received by msc 8/10/2018 6:32:26 pm...this court's decision in covenant med ctr, inc v state...
TRANSCRIPT
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STATE OF MICHIGAN
IN THE SUPREME COURT
(On Application for Leave to Appeal from the Court of Appeals)
W.A. FOOTE MEMORIAL HOSPITAL, d/b/a ALLEGIANCE HEAL TH, a Michigan Non-profit Corporation
Plaintiff-Appellant,
V
MICHIGAN ASSIGNED CLAIMS PLAN, MICHIGAN AUTOMOBILE INSURANCE PLACEMENT FACILITY,
Defendants-Appellees,
and
JOE DOE INSURANCE COMPANY,
Defendant.
Supreme Comi Case No. 156622 Court of Appeals Case No. 333360 Kent County Circuit Court Case No. 15-08218-NF
AMICUS CURIAE BRIEF OF THE MICHIGAN HEALTH & HOSPITAL ASSOCIATION
CLARK HILL PLC Jennifer K. Green (P69019) Cynthia Filipovich (P53173) 151 S. Old Woodward Avenue, Suite 200 Birmingham, MI 48009 (248) 642-9692 Attorneys for Amicus Curiae Michigan Health and Hospital Association
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TABLE OF CONTENTS
TABLE OR AUTHORITIES .......................................................................................................... ii
STATEMENT OF QUESTION PRESENTED ............................................................................. iv
STATEMENT OF INTEREST OF AMICUS CURIAE .................................................................. l
SUMMARY OF ARGUMENT ...................................................................................................... 2
STATEMENT OF FACTS ............................................................................................................. 4
ST AND ARD OF REVIEW ............................................................................................................ 4
ARGUMENT .................................................................................................................................. 4
I. BECAUSE THE COURT OF APPEALS' DECISION IN COVENANT ANNOUNCED A NEW RULE OF LAW, POHUTSKI CONTROLS AND, UNDER THE POHUTSKITEST, IT IS CLEAR THAT THE COVENANT DECISION SOLELY APPLIES PROSPECTIVELY ......................................................................................................................... 4
A. The Court of Appeals' Tortured Analysis Must be Rejected .............................................. 4
B. Under the Pohutski Paradigm, Covenant Applies Prospectively .......................................... .
1) Covenant established a new rule oflaw ........................................................................... 6
2) Application of Pohutski 's three-factor test demonstrates that Covenant solely has prospective application ................................................................................... 9
a) The new rule's purpose is served by prospective application .................................... 9
b) The vast reliance on the old rule inures to prospective application ......................... 10
c) Covenant's disruption to the administration of justice when applied retroactively requires that it solely have prospective application ............................ 13
d). The Court of Appeals Improperly Found that Pohutski Had Been Impliedly Repudiated ................................................................................................................ 16
II. POHUTKSI HAS NOT BEEN "EFFECTIVELY REPUDIATED" AND THE COURT OF APPEALS HAS NO AUTHORITY TO RULE THAT IT HAS .............................................. 17
A. The Comi of Appeals Lacks Authority to Find Supreme Court Precedent "Effectively Repudiated." ....................................................................................................................... 17
B. Pohutski Remains Viable and Has Not Been Undercut by Spectrum, Hathcock, or Devillers ............................................................................................................................. 18
CONCLUSION AND RELIEF REQUESTED ............................................................................ 22
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Cases Bezeau v Palace Sports & Entertainment, Inc,
487 Mich 455; 795 NW2d 797 (2010), citing Pohutski v City of Allen Park, 465 Mich 675; 641 NW2d 219 (2002) ....................................................................................................... passim
Bezeau v Palace Sports & Entertainment, Inc, 487 Mich 455, 795 NW2d 797 (2010) ............... 19 Boyd [v WG. Wade Shows,
443 Mich. 515; 505 NW2d 544 (1993) ....................................................................................... 8 Boydv WG Wade Shows, 443 Mich 515,523,505 NW2d 544 (1993), ....................................... 19 Chiropractors Rehabilitation Group, PC v State Farm Mut Auto Ins Co,
313 Mich App 113; 818 NW2d 120 (2015) ................................................................................ 7 Co of Wayne v Hathcock, 471 Mich 445,484 n. 98; 684 NW2d 765, 788 (2004 ........................ 21 Cooper v MRM Investment Co,
367 F3d 493 (CA 6 2004) ......................................................................................................... 18 Covenant ................................................................................................................................ passim Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co,
500 Mich 591; 895 NW2d 490 (2017) ............................................................................... passim Devillers v Auto Club Ins Ass'n, 473 Mich 562; 702 NW2d 539 (2005) ...................................... 22 Edwards v Clinton Valley Ctr,
138 Mich App 312; 360NW2d 606 (1984) .............................................................................. 18 Foote v Mich. Assigned Claims Plan,
321 Mich App_, 2017 WL 3836645 ............................................................................. passim Great Northern R. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932)) ...................... 20 Harper v Virginia Dep 't of Taxation,
509 us 86 (1993) ................................................................................................................ 17, 18 Hyde v Univ of Mich Bd of Regents, 426 Mich 223, 240, 393 NW2d 84 7 (1986) ....................... 21 Hyde v Univ of Mich Board of Regents,
426 Mich 223; 393 NW2d 847 (1986) ........................................................................................ 5 Karaczewski v. Farbman Stein & Co,
478 Mich 28, 732 NW2d 56 (2007) .................................................................................. 8, 9, 11 Karaczewski v. Farbman Stein & Co., 478 Mich. 28, 732 N.W.2d 56 (2007), ............................ 19 Lakeland Neurocare v State Farm Mut Auto Ins Co,
250 Mich App 35; 645 NW2d 59 (2002) .................................................................................... 7 LaMothe v Auto Club Ins Ass 'n,
214 Mich App 577; 543 NW2d 42 (1995) .................................................................................. 7 Pohutski v City of Allen Park,
465 Mich 675; 641 NW2d 219 (2002) ............................................................................... passim Riley v Northland Geriatric Center,
431 Mich 632; 433 NW2d 787 (1988) ........................................................................................ 6 Schwartz v Flint (After Remand),
120 Mich App 449; 329 NW2d 26 (1982) ................................................................................ 18 Spectrum Health Hosps v Farm Bureau Mut Ins Co of Michigan,
492 Mich 503; 821 NW2d 117 (2012) ............................................................................... passim Tebo v Havlik,
418 Mich 350; 343 NW2d 181 (1984) ........................................................................................ 6 Univ of Mich Regents v State Farm Mut. Ins Co,
250 Mich App 719; 650 NW2d 129 (2002) ................................................................................ 7
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WA Foote Memorial Hospital v Michigan Assigned Claims Plan, 3 21 Mich App 159; _ NW2d _ (2017) .............................................................................. 3, 4
Wyoming Chiro Health Clinic, PC v Auto-Owners Ins Co, 308 Mich App 389; 864 NW2d 598 (2014) ................................................................................ 7
Statutes MCL 418.845 ....................................................................................................................... 8, 9, 11 MCL 500.3112 ................................................................................................................ 7, 9, 13, 14
Rules MCR 7.312(H) ................................................................................................................................ 1
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STATEMENT OF QUESTION PRESENTED
I. WHETHER THIS COURT'S DECISION IN COVENANT MEDICAL CENTER, INC. V STATE FARM MUT. AUTO. INS. CO., 500 MICH. 191, 895 N.W.2D 490 (2017), SHOULD BE APPLIED TO THIS CASE
Plaintiff-Appellant Allegiance Answers: No.
