Opinion ID: 848821
Heading Depth: 2
Heading Rank: 1

Heading: reimbursement and equitable subrogation

Text: 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, M.C.L. § 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 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 [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 N.W.2d 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 N.W.2d 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, 485 N.W.2d 695. 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, 485 N.W.2d 695, citing Detroit Automobile Inter-Ins Exchange v. Detroit Mut. Auto. Ins. Co., 337 Mich. 50, 59 N.W.2d 80 (1953). Because the no-fault insurer was protecting its own interests and not acting as a volunteer when it paid the 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. at 119, 393 N.W.2d 479. 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, 485 N.W.2d 695.] 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, 393 N.W.2d 479 (citations omitted).] In this case, the Court of Appeals agreed with the WCAC that M.C.L. § 418.315(1) was designed to protect only employees, 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 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, 485 N.W.2d 695. 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 N.W.2d 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 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 M.C.L. § 418.315(1), which sets forth when an employer will reimburse an employee for reasonable 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 M.C.L. § 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, 485 N.W.2d 695. Similarly, plaintiff's recovery here, which is predicated on the doctrine of equitable subrogation, is not limited by the WDCA. 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.