Facts - Plaintiff (appointed next friend of a minor), rejected a case evaluation award. Apparently the defense prevailed and was entitled to claim case evaluation sanctions. Michigan statutes provide that any person who brings an action as next friend for an infant, shall be responsible for the costs of the suit. Taxable costs include those matters especially made taxable elsewhere in the statutes or rules, and any attorney fees authorized by statute or by Court rule. Because Plaintiff wrongfully rejected the case evaluation award, the next friend was found to be liable for those costs. (Berry v Morris, Michigan Court of Appeals Unpublished Decision dated April 1, 2003, Docket No. 234466).

Recommendation – It should always be brought to the attention of Plaintiff’s counsel that the appointed next friend may be liable for various sanctions should Plaintiff fail to make an appropriate recovery. Often times, this realization will assist in facilitating the reasonable settlement of a claim.

Facts – Esquivel purchased a 1997 Blazer which he financed at the dealership. The finance agreement was assigned to Plaintiff in 1998. Under the terms of the contract, Esquivel was required to maintain insurance on his vehicle at all times. When Esquivel obtained insurance coverage for the vehicle, Plaintiff was listed as a lienholder. However, Esquivel also named himself as an excluded driver. The Blazer was destroyed in an accident while Esquivel was operating it. Because he was an excluded driver, the No-Fault insurer denied Plaintiff’s claim for coverage.

In analyzing this particular claim, the Court of Appeals discussed the two types of loss payable clauses (otherwise known as mortgage clauses) contained in insurance policies which protect lienholders. The first type commonly known as an ordinary loss payable clause, directs the insurer to pay the proceeds of the policy to the lienholder as its interest may appear, before the insured receives payment on the policy. Under this type of policy, the lienholder is simply an appointee to receive the insurance fund to the extent of its interest, and its right of recovery is no greater than the right of the insured. There is no privity of contract between the two parties because there is no consideration given by the lienholder to the insured. Accordingly, a breach of the conditions of the policy by the insured would prevent recovery by the lienholder.

The second type is known as a standard loss payable clause. Under this type of clause, a lienholder is not subject to the exclusions available to the insurer against the insured because an independent or separate contract of insurance exists between the lienholder and the insurer. In other words, there are two contracts of insurance within the policy – one with the lienholder and the insurer and the other with the insured and the insurer. Under the standard loss payable clause, the consideration for the insurer’s contract with the lienholder is that which the insured paid for the policy itself.

The policy in this case contained a standard loss payable clause, meaning that there was a separate contract for insurance coverage with Plaintiff as a lienholder. However, insurers may avoid liability to lienholders by expressly excluding coverage for certain acts committed by an insured. In this case, the loss payable clause provided that coverage was excluded if the insured breached his agreement with the lienholder. Plaintiff’s agreement with Esquivel required that he maintain insurance on the vehicle at all times. However, by listing himself as an excluded driver, Esquivel negated coverage for the vehicle while he operated it. Accordingly, by operating the vehicle while he was listed as an excluded driver, Esquivel breached the agreement. Thus, Defendant was not liable to Plaintiff pursuant to the express language in the loss payable clause excluding coverage under the circumstances. (Dart Bank v Titan Insurance Company, Michigan Court of Appeals Unpublished Decision dated April 22, 2003, Docket No. 235483).

Recommendation – It was incumbent upon Plaintiff to exercise its rights under the loan agreement to protect itself against risk of loss. When investigating a claim of this type, claims personnel should immediately secure a copy of the declaration page forwarded to the lienholder. That document should clearly show that the lienholder had actual knowledge that the insured was listed as an excluded driver.

Facts – Plaintiff was injured in a motor vehicle accident and sought PIP benefits from her insurer. She was billed $225,580.00 by the hospital for medical treatment. The hospital submitted its bill to Medicare and received $100,259.47 which it accepted as payment in full for its services. Thereafter, Defendant insurer reimbursed Medicare for that amount, as it had primary coverage. The Trial Court found that Plaintiff had incurred the entire expense stated in the hospital’s bill, and granted Plaintiff judgment for the difference in the amount billed and the amount paid.