Defendants-Appellees Answer: Yes.
Amicus Curiae MHA Answers: No.
The Court of Appeals Answered: Yes.
This Comi Should Answer: No.
II. WHETHER THE COURT OF APPEALS CORRECTLY CONCLUDED THAT THIS COURT'S DECISION IN POHUTSKI V CITY OF ALLEN PARK, 465 MICH. 675, 696, 641 N.W.2D 219 (2002), HAS BEEN "EFFECTIVELY REPUDIATED" IN THE CONTEXT OF JUDICIAL DECISIONS OF STATUTORY INTERPRETATION, SEE SPECTRUM HEALTH HOSPITALS V FARM BUREAU MUT. INS. CO. OF MICHIGAN, 492 MICH. 503,821 N.W.2D 117 (2012); WAYNE COUNTY V HATHCOCK, 471 MICH. 445, 484 N. 98, 684 N.W.2D 765 (2004); DEVILLERS V AUTO CLUB INS. ASS'N, 473 MICH. 562, 587 N. 57, 702 N.W.2D 539 (2005).
Plaintiff-Appellant Allegiance Answers: No.
Defendants-Appellees Answer: Yes.
Amicus Curiae MHA Answers: No.
The Court of Appeals Answered: Yes.
This Court Should Answer: No.
III. IF POHUTSKIHAS NOT BEEN EFFECTIVELY REPUDIATED, WHETHER THE POHUTSKIFRAMEWORK SHOULD HAVE BEEN APPLIED IN SPECTRUM.
Plaintiff-Appellant Allegiance Answers: No.
Defendants-Appellees Answer: No.
Amicus Curiae MHA Answers: No.
The Court of Appeals Answered: Did not Answer.
This Court Should Answer: No.
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STATEMENT OF INTEREST OF AMICUS CURIAE
Amicus curiae Michigan Health & Hospital Association ("MHA") advocates for
Michigan hospitals and the patients they serve. Established in 1919, the MHA represents the
interests of its member hospitals and health systems in both the legislative and regulatory arenas
on key issues and supports their efforts to provide quality, cost-effective and accessible care.
Using their collective voice, the MHA advocates for its members before the legislature,
government agencies, the media and the public. In addition, the association provides members
with essential information and analysis of healthcare policy and offers relevant education to keep
hospital administrators and their staffs current on statewide issues affecting their facilities. The
MHA appears before this Court as a representative of nearly 150 healthcare facilities, ranging
from community hospitals, teaching hospitals, long term acute care hospitals, public hospitals
(owned by city, county, state or federal government) and nonpublic hospitals (individually
incorporated or owned and operated by a larger health system). The issues before the Court are
the utmost concern for the MHA's members, as services rendered to auto accident victims
comprise a substantial portion of the revenue at the MHA member facilities, and any decrease in
that revenue will inevitably result in less access to healthcare for the patients that they serve.
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SUMMARY OF ARGUMENT
This Court's decision in Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich
591; 895 NW2d 490 (2017) announced a new rule of law that ove1ruled decades of jurisprudence
providing a healthcare provider a direct cause of action against an insurer. In its wake, the
Covenant decision left circuit courts grappling with how to treat the wealth of cases that accrued
and/or were filed under the old rule of law. To be sure, post-Covenant, healthcare providers,
insureds, and insurers alike have experienced conflicting decisions from circuit courts, not only
from county to county, but from judge to judge, with the bottom-line outcome all too often being
that healthcare providers are deprived payment for services rendered to an injured insured.
The confusion that has resulted enables insurers to obtain windfalls, shirking their
obligations to their insureds in total contravention of the purpose of the No-Fault Act. Pending
cases initiated by providers prior to Covenant are being dismissed despite the obligation of the
Defendant insurer to pay benefits on behalf of the injured person, and it is often too late for the
injured person to recover against the insurer directly because of MCL 500.3145 ("the one year
back rule"). This is effectively leaving providers with no other choice but to sue the injured
person for payment that is the obligation of their insurer to pay or to suffer losses for necessary
treatment provided to severely injured people who would otherwise have their treatment covered
under the statute.
The clear and simple solution to correct the havoc that any retroactive application of
Covenant is having on the effective administration of justice is to apply it prospectively only. By
doing so, healthcare providers, such as MHA members, are not improperly penalized for relying
on the old rule of law, insurers are simply held to pay what they are obligated to pay, and all
insureds - along with the general public - rest secure in the knowledge that healthcare providers
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remain fiscally viable. Prospective only application would have only limited applicability and
would not result in any unexpected liability or prejudice for insurers. Only those currently
pending cases filed by medical providers would be able to continue under the framework that
existed prior to Covenant.
