By Lindsay N. Dangl
I was reading the article written by Stephen H. Sinas titled “Extending the ‘one-year-back rule’ will decrease no fault litigation.” While Mr. Sinas artfully articulated his position, I respectfully disagree. I wanted to provide the readers with a different perspective.
Mr. Sinas argues in his article that extension of the “one-year-back rule” to a three-year limitation provision will “vastly improve the no-fault insurance system for all Michigan citizens.” This is because Mr. Sinas argues, “In many situations, one year is not enough time to make sure a no-fault insurance company pays every single medical expense that arises from a motor vehicle accident.” Mr. Sinas asserts this one year time period causes “numerous unnecessary lawsuits...simply because the no-fault insurance company has not yet paid for medical services rendered within a year.” I agree that injured individuals should be allowed a reasonable period of time to submit their claims for payment to their auto insurance. However, Mr. Sinas is advocating individuals be allowed three years following the date a medical expense is incurred to submit this bill to the insurance company. This is entirely too much time. The one year individuals are already permitted is too much time.
A proper analysis of this topic first requires fully examining the statutory language of MCL 500.3145. The first section of this statute contains a one year statute of limitations limitation period on claims for personal protection benefits. Section 3145 of the Act provides with regard to bodily injury,
“An action for recovery of personal protection insurance benefits payable under this chapter for accidental bodily injury may not be commenced later than 1 year after the date of the accident causing the injury unless written notice of injury as provided herein has been given to the insurer within 1 year after the accident or unless the insurer has previously made a payment of personal protection insurance benefits for the injury....”
The statute requires a claimant to bring the action for benefits or at least notify the insurer of the claim for benefits within one year of the accident. This is necessary as a lot happens in a year following an accident. Some of the most common problems include vehicles involved in the accident being destroyed, original photographs or digital data being lost because people change cell phones, and witnesses to the accident moving from the addresses listed on the police report. If the insurance company at least has notice of the accident, they can begin the investigation and attempt to save some of this evidence that would be lost.
In addition to the requirement that a claimant at least notify their insurance company one year after the accident, the statute contains the one-year-back rule. The rule is as follows:
“...If the notice has been given or a payment has been made, the action may be commenced at any time within 1 year after the most recent allowable expense, work loss or survivor's loss has been incurred. However, the claimant may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced...” MCL 500.3145(1).
This is the portion of the statute has been interpreted not as a statute of limitation, but as a damages limiting provision. The claimant does not need to file suit within one year of the injury if the insurance company has notice the accident occurred. Rather, the individual can file a lawsuit within one year of the most recent expense being incurred. Remember, Michigan at this point has lifelong medical benefits following an injury in a motor vehicle accident. This portion of the statute is in effect a lifelong tolling of the statute of limitations. A claimant is permitted to file a lawsuit within one year of the time the most recent expense is incurred, regardless of when the accident happened. Because claimants are given this lifelong statute of limitations, it makes sense that the Legislature had to limit their period of recovery in some way. Under the statute, the one-year-back rule mandates that an individual who files suit cannot collect damages for any expense incurred more than one year prior to the date of filing. One year is more than enough time for a claimant to determine if filing litigation is necessary or if a medical expense has been disputed.
The one-year-back rule is just as vital to investigation of a potential injury claim as the one year notice provision. Similar evidentiary problems exist. Physicians change practices, medical records become difficult to track down, and claimants can experience complications from other, unrelated medical conditions. As the claimant gets further from the date of the treatment for which compensation is sought, the insurance company’s right to investigate the claim or even obtain a second opinion regarding the medical condition of the claimant is lost in a very meaningful way. The Legislature determined that if the claimant is seeking to have a specific medical treatment paid for, they have up to one year to file a claim against the insurance company that the treatment was incurred and must be paid. However, a year is a long time. Any number of things could have occurred. Over that one year time span the individual’s medical condition may have changed significantly. Additional medical treatment may have been incurred. Other injuries may have happened. This is why I believe a claimant to be reimbursed for medical treatment should be limited to a much shorter period of time. If the insurer is going to be obligated to pay for the treatment, the insurer must be afforded the opportunity for a meaningful investigation and if necessary defense.
Take for example the situation where an individual is seeking reimbursement for a spinal fusion surgery. This individual, as permitted by the current law, does not need to notify the insurance company that he or she is even planning to have the procedure until a year after the surgery is performed. In this case, the insurance company’s ability to go back and see the condition of the individual’s spine before the surgery is entirely lost. The insurance company is limited to having a doctor look at medical records instead of personally examine the claimant to determine if the surgery was reasonable and necessary medical treatment related to the accident. What if this surgery was performed 10, 20, or even 60 years after the motor vehicle accident took place?
