Covenant Medical Center, Inc. v. State Farm Mutual Automobile Insurance Co.
313 Mich. App. 50
| Mich. Ct. App. | 2015Background
- In 2011 State Farm insured Jack Stockford, who was injured in a motor-vehicle accident. Covenant Medical treated Stockford in 2012 and billed State Farm $43,484.80.
- Covenant sent written bills to State Farm in July, August, and October 2012; State Farm responded in writing in November 2012.
- On April 2, 2013, State Farm paid Stockford $59,000 and obtained a release purporting to discharge State Farm from "all past and present claims incurred through January 10, 2013."
- Covenant Medical sued State Farm alleging an unreasonable refusal to pay the $43,484.80 owed for medical services and sought penalties, interest, and costs.
- The trial court granted summary disposition to State Farm, concluding the release barred Covenant’s claim. Covenant appealed. The Court of Appeals reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer’s settlement with insured and insured’s release extinguish a medical provider’s claim when insurer had prior written notice of the provider’s claim | Covenant: Because it provided State Farm written notice before settlement, State Farm could not discharge liability by paying the insured | State Farm: The insured’s release bars the provider’s claim; payment to insured discharged liability | Reversed: Under MCL 500.3112, written notice to insurer of a third-party claim prevents insurer from discharging that claim by paying the insured; insurer must seek court allocation |
Key Cases Cited
- Krohn v Home-Owners Ins Co, 490 Mich 145 (statutory interpretation; ascertain legislative intent)
- Klooster v City of Charlevoix, 488 Mich 289 (read statutes as a whole)
- Lakeland Neurocare Ctrs v State Farm Mut Auto Ins, 250 Mich App 35 (statutory construction; plain meaning)
- Mich Head & Spine Institute, PC v State Farm Mut Auto Ins Co, 299 Mich App 442 (distinguishable: release issue for services rendered after release)
- Moody v Home Owners Ins Co, 304 Mich App 415 (provider’s right derived from insured’s right to benefits)
- Wyoming Chiropractic Health Clinic, PC v Auto-Owners Ins Co, 308 Mich App 389 (provider has independent standing to sue insurer)
- Regents of Univ of Michigan v State Farm Mut Ins Co, 250 Mich App 719 (provider claims against insurer recognized)