On July 1, 2008, Brent Harris was injured when the motorcycle he was riding was hit by a vehicle insured by Auto Club Insurance Association. Harris had a health insurance contract – also known as a “certificate” – with Blue Cross Blue Shield of Michigan.
The vehicle’s no-fault policy is an “uncoordinated policy,” meaning that Auto Club pays no-fault benefits regardless of what other insurance the insured may have. Under Michigan’s no-fault act (MCL 500.3103 et seq.), the first priority for paying personal injury benefits to an injured motorcyclist falls on the no-fault insurer of the vehicle involved in the accident; a motorcycle is not considered a “vehicle” for the purposes of no-fault personal injury benefits. Auto Club paid Harris’ medical expenses.
But the parties dispute whether Harris’ Blue Cross certificate coordinates with the no-fault policy. Blue Cross maintains that it should not have to pay benefits that Auto Club is already obligated to provide; Auto Club argues that, where an injured person is entitled to both no-fault and health insurance benefits, and those policies are not coordinated, the health insurer should pay.
Blue Cross’ certificate states that Blue Cross will not pay for “[s]ervices covered under any other Blue Cross or Blue Shield contract or any other health care benefits plan.” The contract also provides that Blue Cross “will coordinate the benefits payable under this certificate pursuant to the Coordination of Benefits Act, Public Act No. 64 of 1984 (starting at MCLA 550.251). To the extent that the services covered under this certificate are also covered and payable under another group health care plan, we will combine our payment with that of the other plan to pay the maximum amount we would routinely pay for the covered services.”
The circuit court judge determined, based on the contract’s language, that the Blue Cross certificate coordinated benefits with the no-fault policy; accordingly, Auto Club was liable to pay Harris’ medical expenses, the judge concluded. Among other matters, the judge dismissed Harris’ and Auto Club’s claims against Blue Cross.
But in a 2-1 unpublished opinion, the Court of Appeals reversed that ruling and reinstated the claims against Blue Cross. The appellate court rejected the lower court’s conclusion that the Auto Club and Blue Cross contracts were coordinated.
“If contractual language is clear and unambiguous, its meaning is a question of law, and courts must interpret and enforce the contract as written,” the majority reasoned. “Although [Blue Cross] contends that plaintiff is seeking a ‘windfall’ by obtaining duplicative payment of his medical expenses from two sources, the availability of double recovery for a person entitled to benefits from two contracts depends on the specific contracts.”
The majority rejected Blue Cross’ argument that its certificate – which provided that Blue Cross would not pay for services covered under another “health care services plan” – required coordination of benefits with Auto Club. “We note that the Coordination of Benefits Act does not include a no-fault insurer among the defined entities with which the health care providers will coordinate or a mechanism for coordination,” the majority said. “Although the benefits available under no-fault policies include payment of medical expenses, a no-fault policy is not a ‘group health care plan.’ … or a ‘health care benefits plan.’”
Blue Cross also pointed to a certificate provision that stated that Blue Cross would not pay for “care and services … which you legally do not have to pay or for which you would not have been charged if you did not have coverage under this certificate.” But the Court of Appeals majority rejected that argument. In earlier cases, the Court of Appeals has interpreted “incurred” as it is used in the no-fault act to mean “to become liable for” or “legally obligated” – in other words, that the claimants in those cases did “incur” medical expenses even though an insurer company was paying for them, because the claimants, by accepting health care services, would be legally obligated to pay those expenses. The majority acknowledged that these earlier cases only address when charges are “incurred” under the no-fault act, but added, “[T]his distinction, while factually accurate, is not legally significant because the Court defined ‘incurred’ as being synonymous with legally obligated to pay. The pertinent phrase in this case is, ‘We do not pay for . . . care and services . . . for which you legally do not have to pay . . . .’ The rationale … that a party receiving services has a legal obligation to pay for them when rendered and incurs the expense even if the expense is paid by an insurer, is applicable here, although the phrase and context are different. When [Harris] received the care and services, he legally had to pay for them.”
The majority also was not persuaded by Blue Cross’ argument that, under another provision in the certificate, Blue Cross would be entitled to reimbursement from Auto Club if Blue Cross had paid for Harris’ medical expenses. That provision “addresses the insured’s obligation to cooperate with [Blue Cross] in recovering payments from another source,” the majority reasoned. “It does purport to define when [Blue Cross] is liable or not liable for making the payments in the first instance. But …the recovery to which [Blue Cross] refers is a recovery from a judgment or settlement for a claim for personal injury damages. The plaintiff’s benefits from [Auto Club] do not arise by virtue of a claim for personal injuries resulting in a judgment or settlement for damages for personal injury.”
The dissenting judge said he would have upheld the circuit court’s dismissal of the claims against Blue Cross. “In my view, the contract between [Blue Cross] and [Harris] precluded [Harris] from receiving a double recovery,” the judge declared.
The dissent looked to the provision in the certificate stating that Blue Cross would not cover care and services “for which you legally do not have to pay or for which you would not have been charged if you did not have coverage under this certificate.” “The clause ‘for which you legally do not have to pay’ is written in the present tense,” the dissent reasoned. “Thus, whether we look to the factual situation at the time the complaint was filed or when [Harris] submitted his demand upon [Blue Cross], we know that [Harris] did not legally have to pay anything.”
The parties did not dispute that Auto Club paid Harris’ medical bills, or that Auto Club was required to do so under the no-fault act, the dissenting judge noted. “Consequently, the exclusionary clause applied because [Harris] and [Blue Cross] contractually agreed that [Blue Cross] would not pay for services which ‘you [plaintiff] legally do not have to pay.’ This clause is clear and unambiguous, and enforcement of the terms required the trial court to grant [Blue Cross’s] motion for summary disposition.” Moreover, the dissent said, the majority erred by importing the courts’ interpretation of a no-fault act term, “incur” or “incurred,” into a contract that did not contain that word.
The no-fault act allows coordination of benefits so that consumers who have health insurance can opt to pay a reduced premium for coordinated no-fault coverage, the dissenting judge explained. “And, when both the no-fault policy and the health policy are uncoordinated, the injured person may recoup from both insurers,” the dissent stated. “But what is contained in the health insurance plan is purely a matter of contract, and it is those contract terms that control what obligations [Blue Cross] has toward its insured.”
The dissent rejected Auto Club’s argument that Blue Cross unfairly benefited by Auto Club covering Harris’ medical expenses. First priority for paying the injured motorcyclist’s health care expenses fell on Auto Club under the no-fault act, the judge stated. Any benefit to Blue Cross “is merely the result of no-fault requirements and a plain reading of the contract agreed to by the parties,” the dissenting judge observed. “In essence, all parties received the benefits of their particular bargains.”
Blue Cross appealed, and, in an order dated June 6, 2012, the Supreme Court granted leave to appeal. The Court directed, “The parties shall include among the issues to be briefed whether the plaintiff is entitled to a double recovery from both Auto Club Insurance Association and Blue Cross Blue Shield of Michigan of medical expenses arising from a motorcycle accident involving a motor vehicle.”