895 N.W.2d 188
Mich. Ct. App.
2016

DAWOUD v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Docket Nos. 327915 and 327927

Court of Appeals of Michigan

October 18, 2016

317 MICH APP 517

Submittеd October 5, 2016, at Detroit. Decided October 18, 2016, at 9:05 a.m.

Kevin Dawoud; Mikho Essa by next friend, Bilbil Mano; and Rasha Kamel (plaintiffs) filed an action in the Wayne Circuit Court against State Farm Mutual Automobile Insurance Company, seeking to recover personal protection insurance (PIP) benefits under the no-fault act, MCL 500.3101 et seq., for injuries Dawoud, Essa, and Kamel allegedly received in an automobile accident. Plaintiffs applied for benefits through the Michigan Automobile Insurance Placement Facility because they were not eligible for PIP benefits through any аutomobile insurance. See MCL 500.3171 et seq. Plaintiffs’ claims were assigned to State Farm, and plaintiffs filed this action. Grace Transportation, Inc., and Utica Physical Therapy (the service providers), who provided transportation and therapy services to plaintiffs, intervened in thе action by stipulation of the parties to pursue direct payment of their bills from State Farm. The court, Daphne Means Curtis, J., dismissed plaintiffs’ claims with prejudice when they failed to comply with discovery orders and failed to attend three scheduled depositions. State Farm moved for summary disposition of the service providers’ claims, arguing that the dismissal of plaintiffs’ underlying action constituted an adjudication on the merits under MCR 2.504 and therefore that the service providers’ derivative claim was barred. The circuit court granted State Farm‘s motiоn. Utica Physical Therapy (Docket No. 327915) and Grace Transportation, Inc. (Docket No. 327927) appealed, and the Court of Appeals ordered the cases consolidated.

The Court of Appeals held:

1. Under MCL 500.3112 of the no-fault act, a provider has standing to bring a direct cause of aсtion against an insurer to recover PIP benefits on behalf of the injured individual for services provided. MCR 2.313(B)(2)(c) provides that when a party fails to comply with a discovery order, the court may enter an order dismissing the action or a part of the action. Under MCR 2.504(B)(3), unless a court otherwise specifies in its order for dismissal, a dismissal under that subrule or a dismissal not provided for in that subrule—other than a dismissal for lack of jurisdiction or for failure to join a party under MCR 2.205—operates as an adjudication on the merits. The circuit court did not err by granting summary disposition in favor of State Farm. Because the circuit court did not provide otherwise in the order when it dismissed plaintiffs’ action, the dismissal operated as an adjudication on the merits of plaintiffs’ rights to PIP benefits, and, for that reason, the service providers’ derivative claim was аlso substantively barred on the merits.

2. The service providers failed to develop any argument in support of their assertion that the circuit court‘s order violated the Due Process Clause of the Michigan Constitution, Const 1963, art 1, §§ 16 and 17, and the issue was therefore considered abandoned.

Affirmed.

INSURANCE — NO-FAULT — PERSONAL PROTECTION INSURANCE BENEFITS — SERVICE PROVIDERS — INDEPENDENT ACTION ‍‌​‌‌​‌‌​​‌‌​‌‌​​​‌‌‌​‌​‌‌​‌‌‌‌‌​​‌‌‌‌​‌​‌‌‌​‌​​​‍DERIVATIVE OF INSURED INDIVIDUAL‘S ACTION — EFFECT OF DISMISSAL OF INSURED INDIVIDUAL‘S ACTION.

A service provider may bring an independent cause оf action for personal protection insurance (PIP) benefits against an insurer for medical expenses associated with the treatment of the injured individual under the no-fault act, MCL 500.3101 et seq., but that action is derivative of the injured individual‘s cause of action; a service provider‘s cause of action to recover PIP benefits on behalf of an injured individual is barred if the injured individual‘s claim was dismissed and that order constituted an adjudication on the merits for purposes of MCR 2.504(B)(3).

Temrowski & Temrowski (by Lee Roy H. Temrowski, Jr.) for Utica Physical Therapy and Grace Transportation, Inc.

Scarfone & Geen, PC (by John C. W. Hohmeier and Robert J. Scarfone), for State Farm Mutual Automobile Insurance Company.

Before: SAAD, P.J., and JANSEN and M. J. KELLY, JJ.

PER CURIAM. In this consolidated appeal,1 intervening plaintiffs Grace Transportation, Inc., and Utica Physical Theraрy (collectively, the service providers) appeal the trial court‘s order that granted summary disposition in favor of defendant, State Farm Mutual Automobile Insurance Company, and dismissed their claims on the grounds that the service providers’ claims were barred beсause the insureds were precluded from recovery, as their underlying claims had been dismissed for discovery violations. For the reasons provided below, we affirm.

