Court Opinion

ID: 8487032
Source: CourtListenerOpinion
Date Created: 2022-11-18 05:06:18.553821+00
Date Added: 2024-06-11T16:50:00.251877
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                            COURT OF APPEALS

ENCOMPASS HEALTHCARE, PLLC,                                          FOR PUBLICATION
                                                                     November 17, 2022
               Plaintiff-Appellant,                                  9:05 a.m.

v                                                                    No. 357225
                                                                     Oakland Circuit Court
CITIZENS INSURANCE COMPANY,                                          LC No. 2019-177749-CZ

               Defendant-Appellee.

Before: GLEICHER, C.J., and SERVITTO and YATES, JJ.

GLEICHER, C.J.

        The goals of Michigan’s no-fault insurance system include promptly compensating victims
of motor vehicle accidents for covered losses and reducing the need for litigation. When an insurer
denies a claim, the one-year-back rule serves another goal by encouraging claimants to file suit
when the evidence is fresh, limiting recovery for improperly denied claims to losses incurred
during the year before the action is filed.

       But when is a claim denied, thereby triggering the one-year-back rule’s damage-limiting
provision?

        For decades, our courts equitably tolled the one-year damage-limiting provision until the
date the insurer formally and explicitly denied liability. Our Supreme Court eradicated this judicial
tolling of the one-year-back rule in Devillers v Auto Club Ins Ass’n, 473 Mich 562; 702 NW2d
539 (2005), holding that because the statute did not include a tolling mechanism, none could be
engrafted. In 2019, however, the Legislature amended the no-fault act by adding a tolling
provision. Now, the one-year-back period is tolled until the date of the insurer’s formal denial of
a claim. Applying the new statutory language here, we hold that because Citizens Insurance
Company never formally denied Encompass Healthcare, PLLC’s requests for reimbursement, the
application of the one-year-back rule remained tolled until this lawsuit was filed. We reverse the
circuit court’s contrary finding and remand for further proceedings.

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                                       I. BACKGROUND

       The facts are undisputed. In December 2017, Ronald Mannor was injured in a motor
vehicle accident and required surgery to repair a cervical fracture. Mannor later developed a
pressure sore. Encompass provided treatment for the pressure sore from June to October 2018.
Encompass sought reimbursement from Citizens of $921,828.44, but Citizens paid only
$177,655.25. In May 2019, Mannor assigned his right to benefits and recovery to Encompass.

        On November 4, 2019, Encompass filed a complaint in the Oakland Circuit Court, asserting
breach of contract and seeking declaratory relief against Citizens for unpaid no-fault benefits.1
Encompass alleged that Citizens improperly refused to reimburse it for the reasonably necessary
services it provided to Mannor. Encompass requested a declaration concerning Citizens’
obligation to pay and a judgment for the unpaid reimbursement claims, plus costs, interest, and
fees.

        Following initial discovery, Citizens moved for summary disposition under MCL
2.116(C)(7), (8), and (10). Citizens contended that the one-year-back rule of MCL 500.3145(2)
abrogated any further obligation of payment because Encompass’s November 4, 2019 complaint
was filed more than a year after the losses at issue were incurred, as Mannor’s treatment ended in
October 2018. Citizens requested that the court grant its motion and either (1) dismiss
Encompass’s complaint in its entirety with prejudice, or (2) dismiss Encompass’s complaint with
respect to any expenses incurred before November 4, 2018 (which would account for all of
Encompass’s expenses).

        Encompass conceded that its expenses were incurred more than a year before it initiated
this action, but argued that reimbursement was nevertheless warranted because of the recently
adopted tolling provision within MCL 500.3415(3). According to Encompass, because Citizens
never formally denied its reimbursement claims, the one-year-back rule remained tolled and
Encompass was not required to preserve its claims with an earlier complaint.

        Citizens countered that MCL 500.3145(2) requires strict compliance and is not subject to
tolling under MCL 500.3145(3), at least not under the circumstances here.

       The circuit court partially granted Citizens’ motion as follows:

              Pursuant to MCL 500.3145(2), “the claimant may not recover benefits for
       any portion of the loss incurred more than 1 year before the date on which the action
       was commenced.” [Encompass’s] Complaint was filed on November 4, 2019.
       Therefore, [Citizens] argues that pursuant to the “one-year-back[ ]rule,” as set forth

1
  The no-fault act, MCL 500.3103 et seq., was substantially amended by 2019 PA 21, effective
June 11, 2019. Because Encompass’s complaint was filed after these amendments took effect, this
case is governed by the newly adopted statutory language. See George v Allstate Ins Co, 329 Mich
App 448, 451 n 3; 942 NW2d 629 (2019) (“This case was commenced before the [2019]
amendment[s] and, therefore, it is controlled by the former provisions of the no-fault act.”).

