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LEGAL UPDATES COLLISON & COLLISON, P.C. (Vol. VII, Issue 2) February 2007 This newsletter has been compiled utilizing the latest reported Michigan Court of Appeals and Supreme Court Decisions. Case citations (if published at the time this newsletter is distributed) will reference the specific reporter, volume and page number. Unpublished Decisions (or those which have not been published as of the date of newsletter distribution) will be cited by Appellate Slip Opinion number. Copies of all Decisions summarized within this newsletter are available for your review upon request. Questions and comments are welcomed.
To receive our newsletter, please call (989) 799-3033 or email sky@saginaw-law.com. PERSONAL INJURY PROTECTION Claims submitted to the Michigan Catastrophic Claims Association for reimbursement of the "ultimate loss" are defined as the insurers "actual loss", and there is nothing contained within the statute which requires the amount to be reasonable.
Facts – In this case, there were consolidated appeals concerning the extent of the MCCA’s duty to indemnify its member insurance company’s insureds who had suffered catastrophic injuries. In Docket No. 260604, Daniel Migdal was involved in an automobile accident that left him severely and permanently injured. As a result, he required constant nursing care. Several years later the conservator and the insurer entered into a Stipulated Consent Judgment. USF&G agreed to pay $17.50 per hour for nursing care services for a maximum of 24 hours a day, with yearly increases of 8.5 percent, compounded annually. USF&G maintained that its stipulation to the entry of the Consent Judgment was a product of its best judgment, appeared reasonable, and represented a compromise of various disputed factors. In 2003, USF&G paid $54.84 an hour for Daniel’s nursing care services. USF&G submitted the claims to the MCCA for reimbursement. However, MCCA reimbursed USF&G at $22.05 an hour which it considered a reasonable rate of reimbursement, not the hourly rate stipulated to in the Consent Judgment. As a result, USF&G filed a Complaint for Declaratory Judgment, asking the Court to declare that MCCA was required to reimburse it for all monies paid under the Consent Judgment. The Trial Court granted USF&G’s Motion for Summary Disposition and denied MCCA’s counter-motion. In Docket No. 271199, Robert Allen was involved in an automobile accident that left him severely and permanently injured. Allen and Hartford subsequently reached a settlement wherein Hartford agreed to pay $30.00 an hour for attendant care services. After a claim was submitted to MCCA, it refused to reimburse Hartford for attendant care services paid above $20.00 per hour, questioning the reasonableness of the hourly rate. Hartford filed a Complaint for Declaratory Judgment alleging that under the No-Fault Act, the MCCA had a duty to reimburse Hartford for its net losses above the $250,000.00 statutory threshold. Hartford filed its Motion for Summary Disposition which was denied by the Trial Court.
On appeal, the Court held that when construing the provisions of a statute, the primary task is to discern and give effect to the intent of the legislature. The Court noted that MCCA is a statutorily created, non-profit organization comprising all insurers writing automobile insurance in the State of Michigan. Pursuant to MCL 500.3104(2) insurers belonging to the MCCA are entitled to indemnification for PIP payments incurred in excess of the statutory threshold. MCL 500.3104(25)(c) defines "ultimate loss" as follows:
The MCCA and the amicus curiae Auto Club Insurance Association argued the MCCA should not be required to reimburse an insurer for unreasonable payments incurred by the insurer pursuant to a settlement agreement or a consent judgment. The Court noted however, MCL 500.3104(7) provides what the MCCA shall do on behalf of its member insurers as it relates to review and settlement of catastrophic claims and subpart (g) establishes the procedures for reviewing claims.
Ultimately, pursuant to MCL 500.3104, the MCCA was required to reimburse its members for their actual losses above the statutory threshold without regard to reasonableness. Summary disposition was proper in Docket No. 260604 and the Court of Appeals reversed Docket No. 271199. United States Fidelity Insurance & Guaranty Company v Michigan Catastrophic Claims Association and Hartford Insurance Company of the Midwest v Michigan Catastrophic Claims Association, Docket No. 260604 and 271199 as released for publication February 6, 2007. Recommendation – The Michigan Court of Appeals reiterated, pursuant to MCL 500.3104, that the MCCA shall reimburse its members for their actual losses above the statutory threshold, without regard to reasonableness as it applies in MCL 500.3107. NO-FAULT A short term commercial lessee is liable for any injury caused by the negligent operation of the leased motor vehicle only when it was being operated by the authorized driver under the Lease Agreement, or by the lessee’s spouse, father, mother, brother, sister, son, daughter or other immediate family member.
