Introduction
The purpose of the memorandum is to help better breakdown the rulings and holdings of the most recent Court of Appeals decision rendered on May 9, 2018 in Jawad A. Shah et al v State Farm, ___ Mich App ___ (2018). While this case issued rulings that lower courts (District & Circuit) must follow on three separate issues relevant to healthcare providers and the recent fallout from Covenant Med Ctr, Inc v State Farm, 500 Mich 191; 895 NW2d 490 (2017), the ultimate take-a-way from the recent Shah decision is that, as of right now, “anti-assignment” provisions, regardless of how they are phrased, requiring consent from the insurance companies are not enforceable and not valid. This only applies to post-loss situations, which we have explained in greater detail below. This memorandum explains the issues decided on from a laymen’s perspective, then a more legal perspective should you be interested in a more detailed explanation.
Plain Language Overview & Summary
The recent Shah decision rendered by the Court of Appeals deals with 3 separate issues within the “healthcare provider vs insurance company” world:
- Whether Covenant applies to cases that were already filed prior to May 25, 2017 without an assignment of benefits/rights; and
- Whether the insurance companies’ “anti-assignment” provision, which requires their consent to make assignments by patients valid against them, are valid and enforceable; and
- Date of the Assignment and the Application of the One Year Back Rule.
Issue 1: Does Covenant Apply?
Issue (1) is no longer even an issue at the trial court level (this is where your cases always start). The Court of Appeals issued an opinion in W A Foote Memorial Hosp v Mich Assigned Claims Plan, 321 Mich App, 159; ___ NW2d ___ (2017) that controls on the issue on whether the ruling in Covenant applied retroactively or prospectively. If it applied prospectively, this would mean that any cases that were filed prior to May 25, 2017 without an assignment could still proceed and be litigated as if the Supreme Court’s ruling in Covenant didn’t exist. If applied retroactively, this would mean that any cases that were filed prior to May 25, 2017 without an assignment could not continue unless the healthcare provider obtained an assignment and then their attorneys would be allowed to file an Amended Complaint alleging an assignment. In the previous decision of W A Foote Memorial, the Court of Appeals already ruled that Covenant was to be applied retroactively.
Summary: if the case was filed prior to May 25, 2017, and no assignment was obtained prior to filing or prior to a Motion to Dismiss was held in the case, the case would be dismissed.
Issue 3: Date of Assignment and the One Year Back Rule
Issue (3) is plainly put: Healthcare providers only obtain the right to bring a lawsuit on the day the assignment is executed by the patient. This means that the following MUST happen:
- the Assignment form MUST be filled out by the patient in its entirety
- the Assignment form MUST be dated
- The identification of the “Assignor,” the patient, MUST be clearly shown.
- The identification of the “Assignee,” the healthcare provider, MUST be clearly and accurately shown.
Again, the assignment form MUST be dated accurately. The One Year back rule will apply from the date of the assignment if the lawsuit is already going. The One Year back rule will apply from the date of the filing of the lawsuit itself if the Assignment is obtained before filing.
Now, the Shah case dealt with facts and circumstances that are not really present anymore concerning when the AOB was obtained. The Shah case was dealing with a healthcare provider lawsuit that had been filed pre-Covenant and they obtained the AOB afterwards. As we are almost one-year removed from the Covenant decision, all healthcare provider lawsuits are now filed with the assignment, but there is a potential wrinkle going forward that may or may not arise that you should be aware of. This could be a potential pitfall to maximizing potential recovery of all unpaid dates of service.
Now, typically, most defense attorneys do not require us to amend our complaint to include these new dates of service. However, given this new decision it may become necessary for us to do so, hence the reason Issue (3) requires some discussion because keeping your attorneys aware of new treatment and updated balances will be time-sensitive with the one-year back rule in play.
The complaint tells the court and the insurance company what we are claiming as far as unpaid dates of service. As each unpaid DOS is its own “chose in action” or “claim,” technically, under the law, we can only deal with the DOS that are included in the original complaint, not new treatment rendered after we file suit. This is the technical rule, not the reality of how defense attorneys and us (your attorneys) deal with new treatment and already pending lawsuits. But, we cannot count on the insurance companies allowing this to continue. So, if we need to amend the complaint, there are two schools of thought on how these amendments are dealt with in relation to the one-year back rule.
One approach is what we refer to as the “relates back” doctrine. This means that for the purposes of the one year back rule, any filed amended complaint with new dates of service would “relate back” to the filing date of the original complaint for the purposes of determining which DOS are compensable. The second approach is referred to as the “supplemental pleading” doctrine. This means that for the purpose of the one year back rule, any filed amended complaint with new damages would NOT relate back to the original filing date and any new DOS alleged in the amended complaint would only be compensable if they were within one year back of the specific filing date of the amended complaint.
Here’s an example: The original complaint with the original unpaid DOS are filed on January 1, 2018. The only DOS that would be compensable at this point would be DOS that occurred no earlier than January 1, 2017. Now, let’s say that litigation continued and new treatment is rendered to the patient while this occurring. An updated balance is provided to the attorney and he files an Amended Complaint on June 1, 2019.
