From No-Fault Corner, a column published in The Journal of Insurance & Indemnity Law

Volume 10, No. 4 – October 2017

Written by Ronald M. Sangster Jr.


For those of us who practice in the no‑fault insurance arena, the past few months could best be characterized as the “Summer of Covenant” or “Covenant 24/7.” The courts have been inundated with Motions for Summary Disposition, Motions to Amend Complaint, Motions to Strike Assignments and countless other motions – all stemming from the Michigan Supreme Court’s landmark decision in Covenant Med Ctr v State Farm, 500 Mich 191; 895 NW2d 490 (2017).  Not surprisingly, there has also been a flurry of appellate court activity applying the Supreme Court’s holding in Covenant, to the effect that while medical providers no longer have a statutory cause of action to recover payment of medical expenses from a no‑fault insurer, the medical provider might be able to pursue alternative theories of recovery.

The most significant decision handed down in the post-Covenant era thus far is WA Foote Mem’l Hosp v Michigan Assigned Claims Plan, __ Mich App __; __ NW2d __ (Docket No. 333360, rel’d August 31, 2017).  This case was one of the first cases to be considered by the Michigan Court of Appeals after Covenant, as oral argument had already been scheduled to occur prior to the release of the Supreme Court’s decision in Covenant.  As a result, the primary issue in WA Foote Mem’l Hosp was whether or not Covenant was to be applied retroactively or prospectively, only.  The importance of the Court of Appeals’ opinion was underscored by the fact that certain district court judges were applying Covenant on a prospective basis, only, thereby preserving the medical provider’s right to sue no‑fault insurers under pre-Covenant case law.  In its published opinion, though, the Court of Appeals put a swift end to those decisions, and ruled that the Michigan Supreme Court’s decision in Covenant is to be given full retroactive effect, regardless of whether the insurer had actually raised a “Covenant” defense, based upon the provider’s purported lack of standing to commence litigation.

The WA Foote Mem’l Hosp decision was initially brought before the Court of Appeals because the hospital had initiated a claim for no‑fault benefits with the Michigan Assigned Claims Plan without conducting a thorough investigation as to whether there might be a higher priority insurer in the picture.  After suit was filed against the MACP, it was discovered that there was, in fact, a higher priority insurer in the picture but, because the insurer had not received notice within one year of the date of loss, the hospital could not initiate a claim against that insurer.  The lower court had granted summary disposition in favor of the MACP, noting that the hospital could have identified a higher priority insurer if it had filed suit directly against the patient for the unpaid medical bills, if it had obtained the information from the patient at the time of the treatment, if it had obtained the police report regarding the accident, or had followed up on information that it had regarding actual ownership of the vehicle occupied by the patient.

While the appeal was pending, the Michigan Supreme Court released its decision in Covenant, at which time the parties briefed the issue as to whether or not Covenant should be applied retroactively.  In a rather lengthy opinion, the Court of Appeals issued the following key rulings:

  • First, the court ruled that, in light of the U.S. Supreme Court’s decision in Harper v Virginia Dept of Taxation, 509 U.S. 86, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993) and the Michigan Supreme Court’s decision in Spectrum Health v Farm Bureau, 492 Mich 503, 821 NW2d 117 (2012), Covenant was to be given full retroactive effect;
  • The court rejected the provider’s argument that the insurer had failed to properly preserve the issue, noting that the Court Rules, specifically, MCR 2.111(F)(2), indicate that the defense of a “failure to state a claim upon which relief can be granted” is not waived even if not asserted in a responsive pleading or motion;
  • Regarding the provider’s argument that it should be allowed to amend its Complaint to assert an alternative theory of recovery, including the pursuit of benefits under an assignment theory, the Court of Appeals noted that “the most prudent and appropriate course for us to take at this time is to remand this case to the trial court with discretion that it allow Plaintiff to move the amend its Complaint, so that the trial court may address the attendant issues in the first instance.”
  • WA Foote Mem’l Hosp, slip opinion at p. 20.

Now that the issue of Covenant’s retroactivity has been resolved, the author anticipates that the next round of appellate court activity will concern the validity of the various assignments that are being obtained by medical providers.

Since Covenant was released, the Supreme Court has vacated a number of prior decisions from the Court of Appeals, with instructions to the Court of Appeals to reconsider the case in light of Covenant.  These decisions, along with a brief statement of what the case initially involved, include the following:

  • Chiropractors Rehab Grp PC v State Farm, Supreme Court docket no. 152807 (Court of Appeals had allowed medical providers to pursue claims for medical expenses against a no-fault insurer, notwithstanding Claimant’s repeated failures to appear for IME’s and/or EUO’s);
  • Detroit Med Ctr v MPCGA, ___ Mich ___, 900 NW2d 624 (2017) (Court of Appeals had reversed a summary disposition decision concerning an “unlawful taking” issue);
  • VHS Huron Valley Sinai Hosp v Sentinel Ins Co, ___ Mich ___, 900 NW2d 628 (2017) (Court of Appeals’ decision dealt with whether a release of an uninsured motorist claim barred a provider’s suit for payment of PIP medical expenses);
  • Spectrum Health Hosp v Westfield Ins Co, 500 Mich 1024, 897 NW2d 166 (2017) (Court of Appeals refused to consider two lower court decisions regarding the compensability of maintenance injuries under the Parked Vehicle Exclusion set forth in MCL 500.3106(1)(1)); and
  • Bronson Methodist Hosp v Michigan Assigned Claims Facility, 500 Mich 1024, 897 NW2d 735 (2017) (Court of Appeals’ decision pertained to whether or not the Michigan Assigned Claims Plan could be forced to assign an insurer in a situation where the underlying patient was injured in an automobile accident while driving his own motor vehicle)

In perhaps an indication of what is to come, the Court of Appeals recently issued a peremptory order instructing the lower court to dismiss the lawsuit where the provider had failed to secure an assignment prior to filing suit. In Standard Rehab Inc v Grange Ins Co of Michigan, unpublished opinion per curiam of the Court of Appeals, issued September 5, 2017 (Docket No. 331734), the Court of Appeals had granted leave to appeal “to determine whether reports prepared for non-party independent medical examinations (IMEs) may be obtained during discovery for the purpose of establishing bias by the physician retained by Defendant insurer to prepare an IME report in the instant case.”  During the pendency of the appeal, the Michigan Supreme Court issued its decision in Covenant, and the matter was brought up during oral argument.  At oral argument, counsel representing Standard Rehabilitation conceded that the underlying patient had not made an assignment of their claims to Standard Rehabilitation prior to the lawsuit being filed.  Therefore, the matter was “remanded with direction to dismiss this case.”  This order is actually in keeping with the trends in the circuit courts and district courts, which have been regularly dismissing lawsuits filed by medical providers where the provider has failed to obtain an assignment.


Lost in the Covenant aftermath was the fact that the Michigan Supreme Court issued two other decisions that impact no‑fault jurisprudence.  One of these cases discusses what constitutes proper notice of a claim under MCL 500.3145(1).  The second deals with the compensability of injuries arising out of a parked motor vehicle.  These two cases are analyzed below.

Perkovic v Zurich American Ins Co, 500 Mich 44; 893 NW2d 322 (2017)

In order to initiate a claim for no‑fault benefits, most, if not all, no‑fault insurers require that an Application for Benefits be filed. These applications usually provide information regarding the accident itself, as well as a description of the injuries, the places where the injured Claimant received any hospital or medical treatment, and information regarding any claims for work loss benefits.  The information included in an Application for Benefits is designed to comply with MCL 500.3145(1), which contains a strict one-year notice provision:

An action for recovery of personal protection insurance benefits payable under this chapter for accidental bodily injury may not be commenced later than 1 year after the date of the accident causing the injury unless written notice of injury as provided herein has been given to the insurer within 1 year after the accident or unless the insurer has previously made a payment of personal protection insurance benefits for the injury. . . The notice of injury required by this subsection may be given to the insurer or any of its authorized agents by a person claiming to be entitled to benefits therefor, or by someone in his behalf.  The notice shall give the name and address of the claimant and indicate in ordinary language the name of the person injured and the time, place and nature of his injury.

Many insurers have been denying claims for benefits if the injured Claimant fails to complete and submit a timely Application for Benefits. In Perkovic, though, the Michigan Supreme Court made it clear that by virtue of the plain language of MCL 500.3145(1), the notice requirement can be satisfied by a medical provider who submits medical records, billing records, and in appropriate cases, the police report, because taken together, these documents provide:

