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____________________________________________________________________________________________________________________________ Michigan Supreme Court Lansing, Michigan 48909

Chie f Justice Justices Maura D. Corrigan Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Clifford W. Taylor Robert P. Young, Jr. 

# Opinion

Stephen J. Markman FILED APRIL 1, 2003

AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellant,

v No. 119403 AMOCO PRODUCTION COMPANY, Defendant-Appellee.

AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellee,

v No. 119410 AMOCO PRODUCTION COMPANY, Defendant-Appellant.

BEFORE THE ENTIRE BENCH MARKMAN, J.We granted leave to appeal to consider whether plaintiff,

a no-fault insurer, is entitled to invoke the doctrine of equitable subrogation in order to receive full reimbursement from defendant, an employer that is self-insured for worker’s compensation, for medical expenses that pl aintif f paid on behalf of its insured, an emplo yee of defendant who was injuredduring the course of his employment. The Court of Appeals affirmed the finding of the Worker ’s Compensation Appellate Commission ( WCAC ) that plaintiff’s reimbursement was limitedby the cost containment rules in the Worke r’ s Disability Compensation Act ( WDCA ). The Court of Appeals also affirmedthe magistrate’s award of ten perc ent interest pursuant to MCL 4 18.801(6). Because we conclude that plaintiff is entitled to full reimbursement from defendant on the basis of the doctrine of equitable subrogation, we reverse the judgment of the Court of Appeals on this issue. Because the interest issue was not properly preserved, we decline to rule on this issue. We remand to the WCAC for a finding regarding the amount of medical expenses paid and the amount of reimbursement owed to plaintiff. I. F ACTS AND P ROCEDURAL H ISTORY After he arrived at work on Janu ary 30, 1994, Leroy Smithingell, an employee of defendant, was injured in an acci dent i nvolving his motor vehicle. Defendant denied his applicationfor worker’s compensation insurance benefits on 2the basis that the injury was not work related. Smithingell fileda claim withplaintiff, his no-fault automobile insurer, whichpaid no-fault benefits, including wage-loss and medical expenses. Plaintiff filed a petition to determine reimbursement and future rights, arguing that Smithingell was injured during the

course of his employment and therefore defendan t was liable for all past and future benefits. The worker’s compensation magistrate ruled that the accident was, in fact, work related andthat plaintiff was entitled to reimbursement from defendant for medical expenses paid. 1 However, the magistrate determinedthat the amount of reimbursement was subject to the worker’s compensation administrative cost containment rules, promulgated pursuant to MCL 418.315(2), whi ch c ap the fees that health care providers may charge employers or worker’ s compensationcarriers for treatment of work-related injuries. The WCAC affirmed the magistrate’s decision. After two remands to the WCAC , 2 the Court of Appeals

1 The magistrate a lso ruled that plaintiff was not entitled to recover from defendant for the wage-loss benefits it paid. Plaintiff has not appealed this ruling, and thus, it is not before this Court at this time.

2 On November 6, 1998, the Court of Appeals remanded the case to the WCAC for reconsideration in light of Perez v State Farm Mut Automobi le Ins Co , 418 Mich 634, 650; 344 NW2d 773 (1984), Luth v Detroit Automobile Inter-Ins Exchange , 113 Mich App 289, 294; 317 NW2d 867 (1982), and MCL 418.852(1). On remand, the WCAC again affirmed the magistrate’s decision. (continued...) 3grantedplaintiff’s a ppl ication for leave to appeal and affirmedthe decision of the WCAC . 245 Mich App 171; 628 NW2d 51 (2001). The Court of Appeals concluded that MCL 418.315(1), which requires an employer to reimb urse an employee for reasonable medical expenses paidby the employee f or a w ork-related injury, does not authorize full reimbursement to the no-fault insurer because the payments being reimbursed were not made by the employee. The Court also found that the magistrate correctly awarded plaintiff ten percent interest under MCL 418.801(6) and remanded the case to the WCAC for a finding regarding the amount of medical expenses paidby plaintiff and the amount of reimbursement owed by defendant. We granted plaintiff’s applicatio n for leave to appeal (Docket No. 119403) and defendant’s application for leave to appeal (Docket No. 119410). 466 Mich 859; 643 NW2d 578 (2002). II. S TANDARD OF R EVIEW This case requires us to construe certain provisions of Michigan’s Worker’s Disability Compensation Act. Questions of

