                           STATE OF MICHIGAN

                            COURT OF APPEALS


AUTO-OWNERS INSURANCE COMPANY,                                     FOR PUBLICATION
HOME-OWNERS INSURANCE COMPANY,                                     December 18, 2018
and CALEB CASANOVA,                                                9:00 a.m.

                Plaintiffs-Appellees,

v                                                                  No. 339799
                                                                   Ingham Circuit Court
COMPASS HEALTHCARE PLC d/b/a                                       LC No. 16-000870-CK
COMPASS HEALTH, and LANSING
NEUROSURGERY,

                Defendants-Appellants.


Before: BOONSTRA, P.J., and JANSEN and GADOLA, JJ.

PER CURIAM.

        Defendants appeal as of right the trial court’s opinion and order denying their motion for
summary disposition, sanctions, and attorney fees, and instead granting summary disposition and
awarding attorney’s fees and costs to plaintiffs. We affirm in part, and reverse in part as to the
trial court’s award of reasonable attorney’s fees and costs under MCL 445.257(2).

                           I. RELEVANT FACTUAL BACKGROUND

       On July 3, 2014, plaintiff Caleb Casanova was injured in an automotive accident.
Casanova sustained a concussion, a comminuted fracture of his C2 vertebrae, and various other
minor injuries. Casanova was admitted to the intensive care unit of Sparrow Hospital, and
defendants1 provided treatment to him on July 4, 2014. Compass Health submitted a bill to
Home-Owners Insurance Company (Home-Owners), Casanova’s no-fault insurer, for $1,859.00.
On August 5, 2014, Home-Owners submitted payment to Compass Health in the amount of
$1,076.14. On August 13, 2014, Compass Health sent an invoice directly to Casanova for the
remaining $782.86. A second statement was sent to Casanova on September 5, 2014.




1
    Lansing Neurosurgery is a division of Compass Health.


                                               -1-
        On September 18, 2014, Home-Owners sent a second letter to Compass Health,
indicating that if Compass Health wished to dispute the reasonableness of its $1,076.14 payment,
it was to deal with Home-Owners directly, and not with Casanova. Regardless, Compass Health
continued to send Casanova invoices on October 20, 2014, and on February 11, 2016. On March
1, 2016, Home-Owners sent second letter to Compass Health, advising that reasonable payment
had been made to Compass Health on behalf of Casanova in accordance with MCL 500.3107 and
MCL 500.3157. Accordingly, Compass Health could pursue legal action if it wished to dispute
the reasonableness of the payment, but was to cease direct contact with Casanova. Regardless,
Compass Health sent two more invoices to Casanova on April 11, 2016, and April 20, 2016.

        On May 5, 2016, Home-Owners sent a third letter to Compass Health: this time a cease
and desist. The letter advised Compass Health that Home-Owners Insurance Company was “the
only proper party to any dispute as to the reasonableness of the payment[,]” and that all
collections efforts directed at Casanova should be ceased. Yet on June 10, 2016, July 11, 2016,
and August 10, 2016, Compass Health sent invoices directly to Casanova.

        On November 15, 2016, plaintiffs filed a five count complaint against defendant, seeking
a declaratory judgment under the No-Fault Act, MCL 500.3101 et seq., seeking a “declaration
from the [c]ourt as to whether Compass [Health] may attempt to obtain payment” of its “balance
bill” directly from Casanova, regardless of the reasonable payment made by Home-Owners.
Plaintiffs also sought injunctive relief, requesting that Compass Health be prevented from
contacting Casanova regarding collections pending the outcome of the instant action. Casanova
also sought relief under the Michigan Regulation of Collection Practices Act (the MRCPA),
MCL 445.251 et seq., seeking damages. Finally, all plaintiffs sought attorney fees pursuant to
MCL 500.3148(2).

