No Fault Update: Assignments and the Real Party in Interest

Name: C-Spine Orthopedics, PLLC v. Progressive Michigan Ins. Co.

Court: Michigan Supreme Court

Issued: July 3, 2025

INTRODUCTION

This summer, we tracked several updates to No-Fault Act case law developments from across the Michigan Supreme Court and Court of Appeals. Included herein is a salient discussion of those updates.

In C-Spine, Progressive argued that C-Spine could not maintain an action because they assigned away their claims and hence, were not the parties in interest. The Supreme Court determined that while a failure to bring suit in the name of the real party in interest is grounds for dismissal, this defect does not necessarily mean that the suit should be dismissed. It is possible to cure this defect in some circumstances, but plaintiffs must take some action in the litigation that would allow the court to assess the effect of the change in parties. The Supreme Court addressed several potential cures, such as filing an amended complaint joining or substituting the proper plaintiff; filing an amended complaint reflecting that the original plaintiff has become the real party in interest through an assignment; or intervention by the real party in interest.

While C-Spine was not the real party in interest when the litigation commenced, C-Spine was restored as a real party in interest via a counter-assignment. The Court opined that despite attaining party in interest status, C-Spine was required to take some other action that would have allowed the trial court to consider their effect.

In the companion to C-Spine, Parie Wallace executed assignments transferring her right to collect PIP benefits for her treatment to her medical provider. After executing this assignment, Wallace filed suit for PIP benefits from Progressive. Progressive moved for summary judgment on the basis that Wallace was not the proper party in interest to litigate the claim. In response, Wallace argued that her and her medical providers "mutually rescinded" the assignments, rendering the assignment void ab initio and retroactively making her the real party in interest. However, the Supreme Court recognized that rescission is an equitable remedy that only a court may issue; individual parties may not unilaterally declare a rescission. Hence, whatever action was taken between Wallace and her providers, the action could not be given legal effect as to a third party without a ruling from a court. Therefore, the Supreme Court found that there was never the proper real party in interest analysis conducted.

The practice point from C-Spine is that while Michigan Court Rules require a claim to be filed by the real party in interest, and a claim by a party without an interest is generally grounds for dismissal, it is possible for a plaintiff to cure the defect by taking action that allows for the trial court to assess changing parties. Therefore, a claim brought by a party without an interest must take some affirmative action and seek a ruling from the court on the party-in-interest issue to regain status as the party in interest.

Name: Bonter v. Progressive Marathon Ins. Co.

Court: Michigan Supreme Court

Issued: July 2, 2025

Effective June 11, 2019, MCL 500.3009 sets minimum liability limits for property damage and bodily injury or death coverage in auto liability policies. Within 3009, Subsection (1) requires any policy delivered or issued for delivery after the statute’s effective date to “comply with ‘all’ the coverage requirements in Subsections (1)(a) and (1)(b) unless the insured selects a different coverage level under Subsection (5).” Subsections (1)(a) and (b) mandate pre-July 2, 2020, liability limits of $20,000/$40,000, with a step up in coverage limits to $250,000/$500,000 for the coverage period beginning July 2, 2020. Section (1) contains exclusions from the step up in liability required on and after July 2, 2020. 500.3009(5)-(8) provides for exclusions in the step up in liability limits required on and after July 2, 2020, but these exclusions are only effective if the insured makes an affirmative choice for lower limits.

Irregardless of the selection made by the insured, Section (1) states that any auto liability policy issued for a vehicle registered in the State of Michigan is “subject to all of the following limits” including Subsections (1)(a) and (1)(b). Thus, the issue before the Court was whether a policy issued before July 2, 2020, with an effective date continuing after July 2, 2020, was required to have a step up in liability limits from $20,000/$40,000 to $250,000/$500,000. The Court found that the Michigan Legislature’s use of the phrase “subject to all of the following limits” required that any policy issued before July 2, 2020, with an effective date extending beyond July 2, 2020, must issue a policy containing the $250,000/$500,000 minimum coverage step up as provided in Subsections (1)(a) and (1)(b), unless the insured makes an affirmative choice under subsection (5) for lower minimum liability limits.