But the Court of Appeals in WA Foote Memorial Hospital v Michigan Assigned Claims
Plan, 321 Mich App 159; _ NW2d _ (2017) saw it differently. (Exhibit 2, Foote, 2017 WL
3836645 (Aug 31, 2017) In an end-driven opinion, the Court of Appeals not only held that
Covenant applies retroactively, but in doing so, the court engaged in the height of judicial
activism by sweeping aside this Court's controlling jurisprudence as being "effectively
repudiated." That is, based simply on its own flawed reasoning, the Court of Appeals found that
this Court's decision in Spectrum Health Hasps v Farm Bureau Mut Ins Co of Michigan, 492
Mich 503; 821 NW2d 117 (2012), renounced the Court's long-standing decision in Pohutski v
City of Allen Park, 465 Mich 675, 696; 641 NW2d 219 (2002), such that Pohutski no longer
applied. Then, so as to somehow justify its decision to eschew stare decisis and justify its end
driven analysis, the Court of Appeals misapplied the Pohutski test. In essence, by disavowing
decades of Michigan jurisprudence under the rational that Pohutski had been impliedly
repudiated, the Court of Appeals did exactly what it railed against - judicial activism.
For all of the reasons set forth below, Spectrum Health did nothing to disturb the
paradigm set f01ih by this Court in Pohutski for determining whether a decision is to have
prospective application only. And, for all of the reasons set forth below, Covenant must be
applied prospectively because, absent prospective application, this new rule of law ultimately has
a negative impact on healthcare providers and patients alike, such that the health and wellbeing
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of the citizemy of this State is compromised Covenant's retroactive application. This bad public
policy created by Foote must be reversed.
STATEMENT OF FACTS
Amicus curiae MHA adopts as its own the Statement of Facts set f01ih in Allegiance's
Application for Leave to Appeal.
STANDARD OF REVIEW
Amicus curiae MHA adopts as its own the Standard of Review set forth in Allegiance's
Application for Leave to Appeal.
ARGUMENT
I. BECAUSE COVENANT ANNOUNCED A NEW RULE OF LAW, UNDER POHUTSKI, WHICH CONTROLS, IT SHOULD BE APPLIED PROSPECTIVELY ONLY AND NOT TO THIS CASE.
A. The Court of Appeals' Tortured Analysis Must be Rejected.
The Comi of Appeals recognized that the issue before it was "whether Covenant applies
only prospectively, or applies to cases pending on appeal when it was issued." Foote v Mich.
Assigned Claims Plan, 321 Mich App_, 2017 WL 3836645 at *4. The court then noted the
"general rule" that decisions are to be given retroactive effect, but then accurately recognized
that "[ c ]omplete prospective application has generally been limited to decisions which ovenule
clear and uncontradicted case law." Id. at *6. Likewise, the comi also accurately recognized
that, as Allegiance advocated, decisions from this Court employ a "flexible approach" to
determining whether a judicial decision has retroactive effect." Id, citing Bezeau v Palace
Sports & Entertainment, Inc, 487 Mich 455; 795 NW2d 797 (2010), citing Pohutski v City of
Allen Park, 465 Mich 675,696; 641 NW2d 219 (2002).
Indeed, the Court of Appeals quoted this Comi' s decision in Hyde v Univ of Mich Board
of Regents, 426 Mich 223, 240; 393 NW2d 847 (1986) when emphasizing the exception to 4
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retroactive application: '"We have often limited the application of decisions which have
overruled prior law or reconstrued statutes. Complete prospective application has generally
been limited to decisions which overrule clear and uncontradicted case law."' Foote, supra at
*6 (emphasis added). Likewise, the Court of Appeals further recognized this Comi's long line of
cases that expressly embraced the exceptions to the "general" rule ofretroactive application. For
example, the Comi of Appeals recognized this Comi's admonition in Pohutski that "a more
flexible approach" to retroactivity should be employed "'if injustice would result from full
retroactivity. . . . Prospective application may be appropriate where the holding overrules settled
precedent."' Foote, supra at *6, quoting Pohutski, 465 Mich at 696.
To that end, the Court of Appeals also recognized the paradigm set forth in Pohutski for
determining whether a decision should solely be given prospective application: first, the
threshold question of "whether the decision clearly established a new principle of law" must be
answered in the affirmative; second, if the answer to the threshold question is "yes," then three
factors, (1) the purpose to be served by the new rule, (2) the extent of reliance on the old rule,
and (3) the effect of retroactivity on the administration of justice[,]" must be weighed. Foote,
supra at *6. And the Court of Appeals reiterated that the approach to determining retroactivity is
a "flexible" one. Id., citing Tebo v Havlik, 418 Mich 350, 360; 343 NW2d 181 (1984). Finally,
the Comi of Appeals recognized this Comi's pronouncement in Riley v Northland Geriatric
Center, 431 Mich 632; 433 NW2d 787 (1988), that "'resolution of the retrospective-prospective
issue ultimately turns on considerations of fairness and public policy."' Roofe, supra at *6
( emphasis added), quoting Riley, 431 Mich at 644.
In what can only be described as a means to justify an end-driven result, the Comi of
Appeals swept this body of case law out of the jurisprudence. The Court of Appeals found that it
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"need not address the 'threshold question' and 'three-factor test' of Pohutski because this Cami's
holding in Spectrum Health "effectively repudiated" the Pohutski paradigm, "at least in the
context of judicial decisions of statutory interpretation." Foote, supra at *12 (emphasis added),
citing Spectrum Health Hasps v Farm Bureau Mut Ins Co of Michigan, 492 Mich 503, 821
NW2d 117 (2012). Thus, simply on its own accord, the Court of Appeals decided that, as to the
retroactivity inquiry, Pohutski and this Cami's similar body of case law was no longer good law.
B. Under Pohutski, Covenant Should Apply Prospectively Only.
1) Covenant established a new rule of law.
The threshold factor of the Pohutski test is satisfied because Covenant clearly established
a new principle of law. To illustrate, for more than twenty years prior to this Court's decision in
Covenant, the language of MCL 500.3112 of Michigan's No-Fault Insurance Act - stating that
benefits are "payable to or for the benefit of an injured person" - had consistently been
interpreted as allowing for a direct cause of action against a no-fault isurance carrier by a third
pmiy healthcare provider. See, e.g., Chiropractors Rehabilitation Group, PC v State Farm Mut
Auto Ins Co, 313 Mich App 113, 124; 818 NW2d 120 (2015); Wyoming Chiro Health Clinic, PC
v Auto-Owners Ins Co, 308 Mich App 389, 398-97; 864 NW2d 598 (2014); Univ of Mich
Regents v State Farm Mut. Ins Co, 250 Mich App 719, 731-34; 650 NW2d 129 (2002); Lakeland
Neurocare v State Farm Mut Auto Ins Co, 250 Mich App 35, 42-43; 645 NW2d 59 (2002);
LaMothe v Auto Club Ins Ass 'n, 214 Mich App 577, 586; 543 NW2d 42 (1995).