2 (...continued) On May 25, 1999, the Court of Appeals remanded the case to the WCAC a second time for a determination whether the WDCA ’s cost containment r ul es apply and the amount of reimbursement. On remand, the WCAC concluded that the cost containment rules applied to limit the reimbursement and affirmed the magistrate’s ruling again. 4statutory construction a re rev iewed de novo as questions of law. Cruz v State Farm Mut Automobile Ins Co , 466 Mich 588, 594; 648 NW2d 591 (2002). We must also consider the applicationof the doctrine of equitable subro ga tion. An inquiry into the nature, scope, and elements of a remedy is a question of law that is reviewed de novo. Hartford Accident & Indemnity Co v Used Car Factory, Inc , 461 Mich 210, 215, n 5; 600 NW2d 630 (1999). III. A NALYSIS A. R EIMBURSEMENT AND E QUITABLE S UBROGATION The WDCA provides that if an employer fails to furnish an employee withreasonable medical services for the treatment of

a work-related injury, the employer shall reimburse th e employee for the employee’s reasonable medical expenses arising out of the injury. The relevant statutory provision, MCL 418.315(1), provides: The employer shall furnish, or ca use to be fu rn ished, to an employee who receives a personal injury arising out of and in the course of employment, reasonable medi ca l, surgical, and hospital services and medicines, or other attendance or treatment recogn iz ed by the laws of this state as legal, when they are needed. . . . If the employer fails, neglects, or refuses so to do, the employee shall be reimbursedfor the reasonable ex pense paid by the employee, or payment may be made in behalf o f t he employee to persons to whom the unpaid expenses may be owing, by order of the worker's compensation magistrate. . . . Under this provision, if Sm ithingell, the insured, had

5paid the medical expenses arising out of his work- re lated injury, he would be entitled to reimbursement from defendant for the reasonable amount of such expenses. 3 The question presented in this case is whether plaintiff may stand in the place of its insured, Smithingell, and be reimbursed fully by defendant for the reasonable amounts that it paid on behalf of Smithingell. 4 The resolution of this question in volves the doctrine of equitable subrogation. This Court has explained that

3 Plaintiff argued alternatively that it was entitled to reimbursement on the basis of the clause provi ding t hat “payment may be made in behalf of the employee to persons to whom the unpaid expenses may be owing . . . . ” MCL 418.315(1). At oral argument and in its brief, plaintiff suggested that this language was broad enough to provide for payment to a third party, such as plaintiff here, who paid the employee’s medical expenses for which the e mployer was responsible, and that it did not just apply to “unpaid expenses” owed directly to the medical provi der. Although this clause may conceivably be read to allow for such payment to a third party, the clause does not specify what the rate of reimbursement is to be, i.e., is it the “reasonable expenses” to be paid to the employee unlimited by the cost containment rules, or is it the expenses limited by the cost containment rules? Because this clause does not provide any answer to the question immediately before us—whether plaintiff is entitled to full reimbursement of the expenses — we do not rely on it as the basis for our decision.