        In lieu of an answer, defendants moved for summary disposition pursuant to MCR
2.116(C)(4) and (C)(8), and for sanctions pursuant to MCR 2.114(F). Defendants argued that
plaintiff’s claim for declaratory relief was moot, as the underlying debt giving rise to plaintiffs’
claim was unenforceable. Specifically, defendants admitted that “[t]he debt is unenforceable . . .
pursuant to the one-year-back rule that governs the recovery of benefits under” MCL 500.3145.
Similarly, defendants argued that because the underlying debt was unenforceable, plaintiffs’
claim for injunctive relief was not yet ripe for review. Finally, defendants argued that plaintiffs
were not entitled to attorney fees under MCL 500.3148(2) because plaintiffs could not recover
fees related to a lawsuit they initiated. Defendants also sought sanctions, claiming plaintiffs’
lawsuit was “frivolous.”

        In response, Casanova argued that despite defendants’ admission that the balance owed
was unenforceable as a matter of law, defendants continued to contact him in an effort to collect,
and for that reason, plaintiffs are entitled to the relief requested in their complaint. With his
response to defendants’ motion for summary disposition, Casanova included a counter-motion
for summary disposition pursuant to MCR 2.116(C)(10), which Home-Owners concurred with.
Plaintiffs agreed that all of the medical expenses incurred by Casanova were covered under his
no-fault insurance policy with Home-Owners, and that pursuant to MCL 500.3157, Home-
Owners had paid defendants a reasonable amount for services actually rendered. Accordingly,
Casanova was not responsible for the difference. Further, in light of defendants’ own admission


                                                -2-
that the balance owed was unenforceable, summary disposition in favor of plaintiffs was
appropriate.

        Defendants replied, now arguing that plaintiffs had misunderstood their argument:
although the “balance bill” was unenforceable under the No-Fault Act, Casanova still incurred an
implied contractual obligation to pay independent of the No-Fault Act. Defendants articulated
that they had not raised this earlier, as plaintiffs had never claimed the balance was
unenforceable under contract law, and defendants were not required to negate every theory not
raised by plaintiffs.

        Following a hearing on defendants’ motion for summary disposition, and Casanova’s
counter-motion for summary disposition, the trial court entered a written opinion and order
granting summary disposition in favor of and awarding attorney fees and costs to plaintiffs, and
denying defendants summary disposition, sanctions, and attorney’s fees and costs. The trial
court ultimately concluded that Michigan law is well settled, and there is no factual dispute, that
Home-Owners is Casanova’s no-fault insurer, and accordingly, are “liable to pay benefits for
Casanova’s care, treatment, and rehabilitation arising out of this injury.” Further, the No-Fault
Act provides that under MCL 500.3107, Home-Owners must pay all “[a]llowable expenses
consisting of all reasonable charges incurred for reasonably necessary products, services, and
accommodations[.]” Defendants, as medical providers, also have duties under the No-Fault Act,
including the duty to charge no more than a “reasonable amount” for the products, services, and
accommodations rendered. This means that a medical provider “shall not exceed the amount the
person or institution customarily charges for like products, services and accommodations in
cases not involving insurance.”

       The trial court went on to conclude that “it is a well-settled matter of law that insurance
providers like [Home-Owners] have an obligation to audit charges and make only reasonable
payments as part of a cost-policing function meant to provide health care providers an incentive
to keep costs to a minimum.” Further, simply because plaintiffs did not frame their complaint as
requesting a declaration about Casanova’s contractual liability does not mean that plaintiffs’
complaint “failed to state a claim or allege sufficient facts.” Indeed, plaintiffs’ “argument,
through the Complaint and pleadings, is clearly that they are seeking a declaration on the
question of whether the practice of reasonable partial payments made by insurers to providers
allowed by the No-Fault Act should result in liability to the insured.” To that end, the trial court
concluded that based on relevant case law, statutory interpretation, and public policy:

       a [medical] provider cannot lawfully charge more than a reasonable amount for
       products, services, and accommodations, [and it] is clear, that once an insurer has
       made its required audit, determination, and payment of benefits for the reasonable
       and necessary charges billed by providers, a provider cannot then pursue and
       collect the remainder of the bill from a patient insured. Where a provider disputes
       an insurer’s determination and subsequent partial payment, that dispute belongs
       solely between the provider and insurer, and is subject to the one-year-back
       provision of MCL 500.3145.




