The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6865 August 18, 1995 INSURANCE: Payments by no-fault auto insurers to health care providers The no-fault insurance act does not prohibit a health care provider from entering into an agreement with a person insured by a no-fault auto insurance carrier requiring the insured to pay all costs of medical treatment not covered by the person's no-fault insurance. If a person insured by a no-fault insurance carrier enters into an agreement with a health care provider to pay for the costs of medical treatment not covered by his no-fault insurance carrier, that carrier must defend him from enforcement of that agreement if the medical treatment in question arguably falls within the scope of the insured's no-fault coverage. A no-fault automobile insurance company may use the services of a subsidiary company in determining the reasonableness of charges to its insureds by a health care provider and it is not required to use a disinterested third party in determining reasonableness. A no-fault automobile insurance company must pay personal protection benefits to a health care provider within 30 days after reasonable proof of the fact and amount of the loss; failure or refusal to make payment within this 30 day period subjects the insurer to an interest penalty and may, in addition, make the insurer liable for attorney fees if its failure or refusal to make a timely payment is determined to be unreasonable. Honorable Kirk A. Profit State Representative The Capitol Lansing, Michigan You have asked several questions relating to Chapter 31 of the Insurance Code of 1956, as added by 1972 PA 294, MCL 500.3101 et seq; MSA 24.13101 et seq, the portion of the Code which is commonly known as the no-fault insurance act. Your questions concern those sections of the no-fault insurance act that establish the responsibilities of a no-fault automobile insurer to pay for medical treatment given to its insured as a result of a covered accident. Your first question may be stated as follows: May a health care provider enter into an agreement with a person insured by a no-fault auto insurance carrier requiring the insured to pay all costs of medical treatment not covered by the person's no-fault insurance? The Michigan Supreme Court has stated that the Insurance Code of 1956, as amended by the no-fault insurance act, contains only one subject, which is expressed in the title of the statute. Advisory Opinion Re Constitutionality of 1972 PA 294, 389 Mich 441, 462-469; 208 NW2d 469 (1973), rejected in part on other grounds, Cassidy v McGovern, 415 Mich 483, 501.502; 330 NW2d 22 (1982). The Court has also observed that since personal protection insurance benefits are mandated by the no-fault act, that "statute is the 'rule book' for deciding the issues involved in questions regarding awarding those benefits." (Footnote omitted.) Rohlman v Hawkeye-Security Ins Co, 442 Mich 520, 525; 502 NW2d 310; reh den 443 Mich 1206; 506 NW2d 870 (1993). Finally, in construing the no-fault act, it must also be noted that insurance laws are to be liberally construed in favor of policyholders, creditors and the general public. Blekkenk v Allstate Ins Co, 152 Mich App 65, 77; 393 NW2d 883 (1986). Under section 3101 of the no-fault act, all owners or registrants of motor vehicles required to be registered in Michigan are required to maintain no-fault insurance coverage. Pursuant to section 3105 of that act, the coverage provided by the no-fault insurer must include, inter alia, "benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle." Section 3107 of that act describes the extent of the insurer's liability for such injuries as follows: (1) Except as provided in subsection (2), personal protection insurance benefits are payable for the following: (a) Allowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation. [Emphasis added.] Finally, section 3157 of that act limits the amount that a health care provider may charge for medical goods and services provided to a person injured in a covered accident: A physician, hospital, clinic or other person or institution lawfully rendering treatment to an injured person for an accidental bodily injury covered by personal protection insurance, and a person or institution providing rehabilitative occupational training following the injury, may charge a reasonable amount for the products, services and accommodations rendered. The charge shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance. [Emphasis added.] In McGill v Automobile Ass'n of Michigan, 207 Mich App 402; 526 NW2d 12 (1994), the plaintiffs were insured under the no-fault act when they sustained injuries in covered motor vehicle accidents. However, their no-fault insurance carriers failed to pay all of their medical bills, claiming that "the amounts billed were unreasonable." Id., p 404. The Court of Appeals ruled that: According to the plain and unambiguous language of 3107, an insurer is liable only for those medical expenses that constitute a reasonable charge for a particular product or service. Also, [quoting section 3157], medical care providers are prohibited by law from charging more than a reasonable fee. When read in harmony, 3107 and 3157 clearly indicate that an insurance carrier need pay no more than a reasonable charge and that a health care provider can charge no more than that. In theory, the insureds could be sued for the difference between what the carrier will pay and what the provider demands, but it is unlikely that the insureds would be liable for those expenses. As the Supreme Court noted in Nasser: We question, in any event, the Court of Appeals apparent conclusion that if the insurer is not made liable for even unreasonable and unnecessary