Michigan Court of Appeals Reaffirms Assignor’s Settlement of No-Fault Benefits is Binding on Assignees Unless Insurer Receives Notice of Assignment

In a recent unpublished opinion, the Michigan Court of Appeals reaffirmed in New Horizon Chiropractic v State Farm, issued on June 9 (Docket No. 357148), that MCL 500.3112 operates to discharge an insurer's liability for Personal Injury Protection (PIP) benefits assigned to a medical provider when it settles the PIP claims of the assignor without having been provided notice of the assignment.

In New Horizon, Darryl White was involved in an automobile accident in June 2017. Ten months later, White filed suit against State Farm, seeking the payment of no-fault PIP benefits. While the lawsuit was pending, in December 2018, White received treatment for injuries he claimed were related to the 2017 accident at New Horizon. White also assigned his right to PIP reimbursement for that treatment to New Horizon.

White and State Farm ultimately reached a settlement, which was signed on October 17, 2019. In the agreement, White agreed to release State Farm from any and all past, present and future PIP claims against it. 

After the settlement, New Horizon filed a separate lawsuit against State Farm, seeking the payment of No-Fault PIP benefits as White’s assignee. State Farm moved for summary disposition and argued that its good faith payment to White discharged its liability under MCL 500.3112. That statute states in relevant part, “payment by an insurer in good faith of personal protection insurance benefits, to or for the benefit of a person who it believes is entitled to the benefits, discharges the insurer’s liability to the extent of the payments unless the insurer has been notified in writing of the claim of some other person.” State Farm also argued that New Horizon’s claim was barred by res judicata. The trial court denied State Farm’s motion and concluded the New Horizon bills were not part of the settlement. 

On appeal, the appellate court reversed the trial court’s order denying summary disposition to State Farm, determining the release operated to extinguish all claims related to the underlying motor vehicle collision and that New Horizon failed to present any evidence that it notified State Farm of its assignment before the settlement with White was entered into. Thus, the unless-notified-in-writing exception to the discharge of liability under MCL 500.3312 was not triggered:

“The record is devoid of any evidence that defendant was aware, before entering into the settlement agreement, of any assignment to plaintiff of White’s right to PIP benefits. Although defendant was given notice, through the case evaluation process, that plaintiff had provided services to White, defendant’s mere awareness of plaintiff’s services and bills did not itself establish awareness by defendant of any right for plaintiff to receive payment for PIP-related services.”

In addition, the appellate court determined analysis of State Farm’s alternative res judicata argument was not needed because its good-faith payment to White discharged its liability as a matter of law under MCL 500.3112. This is important because the Michigan Supreme Court recently held in Mecosta County Medical Center, et al. v Metropolitan Group Property and Casualty Ins Co, et al. that the privity element of res judicata is not met in an action commenced after an assignment occurred.

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