                                                -3-
         Finally, the trial court concluded that by sending defendant at least ten collections letters
or billing statements, and ignoring the cease and desist letters sent by Home-Owners, defendants
had willfully violated the MRCPA,

       by making misleading statements to Casanova that he owed the balance bill,
       where [d]efendants were on notice that Casanova’s liability was in dispute and
       where Casanova never owed the bill charged in accordance with the No-Fault
       Act, pursuant to MCL 445.252(e). . . . Casanova is thus entitled to $150 in
       damages per violation, that being each of the ten billing statements sent to
       Casanova in an attempt to collect a debt he did not owe.

The trial court reiterated that because defendants violated MCL 445.252(e), plaintiffs were
entitled to reasonable attorney’s fees and costs under MCL 445.257(2).

        Two days after the trial court entered its opinion and order, our Supreme Court issued its
decision in Covenant Medical Center, Inc v State Farm Mutual Auto Insurance Company, 500
Mich 191; 895 NW2d 490 (2017). Accordingly, defendants moved for reconsideration of the
trial court’s opinion and order under MCR 2.119(F). Defendants argued that after Covenant,
medical providers have “no statutory cause of action under the No-Fault Act against insurers, but
that they are not remediless as providers can seek payment from the insured person for their
reasonable charges.” Accordingly, because Covenant is controlling “and precludes a finding in
favor of [p]laintiffs,” reconsideration is appropriate under MCR 2.119(F).

       The trial court entered an opinion and order denying defendants’ motion for
reconsideration on August 7, 2017. The trial court concluded, in relevant part:

       This Court acknowledges that, pursuant to Covenant, [d]efendants had a legal
       right to seek payment directly from Casanova under the provisions of the No-
       Fault Act. However, the issue presented before this Court was a separate
       consideration: whether health care providers could seek payment of “balance
       bills” from a patient-insured on a contractual liability theory, rather than under
       the No-Fault Act, after a provider’s charges were audited for reasonableness and
       the provider was paid a partial payment based on the findings of those audits.
       This Court finds that although the May 23, 2017 Opinion & Order erred with
       regard to the determination that providers must dispute partial payments with
       insurers, rather than patient-insured, it does not affect this Court’s determination
       that a provider does not have a contractual right to pursue a patient-insured after a
       provider’s charges have been determined to be unreasonable in accordance with
       the No-Fault Act, and therefore, a different disposition of the motion is not
       required.

                                               * * *

       This Court determined that the provisions of the No-Fault Act requiring a
       provider to charge only “reasonable and necessary charges,” and the provisions of
       the Act requiring an insurer to pay “[a]llowable expenses consisting of all
       reasonable charges. . .” imposed a standard of reasonableness that an insurer was

                                                 -4-
       duty-bound to enforce through audits. MCL 500.3107, MCL 500.3157. The
       Covenant decision did not change or affect either the standard of reasonableness
       or the insurer’s duty to audit; indeed, the Covenant, decision noted that a provider
       may seek payment only for a provider’s reasonable charges. Since the present
       case raises the issue of a “balance bill,” Covenant does not provide [d]efendants
       with an unfettered right to pursue the patient-insured, Casanova, because
       [d]efendants’ charges were found to be unreasonable. This Court erred when it
       placed the dispute over whether [d]efendants’ charges were reasonable between
       [d]efendants and Auto-Owners and Home-Owners, as Covenant removed a
       provider’s cause of action against an insurer absent an assignment of no-fault
       benefits, but Covenant does not remove the necessity of resolving the dispute
       under the provisions of the No-Fault Act.

