed by—and thus did not have standing to contest—its decision to not pay her providers their full charges because of it promised to defend and indemnify her from future legal action by her providers. Flowers argued, conversely, that she was harmed by Auto Club’s decision because her unpaid debts could negatively affect her credit rating. The trial court agreed with Flowers, and denied Auto Club’s motion.
The Court of Appeals reversed the trial court’s denial of Auto Club’s motion, observing that the outcome of this case is controlled by Lamothe v Auto Club Ins Ass’n, 214 Mich App 577 (1995). Lamothe, the Court noted, is “directly on point . . . the only differences being that Flowers argues that the harm to her credit rating is a damage in and of itself.” As to that issue, the Court noted that “Auto Club has repeatedly represented to this court that its promise to indemnify and defend Flowers also obligates it to protect her credit,” which the Court apparently took at face value.
“This case is nearly identical to LaMothe, the only differences being that Flowers argues that the harm to her credit rating is a damage in and or itself (the LaMothe plaintiff argued that damaged credit caused anxiety, which this Court said was not recoverable, id. at 582-583) and Auto Club has allegedly left some medical bills completely unpaid. As for the credit issue, Auto Club has repeatedly represented to this court that its promise to indemnify and defend Flowers also obligates it to protect her credit. As explained in LaMothe, Auto Club’s promise to indemnify and defend Flowers is legally enforceable and requires Auto Club to aid Flowers as promised in the future even if Auto Club no longer insures Flowers. This promise is also not limited to only those claims that Auto Club has partially paid. Rather, Auto Club has promised to indemnify and defend Flowers against any medical provider seeking unpaid bills. That promise applies equally to unpaid and partially-paid bills. Thus, just like in LaMothe, Flowers cannot state a claim because Auto Club’s promise protects her from any harm resulting from Auto Club’s decisions regarding which medical bills to pay. See id. at 583-585.”
Judge Swartzle concurred with the majority, but wrote separately to express his disagreement with LaMothe, which, in his opinion, improperly presumes that the insurer complied with its statutory duty to pay the “reasonable charges” and that the provider did not charge reasonable fees. He argued that the better course of action in cases such as this “would be to let the factual dispute about the reasonableness of bills play out in litigation,” especially because Auto Club’s unspecific promise to defend and indemnify Flowers left too many questions unanswered: for example, “[h]ow, will the insurer, in actuality, rehabilitate an insured patient’s decimated credit score such that the patient’s credit is no worse than what it was before significant medical bills went unpaid?”; and “if the insured patient needs a particular service but its medical provider refuses to provide the service because of unpaid bills, will the insurer assist the insured (and pay and necessary expenses) in finding equivalent replacement services?”
“But what LaMothe and McGill both failed to recognize was that medical providers have been under a similar statutory duty to charge only ‘reasonable’ fees for necessary services provided. See MCL 500.3157 (1994 and 1995) and MCL 500.3157(1) (current). Thus, both sides of the payment equation under the no-fault act—the provider and the insurer—have reciprocal statutory duties to charge and pay only ‘reasonable’ fees. The panels in each case appeared to presume that the insurer was just fulfilling its statutory obligation, but there was no similar presumption that the provider was just fulfilling its statutory obligation as well. Moreover, in LaMothe, the majority expressly concluded that the insurer had, in fact, paid ‘those charges reasonably incurred for reasonably necessary products, services, and accommodations for plaintiff’s care.’ 214 Mich App at 581-582. Yet, this was one of the key factual claims in dispute—i.e., whether the insurer had paid for reasonable charges—and the majority made an inappropriate finding of fact on a motion for summary disposition under MCR 2.116(C)(10).
Thus, the insured patient remains caught in the middle between, on the one hand, providers who demand payment at the risk of lost services, lawsuits, or collection agencies, and, on the other hand, insurers who refuse payment.
To be clear—none of this is to say that the insurer is necessarily wrong in the instant case. Auto Club might well have paid every reasonable fee charged for every necessary service received by plaintiff. But we cannot know this at the pleading stage. MCR 2.116(C)(8). The better approach, in my opinion, would be to let the factual dispute about the reasonableness of bills play out in litigation, rather than to assume that (1) the insurer paid reasonable charges, but (2) the provider did not charge reasonable fees for necessary services.
As to an insurer’s promise to defend and indemnify an insured patient—the key feature that short circuits the patient’s suit against the insurer—the details of the promise are universally scant, at least as recounted in case law. So, for example, (1) if the insured patient is subsequently sued by a provider for an unpaid bill, will the insurer let the patient hire an attorney of her choice and still pay for the cost of that attorney? Or, will the insurer require that the patient use an attorney of its choosing? (2) If the insured patient believes that the unpaid bill was for a necessary service reasonably priced, and that patient admits this in her answer to a provider’s lawsuit against her, will the insurer then accept the admission and cover the bill in full? (3) How will the insurer, in actuality, rehabilitate an insured patient’s decimated credit score such that the patient’s credit is no worse than what it was before significant medical bills went unpaid? Will the insurer, for example, fund a patient’s lawsuit against a credit bureau under the Fair Credit Reporting Act or similar consumer-protection law? (4) And, as a final example, if the insured patient needs a particular service but its medical provider refuses to provide the service because of unpaid bills, will the insurer assist the insured (and pay any necessary expenses) in finding equivalent replacement services?”