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Attorney can charge hospital fees for securing PIP benefits after denial by insurer

The Detroit Medical Center objected to Gail Miller's attorneys' attempt to require it to contribute to the fees and expenses incurred in securing PIP benefits from Citizens Insurance after a catastrophic car accident.  When Miller was appointed guardian and conservator for her son, Ryan, after a devastating injury, she submitted the PIP expenses to the vehicle insurer for payment.  Citizens denied payment and attempted to rescind the insurance contract.  It argued that the vehicle had been used for a business purpose, entitling Citizens to void the insurance contract in its entirety.  Miller's attorneys attempted, unsuccessfully, to persuade Citizens that it could not deny PIP benefits to the innocent Ryan.  When negotiations broke down, the guardian filed suit.  Within a matter of months, Citizens agreed to pay PIP benefits and the attorneys proposed to allocate the contingent fees and costs to all of the persons who benefited from the "common fund" they had created.  All of the medical creditors agreed except the DMC.

The DMC initially argued that it should not have to pay because it was never notified of the lawsuit or the attorneys' efforts to secure payment.  The Court noted that this claim was demonstrably false, based on the exhibits presented in court.  The DMC also argued that there was precedent supporting its right to avoid contributing to costs or fees.  The Court of Appeals examined the previous case cited by the DMC, however, and distinguished it.  In this case, the insurer had denied coverage, whereas in the prior case where fees were denied, the attorney had attempted to impose a claim for fees on medical expenses that were voluntarily paid by the insurer.

Finally, the Court noted that the DMC had taken no action to collect the expenses on its own and it had also failed to notify the attorney that it wished to pursue its medical claim independently.  Having remained silent while the attorneys achieved a common fund that benefited the DMC, the hospital was required to contribute its fair share to the expenses of achieving the recovery.

The Court of Appeals also rejected the Millers' attorneys' argument that since the DMC was willing to passively accept Medicaid payment for its services, it should be limited to reimbursement of that lower amount.  The Court of Appeals panel termed this suggestion "punitive" and refused to adopt the attorneys' reasoning.

Thompson O’Neil, P.C.
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Traverse City, Michigan 49684
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