                                                -2-
       in MCL 500.3145(2), supra, any portion of the loss incurred by [Encompass] before
       November 4, 2018 is not recoverable.

               However, the Court finds that MCL 500.3145(3) acts to toll the limitations
       period in 500.3145(2) for any losses which were not formally denied by [Citizens]
       prior to November 4, 2018. The Court finds that [Citizens’] [EORs] serve as formal
       denials within the purview of MCL 500.3145(3) because [Citizens] denied portions
       of [Encompass’s] claims. The Court finds that summary disposition is appropriate
       regarding all claims that were denied via an [EOR] prior to November 4, 2018.
       However, summary disposition is inappropriate as to any claims that were denied
       via an [EOR] dated on or after November 4, 2018.

The court later clarified this ruling at Encompass’s request, stating:

       The Court’s May 14, 2020 Opinion & Order was clear. All claims which were
       denied by an [EOR] prior to November 4, 2018 are barred by the limitations period
       in MCL 500.3145(2). The Court’s ruling made it clear that an [EOR] serves as a
       formal denial within the purview of MCL 500.3145(3). Therefore, the limitations
       period in MCL 500.3145(2) began[, for each reimbursement claim,] upon the
       issuance of the first [EOR] denying the claim in whole or in part.

      On April 30, 2021, the circuit court entered a stipulated order dismissing Encompass’s
complaint without prejudice so that Encompass could file the instant appeal challenging the court’s
May 14, 2020 and January 8, 2021 orders.

                                  II. STANDARD OF REVIEW

        We review de novo a trial court’s ruling on a motion for summary disposition. El-Khalil
v Oakwood Healthcare, Inc, 504 Mich 152, 159; 934 NW2d 665 (2019). We also review issues
of statutory interpretation de novo. People v Zajaczkowski, 493 Mich 6, 12; 825 NW2d 554 (2012).

        Under MCR 2.116(C)(7), summary disposition is warranted when a claim is barred by the
applicable statute of limitations. Al-Shimmari v Detroit Med Ctr, 477 Mich 280, 288; 731 NW2d
29 (2007). Additional documentary evidence beyond the pleadings may be submitted by the
parties, but is not required; if provided, such evidence must be considered. Maiden v Rozwood,
461 Mich 109, 119; 597 NW2d 817 (1999). Whether a statute of limitations applies in a case is a
question of law we review de novo. Ferndale v Florence Cement Co, 269 Mich App 452, 457; 712
NW2d 522 (2006). In contrast, motions under MCR 2.116(C)(8) “test[] the legal sufficiency of a
claim based on the factual allegations in the complaint.” El-Khalil, 504 Mich at 159. “When
considering such a motion, a trial court must accept all factual allegations as true, deciding the
motion on the pleadings alone.”2 Id. at 160.

2
 Because the circuit court evaluated documents outside of the pleadings, we consider the motion
as granted under MCR 2.116(C)(7) and/or (10). See Spiek v Mich Dep’t of Transp, 456 Mich 331,
338; 572 NW2d 201 (1998).

                                                 -3-
        MCR 2.116(C)(10) provides that summary disposition is appropriate when “[e]xcept as to
the amount of damages, there is no genuine issue as to any material fact, and the moving party is
entitled to judgment or partial judgment as a matter of law.” A motion brought under MCR
2.116(C)(10) tests the factual support for a party’s action. Pioneer State Mut Ins Co v Dells, 301
Mich App 368, 377; 836 NW2d 257 (2013).

                                           III. ANALYSIS

         “The primary goal of statutory interpretation is to identify and give effect to the intent of
the Legislature. We first look to the specific language of the statute in determining the intent of
the Legislature.” Port Sheldon Beach Ass’n v Dep’t of Environmental Quality, 318 Mich App 300,
308; 896 NW2d 496 (2016). “We accord to every word or phrase of a statute its plain and ordinary
meaning, unless a term has a special, technical meaning or is defined in the statute.” Guardian
Environmental Servs, Inc v Bureau of Constr Codes & Fire Safety, 279 Mich App 1, 6; 755 NW2d
556 (2008). Relevant here, Michigan courts have recognized that statutory amendments directed
at a particular judicial decision can be remedial in nature by “reinstat[ing] the state of the law as it
existed prior to the judicial decision.” Buhl v Oak Park, 329 Mich App 486, 505-506; 942 NW2d
667 (2019), rev’d on other grounds, 507 Mich 236 (2021).

