Jawad A. Shah, M.D., PC v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 08 May 2018
• Docket Number: No. 340370,340370
• Citation: 324 Mich.App. 182,920 N.W.2d 148
• Parties: JAWAD A. SHAH, M.D., PC, Integrated Hospital Specialists, PC, Insight Anesthesia, PLLC, and Sterling Anesthesia, PLLC, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

324 Mich.App. 182

920 N.W.2d 148

JAWAD A. SHAH, M.D., PC, Integrated Hospital Specialists, PC, Insight Anesthesia, PLLC, and Sterling Anesthesia, PLLC, Plaintiffs-Appellants,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.

No. 340370

Court of Appeals of Michigan.

Submitted April 11, 2018, at Detroit.

Decided May 8, 2018, 9:00 a.m.

Green & Green, PLLC (by Jonathan A. Green ) for plaintiff.

Miller Canfield, Paddock & Stone, PLC (by Paul D. Hudson and Samantha S. Galecki ) and Hackney Grover PLC (by Ross Lawrence Janecyk ) for defendant.

Before: Borrello, P.J., and Shapiro and Tukel, JJ.

Borrello, P.J.

In this suit seeking recovery of medical expenses under the no-fault act, MCL 500.3101 et seq ., plaintiffs, Jawad A. Shah, M.D., PC, Integrated Hospital Specialists, PC, Insight Anesthesia, PLLC, and Sterling Anesthesia, PLLC, appeal as of right the trial court’s order granting summary disposition in favor of defendant, State Farm Mutual Automobile Insurance Company, and denying as futile plaintiffs’ motion for leave to amend their complaint. For the reasons set forth in this opinion, we reverse the trial court’s order and remand this matter for further proceedings consistent with this opinion.

I. BACKGROUND

This case involves various healthcare providers attempting to recover from a no-fault insurer for services rendered to the insured, George Hensley. According to plaintiffs’ initial complaint filed on February 24, 2017, Hensley was injured on November 30, 2014, in a motor vehicle accident and was insured by defendant. Plaintiffs submitted claims for services rendered to Hensley, but defendant refused to pay these claims. In their complaint, plaintiffs sought a judgment of approximately $82,000, plus interest and reasonable attorney fees. Defendant answered the complaint and filed its affirmative defenses on April 21, 2017, denying liability.

On May 25, 2017, our Supreme Court issued its opinion in Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co. , 500 Mich. 191, 895 N.W.2d 490 (2017). In Covenant , our Supreme Court held "that healthcare providers do not possess a statutory cause of action against no-fault insurers for recovery of personal protection insurance benefits under the no-fault act," expressly overruling a body of caselaw from this Court that had concluded to the contrary. Id . at 196, 895 N.W.2d 490. In explaining its holding, the Covenant Court rejected the notion that a medical provider had independent standing to bring a claim against an insurer to recover no-fault benefits. Id . at 195, 895 N.W.2d 490. However, the Court clarified that its decision was "not intended to alter an insured’s ability to assign his or her right to past or presently due benefits to a healthcare provider." Id . at 217 n. 40, 895 N.W.2d 490.

On July 20, 2017, defendant moved for summary disposition pursuant to MCR 2.116(C)(8). Defendant argued that dismissal was required for failure to state a claim because plaintiffs’ no-fault claim was "in direct contravention of the Michigan Supreme Court’s decision in Covenant ."

Apparently anticipating defendant’s motion, plaintiffs had obtained an assignment of rights from Hensley on July 11, 2017,¹ to pursue payment of no-fault benefits for healthcare services "already provided" by plaintiffs.² Plaintiffs relied on this assignment to then file a response to the summary disposition motion and a motion for leave to amend the complaint to reflect that the suit was being pursued through the assignment of rights obtained from Hensley. Plaintiffs argued that it was necessary to amend the complaint to allow the action to proceed pursuant to their respective assignments because the Covenant decision had extinguished their ability to pursue an independent, direct action against defendant under these circumstances. Again showing foresight in anticipating defendant’s next tactical decision, plaintiffs also preemptively argued that if the trial court were to determine that a contractual provision within defendant’s policy prevented assignments, then such a provision should not be enforced for one of two reasons. First, plaintiffs argued that defendant would have to show that Hensley was a named insured under the policy (rather than, for example, a passenger entitled to benefits under someone else’s policy) for the antiassignment clause to be enforced against him. Second, plaintiffs argued that the antiassignment clause was voidable as against public policy because the assignment was obtained after the loss occurred. Furthermore, in an effort to avoid problems with the one-year-back rule of MCL 500.3145(1), plaintiffs also argued that the amended complaint should relate back to the date of the original complaint because the amendment to accommodate the assignments was intended to support the previously filed no-fault claim that arose from the same transaction or occurrence, namely Hensley’s injuries sustained in the November 30, 2014 accident. Plaintiffs did not contend that Covenant was inapplicable to their suit.

