Allowable Expense Benefits Part I

Allowable Expense Benefits
Scope of the Benefits

Lifetime Benefits for Injured Persons

The Michigan No-Fault Law has the broadest and most generous medical-expense and patient-care provisions of any No-Fault Act in the country.  Subsection 3107(1)(a) states that an injured person is entitled to recover “allowable expenses” consisting of: “All reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.”

The statute contains no further definitions of the scope and extent of these “allowable expenses.”  It is clear, however, that these benefits are payable for life and are payable without regard to any “cap” or “ceiling.”  In other words, the allowable expense benefit is a benefit that is unlimited in amount and duration.  Various court decisions have established that these benefits include a wide variety of products and services.

To learn more about proving that your injuries arose out of a motor vehicle accident, please visit the PIP benefits causation standard section of this website. To learn about the types of expenses that may be covered, please continue reading below.

Lifetime Medical Expenses

Under Section 3107(1)(a) of the No-Fault Act, all reasonable charges for reasonably necessary hospital expenses, physician charges, prescriptions, medical equipment, prosthetic devices, chiropractic treatment, psychological services, in-home care, and other related expenses are compensable as an allowable expense. This is a lifetime benefit, meaning that a patient is entitled to recover necessary medical expenses stemming from the automobile accident for the rest of his or her life.

Although this standard seems broad, patients must take care to ensure that the medical care and treatment they receive will be considered “reasonably necessary.” This is an especially critical issue when the proposed treatment of a patient is considered experimental.

The Michigan Supreme Court has stated that, although experimental procedures may be “reasonably necessary, the proponent of the treatment must establish certain criteria to bring such a treatment or procedure within the scope of compensable medical expenses.” Krohn v Home-Owners, 490 Mich 145 (2011). Specifically, the Supreme Court has said:

“We conclude that if a medical treatment is experimental and not generally accepted within the medical community, an insured seeking reimbursement for this treatment must, at a minimum, present objective and verifiable medical evidence establishing that the treatment is efficacious.  A treatment or procedure that has not been shown to be efficacious cannot be reasonable or necessary under the no-fault act.  An insured’s subjective belief that medical treatment is efficacious, reasonable, and necessary is not enough to create a question of fact.”

In this video, Lansing car accident lawyer Stephen Sinas, who serves as associate general counsel for the Coalition Protecting Auto No-Fault, explains the No-Fault Act’s “reasonable” expense requirement and why it’s a misconception to say that no-fault medical coverage is “unlimited.”

In-Home Attendant Care or Nursing Services

The Act uses the word “services,” which the courts have interpreted to include both unskilled and skilled in-home attendant care and nursing services. As with any allowable expense, these services must be “reasonably necessary” and the amount claimed must be a “reasonable charge.”

As long as these requirements are established, court decisions have made it clear that in-home attendant care and nursing services rendered by family, friends, and neighbors of the injured person are compensable under the Act. In addition, the injured person has a right to hire a commercial in-home health care agency to render these services either in lieu of, or to supplement, family-provided attendant care. See Manley v DAIIE, 425 Mich 140 (1986);Sharp v Preferred Risk Mutual Ins Co, 142 Mich App 499 (1985)VanMarter v American Fidelity Fire Ins Co, 114 Mich App 171 (1982); and Visconti v DAIIE, 90 Mich App 477 (1979).

The in-home attendant care benefit is very important for seriously injured auto-accident victims and their families. It enables them to hire outside help or employ family members so that the injured person can remain at home rather than be institutionalized. Attendant care covers a wide range of “hands on services,” including bathing, dressing, feeding, personal assistance, meal preparation, personal hygiene, transportation to and from medical care, administration of medications, overseeing in-home therapies, etc. In addition, court decisions have made it clear that attendant care benefits go beyond “hands on care” and include the monitoring and supervision of the patient.

The central issue in many of these cases is simply whether the patient can be left alone at any time during a 24-hour day. If not, then attendant care benefits are likely payable for any period of time during which the injured person requires someone to be in attendance.