Application of the Example using the “Relates Back” Doctrine: Using the example above, the controlling date for application of the one year back rule would be the original date of filing (January 1, 2018) making all DOS unpaid from January 1, 2017 to the present compensable regardless of the actual date of filing of the Amended Complaint with new treatment.
Application of the Example using the “Supplemental Pleading” Doctrine: Using the example above, the controlling date for the DOS originally included in the first version would be January 1, 2018. The controlling date for any new unpaid DOS not originally included in the first complaint would be June 1, 2019. This means that any new treatment that was not originally included in the first complaint that occurred prior to June 1, 2018 would be barred by the one year back rule.
The Shah Court adopted the “Supplemental Pleading” Doctrine and this ruling all lower courts must now follow. So, if you send a bill for litigation and the patient is undergoing continued treatment, it is important that updated balances and updated AOBs are provided timely to allow us to file amended complaints if we need to.
Issue 2: Anti-Assignment Provisions
Now, Issue (2) is the biggest ruling to be taken from the recent Shah decision. Courts consistently recognize that the Covenant ruling preserved the patients’ rights/ability to assign their claims for benefits to healthcare providers under the No-Fault Act. However, insurance carriers are arguing that the assignments are invalid because of an “anti-assignment” provision in their insurance policies that require the insurance company’s consent to be valid.
The Shah Court took up this issue/argument. They specifically held that anti-assignment provisions, regardless how they are written, are not valid and not enforceable when dealing with post-loss assignments. A post-loss in the context of the No-Fault Act and medical treatment occurs when the “loss” accrues. Under the No-Fault Act (MCL 500.3110(4)), the loss accrues for unpaid medical expenses when the treatment is rendered as this is the point that the patient incurs a debt for treatment for their injuries. So, any assignment that is executed by a patient for presently rendered medical treatment or past treatment is to be considered a post-loss assignment.
Dispositive Rulings on Specific Issues to Provider Cases
Retroactivity
“Covenant is applicable to this instant case [due to retroactive application. See W A Foote, 321 Mich App at 196], and plaintiffs “do not possess a statutory cause of action” against defendant as a no-fault insurer to recover personal protection insurance benefits under the no-fault act, Covenant, 500 Mich at 196.”[1]
Enforceability of “anti-assignment provisions” requiring consent post-loss
“However, our Supreme Court has also recognized that “courts are to enforce the agreement as written absent some highly unusual circumstances such as a contract in violation of law or public policy. Rory v Continental Ins Co, 473 Mich 457, 469; 703 NW2d 23 (2005).”[2]
“Resolution of this issue turns on the application of our Supreme Court’s decision in Roger Williams Ins Co v Carrington, 43 Mich 252; 5 NW2d 303 (1880). Moreover, it has been deemed controlling on this point of law in at least two relatively recent opinions of the United States District Court for the Western District of Michigan, Century Indemnity Co v Aero-Motive Co, 318 F Supp 2d 530, 539 (WD Mich, 2003)(relying on Roger Williams while explaining under Michigan law, “anti-assignment clause will not be enforced where a loss occurs before the assignment because in that situation the assignment of the claim under the policy is viewed no differently than any other assignment of an accrued cause of action.”)[3]
“Here, there similarly was an accrued claim against his insurer that was held by [the patient] for payment of healthcare services that had already been provided by the plaintiffs before [the patient] executed the assignment.”[4]
“Therefore, we conclude that enforcement of 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 prohibition of assignment violates Michigan public policy that is part of our common law set forth by our Supreme Court. Roger Williams, 43 Mich at 254; Rory, 473 Mich at 469-471.”[5]
Amended Pleading vs Supplemental Pleading
“Through the assignment, plaintiffs only obtained the rights [the patient] actually held at the time of the execution of the assignment. Burkhardt, 260 Mich App at 653, and plaintiffs cannot rely on the relation-back doctrine to essentially gain the potential for a greater right to recovery than they actually received.”[6]
Expectations Going Forward
It is important to note, that this decision by the Court of Appeals in Shah is founded upon a Supreme Court case in 1880 called Roger Williams. This was the sole basis for their decision. It is likely that this ruling will be appealed up to the Supreme Court. Whether the Supreme Court decides to hear the issue is another matter for discussion for another time.
Having said that, at a minimum, healthcare providers’ ability to continue filing litigation against insurance carriers with a properly executed AOB can be enjoyed for a minimum of 9-12 months. This minimum period is based on a worst-case scenario that the Supreme Court overrules this specific decision in the future, which, of course, remains to be determined. But, for now, with a properly executed AOB, litigation against insurance carriers for unpaid medical expenses by healthcare providers can continue.
It is important to remember that there are many auxiliary issues in these cases that can affect our ability to recover beyond these issues. None of these auxiliary issues have been resolved through the Court of Appeals or Supreme Court, so each individual judge in each individual court room is still free to make their own rulings. The anti-assignment provision issue was a large one, the main one, that we were seeking guidance from the Court of Appeals to direct judges that were ruling in favor of insurance companies. Based on this ruling, they can no longer side with the insurance carriers on the specific issue of the validity of their anti-assignment provision and it is to be considered against public policy.
The Takeaway
With a properly executed assignment by the patient for presently rendered or past treatment, a healthcare provider should no longer fear enforcement of any insurance carrier “anti-assignment” clause as the Shah court ruled them invalid due to Michigan public policy.