On September 7, 2017, defendant filed a reply in support of its summary disposition motion. As plaintiffs anticipated, defendant argued that an antiassignment clause in the policy rendered any assignment of rights from Hensley void. Accordingly, defendant argued that plaintiffs’ claims should be dismissed because the antiassignment clause had to be enforced as written and was not against public policy. Defendant also argued that the one-year-back rule of MCL 500.3145(1) would bar the assigned claims, or a portion of the assigned claims, even if the assignments were considered valid. Defendant explained that plaintiffs could not obtain any greater rights than those held by Hensley at the time of the assignments. Had Hensley brought suit on the date of the assignments, he could not have obtained damages for any expenses incurred more than a year before that date. Defendant argued that plaintiffs stood in the shoes of Hensley after the assignments and could not obtain any greater rights than this. Defendant also asserted that Hensley had his own lawsuit that had already been resolved and was no longer pending. Defendant further argued that the relation-back doctrine would not apply because the assignment did not exist on the date plaintiffs originally filed their complaint. Defendant contended that plaintiffs were not really seeking an amendment that could relate back to the original complaint pursuant to MCR 2.118(D) but were actually attempting to supplement their complaint pursuant to MCR 2.118(E) in order to allege a subsequently acquired assignment. Defendant explained that supplemental pleadings never relate back to the date of the original pleading. Finally, defendant explained that Hensley was indeed a named insured, and it provided a copy of the declarations page as support.

On the same day, defendant also filed a response to plaintiffs’ motion for leave to amend their complaint. Defendant raised the same arguments made in its reply brief and argued that for these reasons, any amendment was futile because the cause of action that plaintiff was attempting to add was legally insufficient on its face.

A hearing on the motions was held on September 11, 2017. The parties’ oral arguments reiterated the arguments made in their written submissions. The trial court ruled as follows:

All right, the Court read both of the motions and the briefs, as well as the second motion, which is the motion for leave to file an amended complaint. As I said they interrelate and the circumstances are that Shah was a provider or plaintiffs were health providers—health services care providers for the insured George Hensley. And apparently only after the covenant [sic: Covenant decision] did an assignment take place and the policy language of the State Farm policy, which Mr. Hensley purchased precludes the assignment without approval of State Farm, which did not occur. So actually (inaudible) did not acquire any rights by virtue of the assignment.

And in addition, as pointed out by defense counsel, if it had been granted it would have been a supplemental pleading and the date would be barred under the statute of limitations. You may submit an order if you don’t have one here today.

The trial court clarified that it was granting defendant’s motion for summary disposition, denying leave to file an amended complaint as futile, and dismissing the case with prejudice. The trial court entered an order³ granting summary disposition pursuant to MCR 2.116(C)(8) and dismissing the case with prejudice ‘‘for the reasons stated on the record."

This appeal followed.

II. ANALYSIS

A. RETROACTIVITY OF THE COVENANT DECISION

Plaintiffs first argue that our Supreme Court’s decision in Covenant should not apply retroactively but should instead be given prospective effect only.

Whether a judicial decision applies retroactively is a question that this Court reviews de novo. W.A. Foote Mem. Hosp. v. Mich. Assigned Claims Plan , 321 Mich.App. 159, 168, 909 N.W.2d 38 (2017). However, plaintiffs never challenged the retroactive application of Covenant or the applicability of Covenant to this case in the trial court. In fact, plaintiffs appeared to concede in the trial court that Covenant was retroactively applicable and was consequently controlling in this case. Therefore, we must first address whether plaintiffs preserved their argument that Covenant should apply prospectively only and not retroactively to the instant case.

‘‘Michigan generally follows the ‘raise or waive’ rule of appellate review." Walters v. Nadell , 481 Mich. 377, 387, 751 N.W.2d 431 (2008) (citation omitted). Accordingly, ‘‘[f]or an issue to be preserved for appellate review, it must be raised, addressed, and decided by the lower court." Mouzon v. Achievable Visions , 308 Mich.App. 415, 419, 864 N.W.2d 606 (2014) (quotation marks and citation omitted). The failure to timely raise an issue typically waives appellate review of that issue. Walters , ...