Case Name: SHIELD BENEFIT ADMINISTRATORS, INC v. UNIVERSITY OF MICHIGAN BOARD OF REGENTS
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1997-09-23
Citations: 225 Mich. App. 467
Docket Number: Docket No. 192416
Parties: SHIELD BENEFIT ADMINISTRATORS, INC v UNIVERSITY OF MICHIGAN BOARD OF REGENTS
Judges: Before: Young, P.J., and Doctoroff and Cavanagh, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 225
Pages: 467–476

Head Matter:
SHIELD BENEFIT ADMINISTRATORS, INC v UNIVERSITY OF MICHIGAN BOARD OF REGENTS
Docket No. 192416.
Submitted May 7, 1997, at Grand Rapids.
Decided September 23, 1997, at 9:00 A.M.
Shield Benefit Administrators, Inc., and Oven-Fresh Bakeries, Inc., brought an action in the Court of Claims against the University of Michigan Board of Regents, seeking restitution of a payment made to the University of Michigan Medical Center by Shield, as third-party administrator of Oven-Fresh’s health plan, for services rendered to Claudette Hodge, an insured under the health plan. The parties filed cross-motions for summary disposition on stipulated facts indicating that the Medical Center obtained preauthorization from Shield before each of the medical services was provided, that the Medical Center obtained from Hodge an assignment of her benefits and billed Shield directly, and that Shield paid in full even though the payment was in excess of the plan’s maximum. The court, Michael G. Harrison, J., granted summary disposition for the plaintiffs and denied summary disposition for the defendant, determining that the payment was made under a mistake of fact and that, under Michigan case law, a payment under a mistake of fact must be refunded, even if the mistake was due to a lack of investigation by the payor, in the absence of detrimental reliance by the payee on the payment. The defendant appealed.
The Court of Appeals held-.
1. Restatement, Restitution, § 14(1) — which provides that a creditor of another or one having a lien on another’s property, who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor as to his interests and duties, if the transferee made no misrepresentation and did not have notice of the transferor's mistake — is adopted as law and applies to this case.
2. The retroactive application of Restatement, Restitution, § 14(1) to this case does not overrule established precedent and will not affect negatively the administration of justice.
Reversed.
Young, P.J., dissenting, stated that the well-settled common-law rule that a voluntary payment made under a mistake of fact may be recovered, even if the mistake is due to a lack of investigation, as long as the recipient has not changed position in detrimental reliance on the payment should not-be abandoned in favor of Restatement, Restitution, § 14(1) in the absence of a full assessment of the effects on commerce such a change in the common law would occasion
Payment — Mistake op Fact — Restitution.
A creditor who receives from a third person a payment in discharge of the debtor’s obligation as a result of a mistake of fact by the third person is under no duly to make restitution if the creditor made no misrepresentation and did not have notice of the mistake.
Miller, Johnson, Snell & Cummiskey, P.L.C. (by Stephen R. Ryan), for the plaintiffs.
Stein, Moran, Raimi & Goethel, RC. (by Diana Raimi), for the defendant.
Before: Young, P.J., and Doctoroff and Cavanagh, JJ.

Opinion:
Doctoroff, J.
The parties to this case filed cross-motions for summary disposition on the basis of stipulated facts. Upon plaintiffs' motion, the trial court entered judgment for plaintiffs Shield Benefit Administrators, Inc., and Oven-Fresh Bakeries, Inc. Defendant University of Michigan Board of Regents appeals as of right. We reverse.
According to the stipulated facts, the husband of Claudette Hodge was an employee of plaintiff Oven-Fresh Bakeries, Inc., through which he and his dependents were insured under a group health plan. Plaintiff Shield Benefit Administrators, Inc., (Shield) is a third-party administrator that administers Oven-Fresh's health plan. Hodge was insured under the Oven-Fresh health plan and received treatment at the University of Michigan Medical Center. The medical care was delivered during the first five months of 1994 and cost $4,260. Before each provision of service to Hodge, the Medical Center obtained preauthorization from a Shield agent. The Medical Center obtained an assignment from Hodge and directly billed Shield for the services rendered to Hodge. Shield submitted full payment to the Medical Center for Hodge's treatments.
After making the payment to the Medical Center, Shield discovered that benefits had been paid in excess of Hodge's maximum plan benefit for the applicable period. Accordingly, in November 1994, Shield notified the Medical Center that Shield should not Have paid for Hodge's services, and Shield requested that the payment be refunded. The Medical Center refused to return the $4,260 paid by Shield for the services rendered to Hodge. Shield then filed this action.
The trial court determined that Shield made payment under a mistake of fact and found that, in Michigan, payment made under a mistake of fact must be refunded, even if the mistake was due to a lack of investigation. An exception to this rule exists if repayment would be inequitable in view of the payee's detrimental reliance on the payment. The trial court found no detrimental reliance of this case and thus denied defendant's motion for summary disposition and- ordered restitution of the full amount paid, plus interest and costs.
