Special Tree Rehabilitation System v. Allstate Property and Casualty Ins. Co., 2:17-cv-12567

On August 4, 2012, Carol Baum was injured in an automobile accident and received medical treatment from Special Tree Rehabilitation System, which billed over $148,000.
Allstate insured the at-fault driver (Daniel Roy) and has withheld full payment of Baum’s No-Fault benefits.
Baum (through her guardian) executed multiple assignments of her No-Fault insurance rights to Special Tree, the most recent on July 11, 2017.
Special Tree sued Allstate in Michigan state court on May 1, 2017; Allstate removed the case to federal court.
Allstate filed a Rule 12(b)(6) motion arguing Special Tree (a healthcare provider) lacks a statutory cause of action post-Covenant and that the assignment is invalid; Special Tree filed a late response which the court accepted.
The district court denied Allstate’s motion, finding the Baum assignments valid and controlling precedent on post-loss assignments permitted recovery by assignees despite Covenant.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a healthcare provider may sue for No-Fault benefits after Covenant	Baum assigned her rights to Special Tree, so Special Tree can sue as assignee	Covenant eliminated providers’ independent statutory cause of action	Assignee can sue: Covenant does not bar insureds from assigning past/present benefits; assignment permits suit
Whether Baum’s assignment is invalid because of a policy anti-assignment clause	Michigan law permits post-loss assignments; Baum assigned after the loss	Anti-assignment clause in Roy’s policy would prohibit assignment	Post-loss assignments are enforceable under Michigan law; court assumed assignment valid and noted Allstate did not timely press this defense
Whether plaintiff adequately pleaded and proved the assignment	Special Tree produced multiple executed assignments through Baum’s guardian	Allstate contended assignment not proven	Court found assignments in the record and accepted them for pleading-stage purposes
Whether ethical or procedural defects (ongoing claim) void the assignment	Assignment to collect past/present benefits is permitted even if insured has ongoing claim	Assignment is ethically questionable and possibly unenforceable	Court rejected ethical objection as insufficient to defeat the assignment at this motion stage

Covenant Medical Center, Inc. v. State Farm Mut. Auto. Ins. Co., 895 N.W.2d 490 (Mich. 2017) (holders of provider claims lose an independent statutory cause of action, but insureds may assign benefits)
Marion v. Vaughn, 163 N.W.2d 239 (Mich. Ct. App. 1968) (post-loss assignments of insurance benefits are enforceable)
Agema v. City of Allegan, 826 F.3d 326 (6th Cir. 2016) (pleading standard: factual allegations must make liability plausible)
Riverview Health Inst., LLC v. Med. Mut. of Ohio, 601 F.3d 505 (6th Cir. 2010) (claims showing on face that relief is barred by affirmative defenses may be dismissed)