Spectrum Health Hospitals v. Farm Bureau General Insurance Company
354201
| Mich. Ct. App. | Jul 22, 2021Background
- In Nov. 2017 Kevin Schild was injured in an auto accident; Spectrum Health treated him and billed $443,586.54. Spectrum obtained several written assignments of Schild’s rights during the course of treatment.
- Spectrum assigned Schild’s “all benefits, claims, and any and all other rights,” including the right to sue and to appeal denials, via multiple assignments dated Nov. 17, 2017 through Nov. 23, 2018.
- Farm Bureau paid $323,864.28 and refused the remaining balance, contending Spectrum’s charges were not reasonable/customary under the no-fault act and contesting the validity/scope/timing of assignments.
- Farm Bureau moved for summary disposition (MCR 2.116(C)(5)) arguing lack of standing because the last assignment post-dated the complaint and could not relate back (relying on Shah). The trial court denied that motion.
- Farm Bureau later moved under (C)(8) and (C)(10) arguing the assignments could not convey penalty interest/attorney-fee rights and that Spectrum’s charges were unreasonable; the trial court denied those motions. Parties stipulated damages; the trial court denied Spectrum’s motion for attorney fees under MCL 500.3148. Appeals followed and the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Spectrum had standing/capacity to sue based on Schild’s assignments | Assignments were broad, signed early in treatment, and conveyed all rights (Spectrum stands in Schild’s shoes) | Last assignment (Nov. 23, 2018) post-dated complaint and cannot relate back per Shah, so Spectrum lacks standing | Court: Assignments’ plain language unambiguously conveyed all rights; Shah inapplicable; Spectrum had standing — (trial court denial of C(5) motion affirmed) |
| Whether penalty interest and attorney-fee rights were assignable to Spectrum | Covenant allows insureds to assign their PIP rights; assignees obtain assignor’s rights and defenses, so assigned penalty/fee rights pass to Spectrum | Common law bars assignment of penalty/fee claims; such rights are not assignable | Court: Covenant permits assignment of the insured’s rights; Farm Bureau failed to present binding authority to foreclose assignment; denial of C(8)/(C)(10) motion affirmed |
| Whether Spectrum’s claim was legally insufficient or factually unsupported so summary disposition was proper | Spectrum’s pleadings and documentary evidence support the assignment and claims; factual issues remain about reasonableness of charges | Farm Bureau argued claims were unenforceable as a matter of law and no genuine factual dispute in its favor | Court: (C)(8)/(C)(10) standards favor Spectrum; reasonable minds could differ; trial court did not err denying summary disposition |
| Whether Spectrum was entitled to attorney fees under MCL 500.3148 because Farm Bureau unreasonably refused/delayed payment | Spectrum sought fees arguing Farm Bureau unreasonably refused/ delayed payment of overdue PIP benefits | Farm Bureau contends its refusal was reasonable because the legal standards for “reasonable” charges and assignment issues were unsettled and pending on appeal in other cases | Court: Denial of fees affirmed — Farm Bureau’s refusal presented legitimate legal questions and ongoing appellate issues, so initial denial was not unreasonable |
Key Cases Cited
- Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 500 Mich. 191 (Mich. 2017) (insureds may assign PIP benefits to healthcare providers)
- Shah v. State Farm Mut. Auto. Ins. Co., 324 Mich. App. 182 (Mich. Ct. App. 2018) (assignment obtained after filing cannot be used to recover benefits barred by MCL 500.3145(1))
- Moore v. Secura Ins., 482 Mich. 507 (Mich. 2008) (two prerequisites for attorney-fee award under MCL 500.3148 and standard for when insurer’s refusal is unreasonable)
- Hoffner v. Lanctoe, 492 Mich. 450 (Mich. 2012) (de novo review standard for summary-disposition rulings)
- Coventry Parkhomes Condo. Ass’n v. Fed. Nat’l Mtg. Ass’n, 298 Mich. App. 252 (Mich. Ct. App. 2012) (assignee stands in the shoes of assignor and takes subject to assignor’s defenses)
- Lakeland Neurocare Ctrs. v. State Farm Mut. Auto. Ins. Co., 250 Mich. App. 35 (Mich. Ct. App. 2002) (policy rationale for allowing healthcare providers to enforce penalty provisions to incentivize prompt insurer payment)
- Slocum v. Farm Bureau Gen. Ins. Co. of Mich., 328 Mich. App. 626 (Mich. Ct. App. 2019) (rebuttable presumption arises when insurer refuses payment; reasonableness of initial denial is key)