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Trier of fact to determine whether a customary medical charge is also reasonable under no-fault act

In Advocacy Organization for Patients & Providers v Auto Club Ins Ass’n, ___ Mich ___; ___ NW2d ___ (2005), decided March 8, 2005, the Michigan Supreme Court held "it is for the trier of fact to determine whether a medical charge [in a no-fault action], albeit ‘customary,’ is also reasonable." In so holding, the Supreme Court specifically approved of the Court of Appeals’s resolution of the issues before it in Advocacy Organization for Patients & Providers v Auto Club Ins Ass’n, 257 Mich App 365; 670 NW2d (2003).

This case involved a dispute over the interpretation of two provisions of Michigan’s no-fault act: MCL 500.3107 (§ 3107 ), which governs the amount a no-fault insurer must pay to a health-care provider, and MCL 500.3157 (§ 3157), which details what a health-care provider may charge under the no-fault act and requires that such charge shall not exceed the amount the health-care provider customarily charges in cases not involving insurance. Under the statutory scheme, (1) both the amount chargeable to the patient and the amount the insurer must pay to the health-care provider are limited to a reasonable amount, (2) an insurer is not liable for any medical expense that is not both reasonable and necessary, and (3) the burden of establishing the reasonableness of the charge lies with the plaintiff. Advocacy Organization, 257 Mich App at 374.

The Court of Appeals in Advocacy Organization held that § 3157 "requires that an insurer only pay on behalf of the insured a ‘reasonable’ charge for the particular product or service." Id. at 379. However, because the Legislature did not define what is "reasonable" in this context, the Court noted that "insurers must determine in each instance whether a charge is reasonable in light of the service or product provided," and stated further:


It may be that a health-care provider’s "customary" charge is also reasonable given the services provided, while at other times the "customary" charge may be too high, and thus unreasonable. Either way, the trier of fact will ultimately determine whether a charge is reasonable.


Id. emphasis supplied.

Although it did not delineate the permissible factors for determining what is "reasonable," the Court of Appeals stated that the defendants’ failure to pay less than the amount the health-care provider charged "does not violate the no-fault act where the amount paid is based on a proper determination of what is reasonable and the insurer will defend and indemnify the insured if the health-care provider sues the insured for the balance." Id. at 379-80 (citing LaMothe v Auto Club Ins Ass’n, 214 Mich App 577, 581-82; 543 NW2d 42 (1995)). The Court of Appeals further stated that the plaintiffs could challenge the defendants’ failure to fully reimburse them for medical bills, but held that it would be the plaintiffs’ burden to establish by a preponderance of the evidence that the expenses were both reasonable and necessary. Id. at 380. The Supreme Court noted in its recent opinion that it agreed with the Court of Appeals’s resolution of all the issues presented to it and accordingly affirmed the decision of the Court of Appeals. Advocacy Organization, supra, ___ Mich ___; ___ NW2d ___ (2005), slip op at 3.

Copies of the Court of Appeals and Supreme Court opinions in Advocacy Organization may be obtained from any attorney at Straub, Seaman & Allen, P.C.

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