Under Michigan law, those decisions were binding and provided the rule of law to be
followed in Michigan. MCR 7.215(C)(2) ("A published opinion of the Court of Appeals has
precedential effect under the rule of stare decisis."); Tebo v. Havlik, 418 Mich. 350, 362 (Mich.
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1984) ("A decision by any panel of the Court of Appeals is, therefore, controlling statewide until
contradicted by another panel of the Court of Appeals or reversed or ovenuled by this Court.").
But on May 25, 2017, in Covenant, this Court "overruled" this decades-old body of law,
and held that "healthcare providers do not possess a statutory cause of action against no-fault
insurers." Covenant, 895 NW2d at 493. According to the Comi, the dictionary definition of
"payable," as used in § 3112, is something "that may, can, or must be paid[;]" therefore, the
language of § 3112 "does nothing more than allow a no-fault insurer to satisfy its [payment]
obligation to the insured by paying the injured person directly or by paying a party providing
PIP services on the injured person's behalf[,]" and just because "a third party may receive
payment directly from an insurer for PIP benefits does not mean that the third pmiy has a
statutory entitlement to that method of payment." Id. at 500-01.
This Comi's new pronouncement in Covenant is akin to the Court's new pronouncement
m Karaczewski v. Farbman Stein & Co, 478 Mich 28, 732 NW2d 56 (2007) where, as
recognized in Bezeau, supra, 487 Mich at 463, this Court
overruled Boyd [v WG. Wade Shows, 443 Mich. 515; 505 NW2d 544 (1993)] because the Boyd interpretation of MCL 418.845 failed to recognize that the statute's text required that an injured employee must have been a resident of Michigan at the time of the injury and the contract for hire must have been made in Michigan in order for the employee to be able to successfully file a workers' compensation claim in Michigan. [Bezeau, supra, 487 Mich at 463 ( emphasis added).]
This Comi further recognized that "the purpose of the new rule" announced in Karaczewski "was
to interpret the law consistently with the Legislature's apparent intent when drafting MCL
418.845." Bezeau, supra, 487 Mich at 463 (emphasis added). Finally, this Court recognized that
"[a]lthough the Karaczevvski Court interpreted the statute [MCL 418.845] consistently with its
plain language, the Court's interpretation established a new rule of law because it affected
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how the statute would be applied to parties in workers' compensation cases in a way that
was inconsistent with how the statute had been previously applied." Id. (emphasis added),
citing Pohutski, 465 Mich. at 696-697.
Thus, just as employees who were not residents of Michigan at the time of the injuries
may have been able to successfully file a workers' compensation claim in Michigan pursuant to
MCL 418.845 prior to this Court's decision in Karaczewski, so too healthcare providers to no
fault patients were able to successfully file a claim directly against a no-fault insurer prior to
Covenant. And, just as this Court recognized its decision in Karaczewski was to interpret the law
in accordance with the plain language of MCL 418.845, this Court based its decision in
Covenant to interpret the law in accordance the plain language of MCL 500.3112. It must
therefore follow that, just as this Comi set forth a new rule of law in Karaczewski, the Comi
likewise set forth a new rule of law in Covenant.
The Comi of Appeals' conclusion to the contrary is as tortured as the whole of its
decision. That is, the Court of Appeals concluded that Covenant did not establish a new rule of
law "because MCL 500.3112 at no time provided plaintiff with a right of action against
defendants, and the intervening caselaw from this Court never was the law." Foote, supra at
* 13. According to the Comi of Appeals, "Covenant merely recognized that the law as set fotih
in MCL 500.3112 is and always was the law." Id. The Court of Appeals found that its
conclusion was "particularly" justified given that "the law at issue concerns the very existence of
a right of action." Id.
The Comi of Appeals' conclusion and the reasonmg behind it stands in stark
contradiction to this Court's decision Bezeau, supra. As indicated above, in Bezeau this Comi
found that its decision in Karaczewski set fotih a new rule of law where, prior to Karaczewski,
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employees who were not Michigan residents at the time of their injuries had a claim for workers
compensation benefits pursuant to MCL 418.845. There simply is no way to reconcile the
Comi of Appeals' conclusion to this Court's decision in Bezeau, which of course, relied upon
Pohutski. This thereby further demonstrates the end-driven nature of the Court of Appeals'
decision, because the court could not have reached its conclusion that Covenant did not establish
a new rule of law without first sweeping aside - under the guise of the court's own brand of
decision making - Pohutski and its progeny as "effectively repudiated." The only conclusion
under stare decisis is that Covenant indeed established a new rule of law and, as indicated below,
under Pohutski 's three-factor test, that new rule solely must have prospective application.
2) Application of Pohutski 's three-factor test demonstrates that Covenant solely has prospective application.
a) The new rule's purpose is served by prospective application.
In Covenant, this Comi stated that purpose behind its decision was "to conform our
caselaw to the text of the applicable statutes to ensure that those to whom the law applies may
look to those statutes for a clear understanding of the law." Covenant, 895 NW2d at 496. It is
this very purpose that this Court in Bezeau and in Pohutski found would be fmihered prospective
application of the new rules of law. Specifically, this Court recognized in Bezeau that the
"purpose of the new rule from Karaczewski" was that of "interpreting the law consistently with
the Legislature's apparent intent when drafting MCL 418.845[,]" and that prospective
application served this purpose. Bezeau, 487 Mich at 463, 465 n 6. Likewise, in Pohutski, this
Comi stated that "the purpose of the new rule" was to correct an error in the interpretation of § 7
of the governmental tort liability act[,]" and that "[p ]rospective application would fmiher this
purpose." Pohutski, 465 Mich at 697.
