Health Call of Detroit, Inc. v. Farmers Insurance Exchange

Filing 82

OPINION and ORDER denying Farmers Insurance Exchange's 69 MOTION for Summary Judgment. Signed by District Judge Bernard A. Friedman. (JCur)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
HEALTH CALL OF DETROIT, INC.,
Plaintiff,

Civil Action No. 16-CV-11345

vs.

HON. BERNARD A. FRIEDMAN

FARMERS INSURANCE EXCHANGE,
Defendant.
__________________________________/
OPINION AND ORDER DENYING FARMERS INSURANCE
EXCHANGE’S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Farmers Insurance Exchange’s motion for
summary judgment [docket entry 69]. This motion is fully briefed. Pursuant to E.D. Mich. LR
7.1(f)(2), the Court shall decide it without a hearing.
FACTS
In July 2011, six-year-old Jaden Sears was in a terrible car accident when a car
going seventy miles per hour smashed into his family’s car. He was thrown from the back seat
underneath the dashboard. He suffered skull and sacral fractures and a hemorrhagic contusion in
his right temporal lobe. Medics unsuccessfully tried to resuscitate him several times. He was
airlifted to the University of Michigan Hospital, where he spent a week in a coma and was
diagnosed with a severe traumatic brain injury. Because Jaden still suffers many side effects, his
physicians prescribed 24-hour attendant care services, primarily for supervision purposes.
In October 2011, Jaden’s mother Velma Sears-Roddy (“Sears”)—acting on Jaden’s
behalf—assigned to Health Call “any rights [Jaden] may have as a result of Health Call providing
services.” Def.’s Mot. Ex. 2. This included the right to “collect any and all benefits.” Id.

In July 2012, Sears—acting as Jaden’s next friend—filed a complaint against
Farmers, who was refusing to pay no-fault benefits. In January 2014, the case was settled, and
Sears—acting on Jaden’s behalf—signed a partial release of claims against Farmers. The release
explicitly did not apply to Health Call’s services. For the next year, Farmers paid for Jaden’s
attendant care. But in January 2015, Farmers sent a letter to Sears, stating that based on the
analysis of its physician, Dr. O’Leary, it would no longer pay for Jaden’s attendant care. In
response, Jaden’s longtime physician, Dr. Pelshaw, wrote to Farmers, explaining Jaden’s need for
attendant care, but to no avail.
In February 2015, Health Call began providing services to Jaden. In February 2016,
Health Call filed the instant complaint against Farmers, asserting a violation of Michigan’s No
Fault Act (“the Act”). Health Call claimed the right to sue under the Act based on two theories: a
contractual theory grounded in the 2011 assignment and a statutory theory grounded in the Act
itself. Health Call’s statutory cause of action had been recognized by the Michigan Court of
Appeals for decades. In May 2017, however, the Michigan Supreme Court overruled that line of
cases in Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 895 N.W.2d 490, 493 (Mich.
2017), stating “that healthcare providers do not possess a statutory cause of action against no-fault
insurers for recovery of personal protection insurance benefits under the no-fault act.”
In June 2017, Sears signed another assignment of benefits to Health Call, which
states: “In consideration for the services provided to [Jaden] by Health Call, [Jaden] assigns and
transfers to Health Call all of [his] rights and interest in his[] insurance benefits for services
rendered by Health Call” and “further grants to Health Call the full power and authority . . . to
pursue claims directly against” Farmers. Def.’s Mot. Ex. 1.

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The case was scheduled for trial in late March 2018. The morning of trial, however,
the parties agreed that rather than try the case, they would file a “Stipulated Order and Partial
Judgment” and have the Court decide the case on a motion for summary judgment. They stipulated
that the motion would “argue the applicability of the ‘one year back’ rule [and] . . . whether
HealthCall is entitled to interest . . . and/or attorney fees.” Partial J. ¶ 3.
To set the stage, Farmers stipulated to failing to pay invoices “more than 30 days
past due from the date Farmers received reasonable proof”; to a “partial judgment in the amount
of $252,158.00 . . . in favor of Health Call and against Farmers, which represents the full amount
of Health Call’s principal damages for its claim brought pursuant to the No-Fault Act”; and to
penalty interest and attorney fees, if the Court held that they were recoverable. Id. ¶¶ 1, 2, 5–6.
Critically, Farmers also stipulated that Health Call’s “claim was raised pursuant to
valid assignments from Velma Sears on behalf of Jaden Sears,” that all of the Court’s prior rulings
“stand,” and that the 2011 and 2017 assignments are “valid.” Id. ¶¶ 1, 7.
LEGAL STANDARD
Federal Rule of Civil Procedure 56(a) states that any party moving for summary
judgment must identify “each claim or defense . . . on which summary judgment is sought. The
court shall grant summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.”
DISCUSSION
There is no genuine dispute as to the material facts—Farmers admits that it did not
remit insurance benefits to Health Call for reasonably necessary medical services Health Call
provided. They disagree only about whether Farmers is entitled to judgment as a matter of law.

