Covenant v State Farm flipped the script on longstanding principles of practice. The Supreme Court of Michigan stated in that case medical providers did not have a direct (statutory) right to sue insurers for un-paid medical bills. This meant that direct suits or interventions by medical professionals could not be maintained in the court system. The Court in a footnote indicated that medical providers could have rights assigned to them and act upon those rights to maintain a direct cause of action.
Many providers sought and obtained assignments from patients for past treatment. The insurance companies pointed to anti-assignment language within the policies themselves in an attempt to void the assignments and dismiss the provider actions. The Court of Appeals in Jawad A Shah, MD, PC v State Farm Mut Auto Ins Co, 324 Mich App 182; 920 NW2d 148 (2018) struck down the insurance companies arguments and indicated that providers could seek assignments from Patients but only received the rights the patients had on the date the assignment was given.
Assignments must be signed AFTER treatment to be valid under the Michigan No-Fault Act. The best practice is to have the patient sign the assignment as they are checking out.
In 2019, Governor Whitmer signed the new Michigan No-Fault Act, which includes a provision for providers to directly sue insurers for unpaid bills. This means that if a patient does not sign an assignment you can still directly go after the insurer with your own counsel. However there are still some reasons to get assignments and notify the insurer of the assignment:
- Protection. As stated above the assignment, and notice to the insurer, protects provider’s bill from being resolved by someone other than the provider or their appointed representative.
- Additional Coverage. If a patient has a policy (or assigned claim) that has a cap on the PIP that becomes exhausted, an assignment will allow a claim against any third-party defendants for excess economic damages. Being able to bring that claim could allow for more recovery for the Provider from an alternative source other than the patient directly.