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Medical Provider Reimbursement Case Moves to Michigan Supreme Court


Can doctors, medical service providers, and hospitals file suits against no-fault insurers seeking payment for services they have rendered to individuals in car accidents? If they can, can these medical providers safeguard their rights to reimbursement by sending written notices to no-fault insurers regarding their intent to collect pay on their own?

The Michigan Supreme Court seems ready to answer these questions or to hear arguments regarding these questions by granting leave to appeal in the case Covenant Medical Center, Inc v State Farm Mutual Automobile Ins Co. During this case, the following two issues will be addressed:

  • Whether providers have a direct cause of action against no-fault insurers
  • Whether an individual injured in a car accident can discharge the claims of providers that have notified the no-fault insurer of their intent to pursue reimbursement

The Decision

During the case, Covenant Medical Center sent numerous bills to State Farm for medical treatment the center provided to an injured person who was insured by State Farm. After State farm received and responded to the bills, State Farm entered an agreement with the injured person, agreeing to pay $59,000.00 in exchange for being released from any liability “regarding all past and present claims incurred through January 10, 2013” resulting from the vehicle accident. After, State Farm failed to reimburse Covenant Medical Center for the services, claiming the agreement relieved it of any duty to pay bills. Covenant Medical Center then filed a lawsuit against State Farm for payment, and the trial court ruled in favor of State Farm and dismissed the case.

Upon appeal, Covenant Medical Center argued that that agreement with the injured person did not relieve State Farm of paying the bills, claiming Covenant Medical Center provided notice to State Farm by sending medical bills, making it clear that Covenant Medical Center intended to pursue payment.

This time, the court agreed with Covenant Medical Center finding it safeguarded its right to reimbursement within meaning of the No-Fault Act by sending the medical bills to State Farm. Because State Farm received this notice, the Court of Appeals said that State Farm could not discharge their obligation to pay Covenant Medical Center by settling their claim with the injured person. Additionally, the Court of Appeals rejected State Farm’s argument that the “hold harmless” provision only allowed Covenant Medical Center to seek pay from the injured person. The Court of Appeals emphasized that Covenant Medical Center was not a party to the settlement and release.

Soon, it will be determined whether the rights of medical providers will be upheld by the Michigan Supreme Court. As of now, Covenant Medical Center, Inc v State Farm Mutual Automobile Ins Co. continues to move through the appellate system.

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