Jawad a Shah Md Pc v. State Farm Mutual Automobile Insurance Co
324 Mich. App. 182
| Mich. Ct. App. | 2018Background
- Plaintiffs are medical-provider assignees who sued State Farm for unpaid no-fault medical benefits after assignment from an insured.
- State Farm’s policy contained an anti-assignment clause; plaintiffs argued assignments of past-due benefits were effective despite that clause.
- The parties disputed how to measure the statutory one-year-back limitation in MCL 500.3145(1) (whether it runs from date suit was filed or date of assignment).
- The parties also contested whether the Michigan Supreme Court’s Covenant decision (eliminating a provider’s independent cause of action against insurers) should apply retroactively to unpaid services rendered before that decision.
- Judge Shapiro concurred with the majority that anti-assignment clauses are unenforceable as to past-due benefits, but dissented on measuring the one-year-back rule (arguing it should run from filing date) and on retroactivity (arguing Covenant should be prospective only).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of anti-assignment clause in insurance policy | Anti-assignment clause cannot bar assignment of past-due benefits; assignor performed so right to assign vested | Clause valid to limit assignments and administrative burden; insurer’s contract rights should control | Court (Shapiro concurs) — anti-assignment clause unenforceable as to past-due benefits; assignments effective after loss/performance |
| Measuring the one-year-back limitation (MCL 500.3145(1)) | One-year-back should run from date suit was commenced (original filing date) | One-year-back should run from date of assignment (assignment date determines recoverable back period) | Shapiro dissent — one-year-back runs from date action was commenced (disagrees with majority) |
| Retroactivity of Covenant (provider cause of action rule) | Covenant should be applied prospectively so providers who relied on prior law can be paid for already-rendered services | Covenant applies retroactively to pending cases | Shapiro dissent — Covenant should be applied prospectively (Foote was wrongly decided) |
| Public-policy/No-Fault Act preemption of policy terms | No-fault scheme and long-standing contract law prevent insurers from denying assigned past-due benefits by policy clause | Insurer may draft policy provisions not expressly forbidden by statute to limit administration/costs | Court (Shapiro concurs) — policy provisions cannot defeat statutory purpose; insurer’s public-policy argument unsupported |
Key Cases Cited
- Northwestern Cooperage & Lumber Co v Byers, 133 Mich 534 (1903) (general rule that nonpersonal executory contracts are assignable)
- Roger Williams Ins Co v Carrington, 43 Mich 252 (1880) (assignment of past benefits after performance cannot be contractually limited)
- In re Jackson, 311 B.R. 195 (Bankr. W.D. Mich. 2004) (anti-assignment clause does not prevent assignment of rights after assignor fully performs)
- Covenant Medical Ctr, Inc v State Farm Auto Mut Ins Co, 500 Mich 191 (2017) (Michigan Supreme Court: providers lack independent cause of action against no-fault carriers)
- W A Foote Mem Hosp v Mich Assigned Claims Plan, 321 Mich App 159 (2017) (Michigan Court of Appeals held Covenant should be applied retroactively)
- Shavers v Kelley, 402 Mich 554 (1978) (no-fault act purpose: assured, adequate, and prompt reparation)
- Burkhardt v Bailey, 260 Mich App 636 (2004) (assignee stands in assignor’s shoes; discusses limits when assignor lacked rights at assignment)
- Tebo v Havlik, 418 Mich 350 (1984) (factors supporting limited retroactivity when overruling prior law)