The trial court further noted that in their pleadings, defendants had admitted that the balance in
question was unenforceable under the No-Fault Act’s one-year-back rule. Based on the
foregoing, it concluded that “a different disposition of this case is not required.” This appeal
followed.

     II. MEDICAL PROVIDER’S RIGHT TO SEEK PAYMENT OF “BALANCE BILL”

        Defendants first argue that upon reconsideration, the trial court erroneously refused to
reverse its denial of summary disposition in plaintiffs’ favor, instead erroneously concluding that
despite Covenant, “medical providers have no contractual right to seek payment from their
patients once their patients’ insurers have paid the portion of the medical bills that the insurer
deems reasonable.” We disagree.

        “This Court reviews for an abuse of discretion a trial court’s ruling on a motion for
reconsideration.” Sanders v McLaren-Macomb, 323 Mich App 254, 264; 916 NW2d 305 (2018).
An abuse of discretion occurs when the trial court’s decision is “outside the range of reasonable
and principled outcomes.” Id. MCR 2.119(F)(3) requires the “party moving for reconsideration
to ‘demonstrate a palpable error by which the court and the parties have been mislead and show
that a different disposition of the motion must result from the correction of the error.” The trial
court has “considerable discretion in granting reconsideration to correct mistakes, to preserve
judicial economy, and to minimize costs to the parties.” Id. at 264-265 (citation omitted.)
Additionally, we review questions of law and the interpretation of statutes de novo. Haksluoto v
Mt. Clemens Regional Med Ctr, 500 Mich 304, 309-310; 901 NW2d 577 (2017).

        Defendant correctly argues that in Covenant, our Supreme Court held that “healthcare
providers do not possess a statutory cause of action against no-fault insurers for recovery of
personal protection insurance benefits under the no-fault act,” but rather “a provider that
furnishes healthcare services to a person for injuries sustained in a motor vehicle accident may
seek payment from the injured person for the provider’s reasonable charges.” Covenant, 500
Mich at 196-196, 217. Accordingly, pursuant to MCR 2.119(F)(3), the trial court was well
within its discretion to consider defendants’ motion for reconsideration, and did in fact correctly
conclude that it had previously erred in concluding that defendants were required to pursue only
Home-Owners. Instead, after Covenant, the trial court correctly concluded on reconsideration


                                                -5-
that defendants had a “legal right to seek payment directly from Casanova under the provisions
of the No-Fault Act.”

       The trial court also correctly concluded that despite our Supreme Court’s holding in
Covenant, defendants were still not entitled to summary disposition in their favor. The original
question before the trial court was whether defendants could “seek payment of ‘balance bills’
from a patient-insured on a contractual liability theory, rather than under the No-Fault Act, after
a provider’s charges were audited for reasonableness and the provider was paid a partial payment
based on the findings of those audits.” We agree with the trial court, and conclude that the
answer is no.

        Under MCL 500.3157, a medical provider may only charge a “reasonable amount for the
products, services and accommodations rendered” to an injured person for an accidental bodily
injury covered by personal protection insurance. Likewise, under MCL 500.3107(1)(a), a no-
fault insurer is only responsible for paying “[a]llowable expenses consisting of all reasonable
charges incurred for reasonably necessary products, services, and accommodations for an injured
person’s care, recovery, or rehabilitation.” Therefore, the trial court did not abuse its discretion
in concluding that the “Covenant decision did not change or affect either the standard of
reasonableness or the insurer’s duty to audit; indeed, the Covenant decision noted that a provider
may seek payment only for a provider’s reasonable charges.”

       Our Supreme Court’s decision in Covenant also did not affect this Court’s decision in
AOPP v Auto Club Ins Ass’n, 257 Mich App 356; 670 NW2d 569 (2003), aff’d 472 Mich 91;
693 NW2d 358 (2005). This Court confirmed in AOPP that under the No-Fault Act, a medical
provider will only be paid for reasonable and necessary charges actually incurred. AOPP, 257
Mich App at 374. The No-Fault Act,

       requires that an insurer only pay on behalf of the insured a “reasonable” charge
       for the particular product or service. However, the Legislature has not defined
       what is “reasonable” in this context, and, consequently, insurers must determine
       in each instance whether a charge is reasonable in light of the service or product
       provided. [Id. at 379.]