The Reasonableness Issues Associated with In-Home Attendant Care

Family-provided attendant care claims frequently result in disputes with no-fault insurers. These disputes typically involve two major issues:

(1) How many hours of attendant care are “reasonably necessary”?

(2) What hourly or per diem rate is a “reasonable charge”?

The statute does not specifically or definitively address these issues and neither does any appellate-court decision. Therefore, each case is evaluated on its own merits.

Regarding the reasonableness of the charges, several court decisions hold that it is appropriate to consider commercial rates charged by professional agencies for similar services. In Sharp v Preferred Risk Mutual Ins Co, 142 Mich App 499 (1985), the Court of Appeals stated, “comparison to rates charged by institutions provides a valid method for determining whether the amount of an expense was reasonable and for placing a value on comparable services performed [by family members].” Pursuant to this concept, claims for family-provided attendant care are frequently based upon the commercial rate that would be charged by a professional agency rendering the same services.

However, no-fault insurance companies rarely voluntarily pay attendant care claims at the commercial rate, arguing that the hourly rate earned by the agency employee is a better indicator of the reasonable value of the services. Therefore, there are frequent disagreements between claimants and insurance companies regarding the reasonable value of family-provided attendant care.

In addition, insurers often dispute the amount of hours that are reasonably necessary for a patient’s care. Therefore, these two issues, hours and rates, require careful thought and documentation.

It is also important to point out that, as with all allowable expenses, claims for family-provided attendant care are subject to the “incurred” requirement. In order for an expense to be deemed “incurred,” it must either be paid by or on behalf of the patient or the patient must become liable or obligated to pay the expense.

The Michigan Supreme Court has held that in cases involving family-provided attendant care, the care giver must have an expectation of being compensated for rendering attendant care rather than simply providing the care out of a sense of obligation, duty, commitment, loyalty, or compassion. See Burris v Allstate, 480 Mich 1081 (2008). Therefore, those persons rendering attendant care to family members must be very clear that they are providing the attendant care with the full expectation of being paid in accordance with the provisions of the Michigan No-Fault Act.

The Court reaffirmed this position in the 2012 case of Douglas v Allstate, ____ Mich ____ (2012).  In Douglas, the Court stated:

“an injured person who seeks reimbursement for any attendant care services must prove by a preponderance of the evidence not only the amount and nature of the services rendered, but also the caregiver’s expectation of compensation or reimbursement for providing the attendant care. Because the no-fault act does not create different standards depending on who provides the services, this requirement applies equally to services that a family member provides and services that an unrelated caregiver provides.”

Accommodations

The Act uses the word “accommodations” in describing the allowable expense benefit. Michigan courts have held that this term obligates an insurance company to pay for renovations to make a home or apartment handicap accessible or, if necessary, to build a new residence for catastrophically injured persons where their prior residence cannot be reasonably adapted to provide for the injured person’s care, recovery, or rehabilitation. In this regard, the Michigan Court of Appeals has held: “As long as housing larger and better equipped is required for the injured person than would be required if he were not injured, the full cost is an ‘allowable expense.’”See Sharp v Preferred Risk Mutual Ins Co, supra.

If an insurance company builds a new home for a catastrophically injured child, the courts may permit the insurance company or a court-appointed trustee to hold legal title to all or a portion of the home, depending on the details of the case. See Kitchen v State Farm Ins Co, 202 Mich App 55 (1993). However, in Williams v AAA Michigan, 250 Mich App 249 (2002), the Court of Appeals held that when a no-fault insurance company builds a home for a catastrophically injured adult and the adult is willing to contribute the equity in their existing home toward the construction of the new home, then the injured adult is entitled to full legal ownership of the newly constructed residence.

Where the new home is fully titled in the name of the injured person, the courts have, in some circumstances, permitted the insurance company who paid for the home to have a security interest in the property for a reasonable period of time so that the insurer’s investment can be recouped and transferred to another home should the patient need to move in the future. See Payne v Farm Bureau, 263 Mich App 521 (2004).

