Title: AUTO OWNERS INS CO V AMOCO PRODUCTION CO
Citation: N/A
Docket Number: 119410
State: Michigan
Issuer: Michigan Supreme Court
Date: April 1, 2003

____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
                                          
                                          
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 plaintiff paid on  
behalf of its insured, an employee of defendant who was  
injured during 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  
limited by the cost containment rules in the Worker’s  
Disability Compensation Act (WDCA). The Court of Appeals also  
affirmed the magistrate’s award of ten percent interest  
pursuant to MCL 418.801(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. FACTS AND PROCEDURAL HISTORY  
After he arrived at work on January 30, 1994, Leroy  
Smithingell, an employee of defendant, was injured in an  
accident involving his motor vehicle.  Defendant denied his  
application for worker’s compensation insurance benefits on  
2  
 
 
 
the basis that the injury was not work related. Smithingell  
filed 
a 
claim 
with plaintiff, his no-fault automobile 
insurer,  
which paid 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 defendant was liable  
for all past and future benefits. The worker’s compensation  
magistrate ruled that the accident was, in fact, work related  
and that plaintiff was entitled to reimbursement from  
defendant for medical expenses paid.1  However, the magistrate  
determined that the amount of reimbursement was subject to the  
worker’s compensation administrative cost containment rules,  
promulgated pursuant to MCL 418.315(2), which cap the fees  
that health care providers may charge employers or worker’s  
compensation carriers 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 also 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 Automobile 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...)  
3  
 
 
 
granted plaintiff’s application for leave to appeal and  
affirmed the 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 reimburse an  
employee for reasonable medical expenses paid by the employee  
for 
a 
work-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  
paid by plaintiff and the amount of reimbursement owed by  
defendant.  
We granted plaintiff’s application 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. STANDARD OF REVIEW  
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 rules 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.  
4  
 
statutory construction are reviewed 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  
application of the doctrine of equitable subrogation.  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. ANALYSIS  
A. REIMBURSEMENT AND EQUITABLE SUBROGATION  
The WDCA provides that if an employer fails to furnish an  
employee 
with reasonable medical services for 
the 
treatment 
of  
a work-related injury, the employer shall reimburse the  
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 cause to be 
furnished, to an employee who receives a personal 
injury arising out of and in the course of  
employment, reasonable medical, surgical, and  
hospital 
services 
and 
medicines, 
or 
other  
attendance or treatment recognized 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 reimbursed for the reasonable 
expense paid by the employee, or payment may be 
made in behalf of the employee to persons to whom 
the unpaid expenses may be owing, by order of the 
worker's compensation magistrate. . . .  
Under this provision, if Smithingell, the insured, had  
5  
paid the medical expenses arising out of his work-related  
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 involves 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 providing that 
“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 employer was 
responsible, and that it did not just apply to “unpaid 
expenses” owed directly to the medical provider.  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, although allowing defendant to be 
reimbursed, limited the amount 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 insurer being reimbursed for less than what it 
actually paid.  
6  
 
 
 
[e]quitable subrogation is a legal fiction through 
which a 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-established that 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) (opinion by WILLIAMS, C.J.) (citations  
omitted).]  
When an insurance provider pays expenses on behalf of its  
insured, it is not doing so as a volunteer.  Auto Club Ins  
Ass’n v 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 carrier  
paid most of the medical expenses of its insured and then sued  
the defendant health insurance carrier, whose coverage of the  
insured was 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, 337 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  
7  
insured’s medical expenses, it was entitled to invoke the  
doctrine of equitable subrogation. The Court explained that  
the no-fault insurer  
as subrogee, is asserting the insured's right to 
"maintain a cause of action against a primary 
insurer for the latter's bad-faith failure to  
[satisfy its policy obligations]." Commercial  
Union, 426 Mich 119. It "is equitably subrogated to 
the position of  the insured and 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 insured’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:  
“Since the insured would have been able to  
recover from the primary carrier for a judgment in 
excess of policy limits caused by the carrier's 
wrongful refusal to settle, the excess carrier, who 
discharged the insured's liability as a result of 
this tort, stands in the shoes of the insured and 
should be permitted to assert all claims against 
the primary carrier which the insured himself could 
have asserted.” [Id. quoting Commercial Union,  
supra at 118 (citations omitted).]  
In this case, the Court of Appeals agreed with the WCAC  
that MCL 418.315(1) was designed to protect only employees,  
8  
and 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, Smithingell 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.  
In light of the decision in New York Life, however, we  
disagree with 
the 
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 primary insurer by maintaining the cause of action that  
would have accrued to the insured, had the insured paid his  
own medical bills.  The fact that the insured did not 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  
subrogation to the facts of that case.  In particular, the  
Court in New York Life explained that “the nature of the  
9  
 
 
 
 
present suit by [the subrogee] is determined by the nature of  
the claim 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 New York Life regarding the  
subrogation issue to the facts of this case, we conclude that  
plaintiff is entitled to full reimbursement from defendant on  
the basis of the doctrine of equitable subrogation.  Here,  
plaintiff, the no-fault insurer, paid for Smithingell’s  
medical expenses.  In doing so, plaintiff, because it is a no­
fault 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).  However, 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,  had it 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  
10  
 