In practice, auto liability policies issued after June 11, 2019, must conform with statutory minimum coverage limits under MCL 500.3009. For all policies in effect on or before July 2, 2020, with effective dates continuing thereafter, insurers must automatically provide a step up in minimum bodily injury liability coverage from $20,000/$40,000 of $250,000/$500,000—unless the insured affirmatively opts for lower limits under Subsections (5) through (7). A policy issued after June 11, 2019, that fails to include the increased limits for coverage extending beyond July 1, 2020, is noncompliant unless there is valid documentation of an insured’s selection of lower limits. The default heightened limits automatically apply in the absence of such an opt-out.

Name: Leaverson v. State Farm Mut. Auto. Ins. Co.

Court: Michigan Court of Appeals

Issued: July 23, 2025

Independent medical examiner (“IME”) Appellants appealed a trial court order denying their motions to quash subpoenas issued by the plaintiff related to the discovery of the appellants’ financial records and tax returns.

In general, the Court held, the amounts earned from performing IMEs and acting as expert witnesses for insurance companies is relevant information for a jury to consider when evaluating witness credibility. Therefore, because credibility is always relevant, a court may allow a plaintiff an opportunity to discover an expert’s gross incomes to determine whether an expert possesses a bias in favor of insurers. When a plaintiff shows entitlement to an expert’s gross income and W-2s or 1099s, MCL 500.3151(2)(b) states only records from one year before the date when an independent medical examination may be requested. However, because a calendar year may differ from a tax year, a plaintiff may compel up to two years of records for the purpose of discovering potential bias under MCL 500.3151(2)(b).

Alternatively, for privacy reasons and a potential for exposing unrelated information, the Court determined that a court should not grant a subpoena of the Appellants’ tax returns. However, the Court of Appeals determined that the trial court abused its discretion by granting plaintiff’s discovery of appellants’ tax returns “when there are alternative means to obtain the relevant information without jeopardizing the privacy of appellants and their families[,]” thus indicating circumstances may exist where it is appropriate to subpoena an individual’s tax returns when there are no alternative means to obtain relevant information.

Thus, from a practical perspective, Leaverson allows the discoverability of certain IME doctors’ financial records such as gross income and the sources thereof. A plaintiff may be able to compel the discovery of up to two years of an IME doctor’s gross income because this information bears on the IME doctor’s potential a bias in favor of insurers and bias is always at issue.

Name: Kapsokavathis, PLC v. Auto-Owners Ins. Co.

Court: Michigan Court of Appeals

Issued: July 10, 2025

Kapsokavathis PLC was assigned an entitlement of PIP benefits by Constance Black, who Kapsokavathis provided medical treatment to, and then initiated this provider suit against Auto-Owners for PIP benefits. An issue before the court was whether a claims representative may testify regarding how the representative handled an insured’s claim. Auto-Owners asserted that how it handled the claim is relevant to the issue of whether penalty interest was warranted. However, the court held that a claims representative can testify only about what was received by the representative and when the proof was received. The representative’s subjective thoughts on whether what was received was “reasonable” is not relevant because reasonableness is an issue for the trier of fact to decide. Therefore, because the Court found this testimony to be “irrelevant,” it may be excluded from evidence.

The Kapsokavathis Court further denied the admission of a letter written by Black’s counsel. Auto-Owners sought admission of the letter and argued its admissibility under the party-opponent hearsay exception. However, the Court opined that there is no authority holding or establishing that an assignor is a party to a lawsuit when the assignee is the actual party bringing the claim. While it is true that an assignee stands in the shoes of an assignor—subjecting the assignor to the same rights and defenses as the assignee—it does not follow that the assignor is a “party” for evidentiary purposes, and thus, Black was not a party-opponent.

Practically speaking, a claims representative’s testimony about the reasonableness of a claim is irrelevant and will be excluded. Instead, a claims representative may only testify as to what they received from an insured and when it was received. Additionally, it remains advisable to notify the insured, in writing, specific documents and information needed, within 30 days of receiving a proof of loss to demonstrate that the insured’s submission is unsatisfactory. This will reset the 30-day timeframe until the insured responds to the request. Likewise, the Leaverson Court clarified that there is no authority to support the proposition that an assignee is a “party” to a lawsuit despite the fact that the assignor stands in the assignee’s shoes.