In addition to the cost of a residence, accommodation claims also involve issues as to whether insurance companies are obligated to pay the ongoing expenses related to home ownership, such as property taxes, homeowners insurance, maintenance expenses, utilities, etc. Issues may also arise as to whether the family members of the injured person residing in the home are obligated to contribute to the expense of constructing and maintaining the residence as a form of “rent” for being able to live there.

Clearly, enforcing the right to the accommodation benefit can be a complicated matter that involves the resolution of many issues that may have long-term implications for severely injured people.

Room and Board Expenses

In 1993 the Court of Appeals held that room and board expenses for a severely injured person cared for at home are compensable under Subsection 3107(1)(a) where the “injured person is unable to care for himself and would be institutionalized were a family member not willing to provide home care.” See Reed v Citizens Ins Co of America, 198 Mich App 443 (1993).

However, the Supreme Court reversed the Reed case in Griffith v State Farm, 472 Mich 521 (2005) and also held that the expense of nonmedical food for persons cared for at home is not a recoverable benefit. Still, room and board charges incurred by institutionalized patients for any type of food served in a hospital or residential facility continue to be compensable under the statute.

Rehabilitation

Michigan courts have held that the allowable expense benefit includes not only services for the physical rehabilitation of the injured person, but also the reasonable expense of vocational rehabilitation, job retraining and job placement. Furthermore, the courts have rejected the argument that a no-fault insurer is only obligated to restore the injured person to his or her “pre-accident status” as opposed to elevating the victim to a higher functional level reasonably consistent with the person’s capabilities.

The fact that the Michigan no-fault system provides full physical as well as vocational rehabilitation is a very important benefit for seriously injured victims. SeeBailey v DAIIE, 143 Mich App 223 (1985)Kondratek v Auto Club Ins Ass’n, 163 Mich App 634 (1987); and Tennant v State Farm Mutual Automobile Ins Co, 143 Mich App 419 (1985).

Special Transportation

In certain situations, an insurance company may be obligated to pay for the purchase and/or modification of a motor vehicle for the transportation of a seriously injured person. An example would be persons suffering spinal-cord injuries or serious brain injuries who, because of the nature of their disability, now need a handicapper-equipped van or other specially adapted vehicle in order to be transported. Depending upon the facts of the case, the insurer’s obligation may be to equip an existing vehicle with handicapper equipment or to fully fund the purchase of a new vehicle outfitted with such equipment.

The issue of whether a new vehicle should be purchased or an existing vehicle specially equipped, is determined by what is considered “reasonably necessary” for the injured person’s care, recovery, or rehabilitation. See Davis v Citizens Ins Co of America195 Mich App 323 (1992).

Insurance companies may be obligated to continue payment of special vehicles for the lifetime of the injured person. In 2011, the Michigan Court of Appeals determined that a wheelchair-bound Plaintiff was entitled to recover the cost of both the purchase of a new van, and the outfitting of that van for handicap use, because that van “satisfies the statutory criteria of being sufficiently related to injuries sustained in a motor vehicle accident and . . . is a reasonable charge and reasonably necessary for the injured person’s care, recovery, or rehabilitation under MCL 500.3107(1)(a).” Admire v Auto-Owners Ins Co, No. 289080 (Mich App, Feb 15, 2011). However, in September, 2011, the Michigan Supreme Court granted leave to appeal this ruling, and thus the matter remains unsettled.

Medical Mileage

An insurance company is obligated to pay mileage to transport an injured person to and from necessary medical care or rehabilitation. There is some dispute as to the appropriate mileage rate, but some court decisions have held it is proper to utilize the State of Michigan mileage reimbursement rate as a guide. See Swantek v Automobile Club of Michigan Ins Group, 118 Mich App 807 (1982).

Guardian Expenses

Where a seriously injured person requires the probate-court appointment of a guardian or conservator, the costs of appointing and maintaining such a probate fiduciary are recoverable as an allowable expense. See Heinz v Auto Club Ins Ass’n, 214 Mich App 195 (1995).