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Yet, the Court of Appeals found that Covenant's purpose - which is completely in line
with the purposes of Karaczewski and Pohutski - was not advanced by prospective application,
while incredibly claiming that its finding was based on the maxim that "the law requires
consistency" and that "prospectivity [sic] undermines rather than advances that objective."
Foote, supra at * 13. It is the Court of Appeals' opinion itself that turns a blind eye to
consistency in the law and stare decisis by engaging in impermissible judicial activism that
Pohutski and its progeny have been "effectively repudiated." Once again, the Court of Appeals'
got it wrong. The purpose of Covenant is clearly served by prospective application alone.
b. The vast reliance on the old rule inures to prospective application.
It is without dispute that the medical providers of no-fault insureds relied upon the old
rule of law for decades. It is this very type of reliance - i.e., reliance on the law where an injured
party is at the center of the dispute - that this Court has embraced as inuring to prospective
application of a new rule of law. For example, in Bezeau, this Court found that its prior decision
giving retroactive application to the new rule of law set forth in Karaczewski was erroneous
because the Court had failed to "give due weight" to the reliance that "[ a]ttorneys, employers,
insurance carriers, and various employees" placed on the old law that had been in place for
decades." Bezeau, 487 Mich at 464, 465. This Court recognized that
In addition to reliance by the courts, insurance decisions have undoubtedly been predicated on this Court's longstanding interpretation of MCL 418.845 under [the old law]. Nonresident injured employees, like plaintiff, who initially entered into contracts for hire in Michigan, but later agreed to work outside Michigan, have relied on the ability to obtain workers' compensation benefits based on their employment relationship with Michigan employers. Prospective application acknowledges that reliance and assures the fair resolution of those pending workers' compensation cases. [Id. (emphasis added; citation omitted).]
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Likewise, in the case of Covenant, attorneys, medical providers, and no-fault insureds
alike have for decades relied upon the old law, and thus have provided services to injured no
fault patients secure in the knowledge that they would be paid for those services, even if it meant
by way of a lawsuit. In turn, injured no-fault patients readily received the treatment they needed
to heal without having to deal with possible lawsuits in the process. And attorneys representing
those medical providers properly advised their clients that medical services could be provided to
no-fault insureds - without the need for an assignment as suggested by Covenant as being the
providers means of recourse - because if payment was not received a direct cause of action
against the insurer was possible.
Then Covenant comes along and changes everything, and, according to the Court of
Appeals, in doing so, Covenant simply stated what the law was all along. Such shortsightedness
ignores the realities not only of the law, but of the precarious position that the actors involved
must now face. For example, the health care providers may now question its counsel as to why it
was not advised to obtain an assignment regarding its treatment of injured insured. And the
reality is that once an insured is discharged it is oftentimes difficult, if not impossible to locate
them, they are often impecunious, and they often retain their own attorney who instructs them to
not sign an assignment. Without the assignment, the healthcare provider has no recourse to sue
the no fault carrier, and must rely on the patient's attorney to collect the bill, which often then
results in a significant reduction in the amount collected. The only recourse to the healthcare
provider then is to place a charging lien on the suit and demand the insurance canier put the
healthcare provider's name on any settlement check, leaving the issue of plaintiff's claimed
attorney fees to be argued before the court.
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And the reality is that if medical providers cannot recoup the cost for providing
treatment, then it's a slippery slope to the day when they are unable to provide care at all, thereby
severely compromising care to the injured. As this Comi has recognized, this is precisely the
type of hardship that must be avoided by retrospective application of a new rule of law. Id.; see
also Pohutski, 465 Mich. at 697 (finding that "[i]n addition to reliance by the courts [ on the old
law], insurance decisions have undoubtedly been predicated upon [the old law such that]
municipalities have been encouraged to purchase insurance, while homeowners have been
discouraged from doing the same," thereby inuring to prospective application of the new rule).
The Comi of Appeals' conclusion to the contrary simply advances its erroneous end-
driven result in this case. To illustrate, the Comi of Appeals correctly found that
there can be no doubt that plaintiff and others have heavily relied on our prior caselaw over the course of many years. We do not in any way seek to diminish that fact or to minimize the negative effects that might be felt by those who relied on preCovenant decisions. The reliance is real, as are the consequences that flow from it. [Foote, supra at *13 (emphasis added).]
But despite the comi's recognition of the significant reliance on the old rule of law and the
negative consequences that flow from that reliance, the Court of Appeals went on to conclude
that the decades of settled jurisprudence never considered whether a private cause of action
under § 3112 existed, which thereby somehow rendered reliance on the old jurisprudence
unreasonable. This conclusion is nonsensical. If the msurers themselves never before
questioned the old rule of law that allowed for a direct action by a third party provider, it
logically follows that the third-paiiy provider's reliance on the old rule was even more
reasonable.
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That is to say, the Court of Appeals' opinion implies that healthcare providers should
have questioned their ability to bring a direct cause of action against an insurance company in the
courts, while the insurance company did nothing. The opinion also suggests that healthcare
provider's counsel should have advised not to pursue a direct cause of action against the insurer
under § 3112, but instead should sue the insured directly, or should instead regularly seek
assignments. But all of these actions were both counter to logic and the state of the law, such
that reliance on the old law was indeed perfectly reasonable. In short, the vast reliance on the old
rule of law clearly inures to Covenant's prospective application.
c. Covenant's disruption to the administration of justice applied retroactively requires that it solely have prospective
application.
when
The detrimental effect that the retroactive application of Covenant 1s having on
administration of justice permeates Michigan's courts. For example, since the Covenant
decision, healthcare providers who are owed significant sums have faced a number of defenses in
their suits against insurance companies such as the lack of any assignment by the insured, which
courts are finding fatal to a healthcare provider's claims, thereby denying healthcare providers
payment for services that were undeniably rendered. When healthcare providers are not paid for
services rendered their livelihood is compromised, just as that of any other similarly situated
business, but in the case of healthcare providers, when their business model suffers, so does the
health and wellbeing of those they serve. And to make matters worse, not only are patients
ultimately harmed, but the very paiiy that is contractually bound to pay for the care and
treatment, the insurance company, is the paiiy who reaps a windfall. Indeed, under retroactive
application of Covenant's new rule of law, not only does the insurer reap the benefits of timely
paid premiums from the insured, the insurer is relieved of its contractual obligation to pay for its
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insured's care simply by way of the serendipitous timing of the healthcare provider's lawsuit for
payment relevant to Covenant's release.