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Michigan law establishes a system of mandatory no-fault automobile insurance.
Mich. Comp. Laws §§ 500.3101–3179. One subset of this insurance is personal protection
insurance. Id. § 500.3105(1). “Under personal protection insurance an insurer is liable to pay
benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of
a motor vehicle as a motor vehicle . . . without regard to fault.” Id. § 500.3105(1)–(2). Personal
protection benefits cover “reasonable charges incurred for reasonably necessary products, services
and accommodations for an injured person’s care, recovery, or rehabilitation.” Bronson Methodist
Hosp. v. Auto-Owners Ins. Co., 814 N.W.2d 670, 677–78 (Mich. 2012) (discussing §
500.3107(1)(a)).
A. One-Year-Back Rule
1. Applying Mich. Comp. Laws § 500.3145(1) Directly to Health Call’s Claim
Farmers first argues that § 500.3145(1) bars Health Call’s claim.

Section

500.3145(1) states: “claimant[s] may not recover benefits for any portion of the loss incurred more
than 1 year before the date on which the action was commenced.” As Farmers notes, the Michigan
Supreme Court has stated that § 500.1345(1)’s purpose is to limit “open-ended liability”:
The one-year-back rule codifies an integral part of the legislative
compromise that is the no-fault act, and invalidating that
compromise will threaten the continued fiscal soundness of our nofault system. Given that Michigan is the only state with a no-fault
automobile-injury reparations scheme with mandatory, unlimited,
lifetime medical benefits, the Legislature adopted a unique approach
to defining the temporal limitations for filing suit without allowing
open-ended liability or time-barring claims before they accrue. The
Legislature addressed this problem by enacting the one-year-back
rule, which limits recovery to losses incurred within one year before
suit was filed. Thus, the creation of MCL 500.3145(1) was the
Legislature’s reasonable and simple approach to resolving the
problem of allowing a reasonable amount of time for pursuing a
claim while protecting the fiscal integrity of the no-fault system.
Joseph v. Auto Club Ins. Ass’n, 815 N.W.2d 412, 423 (Mich. 2012).

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Here, Health Call satisfies both the text and purpose of § 500.3145(1). Health Call
commenced the instant action in February 2016 and seeks benefits back to February 2015. Further,
Health Call, by giving Farmers notice in February 2016 that it was contesting Farmers’s denial of
benefits, and by seeking only one year’s worth of unpaid benefits, satisfies § 500.3145(1)’s
purpose of limiting open-ended liability. In Farmers’s view, § 500.3145(1)’s purpose is to allow
insurers to be confident that denials that occurred many years before will not be challenged.
Farmers does not show how this case runs afoul of that purpose.
2. Health Call’s Status as a Claimant Under § 500.3145(1)
Next, Farmers argues that the Court’s § 500.3145(1) analysis should consider June
2017, not February 2016, as the date this action commenced because Health Call was not a
legitimate claimant until it received the 2017 assignment.

Farmers contends that under §

500.3145(1) claimants are only those who can state a legitimate claim when the complaint is filed,
and in light of Covenant, Health Call was not a legitimate claimant until it received its assignment
in June 2017.
The Court disagrees with Farmers’s argument for two reasons. First, Farmers’s
definition of a claimant is wrong. The Michigan Supreme Court has defined a claimant under §
500.3145(1) not as someone who can state a legitimate claim, but more simply as someone who
does state a claim. Perkovic v. Zurich Am. Ins. Co., 893 N.W.2d 322, 327 (Mich. 2017) (quoting
Merriam–Webster’s Collegiate Dictionary (11th ed.) as stating that a “‘claimant’ is ‘one that
asserts a right or title,’” and that the “person who asserts a right or title is the party that ultimately
makes a claim”). In short, a true claimant is one who asserts a claim, and determining whether a
party is a true § 500.3145(1) claimant does not depend on the claim’s legitimacy.