        Encompass contends that the circuit court committed reversible error in partially granting
Citizens’ motion for summary disposition regarding any reimbursement claims that were “denied”
by its provision of “explanations of review” (EORs) to Encompass before November 4, 2018.
Specifically, Encompass argues that the court erroneously determined that the EORs constituted
“formal denials” as contemplated under MCL 500.3145(3).

        Encompass particularly faults the circuit court for “effectively reading into the amended
statute language that did not exist and ignoring longstanding case law that clearly explained an
insurance company’s obligation when formally denying a claim.” Relying on various cases,
Encompass asserts that a formal denial is a legal term of art demanding that such expressions be
explicit and unequivocal, requirements that were allegedly lacking in the EORs (or satisfaction of
which is at least subject to a question of fact). Encompass also notes that Citizens’ practices in
responding to the claims allowed for reevaluation of particular expenses even after the initially
stated “Approval Date” in each EOR.

        Encompass argues further that because Citizens never formally denied the reimbursement
claims, the one-year-back rule remained tolled up to the filing of its complaint in November 2019
and did not prohibit relief for any of its claims. Accordingly, Encompass requests that this Court
reverse the circuit court’s May 14, 2020 order partially granting Citizens’ motion for summary
disposition (as well as the court’s related January 8, 2021 order clarifying this earlier ruling) and
remand for further proceedings.

        Citizens counters that the circuit court correctly determined that the EORs constituted
formal denials under MCL 500.3145(3), thereby ending the tolling period for each reimbursement
claim. Noting that the no-fault act does not define “formal denial,” Citizens claims that its EORs
clearly met this standard based on the normal dictionary definitions of “formal” and “denial.”
Citizens also argues that the EORs otherwise complied with separate caselaw requiring that such
expressions be sufficiently explicit.

                                                  -4-
      A. THE ONE-YEAR-BACK RULE AND THE 2019 NO-FAULT AMENDMENTS

       Before the recent no-fault amendments, MCL 500.3145, as amended by 2019 PA 21,
provided, in relevant part:

                (1) An action for recovery of personal protection insurance benefits payable
        under this chapter for accidental bodily injury may not be commenced later than 1
        year after the date of the accident causing the injury unless written notice of injury
        as provided herein has been given to the insurer within 1 year after the accident or
        unless the insurer has previously made a payment of personal protection insurance
        benefits for the injury. . . . However, the claimant may not recover benefits for any
        portion of the loss incurred more than 1 year before the date on which the action
        was commenced. . . .

                (2) An action for recovery of property protection insurance benefits shall
        not be commenced later than 1 year after the accident. [Emphasis added.]

         Until 2005, Michigan courts interpreted the one-year-back rule to incorporate a judicially
created tolling provision that remained in effect until a no-fault claim was formally denied by the
insurer. This Court first applied this tolling rule to former MCL 500.3145 in Richards v American
Fellowship Mut Ins Co, 84 Mich App 629; 270 NW2d 670 (1978).3 See id. at 635 ([R]running of
the 1 year statute of limitations was tolled from the day [the] plaintiff gave notice of loss . . . until
liability was formally denied by [the] defendant. . . .”) (emphasis added). Despite that no such
tolling exception was explicitly included in the statute, the Richards Court reasoned:

        [Section] 3145 must be construed in accordance with the Legislature’s purpose in
        enacting no-fault insurance, i.e., that persons injured in automobile accidents be
        promptly and adequately compensated for their losses arising out of the motor
        vehicle mishap.

                [Without tolling], we would in effect be penalizing the insured for the time
        the insurance company used to assess its liability. To bar the claimant from judicial
        enforcement of his insurance contract rights because the insurance company has
        unduly delayed in denying its liability would run counter to the Legislature’s intent
        to provide the insured with prompt and adequate compensation.