Again, in Bronson Methodist Hosp v Auto-Owners Ins Co, 295 Mich App 431, 448; 814 NW2d
670 (2012), this Court concluded that no-fault insurers are required to challenge a medical
provider’s charges in order to determine if they are reasonable, and that medical providers should
expect no less. Further, the “ ‘customary’ fee a particular provider charges under [MCL
500.3157] does not define what constitutes a ‘reasonable charge’ under [MCL 500.3107]. . . .
Rather, the ‘customary fee’ is simply the cap on what health-care providers can charge, and is
not, automatically, a ‘reasonable’ charge requiring full reimbursement under [MCL 500.3107].”
AOPP, 257 Mich App at 377.

        However, medical providers are permitted to “challenge [the] failure to fully reimburse
them for medical bills as a violation of” the No-Fault Act. Id. at 380. They must do so in the
trial court, and have the burden of establishing by a preponderance of the evidence that their
charges were reasonable. Id. See also Bronson, 295 Mich App at 450, where this Court again
reiterated that the No-Fault Act contemplates that,

                                                -6-
       insurers will assess the reasonableness of a provider’s charges, paying that portion
       deemed reasonable, with the provider having the prerogative to then challenge the
       insurer’s decision not to pay the entire charge submitted by filing suit. Once the
       action is filed, the provider has the burden of proving by a preponderance of the
       evidence the reasonableness of its charges.

As the trial court concluded in its opinion and order on reconsideration, “[t]he only effect of
Covenant was to place the dispute over the reasonableness of the charges between a provider and
a patient-insured, rather than between a provider and an insurer.” It did not alter the method of
disputing the reasonableness of the amount paid.

        In this case, it is clear that defendants never filed an action against Home-Owners, or
against Casanova, challenging Home-Owner’s determination of the reasonableness of its
charges. Likewise, defendants never raised the reasonableness of its charges as an issue in its
motion for summary disposition, or any other responsive pleading, and never presented any
evidence from which the trial court could have concluded by a preponderance of the evidence
that the $1,859.00 incurred by Casanova was reasonable and necessary. Instead, defendants have
chosen to harass Casanova over $782.86 outside of the courts since 2014.

        To conclude that defendants could prevail on the theory of an implied contract is contrary
to the purpose of the No-Fault Act, and its implications would allow medical providers to
circumvent the protective nature of the No-Fault Act. Therefore, we conclude that any claim
defendants may have against Casanova would be for payment of services rendered to an injured
person “covered by personal protection insurance” under the No-Fault Act. See MCL 500.3157.
Accordingly, reversal of the trial court’s original opinion and order granting summary
disposition in favor of plaintiffs was unnecessary, and it was not an abuse of the trial court’s
discretion to refuse to do so.

                                 III. ONE-YEAR-BACK RULE

       Second, defendants argue that the trial court erroneously concluded that medical
providers must file suit within one year from the date of providing medical services relating to
automobile related injuries, as the one-year-back rule does not apply to benefits payable under
Michigan contract law. Defendants further argue that after Covenant, a claim by a medical
provider against its patient is not viewed as an action for recovery of PIP benefits under MCL
500.3145. Rather, it is an “attendant contract claim.” We disagree.

        Again, “[t]his Court reviews for an abuse of discretion a trial court’s ruling on a motion
for reconsideration.” Sanders v McLaren-Macomb, 323 Mich App 254, 264; 916 NW2d 305
(2018).

