Background
Daniel Wilson was injured in a November 2022 motor-vehicle collision and carried automobile insurance from Citizens United Reciprocal Exchange with a $250,000 limit on PIP medical benefits. After Citizens paid several providers, approximately $181,000 remained. Citizens, Wilson, and certain providers attended an April 18, 2024 facilitation concerning distribution of those funds, but they did not reach an agreement and continued negotiating afterward.
Central Home Health Care Services submitted a claim on May 22, 2024, for services provided to Wilson from January through April 2024. Citizens received written notice of the claim on May 23 and denied it on May 31, but did not include Central in the ongoing allocation negotiations. Citizens later reached a pro rata agreement with other claimants and paid them, exhausting the policy limit. Central sued for PIP benefits, penalty interest, and attorney fees, and the circuit court granted Citizens summary disposition based on exhaustion of the policy limit.
The Court’s Holding
The Michigan Court of Appeals reversed. Under MCL 500.3112, an insurer’s good-faith payment of PIP benefits discharges its liability to the extent of the payments unless it has received written notice of another person’s claim. Because discharge by payment is an affirmative defense, Citizens bore the burden of producing evidence establishing that defense.
Citizens did not establish that it had paid, or entered a final binding agreement to pay, the remaining benefits before receiving Central’s written claim. Its own evidence showed that negotiations continued after May 23, additional providers were added to the proposed distribution in June, approval was not obtained until June 20 at the earliest, and the relevant payments began in July. Viewing that evidence in Central’s favor, Citizens was not entitled to judgment as a matter of law merely because it later exhausted the policy by paying other claimants. The court remanded for further proceedings without deciding that Central was entitled to payment.
Key Takeaways
- An insurer asserting discharge through payment under MCL 500.3112 bears the burden of supporting that affirmative defense with evidence.
- An offer or preliminary allocation discussed at facilitation does not establish policy exhaustion when negotiations and approvals remain ongoing.
- Later exhaustion of PIP limits does not automatically defeat a provider’s claim when the insurer received written notice before reaching a final distribution agreement or making the exhausting payments.
Why It Matters
The decision emphasizes that the timing of written notice, settlement, and actual payment can determine whether exhaustion of PIP limits shields an insurer from a provider’s claim. Insurers cannot establish discharge merely by showing that they eventually paid the full policy limit when their own records indicate that they knew of an additional claim before finalizing the allocation.
For providers, the ruling underscores the importance of promptly submitting written claims and preserving proof of receipt. It also confirms that evidence concerning negotiations, releases, and payment dates may create a factual dispute sufficient to defeat summary disposition.