4 The Court of Appeals, althoughallowing defendant to be reimbursed, limited th e amou nt of reimbursement to the fees contained in the cost containment rules promulgated pursuant to MCL 418.315(2). These rules limit the amount that health care providers may charge employers or worker’s compensation carriers for medical treatment of work-related injuries. Applying the cost containment rules to a reimbursement amount due a no-fault insurer, such as plaintiff, can result in the no-fault insu rer be ing reimbursed for less than what it actually paid. 6[e]quitable subrogation is a legal fiction through whicha person who pays a debt for which another is primarily responsible is substituted or subrogated to all the rights and remedies of the other. It is well-establishedthat the subrogee acquires no greater rights than those possessed by the subrogor, and that the subrogee may not be a "mere volunteer." [ Commercial Union Ins Co v Medical Protective Co , 426 Mich 109, 117; 393 NW2d 479 (1986) (o pinion by W ILLIAMS , C.J.) (citations omitted).] Whenan insurance provider pays expenses on behalf of its insured, it is not doing so as a volunteer. Auto Club Ins Ass’nv New York Life Ins Co , 440 Mich 126, 132; 485 NW2d 695 (1992). The nature of the claim asserted by the subrogee is determined by the nature of the claim that the subrogor would have had. Id . at 135. Turning to the case before us, it is noteworthy that the facts of New York Life are similar to those presented here. In New York Life , the plaintiff no-fault insurance car rier paidmost of the medical expenses of its insuredand then sued the defendant health insurance carrier, whose coverage of the insuredwas primary, for reimbursement. The Court recognized that when an insurance carrier pays the expenses of its own insured pursuant to an insurance contract, it is not acting as

a volunteer. Id. at 132, citing Detroit Automobile Inter-Ins Exchange v Detroit Mut Auto Ins Co , 3 37 Mich 50; 59 NW2d 80 (1953). Because the no-fault insurer was protecting its own interests and not acting as a volunteer when it paid the

7insured’s medical expenses, it was entitled to inv ok e the doctrine of equitable subrogation. The Court explained that the no-fault insurer

as subrogee, is asserti ng t he insured's right to "maintaina cause of action aga inst a primary insurer for the latter's bad-faith failure to [satis fy its policy obligations]." Commercial Union , 426 Mich 119. It "is equitably subrogatedto the position of the insuredand acquires no lesser or greater rights than those held by the insured." Id . [ New York Life , supra at 136.] The nature of a lawsuit by a no-fault insurer as subrogee is to be determined by looking at the nature of the claim that the insured would have had against the primary insurer. In New York Life , the Court found that the no-fault insurer, as subrogee, was asserting the insu re d’s right to maintain a

cause of action against the primary insurer on the basis of the primary insurer’s bad-faith failure to satisfy its policy obligations. The Court relied on precedent that had explained: “Sinc e the insured would have been able t o recover from the primary carrier for a judgment in excess of policy limits caused by the c arrier 's wrongful refusal to settle, the excess carrier, who discharged the insured's liab il ity as a result of this tort, stands in the shoes of th e i nsured and shouldbe perm itted to assert all claims against the primary carrier whichthe insured himself could have asserted.” [ Id . quoting Commercial Union , supra at 118 (citations omitted).] Inthis case, the Cou rt of Appeals agreed with the WCAC that MCL 41 8.315( 1) was designed to protect only employees,

8and not an insurer such as plaintiff. Additionally, the Court rejected plaintiff’s argument that it was entitled to equitable subrogation, finding that because Smithingell had not paid his medical expenses himself, Smith in gell had no right to reimbursement from defendant and therefore plaintiff did not have a right to full reimbursement for the amounts it paid on behalf of Smithingell. Instead, the Court concluded that plaintiff’s reimbursement was limited by the WDCA ’s cost containment rules. Inlight of the decision in New York Life , however, we disagree withthe Court of Appeals conclusion that plaintiff’s reimbursement is capped by the cost containment rules of the

WDCA . In New York Life , the no-fault insurer paid most of the insured’s medical expenses and was permitted to recover from the pr imary insurer by maintaining the cause of action that would have accrued to the insured, had the insured paid his

ownmedical bills. The fact that the insured didnot pay his bills was precisely the reason the no-fault insurer, which did pay the bills, was permitted to recover the same reimbursement as that to which the insured would have been entitled had he paid his bills. We believe that the decision in New York Life properly explained and applied the doctrine of equitable subrogationto the facts of that case. In particular, the Court in New York Life explained that “the nature of the