The retroactive application of Covenant is also wreaking havoc on the administration of
justice because nearly all no-fault policies contain language that the policy is either not
assignable, or the insured patient needs to ask the insurer's permission before providing an
assignment. It has been the experience of MHA members that the Wayne, Oakland, and
Macomb County Circuit Court have been inconsistent in their enforcement of anti-assignment
clauses. The inconsistencies themselves are adverse to justice - i.e., a healthcare provider may
successfully overcome the anti-assignment language of an injured insured's policy in one county,
but in another county that same healthcare provider cannot overcome the same anti-assignment
language in the same type of policy issued by the same insurer - and to the extent that any court
is disallowing payment to a healthcare provider based on such anti-assignment language the
outcome is detrimental to the both healthcare provider and, perhaps even more so, to the life and
wellbeing of the injured insured.
Perhaps the worst miscarriage of justice caused by the retroactive application of
Covenant is that many of the cases that were pending when Covenant was decided involved an
assignment that was signed beyond one year from the date the services were rendered, even
though the filing of the lawsuit was within one year. Some circuit courts are precluding MHA
members from recovering for services that were provided more than one year from the date of
the assignment. In many instances, this effectively eliminates most, if not all, of the payment
owed, thereby once again providing an impermissible-and unjustified-windfall to insurers.
Finally, yet another of the many adverse effects of Covenant's retroactive application to
the administration of justice is that some circuit courts have ruled that when the patient assigns a
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portion of the policy related to the medical bills, the patient has made a "paiiial assignment,"
which thereby violated the terms of the policy and voided the assignment. MHA members have
experienced such a result and thus had their legitimate claims for payment on services rendered
dismissed.
The above demonstrates that the healthcare providers who, relying on the old rule of law,
filed suit prior to Covenant, are becoming "a distinct class of litigants denied relief because of an
unfortunate circumstance of timing," the likes of which this Court has found runs counter to
retroactive application of a new rule of law. See Pohutski, 465 Mich at 698-699; see also
Bezeau, 487 Mich at 465 ( concluding that the administration of justice was adversely affected by
retroactive application of a new rule of law because the litigation under the old law suddenly
became moot under the new rule). Indeed, if Covenant was applied prospectively, justice would
be served as the circuit courts would have clear guidance on how to proceed under the old rule
which, in turn, would result in an orderly and fair administration of justice.
The Court of Appeals' conclusion that the "weighing of this factor is at best
inconclusive" ignores the wealth of cases filed by healthcare provider cases under the old law
that were, and continue to be pending, the circuit court's conflicting decisions in attempting to
apply Covenant retroactively, and the breadth of the adverse consequences experienced by the
healthcare providers, including MHA members, by the summary dismissal of their claims. To be
sure, the magnitude of the adverse effect that the retroactive application has had on financial
viability of healthcare providers, and therefore on their ability to service the needs of injured
insureds, is profound and cannot logically be considered as "inconclusive." On information and
belief, because of the retroactive application of Covenant, members of the MHA have already
been denied the ability to receive payment for millions of dollars of services rendered. As stated,
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this result is bad for healthcare providers and injured alike, and simply results in an
impermissible windfall to insurers the likes of which makes for bad public policy and the proper
administration of justice.
Accordingly, Covenant undeniably established a new rule of law, and the balance of the
three Pohutski factors clearly shows that Covenant should be solely be applied prospectively.
d. The Court of Appeals Improperly Found that Pohutski Had Been Impliedly Repudiated.
The Court of Appeals' judicial activism did not end there. The court went on to make
another pronouncement as to this Court's retroactivity decisions, by concluding that, in Spectrum
Health, this Court "essentially adopted the rationale of the United States Supreme Court in
Harper relative to the retroac~ive applicability of its judicial decisions of statutory interpretation
'to all cases still open on direct review and as to all events, regardless of whether such events
predate or postdate [the] announcement of the rule."' Foote, supra at *12 (emphasis added),
citing Harper v Virginia Dep't a/Taxation, 509 US 86, 97 (1993). Then, having concluded that
this Court had "essentially repudiated" Pohutski and had "essentially adopted" Harper for
purposes of deciding the case before it, the Court of Appeals incredibly invited this Court to
post-hoc decide whether these conclusions were conect. Id. ("Having so concluded, we invite
our Supreme Court to state expressly whether or to what extent it adopts the Harper rationale
into Michigan state comi jurisprudence.").
The Comi of Appeals' tortured analysis turns the hierarchy of Michigan's comi system
on its head. It is not for the Comi of Appeals to decide whether Supreme Comi precedent is or is
not "essentially" good law or whether this Comi has or has not "adopted" federal law; rather, as
the Court of Appeals itself has recognized, "[u]nder the rule of stare decisis, [the Comi of
Appeals] is bound to follow decisions of the Michigan Supreme Court, even if [it] disagree[s]
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with them." Edwards v Clinton Valley Ctr, 138 Mich App 312, 313; 360 NW2d 606 (1984),
citing Schwartz v Flint (After Remand), 120 Mich App 449, 462; 329 NW2d 26 (1982); see also
Cooper v MRM Investment Co, 367 F3d 493, 507 (CA 6 2004) (recognizing that "[i]mplied
overrulings ... are disfavored").
To add insult to injury, while concluding that this Comi had "essentially repudiated"
Pohutski, and had "essentially adopted" Harper - i.e., while engaging in the height of judicial
activism, the Court of Appeals criticized prospective application of decisions as "the handmaid
of judicial activism, and the born enemy of stare decisis." Foote, 321 Mich App at * 10 (internal
quotation marks and citation omitted). Indeed, but for the Court of Appeals own judicial
activism, the law is clear that the proper analysis in this case is that set fo1ih in Pothutski, and, as
set forth below, under Pohutski, this Court's decision in Covenant should solely have prospective
application.
