Oftentimes, a no-fault claimant will file a lawsuit asking the court to adjudicate all of their no-fault claims and award all unpaid benefits. Sometimes, though, that claimant is still seeking treatment for their alleged injuries while their lawsuit is pending. When that’s the case, it’s not uncommon for one of their medical providers to also file suit, seeking no-fault benefits for services allegedly arising out of the same accident. Although MCR 2.209(A)(3) allows the provider to intervene in the claimant’s underlying lawsuit, sometimes the provider elects to proceed with its own lawsuit based on an assignment of rights between it and the claimant.

That is the scenario that played out in Physiatry and Rehab Assoc v State Farm Mut Auto Ins Co (Docket No. 350826). In that case, the Michigan Court of Appeals affirmed a trial court’s order awarding summary disposition in favor of the no-fault insurer, disposing of a provider suit where the injured party executed an assignment after she filed her own lawsuit seeking all unpaid no-fault benefits.

Background on Physiatry and Rehab Assoc v State Farm

Lina Kasha was allegedly injured in a motor vehicle accident on November 18, 2016. At the time, Defendant State Farm Mutual Automobile Insurance Company was her no-fault insurer. On November 17, 2017, Kasha sued State Farm and others in Wayne County Circuit Court, requesting that the trial court adjudicate all of her no-fault claims and award any unpaid benefits.

After filing that lawsuit, Kasha began treating with Plaintiff Physiatry and Rehab Associates (PRA). She executed an assignment of rights on November 5, 2018, transferring to PRA all of her rights to recover compensation for past and present services that PRA provided.

On January 14, 2019, PRA filed its own lawsuit against State Farm in Oakland County Circuit Court as Kasha’s assignee, seeking no-fault benefits for services it provided to her. The complaint acknowledged Kasha’s pending lawsuit. The billing statement attached to the complaint detailed services provided between March 26, 2018, and October 5, 2018. On February 25, 2019, PRA served State Farm’s registered agent with the complaint.

On February 27, 2019, Kasha and State Farm reached a settlement agreement. Kasha signed the release on April 16, 2019. It encompassed all claims for personal protection insurance (PIP) benefits arising out of the accident that had accrued on or before March 1, 2019. As part of the release, Kasha warranted that she had not assigned or transferred any claims or causes of action related to the subject matter of the release. She also agreed to indemnify State Farm against any claims arising out of such an assignment or transfer. Kasha and State Farm later signed a stipulation and agreement of dismissal, which the Wayne County Circuit Court entered on April 22, 2019.

State Farm then moved for summary disposition of PRA’s claims in the Oakland County suit, arguing that the release, collateral estoppel, res judicata, and State Farm’s good-faith settlement and payment under MCL 500.3112 barred PRA’s claims. The trial court granted State Farm’s motion for summary disposition and denied PRA’s motion for reconsideration. PRA appealed.

Court of Appeals’ Analysis and Ruling

The Court of Appeals affirmed the trial court’s order in a unanimous decision.

On appeal, PRA argued that (1) Kasha was unable to release claims that she previously assigned, and (2) res judicata did not apply because PRA’s claims weren’t ripe when Kasha settled her lawsuit, and they arose out of a different transaction or occurrence than Kasha’s claims. The Court of Appeals rejected both arguments.

First, the Court of Appeals explained that “our Supreme Court has long held that when an assignment of claims occurs after a lawsuit is filed—the subject of which concerns those assigned claims—the assignor may settle or release those claims, precluding any further recovery by the assignee.” Physiatry and Rehab Assoc, unpub op at 4, citing Peters v Gallagher, 37 Mich 407, 411-412 (1877), and Sayre v Detroit, G H & M R Co, 205 Mich 294, 315 (1919). Additionally, if an assignee acquiesces in an assignor’s lawsuit, allowing it to continue, the assignee has no grounds to complain about what occurs in the assignor’s action. Id., quoting Peters, 37 Mich at 411-412.

In this case, PRA knew about Kasha’s lawsuit and had the option to intervene under MCR 2.209(A)(3), but it chose not to do so. By failing to intervene, PRA acquiesced in Kasha proceeding with her claims, which she ultimately settled. Thus, PRA was bound by the settlement agreement between Kasha and State Farm.

Second, in rejecting PRA’s argument that res judicata didn’t apply, the Court of Appeals cited well-established case law establishing the purposes and requirements of the doctrine. “‘The doctrine of res judicata is intended to relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and encourage reliance on adjudication, that is, to foster the finality of litigation.’” Physiatry and Rehab Assoc, unpub op at 4, quoting Garrett v Washington, 314 Mich App 436, 441 (2016). For res judicata to apply, the earlier lawsuit must have been decided on the merits; both lawsuits must involve identical parties or their privies; and the matter in the second lawsuit must have been (or could have been) decided in the first lawsuit. Id.

PRA only contested the third element. The Court of Appeals held that State Farm satisfied that prong. PRA was aware that Kasha’s complaint asked the Wayne County Circuit Court to adjudicate all of her rights under the no-fault act, but it failed to intervene in that action. Ripeness wasn’t an issue because PRA’s claims were ripe when it filed its own lawsuit, and there was nothing that prevented PRA from pursuing those claims in Kasha’s pending action instead.

The Court of Appeals further held that PRA’s claims arose out of the same transaction or occurrence as Kasha’s claims. Kasha and PRA both sought no-fault benefits arising out of the same accident. Additionally, because an assignee stands in the shoes of the assignor, PRA’s rights under the assignment necessarily arose from the same transaction or occurrence through which Kasha acquired her rights.

Thus, for all of these reasons, the trial court properly granted summary disposition.

Consequences for Future Litigants

Physiatry and Rehab Assoc illustrates that provider suits arising out of the same accident as an injured person’s lawsuit may be subject to summary disposition if the injured person releases all no-fault benefits arising out of the accident. This is true even when the provider has actual notice of the injured party’s case and the injured party signs a valid assignment of benefits after filing their complaint. Because of this opportunity for summary disposition, insurers and their counsel should strategically negotiate claims in an injured party’s lawsuit where a provider has filed its own suit but hasn’t intervened in the injured party’s case.

If you have questions about obtaining summary disposition in no-fault provider suits, please feel free to contact the author, Joshua M. Stapp. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.