The trial court analyzed this case as a "mistake of fact" situation. It is a well-settled rule that payment made under a mistake of fact can be recovered even if the mistake could have been avoided by the payor. Couper v Metropolitan Life Ins Co, 250 Mich 540, 544; 230 NW 929 (1930); Madden v Employers Ins of Wausau, 168 Mich App 33, 40; 424 NW2d 21 (1988). However, neither Couper nor Madden dealt with a third-party creditor such as the hospital in this case. Thus, this Court, for the first time, is faced with the question whether a medical provider, as a third-party creditor accepting payment to discharge a debt owed by an insured patient, is required to make restitution for a mistaken payment by the insurer. It is undisputed that defendant, as the medical provider, had no notice of the mistake at the time payment was made.
On appeal, plaintiffs contend that, in a case of a third-party creditor, the rule should not change: absent detrimental reliance, payment made under a "mistake of fact" should be refunded. However, defendant urges this Court to adopt the rule expressed in Restatement, Restitution, § 14(1), which would create an exception to the general rule of a "mistake of fact" when a third-party creditor was involved. The Restatement provides:
A creditor of another or one having a lien on another's property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests and duties, if the transferee made no misrepresentation and did not have notice of the transferor's mistake. [Restatement, Restitution, § 14(1), p 55.]
We agree with defendant and adopt the rule expressed in the Restatement.
Unlike the cited Michigan cases involving a "mistake of fact," this case does not involve a payee who has been unjustly enriched. In this case, the defendant's hospital performed valuable services for Hodge and was reimbursed for such services by plaintiff Shield. Thus, it was Hodge, not the hospital, who unjustly benefited from plaintiff's mistake. We agree with the Nebraska Supreme Court, which stated the following in an opinion dealing with the same issue:
The widespread use of assignments of policy benefits to hospitals by patients is well known and is recognized by the health insurance industry. To subject a hospital to possible refund liability if the insurer later discovers a mistaken overpayment, lasting until all such claims are barred by the statutes of limitation, would be to place an undue burden of contingent liability on such institutions. Hospitals would be safe only by requiring insurers to pay benefits directly to the insured patient, and then by accepting payment directly from the patient. By this ruling, we place the burden for determining the limits of policy liability squarely on the only party (as between the insurer and the assignee hospital) in a position to know the policy provisions and its liability under that contract of insurance. Someone must suffer the loss, and as between plaintiff insurer and defendant hospital, the party making the mistake should bear that loss. [Federated Mut Ins Co v Good Samaritan Hosp, 191 Neb 212, 215-217; 214 NW2d 493 (1974).]
In this case, we agree with the reasoning of the Nebraska court that, as between plaintiff insurer and defendant hospital, plaintiff was in the better position to interpret the terms of its own contract, and it should bear the loss of its own mistake.
Plaintiffs contend that even if this Court adopts the third-party creditor exception of Restatement, Restitution, , § 14(1), the rule cannot be applied retroactively. We disagree. Because this issue has not previously been addressed by a Michigan court in the context of a third-party creditor, it does not overrule established precedent and thus can be applied retroactively. See Tebo v Havlik, 418 Mich 350, 381; 343 NW2d 181 (1984) (dissenting opinion by Levin, J). Furthermore, retroactive application of the Restatement will not affect negatively the administration of justice. See King v General Motors Corp, 136 Mich App 301, 306; 356 NW2d 626 (1984). Accordingly, we hold that Restatement, Restitution, § 14(1) will be applied retroactively to the case at bar.
As noted above, it is undisputed that defendant "made no misrepresentation and did not have notice of the transferor's mistake." Restatement, Restitution, § 14(1). Accordingly, under the Restatement provision that we have today adopted, defendant, as a third-party creditor, was not required to repay the funds tendered by Shield. The decision of the trial court is reversed.
Because of our disposition of the above issue, we need not address defendant's argument that Shield did not make a true "mistake of fact."
Reversed. Defendant, being the prevailing party, may tax costs pursuant to MCR 7.219.
Cavanagh, J., concurred.
Couper, supra, involved a two-party transaction in which an overpayment was made to an insured because of a clerical error. Madden, supra, involved a payment to the injured party by an insurance agent under the mistaken belief that the insured was not covered by another insurer whose coverage was primary.
We further note the following cases from foreign jurisdictions that have accepted the Restatement position: Lincoln Nat'l Life Ins Co v Brown Schools, 757 SW2d 411, 414 (Tex App, 1988); Nat'l Benefit Administrators v Mississippi Methodist Hosp & Rehabilitation Center, 748 F Supp 459, 464-466 (SD Miss, 1990); City of Hope Nat'l Medical Center v Western Life Ins Co, 8 Cal App 4th 633, 637-638; 10 Cal Rptr 2d 465 (1992); Time Ins Co v Fulton-DeKalb Hosp Authority, 211 Ga App 34, 36; 438 SE2d 149 (1993); and St Mary's Medical Center v United Farm Bureau Family Life Ins Co, 624 NE2d 939, 946 (Ind App, 1993). See also anno: Right of insurer under health or hospitalization policy to restitution of payments made under mistake, 79 ALR3d 1113.