3
 Although this Court is not required to follow cases decided before November 1, 1990, see MCR
7.215(J)(1), a published case decided by this Court “has precedential effect under the rule of stare
decisis,” MCR 7.215(C)(2). See also Woodring v Phoenix Ins Co, 325 Mich App 108, 114-115;
923 NW2d 607 (2018) (stating that although this Court is not “strictly required to follow
uncontradicted opinions from this Court decided before November 1, 1990,” those opinions are
nonetheless “considered to be precedent and entitled to significantly greater deference than are
unpublished cases”).

                                                  -5-
                                              * * *

              [Allowing tolling under] § 3145 would effectuate the legislative intent in
       enacting the no-fault act. Unable to profit from processing delays, insurance
       companies will be encouraged to promptly assess their liability and to notify the
       insured of their decision. At the same time, the insured will have a full year in
       which to bring suit. [Id. at 634-635 (citations omitted).]

        Our Supreme Court upheld Richards in Lewis v Detroit Auto Inter-Ins Exch, 426 Mich 93;
393 NW2d 167 (1986), while adding a requirement that an insured seek reimbursement with
reasonable diligence for tolling to take effect. Id. at 101-103. See also Johnson v State Farm Mut
Auto Ins Co, 183 Mich App 752; 455 NW2d 420 (1990) (asking whether the plaintiff pursued her
claim with sufficient diligence to allow for tolling); Mousa v State Auto Ins Co, 185 Mich App
293; 460 NW2d 310 (1990) (concluding that the insurer’s formal denial of benefits acted to cut off
tolling). But our Supreme Court overruled Lewis and discarded judicial tolling in Devillers, 473
Mich 562. Devillers criticized Lewis and the cases applying it as wrongly decided, propounding
that the cases manifested judicial policy-making contrary to the plain and unambiguous language
of former MCL 500.3145. Id. at 581-584. The Devillers majority overruled these cases and
concluded that former MCL 500.3145 must be strictly applied as written, without any tolling
provision. See id. at 586.

       Following the 2019 no-fault amendments, MCL 500.3145 now reads, in relevant part, as
follows:

               (1) An action for recovery of personal protection insurance benefits payable
       under this chapter for an accidental bodily injury may not be commenced later than
       1 year after the date of the accident that caused the injury unless written notice of
       injury as provided in subsection (4) has been given to the insurer within 1 year after
       the accident or unless the insurer has previously made a payment of personal
       protection insurance benefits for the injury.

              (2) Subject to subsection (3), if the notice has been given or a payment has
       been made, the action may be commenced at any time within 1 year after the most
       recent allowable expense, work loss, or survivor’s loss has been incurred.
       However, the claimant may not recover benefits for any portion of the loss incurred
       more than 1 year before the date on which the action was commenced.

               (3) A period of limitations applicable under subsection (2) to the
       commencement of an action and the recovery of benefits is tolled from the date of
       a specific claim for payment of the benefits until the date the insurer formally
       denies the claim. . . . [Emphases added.]

        The central difference between the pre and post-amendment MCL 500.3145 is the insertion
of the phrase “until the date the insurer formally denies the claim.” No published authority has yet
addressed the interplay of these amendments with the earlier discussed caselaw. Therefore, we
take this opportunity to conclude that these amendments to MCL 500.3145, particularly the
addition of Subsection (3), act to supersede our Supreme Court’s ruling in Devillers and return the

                                                -6-
state of law to that provided in Lewis and its progeny. Critically, the tolling exception adopted in
MCL 500.3145(3) is identical to that embraced in the cases overruled, demonstrating the
Legislature’s intent to impose a tolling exception to the one-year-back rule in the form it existed
before Devillers.

                         B. FORMAL DENIAL UNDER MCL 500.3145

        Resolution of this appeal turns on whether the trial court properly determined that Citizens’
EORs serve as formal denials of Encompass’s reimbursement claims. First, we note that, as
explained in Lewis, 426 Mich 93, a formal denial ends tolling (and commences the running of the
one-year-back rule) because it “unequivocally impresse[s] upon the insured that the extraordinary
step of pursuing relief in court must be taken.” Id. at 101. Despite Citizens’ reliance on the normal
dictionary definitions of “formal” and “denial” to support its argument, both parties recognize that
Michigan courts have provided specific guidance for what may qualify as a formal denial of claims
in insurance disputes. There is no need to resort to dictionary definitions.

