Another appellate panel in Michigan has issued a decision rejecting an insurer's contention that it did not have to pay no-fault benefits to a heath care provider because of an anti-assignment provision in its insurance policy.
The Case
Team Rehabilitation W2 (“TRW2”) sued State Farm Mutual Automobile Insurance Company, alleging that Timothy Haerens was involved in a car accident on January 3, 2016, sustaining injuries that necessitated medical care and treatment. TRW2 asserted that it provided recovery, rehabilitation, and therapy services to Mr. Haerens, incurring costs and expenses in doing so.
TRW2 further alleged that Mr. Haerens was covered by a no-fault insurance policy issued by State Farm, that State Farm was first in priority to pay benefits relative to Mr. Haerens' therapy, and that TRW2 had provided reasonable proof to State Farm in support of its claim for payment of benefits.
TRW2 contended that State Farm breached the insurance policy and that it had the authority to bring a cause of action against State Farm based on an assignment of limited rights executed by Mr. Haerens on December 1, 2016 that stated that Mr. Haerens assigned to TRW2 “the right to payment for therapy services provided to [Mr. Haerens] by [TRW2] to which [he] may be entitled under the No Fault Act, MCL 500.3101 et seq.”
State Farm moved for summary disposition, asserting that its insurance policy contained a clause that provided that “[n]o assignment of benefits or other transfer of rights is binding upon us unless approved by us.” Thus, according to State Farm, the purported assignment was invalid.
State Farm also contended that the assignment itself waived TRW2's right to pursue Mr. Haerens for services rendered; therefore, under MCL 500.3107(1)(a), “incurred” charges no longer existed, and “allowable expenses” recoverable under the no-fault act had to be actually incurred. Finally, State Farm argued that partial assignments were unenforceable as a matter of law.
In response, TRW2 maintained that it had a viable cause of action against State Farm on the basis of the assignment executed by Mr. Haerens. TRW2 contended that the Michigan Supreme Court, in Covenant Medical Center, Inc. v. State Farm Mutual Automobile Ins. Co, 895 N.W.2d 490 (Mich. 2017), had recognized and approved of such assignments.
The trial court granted summary disposition in favor of State Farm, and TRW2 appealed.
The Appellate Court's Decision
The appellate court reversed, ruling that the trial court had erred in granting summary disposition in favor of State Farm.
In its decision, the appellate court explained that Mr. Haerens had incurred charges when he accepted and received services from TRW2. Therefore, the appellate court continued, the issue was whether those charges lost their “incurred” status following the execution of the assignment between TRW2 and Mr. Haerens.
The appellate court then ruled that the assignment did not discharge the liability or responsibility concerning payment for the services TRW2 rendered, and that the charges did not lose their “incurred” character upon execution of the assignment. In the appellate court's opinion, the trial court's ruling “failed to appreciate the nature of an assignment.”
The appellate court reasoned that an assignee stands in the shoes of the assignor, acquiring the same rights as the assignor. Mr. Haerens, as the assignor, held contractual rights to no-fault benefits under the insurance policy that covered amounts owed to TRW2 for rehabilitation and therapy services, the appellate court said. On consummation of the assignment, TRW2 stood in Mr. Haerens' shoes. The assignment “did not extinguish the obligation or liability; rather, the right to recover the debt simply shifted to the assignee – [TRW2].”
The appellate court found “no language in the assignment indicating that [TRW2] was releasing [Mr.] Haerens from all liability,” but rather that it had agreed not to sue him.
The appellate court was not persuaded by State Farm's contention that the trial court should have granted it summary disposition on the basis of the anti-assignment clause in its insurance policy, noting that it had rejected this argument in Jawad A. Shah, M.D., PC v. State Farm Mutual Automobile Ins. Co., 920 N.W.2d 148 (Mich. Ct. App. 2018), when it held:
[W]e conclude that the anti-assignment clause in the instant case is unenforceable to prohibit the assignment that occurred here – an assignment after the loss occurred of an accrued claim to payment – because such a prohibition of assignment violates Michigan public policy that is part of our common law as set forth by our Supreme Court.
The case is Team Rehabilitation W2 v. State Farm Mutual Automobile Ins. Co., No. 343005 (Mich. Ct. App. April 25, 2019).
Insurance Coverage Law Center Comment
The Michigan Supreme Court has ordered oral argument on the application for leave to appeal filed in Shah and has directed the parties to brief the issue concerning the enforceability of State Farm's anti-assignment clause. 503 Mich 882 (2018).
The Insurance Coverage Law Center will report back on developments in Shah as warranted.
Learn more:
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].