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This definition makes sense given that § 500.3145(1)’s purpose is to limit damages,
not to decide liability or whether a party owns a cause of action. Those decisions are governed by
other rules and sections of the Act. In sum, because there is no danger of open-ended liability so
long as the party asserting rights to no-fault benefits seeks damages incurred only in the year before
it commenced suit, § 500.3145(1) will not bar its claim.
Second, even accepting Farmers’s definition of a claimant, Health Call was a
claimant when it commenced this action. Covenant applies both prospectively and retroactively,
stripping currently litigating healthcare providers of their independent causes of action. But in
February 2016, decades of Michigan Court of Appeals case law undisputedly gave healthcare
providers an independent cause of action. When Health Call filed its suit in reliance on that case
law, it was asserting a legitimate right that, at that time, it owned. Accord Covenant Med. Ctr.,
Inc. v. Auto-Owners Ins. Co., No. 17-CV-11176, 2017 WL 4572327, at *1 (E.D. Mich. Oct. 13,
2017). Indeed, that Farmers neglected to challenge Health Call’s status as a claimant until now
indicates that it, too, believed at that time that Health Call had an independent cause of action.1
Additionally, the complaint shows that Health Call commenced this action believing that even in
the absence of its statutory theory, it owned the cause of action by virtue of the 2011 assignment,
the validity of which Farmers concedes. Pl.’s Resp. p. 15.
Given all of this, the only questions for the Court under § 500.3145(1) are whether
Health Call asserted a right (it did), when it made that claim (February 2016), and between what
dates it claimed losses (February 2015 to February 2016). Because Health Call satisfies §
500.3145(1), the claim is not barred.

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Farmers argues that Health Call could have obtained an assignment at any time before Covenant. This argument,
which implies that Health Call slept on its rights, is weak. Health Call had no way to know in February 2016 that the
Michigan Supreme Court would remove its well-established, independent cause of action in May 2017.

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3. The 2017 Assignment’s Conveyance of Rights in Light of § 500.3145(1)
Farmers argues that § 500.3145(1) could bar Health Call’s claim in yet another way.
It contends that when Sears signed the 2017 assignment, under § 500.3145(1), Jaden could pursue
only the benefits incurred after June 2016. And as noted above, Health Call provided no services—
and therefore created no benefit claims—after March 2016. Farmers notes that under Michigan
law, an assignee stands in the shoes of the assignor. Thus, it concludes, because Jaden had no
rights in light of § 500.3145(1), he had nothing to assign, and the 2017 assignment conveyed
nothing.
The Court disagrees. As noted above, Farmers, through the Partial Judgment, has
already stipulated to the 2017 assignment’s validity and cannot now challenge it.
“Under Michigan law, ‘[a]n assignment is a contract between the assignor and the
assignee and is interpreted according to the rules of contract construction.’” Macomb Interceptor
Drain Drainage Dist. v. Kilpatrick, 896 F. Supp. 2d 650, 658 (E.D. Mich. 2012) (quoting Burkhart
v. Lapham, No. 291705, 2010 WL 4905568, at *2 (Mich. Ct. App. Dec. 2, 2010)). It is axiomatic
that “a valid contract cannot be based upon the illusory promise of one party.” Ridge Runner
Forestry v. Veneman, 287 F.3d 1058, 1062 (Fed. Cir. 2002) (citing Restatement (Second) of
Contracts § 71(1)). See also Roth Steel Prods. v. Sharon Steel Corp., 705 F.2d 134, 145 (6th Cir.
1983) (holding that if “the underlying contractual obligation is predicated on an illusory promise,”
the resulting “contract” is not valid). In Michigan, an illusory contract is “[a]n agreement in which
one party gives as consideration a promise that is so insubstantial as to impose no obligation.”
Employers Mut. Cas. Co. v. Helicon Assocs., Inc., No. 322215, 2017 WL 3925509, at *5 (Mich.
Ct. App. Sept. 7, 2017). In sum, an assignment that fails to assign anything is an illusory contract
and cannot be called “valid.”

