State Farm Mutual Automobile Insurance Company v. Universal Rehab Services, Inc. et al

Filing 246

ORDER Granting 224 Plaintiff's Motion for Reconsideration. Signed by District Judge Victoria A. Roberts. (LVer)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTICT OF MICHIGAN
SOUTHERN DIVISION
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Plaintiff,

Case No. 15-10993
Honorable Victoria A. Roberts

v.
UNIVERSAL REHAB SERVICES,
INC., et al.,
Defendants.
__________________________________/
ORDER: GRANTING PLAINTIFF’S MOTION FOR RECONSIDERATION [Doc. 224];
AND (2) DISMISSING SUMMIT MEDICAL GROUP’S COUNTERCLAIM [Doc. 45]
I.

INTRODUCTION
State Farm Mutual Automobile Insurance Company (“State Farm”) filed this suit

against Summit Medical Group, PLLC (“Summit”) and four others, alleging they
engaged in a scheme to defraud State Farm by submitting fraudulent claims for no-fault
benefits for individuals who were in auto accidents.
Summit, a healthcare provider, filed a three-count counterclaim, alleging: (1)
fraud/fraudulent misrepresentation; (2) civil conspiracy; and (3) declaratory relief. [Doc.
45]. Summit alleges State Farm engaged in a scheme to fraudulently deny, delay and
diminish payment on its claims for recovery of no-fault benefits.
State Farm previously moved to dismiss Summit’s counterclaim. The Court
denied the motion. Citing an intervening change in Michigan law, State Farm now
moves for reconsideration of the order denying its motion to dismiss Summit’s
counterclaim. [Doc. 224]. Summit opposes State Farm’s motion.

For the following reasons, State Farm’s motion for reconsideration [Doc. 224] is
GRANTED, and Summit’s counterclaim [Doc. 45] is DISMISSED.
II.

DISCUSSION
“District courts have authority both under common law and Rule 54(b) to

reconsider interlocutory orders . . . before entry of final judgment.” Rodriguez v.
Tennessee Laborers Health & Welfare Fund, 89 Fed. Appx. 949, 959 (6th Cir. 2004).
Justification for reconsidering an interlocutory order exists where there is: “(1) an
intervening change of controlling law; (2) new evidence available; or (3) a need to
correct a clear error or prevent manifest injustice.” Id. The Court has broad discretion
in considering a motion for reconsideration under this standard. Id. at 959 n.7.
The Michigan Supreme Court recently held that “[a] healthcare provider
possesses no statutory cause of action under the no-fault act against a no-fault insurer
for recovery of . . . benefits.” Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co.,
500 Mich. 191, 895 N.W.2d 490, 505 (2017). The Michigan Court of Appeals
subsequently found that Covenant applies retroactively. See W A Foote Mem’l Hosp. v.
Michigan Assigned Claims Plan, No. 333360, 2017 WL 3836645, at *14 (Mich. Ct. App.
Aug. 31, 2017).
Although Summit’s counterclaims for fraud and civil conspiracy are distinct from a
no-fault claim, reconsideration of the Court’s prior order denying State Farm’s motion to
dismiss is justified based on the conclusion in Covenant that healthcare providers have
no statutory entitlement to demand reimbursement from a no-fault insurer for services it
provided to an insured.

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Summit bases its fraud claim on a purported “statutory duty” owed by State Farm
to pay no-fault benefits to healthcare providers who render treatment to insureds. [See
Doc. 60, PgID 1549]. Based on Covenant and other persuasive authority, Summit’s
assertion of this alleged statutory duty is insufficient to state a plausible fraud/fraudulent
misrepresentation claim.
In Covenant, the Supreme Court of Michigan clarified that healthcare providers
have no statutory right to recover no-fault benefits directly from an insurer; it, therefore,
follows that no-fault insurers do not have any statutory duty to reimburse healthcare
providers directly for services it provided to an insured under the no-fault act. See
Covenant, 895 N.W.2d at 500-05. Because Summit’s fraud counterclaim was based on
its alleged right to recover no-fault benefits directly from insurers, the Covenant decision
undermined the basis of Summit’s claim. In addition, to the extent Summit says it relied
on/was injured by State Farm’s alleged misrepresentations by “delaying or foregoing
legal action against State Farm to collect payment,” its fraud claim fails because it does
not have a statutory right to sue a no-fault insurer for benefits under Covenant.
Moreover, even if Summit had a statutory right to collect no-fault benefits directly
from State Farm, its fraud claim would fail because “a fraud claim does not arise from
an insurer’s mere omission to perform a contractual or statutory obligation, such as its
failure to pay all the [no-fault] benefits to which its insureds are entitled.” Cooper v. Auto
Club Ins. Ass’n, 481 Mich. 399, 409 (2008). In this respect, Summit’s fraud claim “fails
as a matter of Michigan law because the counterclaim does not allege a breach of duty
that is separate and distinct from State Farm’s contractual [or statutory] obligations.”
See State Farm Mut. Auto. Ins. Co. v. Radden, No. 14-13299, 2016 WL 695598, at *2

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(E.D. Mich. Feb. 22, 2016) (dismissing fraud counterclaim against State Farm that is
practically identical to the fraud claim alleged by Summit).
Summit’s civil conspiracy counterclaim also fails, as it is derivative of the fraud
claim. See Knight Indus. & Assocs., Inc. v. Euro Herramientas, S.A.U., No. 2:12-CV14405, 2013 WL 3773373, at *5 (E.D. Mich. July 17, 2013) (“[A] plaintiff asserting civil
conspiracy must demonstrate some underlying tortious conduct, as civil conspiracy is
not an independently actionable tort.”). “Because there is no underlying tort upon which
the civil conspiracy claim could be predicated,” Summit’s civil conspiracy counterclaim is
dismissed. State Farm Mut. Auto. Ins. Co. v. Radden, No. 14-13299, 2016 WL 695598,
at *2 (E.D. Mich. Feb. 22, 2016).
In Count III of its counterclaim, Summit requests that the Court: (1) “declare the
actions of State Farm . . . to be illegal, unconstitutional, grossly negligent, in bad faith
and malicious in fact”; and (2) “order either Kevin Clinton, Michigan Commissioner of
Insurance, to suspend, revoke, or limit the authority of State Farm” or “order both Ruth
Johnson, Michigan Secretary of State, and Kevin Clinton . . . to order State Farm to
cease and desist their illegal, unconstitutional, wrongful . . . and malicious in fact actions
toward Summit.” In Radden, the court dismissed a similar counterclaim because (1) the
defendants lacked standing to bring the claim against non-parties Clinton and Johnson;
(2) the Michigan Unfair Trade Practices Act (“MUTSA”) – which Summit cites as
grounds for declaratory relief – does not permit recovery outside penalty interest.
Radden, 2016 WL 695598, at *2 (citations omitted). For those same reasons, Summit’s
counterclaim for declaratory relief under MUTSA fails.

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III.

CONCLUSION
State Farm’s motion for reconsideration [Doc. 224] is GRANTED. Summit’s

counterclaim [Doc. 45] is DISMISSED.
IT IS ORDERED.
S/Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: December 21, 2017

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