Mich. Spine & Brain Surgeons v. Esurance Prop. & Cas. Ins. Co.

MICHIGAN SPINE AND BRAIN SURGEONS, PLLC, Plaintiff-Appellant, v. ESURANCE PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant-Appellee.

No. 355581

Court of Appeals of Michigan

October 28, 2021

UNPUBLISHED

Oakland Circuit Court LC No. 2020-179099-NF

Before: Shapiro, P.J., and Borrello and O'Brien, JJ.

Per Curiam.

In this action involving plaintiff Michigan Spine and Brain Surgeons' pursuit of no-fault benefits pursuant to an assignment by the recipient of medical services, Michigan Spine appeals as of right the Oakland Circuit Court's order granting defendant Esurance Property and Casualty Insurance Company's motion for summary disposition under MCR 2.116(C)(7) on the basis of res judicata. For the reasons set forth in this opinion, we reverse.

I. BACKGROUND

The underlying facts are not in dispute. Felicia Jones^[1] was involved in a motor vehicle accident on October 18, 2017. On April 9, 2019, Jones initiated an action against Esurance in the Wayne Circuit Court, seeking to recover benefits under the no-fault act, MCL 500.3101 et seq., pursuant to Jones' insurance policy with Esurance.^[2] On October 31, 2019, one of Michigan Spine's physicians performed a surgical operation on Jones' neck that involved the C4 through C7 vertebrae.^[3] On December 17, 2019, Michigan Spine obtained an assignment from Jones with respect to the charges for medical services provided.

On January 17, 2020, while the action between Jones and Esurance was pending in the Wayne Circuit Court, Michigan Spine initiated the instant action in the Oakland Circuit Court. In its complaint, Michigan Spine alleged that Jones was insured a policy of insurance by Esurance and that Michigan Spine was Jones' assignee with respect to medical expenses incurred as a result of injuries suffered in the October 18, 2017 motor vehicle accident. Michigan Spine claimed that it provided medical services to Jones in the amount of $42, 472.96, for which Esurance was liable.^[4]Additionally, Michigan Spine alleged that it was entitled to recover the amount of the provided medical services on the theory that it was a third-party beneficiary of the insurance contract between Jones and Esurance. Finally, Michigan Spine alleged that it had obtained a conditional payment of $207.04 from the Medicare program for medical services arising from the motor vehicle accident and, specifically, that Esurance was liable as the primary non-group health plan for "double damages and full charges" pursuant to 42 USC 1395y, located within the Medicare Secondary Payor Act.

On June 15, 2020, the Wayne Circuit Court granted Esurance's motion for summary disposition in that action based on Jones' fraudulent misrepresentations with regard to her attendant care and household services claims. Jones had claimed that she received attendant care for eight hours per day, seven days per week since the October 18, 2017 accident and that she had also received household services every day since the accident. Jones also indicated that her daughter was her care provider. However, Jones admitted in her December 5, 2019 deposition that she had been incarcerated from January 8, 2018 to June 29, 2018. The Wayne Circuit Court reasoned that it would have been impossible for Jones to have received the claimed attendant care and household services during that period. The Wayne Circuit Court also noted that Jones' daughter testified in her deposition that she did not provide attendant care and household services on a daily basis for the entire period following the accident.^[5] The Wayne Circuit Court dismissed Jones' claims.

On September 1, 2020, Esurance moved for summary disposition in the instant Oakland Circuit Court action on the ground of res judicata pursuant to MCR 2.116(C)(7) and (10). Esurance argued that because of the fraud committed by Jones and the dismissal of her underlying Wayne Circuit Court lawsuit for no-fault benefits against Esurance, Michigan Spine's derivative claims were barred under the doctrine of res judicata.