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Here, Farmers stipulated multiple times as part of the Court’s judgment that the
2011 and 2017 assignments are valid; that is, that they are not illusory and, thus, must convey
something. But its motion argues that the 2017 assignment “did not assign anything under
Michigan law,” Def.’s Mot. pp. 11–12, and under Michigan law, an assignment that imposes no
obligation is illusory and, therefore, invalid. Taking Farmers’s stipulations and argument together,
the 2017 assignment would be simultaneously valid and invalid. Because the Court accepts
parties’ stipulations as true, it cannot accept Farmers’s argument.
To the extent Farmers contends that what the 2017 assignment conveyed is not
pertinent to its validity, Farmers is incorrect. Because an assignment is a contract, to create a valid
one, there must be offer, acceptance, and consideration. Consequently, whether the assignment
conveys anything affects consideration, which goes to the heart of contract validity. Farmers tries
to avoid this by admitting that the 2017 assignment is valid “from a contractual perspective,” but
urges the Court to conduct “a more pragmatic examination” of the assignment by addressing its
“substantive aspects.” Def.’s Mot. p. 10; Reply p. 2. This kind of analysis cannot be undertaken
because an assignment is a contract, and every part of it must be viewed from a “contractual
perspective.”
A final comment is in order: The Michigan Supreme Court did not hand down
Covenant to deliver insurance companies windfalls. Rather, it sought to correct the Michigan
Court of Appeals’s “erroneous interpretations” of the Act specifically in order to “further[] the rule
of law.” Covenant, 895 N.W.2d at 496. The rule of law is no less important here. Allowing an
insurance company to escape paying benefits that it admits it owes—indeed, that it contracted to
pay—does not further the rule of law, but undermines it. See Estate of Grimmett v. Encompass
Indem. Co., No. 14-14646, 2017 WL 5592897, at *9 (E.D. Mich. Nov. 21, 2017) (stating that

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Covenant has given the insurance industry “an unexpected arrow in its quiver that” it is using “to
the detriment of the broader purposes of the no-fault scheme”).
B. Interest and Attorney Fees
Under Mich. Comp. Laws § 500.3142(3), an “overdue payment” of benefits “bears
simple interest at the rate of 12% per annum.” “[I]n an action for personal or property protection
insurance benefits which are overdue,” and where an “insurer unreasonably refused to pay the
claim,” § 500.3148(1) prescribes that the insurer must pay the claimant, “in addition to the
benefits,” a reasonable attorney fee. In short, if a claimant shows that overdue benefits were
unreasonably withheld, he is entitled to interest and attorney fees.
Farmers argues that even if the 2017 assignment’s language did successfully assign
to Health Call the right to benefits, it failed to assign rights to attorney fees or interest. Farmers
contends that no-fault “penalty interest has a different purpose than other types of interest”
awarded in lawsuits. Def.’s Mot. p. 19. In Farmers’s view, penalty interest is “a substantive
element” distinct from benefits, as shown by the fact that a jury must first award benefits before
awarding interest. Id. at 19–20. Further, Farmers argues, because the Act includes a standalone
provision allowing a claimant to seek attorney fees, which are awarded only if the insurer owes
benefits, the attorney fees are also distinct from no-fault benefits. In short, any right to no-fault
attorney fees or interest “is entirely separate and distinct from” a right to no-fault benefits. Id. at
21. Therefore, because the 2017 assignment fails to explicitly mention interest or attorney fees,
Farmers says, Health Call cannot collect them.
The 2017 assignment does not explicitly mention attorney fees or interest. It does,
however, assign the “full power and authority . . . to pursue claims.” Thus, the question is whether
that language includes the right to seek attorney fees and interest.