expenses it will inevitably fall to plaintiff to pay those expenses. To the extent that plaintiff has any liability for these expenses in the event his insurance does not pay, it is presumably contractual. It seems unlikely that plaintiff would have an express agreement with [the doctor] or the hospital to pay unreasonable and unnecessary medical expenses, and equally as unlikely that he would have an implied contractual duty to do so. See 61 Am Jur 2d, Physicians, Surgeons, and Other Healers, 158, pp 290-291. And, while we need not resolve the issue in this case, it seems unlikely that medical expenses found to be unreasonable or unnecessary in a no-fault action would be found recoverable in a contract action against plaintiff. [Nasser at 55-56, n 10.] Furthermore, defendants have stated expressly that they will defend and indemnify plaintiffs in the event that plaintiffs are sued by their providers for the outstanding balance. Indeed they are directed to do so by a recent Interpretive Statement issued by the Commissioner of Insurance. It requires that no-fault insurers: provide insureds and claimants with complete protection from economic loss for benefits provided under personal protection insurance. Auto insurers must act at all times to assure that the insured or claimant is not exposed to harassment, dunning, disparagement of credit, or lawsuit as a result of a dispute between the health care provider and the insurer. [Michigan Department of Commerce, Insurance Bureau Bulletin 92-03, October 23, 1992.] Accordingly, plaintiffs are protected, by both the defendants' promise and the directive of the Commissioner of Insurance, from incurring damages as a result of defendants' payment of less than the full amount billed by plaintiffs' health care providers. [Emphasis added.] [Footnote omitted.] Id., 405-407. Reading the provisions of the no-fault insurance act in light of the construction given those provisions by the Court of Appeals in McGill, it is clear that a health care provider rendering services to a person for injuries covered under that act may charge only a "reasonable amount" for the products, services and accommodations rendered in connection with such covered injuries and, further, that the no-fault insurance company is responsible for paying those reasonable charges for the treatment of such covered injuries. It does not follow, however, that a health care provider is prohibited from entering into an agreement with a patient under which the patient agrees to pay any of the costs of treatment which are not covered by the no-fault insurance policy. A patient may, for example, elect to undergo treatment for a preexisting condition not affected by the covered accident. Such matters may fall outside the scope of coverage under the no-fault policy of insurance and may properly be the subject of an agreement between the patient and the health care provider. Nothing in the no-fault act explicitly precludes such an agreement. (1) It is my opinion, therefore, in answer to your first question, that the no-fault insurance act does not prohibit a health care provider from entering into an agreement with a person insured by a no-fault auto insurance carrier requiring the insured to pay all costs of medical treatment not covered by the person's no-fault insurance. Your second question may be stated as follows: If a person insured by a no-fault insurance carrier enters into an agreement with a health care provider to pay for the costs of medical treatment not covered by his no-fault insurance carrier, may the carrier seek to prevent the health care provider from enforcement of that agreement? The no-fault act does not contain any provision explicitly prohibiting a no-fault insurance company from challenging a health care provider's attempt to enforce a payment agreement between the provider and the insured. To the contrary, as the Court of Appeals stated in McGill, Id., pp 406-407, no-fault insurance carriers have been directed by the Commissioner of Insurance to defend their insureds from claims by health care providers. In addition, the Court of Appeals has held that: An insurer has a duty to defend a suit, despite theories of liability asserted that are not covered, if there are any theories of recovery that fall within the policy. A & G Associates, Inc v Michigan Mutual, 110 Mich App 293, 299; 312 NW2d 235 (1981) lv den 414 Mich 920 (1982). Thus, if the fees which the health care provider seeks to collect under the agreement with the insured concern goods or services which are arguably within the scope of the insured's no-fault coverage, the no-fault insurer not only may but, indeed, must defend the interests of its insured. It is my opinion, therefore, in answer to your second question, that, if a person insured by a no-fault insurance carrier enters into an agreement with a health care provider to pay for the costs of medical treatment not covered by his no-fault insurance carrier, that carrier must defend him from enforcement of that agreement if the medical treatment in question arguably falls within the scope of the insured's no-fault coverage. Your third question may be stated as follows: May a no-fault automobile insurance company use the services of a subsidiary company in determining the reasonableness of charges to its insureds by a health care provider or must it use a disinterested third party in determining reasonableness? Section 3107 of the no-fault insurance act makes a no-fault automobile insurance company liable for "all reasonable charges incurred for reasonably necessary products, services and accommodations." In McGill, supra, at p 408, the Court of Appeals interpreted section 3017 as follows: [T]he plain and ordinary language of 3107 requiring