In reversing the Trial Court’s decision, the Court of Appeals noted prior case law defining the word "incur" as "to become liable for." In this case, Defendant submitted an Affidavit from the health care provider indicating that it accepted the Medicare payment as full and final payment of the cost incurred for Plaintiff’s hospitalization. As such, Plaintiff had no additional liability and incurred no other expenses. (Nortwick v Auto-Owners Insurance Company, Michigan Court of Appeals Unpublished Decision dated April 15, 2003, Docket No. 237310).

Recommendation – MCL 500.3107 provides that personal protection insurance benefits are payable for allowable expenses, consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation. A Motion for Summary Disposition should be filed where expenses are claimed which have not been incurred as required by statute.

Facts – Plaintiff was injured in an automobile accident in May 1996. After the accident, Plaintiff sought treatment from several physicians. Some medical bills were paid by the Defendant, some were denied. Litigation was filed and the matter subsequently went to Trial. Only one of the treating physicians gave specific testimony that his treatments were reasonably necessary and that his charges were reasonable. Following the close of Plaintiff’s proofs, Defendant moved for a partial directed verdict, arguing that Plaintiff failed to provide evidence that unpaid medical bills (except for the one doctor) were attributable to reasonably necessary treatment and that the charges were reasonable. The Trial Court took Defendant’s motion under advisement. It was subsequently denied.

The Court of Appeals indicated that whether an expense is reasonable and reasonably necessary, is generally a question of fact to be resolved by the Jury. In determining damages for allowable expenses, the Jury must not be allowed to speculate concerning the cost of a particular procedure or service. The Court found no requirement that Plaintiff offered direct evidence from a treating physician that the expenses incurred were both reasonable and reasonably necessary in order to prevail. Rather, the Jury is entitled to consider all of the evidence introduced by Plaintiff to decide whether Plaintiff has proved by a preponderance of the evidence that the expenses were reasonable and necessary. Thus, direct and circumstantial evidence, and permissible inferences therefrom, may be considered by the Jury to determine whether there is sufficient proof that the expenses were both reasonable and necessary.

While Plaintiff did not provide direct testimony from two of his doctors that each and every expense was reasonable and necessary, the Court concluded that Plaintiff did provide evidence sufficient to survive Defendant’s motion for directed verdict. The Court found that Doctor Robertson’s testimony supported a legitimate inference that the remaining two treating physicians had also rendered treatment which was both reasonable and necessary. All three doctors each reached the same diagnoses, which permitted the Jury to reasonably infer that all treatment was necessary and related to the accident. Plaintiff provided the Jury with itemized bills for every expense. The Jury was able to scrutinize each expense during its deliberation and compare Doctor Robertson’s bills (which he described as reflecting reasonable charges) to the bills of the remaining physicians to determine whether the expenses reflected therein were also reasonable. (Kallabat v State Farm Mutual Automobile Insurance Company, Michigan Court of Appeals Published Decision dated April 3, 2003, Docket No. 230627).

Recommendation – Without the testimony of Doctor Robertson, Plaintiff’s claim most likely would have failed. It may be advisable to have an independent examining physician review all charges in order to determine whether any particular claim has a legitimate basis in fact.

Facts – Plaintiff was a business invitee, allegedly sustaining injuries when she tripped and fell due to uneven, cracked, deteriorated pavement in the parking lot of Defendant’s premises. Plaintiff’s claim was dismissed by the Trial Court on the grounds that the defects in the parking lot were open and obvious conditions, without special aspects, for which Defendant had no duty to protect Plaintiff.

In upholding the Trial Court’s ruling, the Michigan Court of Appeals noted that contrary to Plaintiff’s claim that the parking lot condition was unavoidable, Plaintiff and other potential patrons could have chosen not to do business with, and thus frequent establishments considered as posing an unreasonable risk of harm to their welfare. This is simply the harsh reality of our premises liability law as it has evolved. In this case, Plaintiff admitted that she saw the defective condition of the concrete and yet chose to traverse the area. Michigan law provides no remedy for the damages that resulted under the circumstances. Despite the obviousness of danger, a landowner may still have a duty to protect an invitee against unreasonable risks of harm arising from a special aspect of the condition. No special circumstances existed in this case. (See Lugo v Ameritech Corp., Inc., 464 Mich 512 (2001)). (Vavrick v Bill’s Automotive and Franklin Properties, LTD., Michigan Court of Appeals Unpublished Decision dated April 17, 2003, Docket No. 238473).

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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