Since the Michigan Supreme Court released its Covenant opinion[1] in 2017, Michigan courts have issued inconsistent decisions regarding a medical provider’s rights under an assignment after the assignor settles his claim for no-fault personal injury protection (PIP) benefits. The Michigan Court of Appeals heeded the calls for direction on this issue and approved Physiatry and Rehab Assoc v Alhalemi, ___ Mich App ___; ___ NW2d ___ (2020) (Docket No. 349465), for publication on July 16, 2020. The Court held that an assignor’s settlement and release of all past, present, and future claims against his insurer is binding on his assignee unless the insurer receives a copy of the assignment before the settlement.
Background on Physiatry and Rehab Associates
Mohammed Alhalemi filed a lawsuit against his insurer, Westfield Insurance Company, seeking the payment of no-fault benefits for injuries that he sustained in a motor vehicle accident. While the lawsuit was pending, Alhalemi executed an assignment of benefits in favor of Physiatry and Rehab Associates, which provided medical services for Alhalemi after the accident. Subsequently, Alhalemi and Westfield entered into a facilitation settlement agreement. The following day, the parties executed a release, under which (1) Alhalemi released his rights to all past, present, and future claims for no-fault benefits arising out of the accident; (2) Alhalemi agreed to defend, indemnify, and hold Westfield harmless for any claims related to unpaid medical expenses (among other things); and (3) Alhalemi acknowledged full responsibility to pay liens, expenses, and/or benefits, including those claimed by a medical service provider.
After the settlement, Physiatry and Rehab Associates filed a separate lawsuit against Westfield, seeking the payment of no-fault PIP benefits as Alhalemi’s assignee. The trial court granted Westfield’s motion for summary disposition, reasoning that Westfield was released from liability under the terms of Alhalemi’s release. The court also held that Westfield was entitled to summary disposition because Physiatry and Rehab Associates failed to show that Westfield received written notice of its claim or the assignment of rights before the settlement.
The Court of Appeals’ Ruling
On appeal, the Court of Appeals affirmed the trial court’s grant of summary disposition.
First, the Court rejected Physiatry and Rehab Associates’ argument that the release only applied to the specific claims that Alhalemi included in his litigation against Westfield. It explained that, under the plain and unambiguous language of the release, Alhalemi relinquished all past, present, and future claims and agreed to pay all unpaid medical expenses.
Further, the Court of Appeals agreed with the trial court that Physiatry and Rehab Associates’ claim was barred due to lack of notice under MCL 500.3112. The provider needed to give Westfield a copy of the assignment of benefits before Westfield entered into the settlement agreement with Alhalemi in order to pursue a claim against Westfield after the release.
Impact of Physiatry Rehab and Associates
The Court of Appeals’ opinion is now binding precedent. It gives district and circuit courts a direct instruction for handling provider cases filed after an injured party settles their claims against a no-fault insurer. If a provider fails to give the insurer notice of its assignment before the insured settles and releases their claims, the provider can’t maintain a separate action to recover no-fault benefits.[2]
Physiatry and Rehab Associates will remain significant as provider litigation shifts in response to the Legislature’s amendment of MCL 500.3112. Under the amended statute, a medical provider can pursue a direct cause of action for no-fault benefits against an insurer without an assignment. This change may cause insurers and their attorneys to be wary as they settle PIP cases with insureds, fearing an influx of provider claims after the settlement. However, under Physiatry Rehab and Associates, a medical provider can’t maintain a separate action against an insurer unless it provides notice of its claim before the insured settles and releases their claims. This should give no-fault insurance companies greater confidence as they settle PIP cases with their insureds.
If you have questions about Physiatry and Rehab Assoc v Alhalemi or no-fault provider litigation more broadly, please feel free to contact the author, Zabbia N. Alholou. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.
[1] Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich 191; 895 NW2d 490 (2017).
[2] Relatedly, the Court of Appeals recently issued an unpublished opinion holding that the submission of a bill isn’t enough to provide notice of an assignment-based claim. Rather, the provider must provide notice of the assignment itself.