Facts – Henry Washington leased a car from Defendant, Budget Rent a Car System, Inc. for his son’s benefit although his son was not a named additional driver on the lease application. The son’s wife, Mr. Washington’s daughter-in-law, borrowed the rental car from her husband. She was involved in an accident and Plaintiff was injured. Plaintiff filed suit against the driver and Budget Rent a Car System, Inc. Subsequently, Budget filed its Motion for Summary Disposition. The Trial Court held that by virtue of her status as Mr. Washington’s daughter-in-law, Defendant was a member of his immediate family. Thus, the Trial Court denied Defendant’s Motion for Summary Disposition.
On appeal, the Court noted MCL 257.401(3) which stated as follows:
Therefore, Defendant Budget could be held liable only if the daughter-in-law was an "immediate family member" of Mr. Washington. An immediate family member was defined as a close relative who resides with the lessee and is dependent upon the lessee for support, which the lessee is under some obligation to provide. In this case, Mr. Washington’s daughter-in-law did not live with him, but lived with his son. In addition, there was not a consistent pattern of reliance and support although he occasionally lent money. Therefore, she was not a part of Mr. Washington’s immediately family within the meaning of MCL 257.401. Therefore the Court reversed and remanded for entry of Judgment in favor of Defendant, Budget Rent A Car System, Inc. Ethridge v Washington, Michigan Court of Appeals Unpublished Decision Dated February 1, 2007, Docket No. 271227.
Recommendation – When presented with a case involving a leased vehicle from a short-term commercial lessee, consideration must be given as to the relationship of the at fault driver and the lessee. If the driver does not live with or have a consistent pattern of reliance and support, same would not be an immediate family member and therefore, the lessor would not be held liable.
PERSONAL INJURY PROTECTION Attorney fees are available if the Trial Court finds that the insurer unreasonably refused to pay the claim, not if the claim was paid at a rate less than what Plaintiff alleged was reasonable. Facts – Plaintiffs, Cheryl and John Crump were paid attendant care service benefits for years prior to filing a complaint to challenge the difference between the amount of benefits paid and their claim of a reasonable amount for such services. In addition, the injured party also filed a separate claim for breach of contract. Following a Jury Trial, Plaintiffs were awarded $51,695.00 for attendant care service benefits and the Trial Court denied Plaintiffs’ request for statutory attorney fees. Plaintiff also moved for attorney fees based upon the Case Evaluation rule. The Trial Court granted same but, only awarded a portion of the attorney fees requested.
First, the Court noted that the thrust of Plaintiffs’ Complaint was challenging the amounts of payment for attendant care services. It was undisputed that the injured person did not incur those costs. The son did not make payments to his parents and did not file this action to recoup monies paid in breach of the contract. The Court noted that all three Plaintiffs were seeking the difference between the amount paid and the amounts desired. Given the fact that the parents were the providers of the services, their own claim for the difference was duplicative of the injured person’s claim. As such, the Trial Court did not err in dismissing the claim raised on the injured party’s behalf for breach of contract.
Next, Plaintiffs alleged that the Trial Court erred in denying their request for attorney fees pursuant to the No-Fault Act, i.e. MCL 500.3148. The purpose of the No-Fault Act is to ensure that benefits are properly paid to the injured party. In the present case, there was no dispute that benefits were paid on behalf of the injured person for years. Plaintiffs’ claim was that the amount of payment was unreasonable. The Court of Appeals, looking at the plain language of the statute, noted that MCL 500.3148(1) provides for attorney fees if the Trial Court finds that the insurer unreasonably refused to pay the claim. The Court noted however, the Defendant did make payment. Therefore, the Trial Court did not clearly err by denying Plaintiffs’ request for statutory attorney fees. Crump v State Farm Mutual Automobile Insurance Company, Michigan Court of Appeals Unpublished Decision Dated January 16, 2007, Docket No. 263406.
Recommendation – It appears that statutory attorney fees are not available when an insurer properly pays benefits on behalf of the injured party and subsequent dispute arises as to the reasonableness of said payments. Should you have any questions or comments regarding this or any of our newsletters, please feel free to contact us by voice 989.799.3033, e-mail jtc@saginaw-law.com or write to Collison & Collison, P.C., 5811 Colony Drive, North, P.O. Box 6010, Saginaw, MI 48608-6010.
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