II. POHUTSKI HAS NOT BEEN "EFFECTIVELY REPUDIATED" AND THE COURT OF APPEALS HAS NO AUTHORITY TO RULE THAT IT HAS.
A. The Court of Appeals Lacks Authority to Find Supreme Court Precedent "Effectively Repudiated."
This Comi's decision in Spectrum cannot be read as impliedly repudiating Pohutski 's
reflection of Michigan's longstanding jurisprudence. The Comi of Appeals does not have the
authority to determine that cases are impliedly of "effectively overruled." As this Comi stated in
Associated Builders & Contractors v City of Lansing, 499 Mich 177, 191-92; 880 NW2d 765,
772-73 (2016):
While it is inarguable that developments over the past century have undercut the foundation upon which Lennane stood, its holding was never explicitly superseded by the ratifiers of the 1963 Constitution or by the Legislature, nor was it overruled by this Comi. The Court of Appeals is bound to follow decisions by this Comi except where those decisions have clearly been overruled or superseded and is not authorized to anticipatorily ignore our decisions where it determines that the foundations of a
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Supreme Court decision have been undermined. Thus, while we agree with the result of the Comi of Appeals' decision, we disapprove of its usurpation of this Court's role under our Constitution.
Id. (footnote omitted; emphasis in original).
"While the Court of Appeals may properly express its belief that a decision of this Court
was wrongly decided or is no longer viable, that conclusion does not excuse the Court of
Appeals from applying the decision to the case before it." Boyd v WG Wade Shows, 443 Mich
515, 523, 505 NW2d 544 (1993), oveITuled on other grounds by Karaczewski v. Farbman Stein
& Co., 478 Mich. 28, 732 N.W.2d 56 (2007), itself overruled in part by Bezeau v Palace Sports
& Entertainment, Inc, 487 Mich 455, 795 NW2d 797 (2010).
B. Pohutski Remains Viable and Has Not Been Undercut by Spectrum, Hathcock, or Devillers.
Further, the Court of Appeals was not coITect that Pohutski has been undercut by more
recent precedent. The Spectrum Court never even mentions Pohutski, much less repudiates it.
Instead, in a one paragraph analysis, the Spectrum Comi determined that its decision should be
applied retroactively. Spectrum, 492 Mich 503 at 536; 821 NW2d 117, 136.
The Court of Appeals in this case inc01Tectly determined that the Spectrum Court
essentially adopted the United States Supreme Court's rational from Harper. Yet, the Spectrum
Cami never cited Harper, nor does the Spectrum decision indicate that its rational reflects a
depaiiure from the longstanding jurisprudence of Michigan. The Comi of Appeals in this case
thus did no more than layer unfounded assumptions with unsupported inferences and
extrapolations to avoid binding precedent rather than follow clear Michigan Supreme Comi
precedent. This is an error of law beyond the authority of the Court of Appeals. Even if the
comi of Appeals had such authority, the single paragraph in Spectrum devoted to the retroactive
application issue is insufficient to unravel decades of jurisprudence by implication.
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Merely because the principles of retroactivity have their genesis in United State Supreme
Court precedent does not mean that Michigan jurisprudence on issues of Michigan law change as
federal precedent changes. In fact, the Michigan Supreme Court has specifically cautioned that
the federal constitution "does not preclude state courts from determining whether their own law
changing decisions are applied prospectively or retroactively." Pohutski, 465 Mich at 696 (citing
Great Northern R. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932)) ("[T]he Federal
Constitution has no voice upon the subject. A state in defining the limits of adherence to precedent
may make a choice for itself between the principle of forward operation and that of relation
backward.").
Despite the admonition in Pohutski that the Michigan Supreme Court is empowered to
determine its own rules for prospective application-regardless of any federal authority on the
subject-the Court of Appeals has essentially held that Michigan jurisprudence adopts federal
precedent, even if that federal precedent has not actually been adopted by any Michigan Court
decisions. Therefore, according to the Court of Appeals, it can find Michigan precedent
impliedly overruled by comparing the sparse reasoning applied in Spectrum with the United
States Supreme Court's decision in Harper. It does so despite the fact that Spectrum never
mentions Harper and does not indicate that it is depaiiing from the previously well settled
rational employed in Michigan. Principles of stare decises dictate that the Spectrum Court
would need to, at the very least, identify that it was applying a new rational and explain the basis
for its departure. However, the Spectrum Court did not even hint that it was changing the law.
Moreover, citing Ha,per, the Comi of Appeals in this case recognized that "State courts
nonetheless appear to remain free to adopt their own approach to retroactivity under state law, so
long as it does not extend to an interpretation of federal law. Foote,, 321 Mich App 159, 180
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(2017), citing Harper, 509 US at 97, 112 SCt 2510. Since Harper has not been directly adopted
nor Pohutski eschewed, explicitly or impliedly, Michigan's longstanding jurisprudence is the
standard to apply and the Harper standard is inapplicable to the extent it conflicts. The Court of
Appeals should not have found Michigan Supreme Court precedent impliedly repudiated merely
because federal law changed.
The Hathcock decision recognized, rather than repudiated Pohutski. Indeed, among the .
issues to be briefed for the Hathcock CoUli was "whether a decision overruling Poletown, supra,
should apply retroactively or prospectively only, taking into consideration the reasoning in
Pohutski v. City of Allen Park, 465 Mich. 675, 641 N.W.2d 219 (2002)." Co of Wayne v
Hathcock, 471 Mich 445, 484 n. 98; 684 NW2d 765, 788 (2004). Justice Cavanagh, in his
partial concurrence, recognized that the factors enumerated in Pohutski "must be considered
when determining whether a decision should have retroactive application." Id. at 505. (emphasis
added).
In Hath9ock, the Court held that Pohutski was inapplicable, not that it had been
repudiated. ("First, this case presents none of the exigent circumstances that warranted the
"extreme measure" of prospective application in Pohutski v. City of Allen Park." Id. at 484 n.
98. Although the Court questioned the appropriateness of rendering prospective only opinions,
the Court fU1iher recognized that prospective only application is appropriate in cases such as this,
where the decision in question "overrule[ d] clear and uncontradicted case law." Id. citing Hyde v
Univ of Mich Bd of Regents, 426 Mich 223, 240, 393 NW2d 847 (1986). Notably, in Hathcock,
the Court overruled Poletown as "inconsistent with our eminent domain jurisprudence [ ... ],"
noting that it was "a radical departure from fundamental constitutional principles and over a
century of this Court's eminent domain jurisprudence[ .. . ]"Id.at 483.