Under the current statute, the claimant could seek reimbursement of this expense at any time within one year after the surgery was performed – regardless of when the initial accident occurred. By that point in time the insurance company’s file regarding the initial accident may have been destroyed and likely the individual has had years of medical treatment prior to the surgery that needs to be investigated. This places a significant burden on insurance companies. This may seem like an uncommon situation, but it happens with relative frequency. It is what occurred in the case of Joseph v ACIA, cited by Mr. Sinas, 491 Mich 200 (2012). In that case, the expenses sought to be reimbursed allegedly arose out of a motor vehicle accident that occurred 32 years earlier. Michigan no fault law is relatively unique in the respect that once an individual is involved in a motor vehicle accident, so long as the claimant can prove that their need for medical treatment is due to an injury that arose out of the motor vehicle accident, the case can be filed any time within one year of the most recent treatment. It is for this reason that a damage limiting provision is necessary. If a claimant were allowed to reach back 32 years, significant evidence will have been destroyed over that period of time and the insurer’s ability to investigate the claim would be severely prejudiced.
Mr. Sinas seemed to indicate that the main issue that makes the one-year-back rule unjust is that insurance companies are keeping these bills and waiting more than a year to make a decision, thereby prejudicing the claimant. That is not the case. In fact, in the Devillers v ACIA case cited by Mr. Sinas, 473 Mich 562 (2005), the Court specifically found, “plaintiff in the case at bar had a full year following the February 2001 termination of payment for home health-care benefits within which to seek reimbursement. In no way was plaintiff's ability to file suit thwarted by dilatory tactics on the part of defendant [insurer] or by the exercise of defendant's [insurer’s] statutory right to delay payment for thirty days following receipt of proof of loss. As soon as PIP payments stopped, plaintiff had the surest notice that her claim was no longer being honored by the insurer.” Id at 584.
Insurance companies are not permitted to hold these claims for a year. The Legislature already dealt with this issue in MCL 500.3142. Section 3142(1) requires that benefits become payable as each individual loss accrues. Section 3142 further outlines that a medical expense claimed is “overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained...” MCL 500.1342(2) (emphasis added).
Each medical expense or treatment is dealt with separately under the one-year-back rule. The Legislature expressly directed,
Each medical expense or treatment is dealt with separately under the one-year-back rule. The Legislature expressly directed,
“If reasonable proof is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer. Any part of the remainder of the claim that is later supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer...”
The penalty on the insurer for having an overdue claim is significant. Not only do overdue benefits carry a 12 percent interest rate, MCL 500.3142(3), but additionally, if a lawsuit does need to be filed, there is a statutory right to an attorney fee on overdue benefits which were unreasonably refused or unreasonably delayed beyond the 30-day time period, MCL 500.3148(1). The issue identified by Mr. Sinas should never be a problem unless the claimant waits an unreasonably long time to submit the medical expense for payment. What is prejudicial is that insurers are held to a 30-day window to evaluate a claim while the claimant is permitted to reach back for reimbursement. While the individual should be permitted a reasonable period of time within which to determine if filing suit is necessary, being able to reach back a full year is too much time.
An effective damage limiting provision is more important now than ever before. I do not dispute that no-fault litigation has increased. As a matter of course, I think many practitioners have seen this. However, this is not due to the one-year-back rule. The rule was enacted in 1973. The rule has not changed, and yet filings have increased. What has changed in recent years is the addition of providers being able to maintain their own lawsuits separate and apart from the claimant (sometimes without even the knowledge of the allegedly injured person) and an increase in no-fault insurance fraud. Rules such as the one-year-back rule help to limit these claims. A shorter time period would be even more advantageous to fight insurance fraud.
A shorter time period would require notice to the insurance company of the medical expense claimed to be compensable when that the insurer can conduct a meaningful investigation of the surrounding circumstances and the claimant’s alleged injuries. A shorter time period might prevent situations I’ve seen where individuals attend 200 unnecessary chiropractic treatments over the course of a year, as the insurer would have the ability to have the claimant examined and at least get a second opinion regarding the proposed treatment before the treatment is rendered. The insurer would have a better opportunity to preserve evidence in a fraudulent claim. Every day that goes by between the time the treatment is rendered and the date a claim is filed makes the investigation of the claim less accurate as information is inevitably destroyed.
A damage limiting provision in the no fault law serves an important purpose. If insurers are only permitted 30 days to decide whether a claim is compensable or face the possibility of harsh sanctions, it is only fair that the claimant would have a reasonable limit on the period of time to submit proof of the expense claimed to be compensable. There is no reason why an individual should be permitted a time limit that is twelve times that imposed upon the insurer. This assists with a timely investigation of the claim. One year is not only enough time, it is more than enough time. The system would be better served by shortening this time period rather than extending it.
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Lindsay N. Dangl is a shareholder with Murphy & Spagnuolo PC in Okemos. Dangl specializes in civil litigation and insurance defense.