  • The name and address of the Claimant (set forth on the billing statement from the medical provider);
  • The name of the person injured (which appears in both the medical and billing records);
  • The nature of his injury (contained within the medical records themselves); and
  • The time and place of the injury (contained in the police report or in the medical records).On appeal, the Supreme Court, in a 6-1 decision authored by Justice Bernstein, rejected any such reliance on the “purposes” behind the one-year notice provision. Instead, adopting a classic textualist argument, the Supreme Court determined that, “the documents transmitted to Defendant contained all of the information required by MCL 500.3145(1) and were sent in behalf of Plaintiff by the Nebraska Medical Center.”Ironically, when seen in light of Covenant, a medical provider has the right to file a claim with a no-fault insurer “in behalf of the injured party,” but does not have the right to enforce payment of medical expenses incurred by that same party in whose behalf the notice was given, against that same no-fault insurer. In a 4-3 decision authored by Justice Viviano, the Michigan Supreme Court reversed the judgment of the Michigan Court of Appeals and determined that there existed a genuine issue of material fact as to whether or not injuries suffered by an injured Claimant while unloading his personal belongings out of a parked motor vehicle were compensable under the no‑fault insurance act. In Kemp, Plaintiff opened the rear door of his extended cab pickup truck and reached into the vehicle to grab his belongings, including his briefcase, an overnight bag, a thermos, and a lunchbox. As he was lowering them from the vehicle, he suffered an injury to his calf muscle. He filed suit against his insurer, Farm Bureau, to recover no‑fault benefits arising out of the incident. Farm Bureau denied the claim and argued that (1) Kemp’s injury did not arise out of the ownership, operation, maintenance or use of the parked motor vehicle as a motor vehicle, (2) the injury did not arise as a direct result of physical contact with property being lifted onto or lowered from the vehicle in the loading or unloading process, as required by MCL 500.3106(1)(b), and (3) his injury did not have a causal relationship to the motor vehicle that was more than incidental, fortuitous, or “but for.” The circuit court granted summary disposition in favor of Farm Bureau and in a 2-1 decision, the Court of Appeals affirmed.With regard to the first issue, the Supreme Court noted that there existed a genuine issue of material fact as to whether or not the injury was the “direct result” of physical contact with the property that Mr. Kemp had just removed from his pickup truck. In so ruling, the Supreme Court rejected Farm Bureau’s argument that the injury must be “due to” physical contact with the property. Instead, all that was required was that the injury was caused by contact with the property being loaded or unloaded. Second, the court determined that the unloading of one’s personal belonging out of one’s vehicle satisfied the “transportational function” requirement of McKenzie v ACIA, 458 Mich 214; 580 NW2d 424 (1998), as a matter of law. Finally, the court ruled that there existed a genuine issue of material fact as to whether or not the causal relationship between the injury and the motor vehicle accident was more than incidental, fortuitous, or “but for,” as required by its earlier decision in Thornton v Allstate Ins Co, 425 Mich 643; 391 NW2d 320 (1986).
  • Justice Zahra, joined by Chief Justice Markman and Justice Wilder, dissented from the majority’s opinion. Justice Zahra and his colleagues concluded that Plaintiff had failed to establish a genuine factual basis from which to conclude that “the injury was a direct result of physical contact with . . . property being lifted onto or lowered from the vehicle in the loading or unloading process,” as required by MCL 500.3106(1)(b). Justice Zahra also invited his colleagues to reexamine the causation element of the Putkamer analytical framework – an invitation that was declined by the majority.
  • In its opinion, the Supreme Court re-affirmed the three-step analytical framework initially enunciated by the court in Putkamer v Transamerica Ins Corp of America, 454 Mich 626; 563 NW2d 683 (1997). First, the injured Claimant must demonstrate that the circumstances surrounding the loss falls within one of the three exceptions to the Parked Vehicle Exclusion set forth in MCL 500.3106(1). Next, the Claimant must show that the injury arose out of the ownership, operation, maintenance or use of the parked motor vehicle as a motor vehicle. Finally, the Claimant had to demonstrate that the injury had a causal relationship to the parked motor vehicle that was more than incidental, fortuitous, or “but for.”
  • Kemp v Farm Bureau, 500 Mich 245; __ NW2d __ (docket no. 151719, issued 6/15/2017)
  • Former Justice Young agreed with the reasoning of the majority opinion, but dissented from the results reached by the majority. Justice Young opined that the notice had to be given by “a person claiming to be entitled to benefits” at the time the notice was given.
  • Perkovic initially involved a dispute among three insurers – Perkovic’s personal no‑fault insurer (Citizens), his trucking fleet insurer (Zurich) and his bobtail insurer (Hudson) over which insurer would be responsible for payment of his no‑fault benefits, arising out of a trucking accident. In an earlier proceeding, the Court of Appeals determined that the fleet insurer, Zurich American Insurance Company, occupied the highest order of priority for payment of Perkovic’s no‑fault benefits. After a remand to the circuit court, Zurich filed a Motion for Summary Disposition, claiming that it did not receive proper notice of the loss, even though it had received medical records and billings from the Nebraska Medical Center within one year. Both the circuit court and the Court of Appeals had granted summary disposition in favor of the insurer, determining that even if there had been technical compliance with the requirements of MCL 500.3145(1), the “purposes” behind the statutory provision were not satisfied because there was nothing in the claim submissions that would have put the insurer on notice that the provider was submitting a claim for Michigan no‑fault insurance benefits.

Although perhaps these cases do not have the significance that the Covenant decision had, both Perkovicand Kemp clarify the proper type of notice that must be given under the No‑Fault Insurance Act, and under what circumstances Claimants can recover for injuries arising out of parked motor vehicles.





No Fault Corner is a column written by Ronald M. Sangster, Jr. and published in The Journal of Insurance and Indemnity Law, A quarterly publication of the State Bar of Michigan’s Insurance and Indemnity Law Section.



About the Author

Ron Sangster practices extensively in the area of First Party No Fault litigation, at both the trial court and appellate court levels. He serves as an Adjunct Professor of Law at Cooley Law School-Auburn Hills, where he teaches the No Fault course. In addition, he is a frequent guest lecturer at Professor Wayne Miller’s No Fault course at Wayne State University Law School. In addition to litigating No Fault and insurance coverage disputes, he also consults with No Fault insurers regarding policy language changes, insurance coverage issues, and other matters of interest to No Fault insurers.  When he isn’t eating, sleeping and breathing no-fault, he’s working on a vintage Honda motorcycle or riding one with his son, Michael.

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