William Beaumont Hosp. v. Wass

315 Mich.App. 392

889 N.W.2d 745

WILLIAM BEAUMONT HOSPITAL,

v.WASS.

No. 323393.

Court of Appeals of Michigan.

Submitted Nov. 9, 2015, at Detroit.

Decided May 17, 2016, at 9:05 a.m.

Blum & Associates (by Joseph L. Konheim and Kamron K. Lessani ) for Jon Wass.

Merry, Farnen & Ryan, PC, Saint Clair Shores (by John J. Schutza ), for William Beaumont Hospital.

Before: SHAPIRO, P.J., and O'CONNELL and GLEICHER, JJ.

PER CURIAM.

Defendant/third-party plaintiff, Jon Wass, appeals a trial court order granting third-party defendant, Time Insurance Company (Time), summary disposition of Wass's breach of contract claim. The trial court concluded that because the Office of Financial and Insurance Regulations (OFIR), an administrative agency, had already issued a decision pursuant to the external review procedures in MCL 550.1915(1), the breach of contract claim was barred by res judicata and collateral estoppel. MCL 550.1915(3), however, provides that Subsection (1) does not preclude Wass from seeking other remedies available under state and federal law. And because Wass was not entitled to an evidentiary hearing at any level of the administrative proceedings, the administrative decision rendered under MCL 550.1915(1) does not have preclusive effect in this case. Accordingly, we reverse and remand for further proceedings.

I. BACKGROUND

On June 28, 2011, Time issued a certificate of insurance to Wass that provided major medical coverage. Pertinent to this dispute, the policy contained a preexisting conditions limitation. After Wass was diagnosed with and began receiving treatment for colon cancer, Time denied his claim for benefits, asserting that the colon cancer was a preexisting condition. Wass appealed the denial to Time's internal grievance panel, which also concluded that the colon cancer was a preexisting condition. Time informed Wass that the grievance panel's decision was the last avenue available for an internal review, but advised him that he could seek an external review by the OFIR pursuant to the Patient's Right to Independent Review Act (PRIRA), MCL 550.1901 et seq.

Wass requested an external review of Time's denial of coverage from the OFIR, which assigned the review to an Independent Review Organization (IRO). Under MCL 550.1911(9), (11), and (13), the IRO was required to review "all of the information and documents" that Time used in making its adverse determination, "any other information submitted in writing" by Wass or Wass's representative, and, to the extent it was available and appropriate, the IRO could also consider additional documentary evidence listed in the statute, such as medical records and practice guidelines. The IRO was not authorized to conduct an evidentiary hearing or hear testimony.¹ The IRO concluded that the colon cancer was a preexisting condition,² thereby precluding Wass from receiving benefits. The OFIR adopted the IRO's recommendation that Wass be denied coverage.

Wass appealed the OFIR's decision in the Oakland Circuit Court pursuant to the provision providing for such review in MCL 550.1915(1). The trial court's review of the OFIR decision was limited to determining whether the decision was authorized by law. See English v. Blue Cross Blue Shield of Mich., 263 Mich.App. 449, 455, 688 N.W.2d 523 (2004). "[A]n agency's decision that ‘is in violation of statute [or constitution], in excess of the statutory authority or jurisdiction of the agency, made upon unlawful procedures resulting in material prejudice, or is arbitrary and capricious,’ is a decision that is not authorized by law." Id. (quotation marks and citations omitted; alterations in original). The trial court did not conduct an evidentiary hearing. Instead, it reviewed the OFIR record and opinion and concluded that the ruling "was not contrary to law or arbitrary and capricious." Wass did not appeal the trial court's decision in this Court.

On January 3, 2013, plaintiff, William Beaumont Hospital, filed a complaint against Wass in district court, seeking payment from Wass for the reasonable and necessary medical services it had provided. After Wass answered and filed a motion to stay the proceedings, the case was transferred to the circuit court. Wass then filed a third-party complaint against Time, alleging breach of contract and asserting that Time was responsible for the amounts sought by Beaumont Hospital. Time asserted in its answer that it had no contractual duty to pay Wass's health care expenses because the contract did not cover his preexisting condition during the pertinent time frame. The insurance company then filed a motion for summary disposition under MCR 2.116(C)(7), asserting that Wass's claims were barred by res judicata and collateral estoppel because of the June 2012 decision by the OFIR. The trial court agreed and granted the motion for summary disposition in Time's favor. Wass now appeals that decision.