9present suit by [the subrogee] is determined by the nature of the cla im that [the insured] would have had against [the primary insurer].” New York Life , supra at 135. We believe this reasoning applies with equal force to this case. Applying the reasoning of N ew York Life regarding the subrogationissue to the facts of this case, we conclude that plaintiff is entitled to full reimbursement from defendant on the basis of the do ctrine of equitable subrogation. Here, plaintiff, the no-fault insurer, paid for Smithingell’s medical expenses. In doing so, plaintiff, because it is a nofault insurer, was not entitled to limit its payment pursuant to the cost containment provisions of the WDCA . Munson Medical Center v Auto Club Ins Ass’n , 218 Mich App 375, 390; 554 NW2d 49 (1996). How eve r, defendant, which was liable for the medical expenses, would have been able to limit its payment to the WDCA cost containment provisions because of its status as self-insured for worker’s compensation, hadit actually paid Smithingell’s medical expenses. The worker’s compensation magistrate found that defendant was liable for Smithingell’s medical expenses as the worker’s compensation insurer because the injury was work related. If Smithingell had paid his expenses, he would, under the statute, be entitled to full reimbursement from defendant for his reasonable medical expenses because the injury was work related. The principle

10of equitable subrogation allows plaintiff to assert the right of Smithingell, its insured, to r ecei ve full reimbursement from defenda nt . 5 The fact that Smithingell did not pay his

ownexpenses, and plaintiff did, is exactly the rea son plaintiff is entitled to assert this right. 6 D ef endant argues that MCL 418.315(1), which sets forth whenan emplo yer will reimburse an employee for reasonable

5 We note that the applica tio n of the doctrine of equitable subrogation under these circumstances is consistent with, and in deed, is supportive of, the general purpose of subsection315(1) to provide employees withfull reimbursement fo r thei r reasonable medical expenses. When, as here, the worker’s compensation insurer is found to be responsible for the employee’s medical expenses, which it previously refused to pay, and the no-fault insurer honors its contract by making payment on behalf of the insured at rates that are not capped by the reduced worker’s compensation cost containment rules, we se e no reason to deny the no-fault insurer full reimbur sement for the reasonable expenses that it paid when the employee would be entitled to such reimbursement. Obviously, to deny the no-fault insurer fu ll r eimbursement wouldprovide disincentive to prompt payments on behalf of the employee. Further, to cap the no - fault insurer’s reimbursement at the cost containment levels, whichbenefit only worker’s compensationinsurers, would afford no incentive for the worker’s compensation insurer to pay the medical expenses in the first place because it would never have to pay more than the reduced amounts of the cost containment schedule, even when later ordered to reimb urse the no-fault insurer. Thus, a limit ation on reimbursement effectively penalizes the no-fault ins urer for abiding by its contract withthe insured and paying promptly the greater rates to whichit is sub ject, while providing no incentive to the worker’s comp ensati on insurer to pay promptly the medical bills for which it is responsible.

6 Because we conclude that plaintiff is entitle d t o recover pursuant to the doctrine of equitable subrogation, we n ee dnot address plaintiff’s alternative arguments for full reimbursement. 11expenses, applies only to the employee and not to a no-fault insurer like plaintiff. Further, defendant argues that this is the employee’s exclusive r emed y, citing MCL 418.131(1), which provides that “[t]he right to the recovery of benefits

as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease.” While we recognize that the WDCA contains an “ exclusive remedy” provision applicable to the employee, we note that its existence does no t prevent plaintiff from seeking to recover under a theory of equitable subrogation, which is separate and independent of the remedies containedin the WDCA . The Court in New Yor k Life addressed the interplay between the no-fault act and the do ctrine of equitable subrogation and concluded that the stat ute of limitations contained in the no-fault act, whichby its terms applied to an action to recover personal protectioninsurance benefits, did not apply to bar a no-fault carrier’s equitable subrogati on claim, which was based on the claim that the insured would have had against the primary insurer. In light of this, the common-law equitable subrogation claim fell outside the scope of the no-fault act. New York Life , supra at 135-138. Similarly , plai ntiff’s recovery here, which is predicated on th e doct rine of equitable subrogation, is not limited by the WDCA .