        We disagree with defendants’ interpretation of Covenant with respect to whether a claim
against a medical provider is now viewed as an action for recovery of PIP benefits, or a contract
claim. Defendants would like this Court to conclude that after Covenant, a medical provider’s
claim against a patient-insured is an “attendant contract claim.” However, the Covenant Court
explicitly stated:


                                               -7-
       We conclude today only that a healthcare provider possesses no statutory right to
       sue a no-fault insurer. . . . This Court need not consider whether [a medical
       provider] possesses a contractual right to sue . . . because [the medical provider]
       did not allege any contractual basis for relief in its complaint. [Covenant, 500
       Mich at 217 n 39.]

Likewise, defendants never filed a complaint seeking payment from either Home-Owners or
Casanova under a theory of implied contract or otherwise. The first time defendants advanced a
theory of contractual liability was in a reply in opposition to Casanova’s response to its motion
for summary disposition. Moreover, given our conclusion supra, that any claim by defendants
would still fall squarely within the parameters of the No-Fault Act, defendants’ recovery would
be subject to the one-year-back rule found in MCL 500.3145.

        In this case, Home-Owners made a reasonable payment to Compass Health on behalf of
Casanova on August 13, 2014. Therefore, in order to contest the reasonableness of the amount
paid, or pursue the remaining $782.86, defendants would have had to file suit against Casanova
on or before August 13, 2015. See MCL 500.3145, which provides that:

       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 . . . or unless the insurer has previously
       made a payment of personal protection insurance benefits for the injury.

Defendants concede they did not file any action in the trial court. Accordingly, any claim
defendants may have had against Casanova is now barred by the one-year-back rule. The trial
court did not abuse its discretion in concluding the same.

        Moreover, defendants have conceded in their pleadings that, “[p]laintiffs’ debt to
[d]efendants in the amount of $782.86 for the outstanding balance of the services rendered to . . .
Casanova on July 4, 2014 is unenforceable as a matter of law[,]” because defendants chose not to
pursue legal action. Further, defendants conceded “[t]he debt is unenforceable . . . pursuant to
the one-year-back rule that governs the recovery of benefits under the” No-Fault Act. Therefore,
defendants have waived this argument. See Bates Assoc, LLC v 132 Assoc, LLC, 290 Mich App
52, 64; 799 NW2d 177 (2010), where this Court articulated that a “party may not claim as error
on appeal an issue that the party deemed proper in the trial court because doing so would permit
the party to harbor error as an appellate parachute.”

                            IV. RECOVERY UNDER THE MRCPA

       Finally, defendants argue that the trial court erroneously granted Auto-Owners and
Home-Owners relief under the MRCPA where only Casanova brought a claim. Therefore, Auto-
Owners and Home-Owners are not entitled to the attorney’s fees and costs awarded by the trial
court under the MRCPA. We agree.

       In their brief on appeal, Auto-Owners and Home-Owners concede that “the lower court
awarded attorney fees only under the MRCPA and that only Mr. Casanova sought recovery
under that Act in the Complaint. As a result, Auto-Owners and [Home-Owners] withdraw their

                                                -8-
request for fees.” Further, Auto-Owners and Home-Owners correctly note in their brief on
appeal that although the trial court had awarded fees to Auto-Owners and Home-Owners under
MCL 445.257(2) in its original opinion and order, it had not yet ruled on the fee request prior to
this appeal. Therefore, Auto-Owners and Home-Owners argue, “any error on this point does not
justify reversal.”

        Only Casanova sought relief under the MRCPA. Therefore, only Casanova is entitled to
damages and reasonable attorney’s costs and fees under MCL 445.257(2). Therefore, the trial
court erred by awarding fees to Auto-Owners and Home-Owners on that basis. Accordingly, we
reverse the trial court’s grant of reasonable attorney’s fees and costs to Auto-Owners and Home-
Owners under MCL 445.257(2).

       We affirm in part, and reverse in part as to the trial court’s award of reasonable attorney’s
fees and costs under MCL 445.257(2).


                                                             /s/ Kathleen Jansen
                                                             /s/ Michael F. Gadola




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