II. ANALYSIS

PRIRA contemplates an aggrieved party being able to pursue both an administrative review and a claim in circuit court. We begin our analysis with the statute.³ MCL 550.1915 provides:

(1) An external review decision and an expedited external review decision are the final administrative remedies available under this act. A person aggrieved by an external review decision or an expedited external review decision may seek judicial review no later than 60 days from the date of the decision in the circuit court for the county where the covered person resides or in the circuit court of Ingham county.

(2) Subsection (1) does not preclude a health carrier from seeking other remedies available under applicable state law.

(3) Subsection (1) does not preclude a covered person from seeking other remedies available under applicable federal or state law.

(4) A covered person or the covered person's authorized representative may not file a subsequent request for external review involving the same adverse determination or final adverse determination for which the covered person has already received an external review decision under this act. [Emphasis added.]

Subsection (1) provides that the final administrative remedies under PRIRA are an external review by the OFIR followed by a review by the circuit court. However, Subsection (3) plainly provides that Subsection (1) does not preclude an aggrieved party from pursuing other remedies under state and federal law, which would include the right to bring an original and separate action in circuit court for breach of contract. There is, notably, no election of remedies language in the statute, nor will we read such a requirement into the statute. See Mich. Ed. Ass'n v. Secretary of State (On Rehearing), 489 Mich. 194, 218, 801 N.W.2d 35 (2011). Accordingly, the statutory language does not preclude Wass's suit. Nevertheless, we must determine whether his suit is precluded by the common-law doctrines of res judicata and collateral estoppel.⁴

The preclusion doctrines of res judicata and collateral estoppel "serve an important function in resolving disputes by imposing a state of finality to litigation where the same parties have previously had a full and fair opportunity to adjudicate their claims." Nummer v. Dep't of Treasury, 448 Mich. 534, 541, 533 N.W.2d 250 (1995). Res judicata applies if "(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." Adair v. Michigan, 470 Mich. 105, 121, 680 N.W.2d 386 (2004). "Generally, for collateral estoppel to apply three elements must be satisfied: (1) a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment; (2) the same parties must have had a full and fair opportunity to litigate the issue; and (3) there must be mutuality of estoppel." Monat v. State Farm Ins. Co., 469 Mich. 679, 682–684, 677 N.W.2d 843 (2004) (quotation marks, citation, and brackets omitted).

In Standard Auto. Parts Co. v. Employment Security Comm., 3 Mich.App. 561, 570, 143 N.W.2d 135 (1966), this Court explained:

In general, the answer given by the courts to the question whether decisions of administrative tribunals are capable of being res judicata depends upon the nature of the administrative action involved. The doctrine of res judicata has been applied to administrative action that is characterized by the courts as "judicial" or "quasi judicial", while to administrative determinations of "administrative", "executive", or " legislative" nature, the rules of res judicata have been held to be inapplicable. 42 Am. Jur., Public Administrative Law, § 161, p. 520. [Emphasis added.]

The preclusion doctrines are applicable to administrative decisions (1) that are "adjudicatory in nature," (2) when a method of appeal is provided, and (3) when it is clear that the Legislature "intended to make the decision final absent an appeal." Nummer, 448 Mich. at 542, 533 N.W.2d 250 ; see also Minicuci v. Scientific Data Mgt., Inc., 243 Mich.App. 28, 38, 620 N.W.2d 657 (2000).

"To determine whether an administrative agency's determination is adjudicatory in nature, courts compare the agency's procedures to court procedures to determine whether they are similar." Natural Resources Defense Council v. Dep't of Environmental Quality, 300 Mich.App. 79, 86, 832 N.W.2d 288 (2013). "Quasi-judicial proceedings include procedural characteristics common to courts, such as a right to a hearing, a right to be represented by counsel, the right to submit exhibits, and the authority to subpoena witnesses and require parties to produce documents." Id.

The Restatement of Judgments, 2d, § 83, p. 266, provides in pertinent part, "An adjudicative determination by an administrative tribunal is conclusive under the rules of res judicata only insofar as the proceeding resulting in the determination entailed the essential elements of adjudication...." The Comments provide that "[w]here an administrative...