I. BASIC FACTS

On November 28, 2012, plaintiffs Kevin Dawoud, Rasha Kamel, and Mikho Essa (plaintiffs) were allegedly involved in a motor vehicle accident. They applied for no-fault benefits through the Michigan Automobile Insurance Placement Facility because they were not eligible for those benefits through any automobile insurance. See MCL 500.3171 et seq. State Farm was assigned the claim, and plaintiffs filed a lawsuit seeking personal protection insurance (PIP) benefits under the no-fault act, MCL 500.3101 et seq., from State Farm. The service providers, who provided therapy and transportation services to plaintiffs, were allowed to intervene by stipulation of all parties to pursue direct payment of their bills by State Farm. Plaintiffs, who failed to comply with discovery orders and failed to attend three scheduled depositions, had their claims dismissed with prejudice.2 Plaintiffs had no further involvement in this case and are not involved in this appeal.

Thereafter, State Farm mоved for summary disposition and argued that the dismissal of the underlying plaintiffs’ case operated as an adverse adjudication on the merits pursuant to MCR 2.504, which barred the service providers from proceeding with their derivative claims. The service providers argued that thеir claims should be allowed to proceed because Michigan law allows for such providers to bring a cause of action in their own name. Following a hearing, the trial court granted State Farm‘s motion. The service providers then filed a motion for reconsidеration, which the court also denied.

II. ANALYSIS

On appeal, the service providers argue that the trial court erred when it granted State Farm‘s motion for summary disposition and dismissed the case. We disagree.

Although the trial court did not specify the court rule it relied ‍‌​‌‌​‌‌​​‌‌​‌‌​​​‌‌‌​‌​‌‌​‌‌‌‌‌​​‌‌‌‌​‌​‌‌‌​‌​​​‍on when it granted State Farm‘s motion for summary disposition, MCR 2.116(C)(10) is the applicable rule. This Court reviews de novo a trial court‘s ruling on a motion for summary disposition. Marilyn Froling Revocable Living Trust v Bloomfield Hills Country Club, 283 Mich App 264, 279; 769 NW2d 234 (2009). A motion under this subrule is properly granted if “there is no genuine issue with respect to any material fact and the moving party is entitled to judgment as a matter of law.” Id. at 278. All documentary evidence submitted by thе parties is considered, and it is considered in the light most favorable to the nonmoving party. Id.

The parties agree, or at least the service providers concede, that if an injured party‘s no-fault act claim fails substantively on the merits (for example, if the individual‘s injury is not the result of an automobile accident), the service providers would have no claim against the insurer because their claims are derivative. At issue here is whether the same principle applies when the injured party‘s no-fault claim “fails,” as it did here, becausе of the injured party‘s failure to attend depositions and otherwise comply with discovery orders and obligations.

The service providers rely only on MCL 500.3112 and Wyoming Chiropractic Health Clinic, PC v Auto-Owners Ins Co, 308 Mich App 389; 864 NW2d 598 (2014), to support their argument that the lower court‘s decision should be reversed. MCL 500.3112 states as follows:

Personal protection insurance benefits are payable to or fоr the benefit of an injured person or, in case of his death, to or for the benefit of his dependents. Payment by an insurer in good faith of personal protection insurance benefits, to or for the benefit of a person who it believes is entitled to the benefits, discharges the insurer‘s liability to the extent of the payments unless the insurer has been notified in writing of the claim of some other person. If there is doubt about the proper person to receive the benefits or the proper apportionment among the persons entitlеd thereto, the insurer, the claimant or any other interested person may apply to the circuit court for an appropriate order. The court may designate the payees and make an equitable apportionment, taking into account the rеlationship of the payees to the injured person and other factors as the court considers appropriate. In the absence of a court order directing otherwise the insurer may pay:

(a) To the dependents of the injured person, the persоnal protection insurance benefits accrued before his death without appointment of an administrator or executor.

(b) To the surviving spouse, the personal protection insurance benefits due any dependent children living with the spouse.

Clearly, the text оf this statute does not address the issue presented in this appeal. It says nothing about whether a provider can proceed against an insurer when the injured party‘s claim has been dismissed because of a discovery violation. It merely states that an “interested pаrty may apply to the circuit court for an appropriate order” if there is doubt about the proper allocation of PIP benefits and that PIP benefits “are payable... for the benefit of an injured person.”

In Wyoming Chiropractic, 308 Mich App at 396-397, this Court affirmed the trial court‘s order that entered judgment in favor of Wyoming Chiropractic and held that a provider has standing to bring a direct cause of action against an insurer to recover PIP benefits on behalf of the injured individual for services provided. After discussing MCL 500.3112 and relevant caselaw, this Court held that MCL 500.3112, and specifically the phrase “or for the benefit of” in that statute, allows ‍‌​‌‌​‌‌​​‌‌​‌‌​​​‌‌‌​‌​‌‌​‌‌‌‌‌​​‌‌‌‌​‌​‌‌‌​‌​​​‍a provider to bring a claim against an insurer for PIP benefits. Id. at 392-397. However, the Court only addressed whether a provider has standing under MCL 500.3112 to sue an insurer for PIP benefits. Id. at 390, 392. The parties agree that the service providers here have standing under MCL 500.3112 to sue State Farm for PIP benefits. However, the narrow legal issue is whether the service providers’ claims for PIP benefits cаn survive when plaintiffs’ underlying claim for PIP benefits was dismissed with prejudice because plaintiffs failed to attend depositions and otherwise comply with discovery orders and obligations.