no-fault insurance carriers to pay no more than reasonable medical expenses, clearly evinces the Legislature's intent to "place a check on health care providers who have 'no incentive to keep the doctor bill at a minimum."' Dean, supra at 273. For the above reasons, we reject plaintiffs' argument that, pursuant to the no-fault act, defendants are obligated to pay the entire amount of plaintiffs' medical bills. Such an interpretation would require insurance companies to accept health care providers' unilateral decisions regarding what constitutes reasonable medical expenses, effectively eliminating insurance companies' cost-policing function as contemplated by the no-fault act. This result would directly conflict with the Legislature's purpose in enacting the no-fault system in general and 3107 in particular. "[I]t is clear that the Legislature did not intend for no-fault insurers to pay all claims submitted without reviewing the claims for lack of coverage, excessiveness, or fraud." Lewis v Aetna Casualty & Surety Co, 109 Mich App 136, 139; 311 NW2d 317 (1981). Clearly, the Legislature has directed no-fault auto insurance companies to review all health care claims to determine if they are reasonable. The no-fault insurance act does not prohibit a no-fault automobile insurance company from using a subsidiary company to assist it in determining the reasonableness of the amounts charged its insureds for health care. There is no legislative requirement that a no-fault auto insurance company use the services of a disinterested third party in determining reasonableness. A plaintiff challenging the no-fault automobile company's determination of reasonableness has the burden of proof. Nasser v Auto Club Ins Ass'n, 435 Mich 33, 49-50; 457 NW2d 637 (1990). It is my opinion, therefore, in answer to your third question, that a no-fault automobile insurance company may use the services of a subsidiary company in determining the reasonableness of charges to its insureds by a health care provider and it is not required to use a disinterested third party in determining reasonableness. Your last question may be stated as follows: In the event of a dispute as to the proper amount of payment, how long may a no-fault automobile insurance company delay payment to a health care provider for personal protection benefits rendered to its insured? Section 3142 of the no-fault act governs the timing of payment of no-fault insurance benefits, providing in part: (1) Personal protection insurance benefits are payable as loss accrues. (2) Personal protection insurance benefits are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained. If reasonable proof is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer. Any part of the remainder of the claim that is later supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer.... (3) An overdue payment bears simple interest at the rate of 12% per annum. In Davis v Citizens Ins Co of America, 195 Mich App 323; 489 NW2d 214 (1992) the insured plaintiff argued that the defendant no-fault insurer was required, under section 3107(a) of the no-fault act, to pay for the cost of a van to enable the plaintiff to get medical treatment. The defendant refused to make this payment. After determining that the van was reasonably necessary and should be paid for by the insurer, the Court of Appeals ruled on the interest penalty as follows: Finally, we agree with plaintiff that she is entitled, under MCL 500.3142(3); MSA 24.13142(3), to interest on the award of personal injury protection benefits. Penalty interest must be assessed against a no-fault insurer if the insurer refused to pay benefits and is later determined to be liable, irrespective of the insurer's good faith in not promptly paying the benefits. [Citations omitted.] Id., p 328. Section 3148 of the no-fault act provides that an attorney who is successful in representing an insured in the insured's attempt to receive overdue personal protection insurance benefits may be entitled to attorney fees from the no-fault insurer: (1) An attorney is entitled to a reasonable fee for advising and representing a claimant in an action for personal or property protection insurance benefits which are overdue. The attorney's fee shall be a charge against the insurer in addition to the benefits recovered, if the court finds that the insurer unreasonably refused to pay the claim or unreasonably delayed in making proper payment. In McKelvie v Auto Club Ins Ass'n, 203 Mich App 331, 335; 512 NW2d 74, lv den 447 Mich 899; 525 NW2d 460 (1994), the Court of Appeals set forth the purpose of section 3148: The purpose of this penalty provision is to ensure prompt payment to the insured. A refusal or delay in payment by an insurer will not be found unreasonable under this statute where it is the product of a legitimate question of statutory construction, constitutional law, or a bona fide factual uncertainty. However, where there is such a delay or refusal, a rebuttable presumption of unreasonableness arises such that the insurer has the burden to justify the refusal or delay. The trial court's finding of unreasonable refusal or delay will not be reversed unless it is clearly erroneous. [Citations omitted.] It is my opinion, therefore, in answer to your last question, that a no-fault automobile insurance company must pay personal protection benefits to a health care provider within 30 days after reasonable proof of the fact and amount of the loss; failure or refusal to make payment within this 30 day period subjects the insurer to an interest penalty and may, in addition, make the insurer liable for attorney fees if its failure or refusal to make a timely payment is determined to be unreasonable. Frank J. Kelley Attorney General (1)