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The Court believes it does for three reasons. First, Farmers’s argument fails to
acknowledge the difference between a cause of action and damages. Although these are distinctly
different concepts, Farmers conflates them, attempting to redefine two damages elements—
interest and attorney fees—as causes of action.
Black’s Law Dictionary (9th ed. 2009) defines “cause of action” as: “A group of
operative facts giving rise to one or more bases for suing” or, “A legal theory of a lawsuit.” In
contrast, it defines “damages” as: “Money claimed by, or ordered to be paid to, a person as
compensation for a loss or injury.” Damages, Black’s Law Dictionary (9th ed. 2009). And it
defines “additional damages” as: “Damages usually provided by statute in addition to direct
damages. Additional damages can include expenses resulting from the injury . . . or punitive
damages.” Additional Damages, id. In sum, a cause of action is the right to pursue a remedy; one
remedy is damages, including statutory damages.
Here, the unpaid no-fault benefits are general damages, and no-fault interest and
attorney fees are additional statutory damages provided by the Act. The Michigan Court of
Appeals confirmed this in Bonkowski v. Allstate Ins. Co., 761 N.W.2d 784, 797 (Mich. Ct. App.
2008), where it said that no-fault interest is merely “a substantive element of the damages.” By
definition then, no-fault interest and attorney fees are not separate causes of action; rather, they are
simply two damages elements the Act provides to successful plaintiffs—individual pieces of a
larger remedy.2  
Farmers provides a strong textual analysis of the Act in support of this
interpretation. Footnote 16 of its motion states:
Michigan’s Supreme Court has interpreted this statutory language
as essentially one continuous thought, observing that the attorney

2

The Court recognizes that this interpretation differs from that in Saunders v. TJX Cos., Inc. FlexPlus Plan, 293 F.
Supp. 3d 716, 731 (E.D. Mich. 2017); the Court does not find Saunders’s interpretation persuasive.

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fees payable under section 3148(1) are only available from an
insurer if the court finds that the insurer unreasonably refused to pay
the claim or unreasonably delayed in making proper payment. See
Pirgu v. United Servs. Auto. Ass’n, 884 N.W.2d 257, 260 (Mich.
2016). This Honorable Court, as a federal court sitting in diversity
jurisdiction, is required to follow that reasoning. See Berrington v.
Wal-Mart Stores, Inc., 696 F.3d 604, 607 (6th Cir. 2012).
The Court agrees with Farmers: Because interest and attorney fees flow directly from and are
inextricably tied to benefits liability, reading the Act’s language as “one continuous thought”—
that is, without creating artificial divisions of rights—is the only reasonable way to read it. For
example, § 500.3142(3) states that interest accrues specifically on the overdue payment.
Separating into individual causes of action the benefits and interest that the Act explicitly ties
together would be a strained, nonsensical reading.
Second, as the assignment is a contract, the Court must read it in context. Given
the history of this case and the relationship between Jaden and Sears and Health Call, there is no
reasonable dispute that Jaden intended to transfer to Health Call all of his no-fault rights. He had
already done so in 2011. He would have no reason to—and Farmers has advanced no explanation
of why he would—withhold from Health Call the rights to pursue attorney fees and interest.
Third, even if no-fault interest and attorney fees were independent causes of action,
the 2017 assignment’s language granting “full power” to pursue “all of [Jaden’s] rights” transfers
exactly what it says: all of Jaden’s rights, including rights to interests and attorney fees. See
Heritage Res., Inc. v. Caterpillar Fin. Servs. Corp., 774 N.W.2d 332, 346 (Mich. Ct. App. 2009)
(quoting Pritts v. J. I. Case Co., 310 N.W.2d 261, 265 (Mich. Ct. App. 1981)) (“The phrase ‘any
and all actual and potential claims’ is very broad. ‘[T]here cannot be any broader classification
than the word “all”. In its ordinary and natural meaning, the word “all” leaves no room for
exceptions.’”). See also In re Pazdzierz 718 F.3d 582, 587 (6th Cir. 2013) (quoting Sweet v. Clay,

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49 N.W. 899, 901 (Mich. 1891) (stating that under Michigan law, “the right to whatever remedy
the assignor has follows the assignment”). In no-fault cases, these “rights” to damages include the
rights to seek interest and attorney fees.
For all of the foregoing reasons,

IT IS ORDERED that Farmers’s motion for summary judgment is denied.

IT IS FURTHER ORDERED that Health Call is awarded penalty interest under §
500.3142 as stipulated in the partial judgment.

IT IS FURTHER ORDERED that Health Call may set out in a separate motion its
claim for attorney fees as stipulated in the partial judgment.

Dated: June 14, 2018
Detroit, Michigan

s/Bernard A. Friedman
BERNARD A. FRIEDMAN
SENIOR UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing document was served upon counsel of record and any
unrepresented parties via the Court's ECF System to their respective email or First Class U.S. mail
addresses disclosed on the Notice of Electronic Filing on June 14, 2018.
s/Johnetta M. Curry-Williams
Case Manager

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