In regard to the argument that their claims for PIP benefits are “derivative” of plaintiffs’ claim for PIP benеfits, the service providers assert without further explanation that “[t]he ‘derivative’ argument is precisely the standing argument [in Wyoming Chiropractic] under a different cloak, especially here where the ‘failure’ of the injured parties’ claim was due to litigation misconduct and not any substantive validity оf the claim for no fault benefits.” The service providers also assert that an injured individual may ultimately be precluded from pursuing a cause of action for PIP benefits if he or she fails to abide by a court order but that such preclusion does not invalidate the claim for bеnefits on substantive grounds.

These arguments are not persuasive. As already noted, the standing issue in Wyoming Chiropractic has little to do with the issue in this appeal. Additionally, the service providers agree that if an injured party‘s claim fails for “substantive” reasons, the provider is precluded from obtaining PIP benefits. Thus, they inherently recognize that a provider‘s claim to PIP benefits, at least in some circumstances, is derivative of the injured party‘s claim to PIP benefits. Accordingly, this case boils down to the specific question of whether the dismissal of plaintiffs’ underlying claims with prejudice due to discоvery violations should be treated differently than a “substantive” dismissal “on the merits.” We hold that it should not be treated differently.

Although the trial court did not specify the court rule under which it dismissed plaintiffs’ claims, it stated that it was dismissing them “for the reasons stated in the brief and on the record.” In its trial court brief, State Farm referred to, among other things, MCR 2.313, which pertains to the failure to provide or to permit discovery. MCR 2.313(B)(2)(c) provides that for failing to comply with a court‘s discovery order a court may enter an order striking pleadings or parts of pleadings, staying further proсeedings until the order is obeyed, dismissing the action or proceeding or a part of it, or rendering a judgment by default against the disobedient party[.] [Emphasis added.]

And the court rules describe the effect given ‍‌​‌‌​‌‌​​‌‌​‌‌​​​‌‌‌​‌​‌‌​‌‌‌‌‌​​‌‌‌‌​‌​‌‌‌​‌​​​‍to such an involuntary dismissal in MCR 2.504(B)(3):

Unless the court otherwise specifies in its order for dismissal, a dismissal under this subrule or a dismissal not provided for in this rulе, other than a dismissal for lack of jurisdiction or for failure to join a party under MCR 2.205, operates as an adjudication on the merits. [Emphasis added.]

And because the court did not provide otherwise in its order for dismissal, the dismissal of plaintiffs’ claims operated “as an adjudication on the merits” with regard to their rights to PIP benefits under the clear lаnguage of the applicable court rule. Further, as the service providers have acknowledged, if an insured‘s claim is substantively barred on the merits, any derivative claims necessarily fail as well. See Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 313 Mich App 50, 54; 880 NW2d 294 (2015),3 Moody v Home Owners Ins Co, 304 Mich App 415, 440-441; 849 NW2d 31 (2014), rev‘d on other grounds by Hodge v State Farm Mut Ins Co, 499 Mich 211 (2016). Accordingly, the trial court did not err when it granted State Farm‘s motion for summary disposition with respect to the service providers’ derivative claims.4

Affirmed. State Farm, as the prevailing party, may tax costs pursuant to MCR 7.219.

SAAD, P.J., and JANSEN and M. J. KELLY, JJ., concurred.

Notes

1
Although appellants filed separate claims of appeal from the same case, this Court consolidated thе two claims. Dawoud v State Farm Mut Auto Ins Co, unpublished order of the Court of Appeals, entered July 22, 2015 (Docket Nos. 327915 and 327927).
2
The trial court also originally dismissed the service providers’ claims but later set aside the dismissal with respect to the service providers.
4
The service providers also appear to argue that the trial court‘s decision violated due process. Their actual “argument” consists of the following:

The Court Rules and statutes clearly give authority for sanctions to disobedient parties, but there is nothing that allows punish-

ment for the acts of others (such punishment would seem to raise constitutional issues as well, Mich Const, Art I, § 16 (prohibiting cruel and unusual punishment); Art I, § 17 (deprivation of property without due process)).

The service providers do not develop any argument with respect to this purported ‍‌​‌‌​‌‌​​‌‌​‌‌​​​‌‌‌​‌​‌‌​‌‌‌‌‌​​‌‌‌‌​‌​‌‌‌​‌​​​‍“constitutional issue.” Accordingly, we treat that issue as abandoned. See Mitcham v Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959) (“It is not enough for an appellant in his brief simply to announce a position or assert an error and then leave it up to this Court to discover and rationalize the basis for his claims, or unravel and elaborate for him his arguments, and then search for authority either to sustain or reject his position.“). As the trial court noted, it appears that the service providers’ remedy is to recover the costs of the therapy and transportation services from plaintiffs.

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