A Return to Tolling: 

The Court of Appeals leaves PIP Insurers on Guard About Denials

Name: Encompass Healthcare, PLLC v. Citizens Insurance Company

Court: Michigan Court of Appeals

Issued: November 17, 2022

INTRODUCTION

The Michigan Court of Appeals recently issued an opinion in which they analyzed the 2019 Amendments to the No-Fault Act to reinstate the equitable tolling of the one-year-back rule that had been previously discarded in Devillers v Auto Club Ins. Ass'n, 473 Mich. 562, 702 N.W.2d 539 (2005). In summary, the Court held that a formal denial of a provider's request for reimbursement is required to prevent tolling of the one-year-back rule found in MCL 500.3145.

ANALYSIS

In reaching its decision, the Court analyzed the 2019 Amendments to MCL 500.3145, which included the addition of the phrase "until the date the insurer formally denies the claim" to the limitations provision of that statute. Prior to that amendment, Devillers v Auto Club Ins. Ass'n, 473 Mich. 562, 702 N.W.2d 539 (2005) had discarded judicial tolling of the No-Fault Act's One-Year-Back Rule.

Encompass Healthcare, PLLC argued that Devillers was no longer applicable after the 2019 Amendments, because of the legislature's inclusion of tolling language. The Court readily accepted this argument and superseded the Devillers decision, enacting a return to the pre-Devillers system of tolling the one-year-back rule.

The Court then turned to an analysis of the phrase "formal denial" in the context of the statute. It adopted a definition that was espoused by several pre-Devillers opinions, holding that a formal denial need not be in writing to be effective, but it must be both explicit and direct.

The Court then applied its new rulings to the circumstances of the dispute between Encompass Healthcare, PLLC and Citizens Insurance. In doing so, they held that the boiler plate language contained in Citizen's Explanation of Review ("EORs") documents was insufficient to constitute a formal denial. The majority of the EORs contained only a statement which read:

This bill has been evaluated against the prevailing billing practices for healthcare providers within your geographic area. The reimbursement rate may therefore be different than the amount billed.

Please be advised that this bill may have been adjusted pursuant to the provisions of any applicable statute or any applicable policy of insurance. Based upon the adjustment of the bill pursuant to any applicable statute or any applicable policy of insurance, the payment for this bill may different that the amount billed.

The Court found that the wavering and broad language of the EORs was insufficient to put a provider on notice that their claim for reimbursement had been formally denied, and that a more explicit and direct notation on an EOR would be needed to convey a "formal denial" as contemplated by MCL 500.3145.

The Court refrained from placing any other limitations on what a formal denial must include to be sufficient. For example, it did not require insurers to send a formal denial letter or other such notice separate from an EOR statement. Rather, it simply required an insurer give notice to a provider that is both explicit and direct. Insurers are free to carry out this requirement in any way they see fit under the Encompass decision.

The take-away from the Encompass decision is that insurers should be careful to ensure that explicit and direct denial language is included in any EORs issued to providers, or to otherwise ensure that a denial is tendered to a provider if the protections of the one-year-back rule are to apply.

We will continue to monitor new caselaw interpreting the 2019 Amendments to the No-Fault Act and the progeny of cases that are sure to follow.