 
  
of equitable subrogation allows plaintiff to assert the right  
of Smithingell, its insured, to receive full reimbursement  
from defendant.5  The fact that Smithingell did not pay his  
own expenses, and plaintiff did, is exactly the reason  
plaintiff is entitled to assert this right.6  
Defendant argues that MCL 418.315(1), which sets forth  
when an employer will reimburse an employee for reasonable  
5 We note that the application of the doctrine of 
equitable subrogation under these circumstances is consistent 
with, and indeed, is supportive of, the general purpose of 
subsection 
315(1) 
to 
provide 
employees 
with 
full 
reimbursement 
for their 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 see no reason to deny the no-fault insurer full  
reimbursement for the reasonable expenses that it paid when 
the employee would be entitled to such reimbursement.  
Obviously, to deny the no-fault insurer full reimbursement 
would provide disincentive to prompt payments on behalf of the 
employee.
 
Further, 
to 
cap 
the 
no-fault 
insurer’s  
reimbursement at the cost containment levels, which benefit 
only 
worker’s 
compensation 
insurers, 
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 reimburse the no-fault 
insurer.  Thus, a limitation on reimbursement effectively 
penalizes the no-fault insurer for abiding by its contract 
with the insured and paying promptly the greater rates to 
which it is subject, while providing no incentive to the 
worker’s compensation insurer to pay promptly the medical 
bills for which it is responsible.  
6 Because we conclude that plaintiff is entitled to 
recover pursuant to the doctrine of equitable subrogation, we 
need not address plaintiff’s alternative arguments for full 
reimbursement.  
11  
 
 
 
expenses, applies only to the employee and not to a no-fault  
insurer like plaintiff. Further, defendant argues that this  
is the employee’s exclusive remedy, 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 not prevent  
plaintiff from seeking to recover under a theory of equitable  
subrogation, 
which 
is 
separate and independent of the 
remedies  
contained in the WDCA. The Court in New York Life addressed  
the interplay between the no-fault act and the doctrine of  
equitable subrogation and concluded that the statute of  
limitations contained in the no-fault act, which by its terms  
applied to an action to recover personal protection insurance  
benefits, did not apply to bar a no-fault carrier’s equitable  
subrogation 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, plaintiff’s recovery here, which is  
predicated on the doctrine of equitable subrogation, is not  
limited by the WDCA.  
12  
 
 
 
For these reasons, we reverse the judgment of the Court  
of Appeals limiting the amount of reimbursement to the WDCA’s  
cost containment provisions.  We affirm the judgment of the  
Court of Appeals remanding the case to the WCAC for a  
determination of the amount of medical expenses paid and the  
amount of reimbursement due.  
B. INTEREST  
The magistrate awarded plaintiff ten percent interest  
pursuant to MCL 418.801(6), which provides:  
When weekly compensation is paid pursuant to 
an award of a worker's compensation magistrate, an 
arbitrator, the board, the appellate commission, or 
a court, interest on the compensation shall 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  
and noted that plaintiff was not entitled to twelve percent  
interest pursuant to MCL 418.852.  The Court found § 852,  
which provides 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  
regarding a claim under this act shall be  
determined by the hearing referee or worker's 
compensation magistrate, as applicable, at the time 
of the award of benefits.  
(2) If a carrier or fund originally determined  
to be liable pursuant 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 reimbursed by the liable 
party or parties with interest at 12% per annum.  
Defendant argues that the judgment of the Court of  
13  
Appeals affirming the ten percent interest award should be  
reversed.  However, neither party requested that the WCAC  
review the interest award, as required by MCL 418.861a(11),  
which states that, “The commission or a panel of the  
commission shall review only those specific findings of fact  
or conclusions of law that the parties have requested be  
reviewed.”  
In its appeal to the WCAC, plaintiff asserted error  
related to two issues: (1) the magistrate’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 cross-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 never specifically  
addressed 
the 
question 
whether 
the 
magistrate 
properly 
awarded  
interest.
 Rather, the WCAC’s opinions merely affirmed the  
magistrate’s decision in its entirety.  
In light of the fact that neither party presented the  
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  
14  
percent interest.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  
question the Court of Appeals’ analysis, because the interest  
issue was not properly preserved, we decline to address  
defendant’s request for relief on this issue.  
IV. CONCLUSION  
We conclude that plaintiff, the 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 reimbursement to the amounts set forth in the  
WDCA’s cost containment rules.  Because we conclude that the  
interest issue was not properly preserved, we decline to  
address it.  We affirm the judgment of the Court of Appeals  
remanding the case to the WCAC 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 language regarding twelve percent interest, it is not 
clear that plaintiff actually asserts that it was entitled to 
such a rate of interest.  In this section, plaintiff merely 
sets forth its general equitable subrogation argument.  
15  
 
amount 
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.  
16