12For these reasons, we reverse the judgment of the Court of Appeals limiting the amount of reimbursement to the WDCA ’s cost contain men t provisions. We affirm the judgment of the Court of Appea ls r emanding the case to the WCAC for a determination of the amount of medical expenses paid and the amount of reimbursement due. B. I NTEREST The magistrate awarded plaintiff ten percent interest pursuant to MCL 418.801(6), which provides: Whenweekly compensation is paid pursuant to an award of a worker's compensation magistrate, an arbitrator, the board, the appellate commission, or a court, interest onthe compensationshall be paid at the rate of 10% per annum from the date each payment was due, until paid. The Court of Appeals found no error in the magistrate’s award

an d n oted that plaintiff was not entitled to twelve percent interest pursuant to MCL 418.852. The Court found § 852, whichprovides as follows, to be inapplicable because it does not, by its own terms, apply under these circumstances: (1) The liability of a carrier or fund regar ding a claim under this act shall be determined by the hearing referee or worker's compensationmagistrate, as applicable, at the time of the award of benefits. (2) If a carrier or fund originally determined to be liable purs ua nt to subsection (1) is subsequently determined to not be liable or not to the same extent as originally determined, that carrier or fund shall be reimbu rsed b y the liable party or parties with interest at 12% per annum. Defendant argues that the jud gment of the Court of 13Appeals affirming the ten percent int eres t award should be reversed. However, neither party requested that t he WCAC review the i nteres t award, as required by MCL 418.861a(11), whichstates that, “The commission or a p anel of the commission shall review only those specific findings of fact

or conc lus ions of law that the parties have requested be reviewed.” Inits appeal to the WCAC , plaintiff asserted error relatedto two issues: (1) the magi str ate’s finding that it

was not entitled to wage-loss benefits and (2) the magistrate’s ruling that the reimbursement was subject to the cost containment rules. In its cr oss-appeal to the WCAC , defendant argued that Smithingell’s injuries did not occur in the course of his employment. Because the interest issue was not presented to the WCAC , the WCAC n ever specifically addressedthe question whether the magistrate properly awarded interest. Rather, the WCAC ’s o pini ons merely affirmed the magistrate’s decision in its entirety. In li ght of the fact that neither party presented t he interest issue to the WCAC , it appears that this issue was not properly preserved pursuant to MCL 418.861a(11). The question whether the interest award was appropriate was first raised by defendant in its brief in response to plaintiff’s brief in the Court of Appeals. The Court of Appeals briefly addressed this question and found no error in the magistrate’s award of ten 14percent int eres t. 7 Defendant then filed its application for leave to appeal with this Court, asserting that the award of interest should be reversed. Accordingly, even though we have concerns about and questionthe Court of Appeals’ analysis, because the interest issue was not properly preserve d, we decline to address defendant’s request for relief on this issue. IV. C ONCLUSION We conclude that plaint iff, t he no-fault insurer, is entitled to invoke the doctrine of equitable subrogation and to stand in the place of its insured to recover full reimbursement from defendant for the reasonable medical expenses it paid on behalf of the insured. Accordingly, we

reverse the judgment of the Court of Appeals limiting plaintiff’s reimbursemen t to the amounts set forth in the

WDCA ’s cost conta inment rules. Because we conclude that the interest issue was not properly preserved, we decline to address it. We affirm the judgment of t he Court of Appeals remanding the case to t he W CAC for a finding regarding the

7 The Court of Appeals indicated that plaintiff had made a “cursory request for twelve percent interest . . . .” 245 Mich App 178. However, a review of plaintiff’s brief in the Court of Appeals does not indicate that this argument was raised. Although the brief quotes MCL 418.852(2), including the l an guage regarding twelve percent interest, it is not clear that plaintiff actually asserts that it was entitled to sucha rate of interest. In this section, plaintiff merely sets forth its general equitable subrogation argument. 15amount of medical expenses paid and the amount of reimbursement owed to plaintiff. Stephen J. Markman Maura D. Corrigan Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Clifford W. Taylor Robert P. Young, Jr.

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