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Thus, the Hathcock decision merely "return[ed] our law to that which existed before
Poletown." Id. at 484. (emphasis added). This is in stark contrast to the case at hand because
prior to Covenant, it had always been understood that providers had a direct cause of action.
Therefore, Hathcock explicitly overruled Poletown, but did not diminish Pohutski in any way.
("It is true, of course, that this Court must not 'lightly overrule precedent."). Id. (footnote and
quotation mark omitted).
This Court's decision in Devillers v Auto Club Ins Ass'n, 473 Mich 562; 702 NW2d 539
(2005) confirms this reading of Hathcock and does nothing to repudiate Pohutski. Citing to the
footnote in Hathcock which cites to Pohutski, the Devillers opinion notes that "[p ]rospective
application is a departure from this usual rule and is appropriate only in 'exigent
circumstances."' Id. at 586. (footnote omitted). Notably, this is the only reference to Pohutski,
in the opinion. Thus, Devillers recognized that decisions may be given prospective only
application under the Pohutski framework, and that Hathcock did not alter this fundamental
principle of Michigan jurisprudence. ("As we reaffirmed recently in Hathcock, prospective-only
application of our decisions is generally 'limited to decisions which overrule clear and
uncontradicted case law."'). Id. at 587. (quotaion mark and footnote omitted; emphasis in
original).
Like in Hathcock, the Devillers decision was "not a declaration of a new rule, but a
return to an earlier rule and a vindication of controlling legal authority [ ... ]." Id. at 587.
( emphasis added). Thus, Devillers also recognizes the continuing vitality of Pohutski and the
availability of prospective only application under its framework. Furthermore, the Devillers
opinion qualified its application as having only "limited retroactivity," making clear it applied
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only to "pending cases in which a challenge to Lewis's judicial tolling approach has been raised
and preserved." Id. Thus, neither Spectrum, Hathcock, nor Devillers have repudiated Pohutski.
1. The Spectrum Cami Did not need to Apply Pohutski
Spectrum did not require application of the Pohutski framework nor did this Court order
the paiiies in Spectrum to address the retroactivity issue. In both Devillers and Hathcock, this
Comi specifically ordered the paiiies to brief the issue of retro activity on appeal. Deville rs, 4 73
Mich 562 at 586 ("In our order granting leave to appeal, we directed the paiiies to address
whether a decision overruling Lewis should be given only prospective application."); Hathcock,
471 Mich 445 at 454-55 ("Our grant order directed the parties to the following issues: [ ... ]
whether a decision ovenuling Poletown, supra, should apply retroactively or prospectively only,
taking into consideration the reasoning in Pohutski v. City of Allen Park, 465 Mich. 675, 641
N.W.2d 219 (2002)."). No such briefing was called for in Spectrum.
Accordingly, the rational in Spectrum with relation to the retroactivity issues was simple.
In Spectrum, Ryan De Young, who had three drunk-driving convictions, was a named excluded
driver on his wife's insurance policy, and had been expressly prohibited from driving her
vehicles, came home drunk and took his wife's car without her permission. Spectrum, 492 Mich
503 at 513; 821 NW2d 117. As the Spectrum Court held, "because there was absolutely no
textual basis to support a family-joyriding exception to MCL 500.3113(a)1[,]" Ryan DeYoung
was precluded from obtaining benefits under his wife's policy. Id. at 530.
1 Under MCL 500.3113: A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident any of the following circumstances existed:
(a) The person was willingly operating or willingly using a motor vehicle or motorcycle that was taken unlawfully, and the person knew or should have known that the motor vehicle or motorcycle was taken unlawfully.
MCL 500.3 l l 3(a)
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With relation to whether the decision should apply retroactively, the Court concluded that
smce "there is no contractual right to have insurance companies provide PIP benefits to
operators" who drove a family member's automobile without permission, the Spectrum decision
did "not at all affect the paiiies' contractual rights, and it is retrospective in its operation." Id.
Given the simplicity of the inquiry before the Spectrum Comi, only one paragraph of analysis is
devoted to the retroactivity issue and the Court gave only cursory treatment to Michigan's
jurisprudence on retroactive application because that was all that was required.
Accordingly, the in-depth analysis of whether application should be retroactive or
prospective required by Pohutski was not required nor called for by the Court in Spectrum.
Indeed, the Spectrum decision was couched within principles of contract interpretation. ("In
other words, our decision today does not at all affect the paiiies' contractual rights, and it is
retrospective in its operation."). Id. On the other hand, in this case, the question of whether
Covenant should be applied as prospective only involves a much different inquiry, and, just like
in Pohutski, is entirely within "the context of erroneous statutory interpretation" rather than
contract. Pohutski, 465 Mich 675 at 679; 641 NW2d 219,224.
Thus, as in Pohutski, the decision before the Court in this case is what "effect [the]
holding will have on the administration of justice." Id. at 696. In considering how Covenant
would impact the administration of justice, one issue to be considered is "whether reliance
interests would work an undue hardship." Id. at 694. In considering the reliance interest, the
Comi considers whether prior jurisprudence has "become so embedded, so accepted, so
fundamental, to everyone's expectations that to change it would produce not just readjustments,
but practical real-world dislocations." Id. at 694. In Spectrum, however, reliance was not an
issue as "it [was] undisputed that there is no contractual right to have insurance companies
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provide PIP benefits to operators in these cases." Spectrum, 492 Mich 503 at 536; 821 NW2d
117, 136. Therefore, Spectrum did not need to apply Pohutski and, accordingly, is limited to its
unique facts.
V. CONCLUSION AND RELIEF REQUESTED
For the above-stated reasons, amicus curiae Michigan Hospital Association respectfully
requests that the Court grant Allegiance's Application for Leave to Appeal, reverse the Court of
Appeals' decision in Foote, and hold that Covenant applies prospectively.
Date: August 10, 2018
Respectfully submitted,
CLARK HILL PLC
By: /s/ Jennifer K. Green Jennifer K. Green (P69019) 151 S. Old Woodward Ave, Suite 200 Birmingham, MI 48009 (248) 642-9692 I Fax (248) 642-2174 j [email protected] Attorney for Amicus Curiae - Michigan Health and Hospital Association
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