Michigan Spine argued in response that res judicata did not apply to bar its claims. First, Michigan Spine contended that because it had obtained the December 2019 assignment from Jones, Jones "could not pursue and resolve a claim she no longer owned, and one that [Michigan Spine] owned and had already filed suit on." Michigan Spine further asserted that Jones did not include the amount for the medical services provided by Michigan Spine in her damages claim for case evaluation in the Wayne Circuit Court action. Next, Michigan Spine additionally argued that Jones lacked standing to pursue the claim under the Medicare Secondary Payor Act and that only Michigan Spine was authorized and required by statute and regulation to pursue this particular claim. Next, Michigan Spine argued that there was no privity between it and Jones because Jones had assigned the claim at issue to Michigan Spine and could not pursue the claims sought by Michigan Spine for the reasons previously stated. Michigan Spine next argued that fraudulent statements made during litigation did not authorize voiding an insurance policy under its fraud provision and therefore did not operate to bar claims made by the injured insured's medical service provider. Finally, Michigan Spine argued that it was an innocent third party with respect to Jones' fraud.

In its reply brief, Esurance argued that a medical provider relying on an assignment of rights to recover for services provided stands in the shoes of the assignor and that Michigan Spine was thus incorrect to assert that the assignment somehow insulated Michigan Spine from the res judicata effect of the Wayne Circuit Court order dismissing Jones' action. Esurance maintained that Michigan Spine could not recover more than Jones as the insured and that because Jones could not recover under the policy, neither could Michigan Spine. Finally, Esurance argued that there was no private cause of action against an insurer under the Medicare Secondary Payer Act when the insured was denied recovery on the basis that the insurance policy was rescinded because Esurance no longer had any contractual obligation to provide no-fault benefits to Jones, and thus was no longer the primary payer, once the policy was rescinded. Esurance maintained that the Medicare Secondary Payer Act was therefore inapplicable.

The Oakland Circuit Court dispensed with oral argument and granted Esurance's motion for summary disposition under MCR 2.116(C)(7). The trial court reasoned that Michigan Spine's action was barred by res judicata because the action filed by Jones against Esurance in the Wayne Circuit Court had been dismissed based on fraud committed by Jones, Michigan Spine and Jones were privies, Michigan Spine's claims were derivative of the Jones' claim, the Wayne Circuit Court action was decided on the merits, and the issue of liability was decided in the Wayne Circuit Court action. The Oakland Circuit Court further concluded that "Plaintiff is not an innocent third party, and that the Medicare Secondary Payor Act is not applicable to this matter for the reasons stated by the Defendant in the reply brief."

Michigan Spine now appeals as of right.

II. STANDARD OF REVIEW

This Court reviews de novo both the circuit court's ruling on a summary disposition motion and the question whether an action is barred by res judicata. Adair v Michigan, 470 Mich. 105, 119; 680 N.W.2d 386 (2004). MCR 2.116(C)(7) provides a basis for summary disposition if "[e]ntry of judgment, dismissal of the action, or other relief is appropriate because of . . . prior judgment . . . ." Summary disposition may be granted under MCR 2.116(C)(7) on the basis of res judicata. King v Munro, 329 Mich.App. 594, 598; 944 N.W.2d 198 (2019). "When it grants a motion under MCR 2.116(C)(7), a trial court should examine all documentary evidence submitted by the parties, accept all well-pleaded allegations as true, and construe all evidence and pleadings in the light most favorable to the nonmoving party." Id. at 599 (quotation marks and citation omitted).

III. ANALYSIS

In Adair, 470 Mich. at 121, our Supreme Court set forth the fundamental legal principles of the res judicata doctrine as follows:

The doctrine of res judicata is employed to prevent multiple suits litigating the same cause of action. The doctrine bars a second, subsequent action when (1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, or could have been, resolved in the first. This Court has taken a broad approach to the doctrine of res judicata, holding that it bars not only claims already litigated, but also every claim arising from the same transaction that the parties, exercising reasonable diligence, could have raised but did not. [Citation omitted.]

In this case, the general question is whether the Wayne Circuit Court's decision granting summary disposition in favor of Esurance and dismissing Jones' claims on the basis of her fraudulent misrepresentations operates to bar Michigan Spine's claims here.

Relative to the three prongs necessary to invoke the doctrine of res judicata, here, there is no dispute in the present case that the Wayne Circuit action was decided on the merits, leaving the second and third res judicata requirements at issue.

With respect to the second requirement, it is undisputed that Michigan Spine was not a party to the Wayne Circuit action initiated by Jones and that the two lawsuits now at issue therefore did not involve the same parties. However, Michigan Spine's claim against Esurance in this case is based on an assignment it obtained from Jones with respect to the medical services provided to Jones. Esurance was a party to...