        In Mousa, 185 Mich App 293, applying the pre-Devillers tolling exception to former MCL
500.3145, this Court explained that while a formal denial need not be in writing, it must be
“sufficiently direct.” Id. at 295. We again interpreted the meaning of a formal denial, albeit
regarding tolling under a separate statutory provision, in McNeel v Farm Bureau Gen Ins Co of
Mich, 289 Mich App 76; 795 NW2d 205, 225 (2010). While the McNeel majority addressed the
timing of a purported formal denial without specifically mentioning its requirements, id. at 86-87,
the dissent clarified the applicable standard as follows:

       Our appellate courts have already parsed the meaning of the term “formal denial.”
       A denial of liability need not be in writing to be formal, but it must be explicit.
       Although the best formal notice is a writing, notice may be sufficiently direct to
       qualify as formal without being put into writing. Accordingly, under this state’s
       jurisprudence, a “formal denial” must be explicit and direct. [Id. at 111 (KELLY, J.,
       dissenting; quotation marks and citations omitted).]

Justice KELLY’s formulation was later embraced by this Court. See also Smitham v State Farm
Fire & Cas Co, 297 Mich App 537, 545, 549; 824 NW2d 601 (2012) (“[A] formal denial such as
is necessary to end tolling must be explicit and unequivocally impress upon the insured the need
to pursue further relief in court[,] . . . [and] an insurer may end the tolling period by explicitly
indicating that the insurer is denying all liability in excess of what it has paid.”). We now readopt
this explanation of “formal denial” detailed in the pre-Devillers line of cases.

       We conclude that Citizens’ EORs did not provide the explicit and unequivocal expression
of finality required to constitute formal denials under our pre-Devillers jurisprudence.
Accordingly, tolling remained in effect under MCL 500.3145(3) until Encompass filed its
November 4, 2019 complaint, and its reimbursement claims were not time-barred by the one-year-
back rule. The circuit court erred in dismissing Encompass’s claims arising from the EORs issued
before November 4, 2018. Summary disposition should have been denied without qualification.

       The EORs included no language clearly stating that the claims were denied, at least not
with the finality and clarity required to end the tolling period. The EORs essentially stated only

                                                -7-
the amount of each claim that was “[a]llowed” versus “[r]educ[ed],” with little additional detail.
While the EORs provided “[c]omments” for most bills, most simply read, “Professional Review
Completed by [various medical personnel abbreviations].” A limited number requested that
Encompass submit additional documentation regarding a claim or claims4 (e.g., “Please send an
updated signed specific Dr. order that should include the to and from dates of service for the IV
infusion medications and supplies for a review consideration. Thank you, Professional Review
Completed, SE, RN”). Given the nature of the comments requesting additional information,
Encompass could not reasonably infer that the EORs were denials. For EORs lacking a request
for more information, Citizens argues that Encompass should have assumed that Citizens had
issued a formal and final denial. But no information ever “explicitly indicat[ed] that the insurer
[wa]s denying all liability in excess of what it ha[d] paid.” Smitham, 297 Mich App at 549
(emphasis added). A direct and forthright denial of coverage puts the claimant on notice that the
clock is ticking. Relying on inferred denials invites disagreements and litigation, undermining one
of the goals of the no-fault act.

       Most of Citizens’ EORs included the following disclaimer:

               This bill has been evaluated against the prevailing billing practices for
       healthcare providers within your geographic area. The reimbursement rate may
       therefore be different than the amount billed.

               Please be advised that this bill may have been adjusted pursuant to the
       provisions of any applicable statute or any applicable policy of insurance. Based
       upon the adjustment of the bill pursuant to any applicable statute or any applicable
       policy of insurance, the payment for this bill may different that the amount billed.

This general disclaimer was merely included as boilerplate and did not afford Encompass with an
explicit and unequivocal denial of benefits. Given the generality of these statements, like that of
the information relating to the amounts approved and any reductions made, Citizens’ EORs simply
lacked the clarity to unequivocally convey a need for Encompass to seek redress in court and make
them formal denials under MCL 500.3145(3).

        We reverse and remand for further proceedings consistent with this opinion. We do not
retain jurisdiction.

                                                            /s/ Elizabeth L. Gleicher
                                                            /s/ Deborah A. Servitto
                                                            /s/ Christopher P. Yates

4
 A single comment provided a more explicit denial of liability for the claims in that EOR, stating,
“Reevaluation completed and further reimbursement is not supported.” But this EOR was
completed in December 2018 and therefore would not have barred relief under the one-year-back
rule even if considered a formal denial.

                                                -8-