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Sharp v Preferred Risk Mutual Ins Co; (COA-PUB, 5/7/1985; RB #834)


Michigan Court of Appeals; Docket No. 79575; Published  
Judges Allen, Gribbs and Gillespie; Unanimous  
Official Michigan Reporter Citation: 142 Mich App 499; Link to Opinion alt   

Allowable Expenses for Attendant Care [§3107(1)(a)]  
Allowable Expenses for Home Accommodations [§3107(1)(a)]  
Allowable Expenses For Room and Board [§3107(1)(a)]  
Standards for Deducfibility of State and Federal Governmental Benefits [§3109(1)]  
Social Security Disability Benefits [§3109(1)]  
12% Interest Penalty on Overdue Benefits – Nature and Scope [§3142(2), (3)]  
One-Year Back Rule Limitation [§3145(1)]

Not Applicable   

This unanimous Opinion by Judge Allen contains several significant holdings regarding the obligation of a no-fault carrier to pay "allowable expenses" under §3107(a) in the case of a severely brain damaged young man.

First, the court held that the no-fault insurer in this case was obligated to pay the entire cost of the rental of an apartment where plaintiff’s disabled son lived for approximately two years until a special handicapper-accessible addition was completed at plaintiff’s home. The alternative to living in this apartment would have been to reinstitutionalize plaintiff’s son in an extended care facility. It was undisputed that the environment of the apartment was more conducive to the rehabilitation of plaintiff s son. The cost of reinstitutionalizing plaintiff’s son would have been $2,800 per month. The maximum rental for the apartment was $445 per month. Prior to the accident, plaintiff’s son lived alone in another apartment and paid $245 a month rent In ruling that the insurance company was obligated to pay the entire monthly rental on the apartment, the court relied upon Manley v DAIIE (Item No. 662). In Manley, the court held that even though everyone must have food to survive, the extraordinary cost of obtaining food for an institutionalized patient renders the entire cost of food an allowable expense. The court applied that reasoning to this case and stated, "We think the same reasoning applies to the cost of the apartment 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.'" The court also noted that a contrary ruling would in essence penalize the plaintiff foe saving the insurance company over $2,000 a month. The court also stated, "Such a decision could result in discouraging home care, which is usually less expensive and offers a higher quality of care than nursing home care in this instance."

Second, the court held that plaintiff was entitled to recover an amount of money that was more than the flat hourly rate that she paid to nurses that she hired for her son's in-home health care. Plaintiff paid RNs $9 an hour, $8 an hour for LPNs and $4 an hour for nurses' aides. The plaintiff charged the defendant $13 per hour for RNs, $11 per hour for LPNs and $7 per hour for nurses' aides. The Court of Appeals approved the additional charges assessed by plaintiff and stated, "Defendant argues that plaintiff is allowed to be reimbursed for more than she actually paid. Defendant's argument, if followed, would deny plaintiff compensation for the process of seeking, interviewing, selecting, training and supervising nurses. Neither would she be compensated for time spent computing hours that the nurses worked, billing the insurance company and paying the nurses. Neither would plaintiff be compensated for money spent on advertising, stationery, and other necessary expenses related to these above-mentioned activities. . . . Manley states that 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. . . . Mrs. Sharp actually does advertise for nurses, interview them, train them, supervise them and when necessary, fire them. The method of charging more per hour than actually paid is a convenient shorthand method for compensating the plaintiff for these activities. This is the same method used by the nursing companies and the plaintiff is billing less than those nursing companies were. The trial court's declaratory judgment is affirmed."

Third, the court held that the defendant insurance company was not entitled to reduce its liability for allowable expenses by the amount that plaintiff’s son received in Social Security disability benefits. The court relied upon Jarosz v DAIIE and held that the Social Security disability benefits do not serve the same purpose as no-fault allowable expenses. The court held that "clearly Social Security disability benefits are not 'products, services or accommodations.' Their purpose is income replacement rather than 'care, recovery or rehabilitation.' “ Therefore, the Social Security benefits were not deductible under §3109(1).

Fourth, the court held that the trial court properly .ruled as a matter of law that defendant waived the statute of limitations defense because it did not assert it in its responsive pleading. The defendant had ample notice that plaintiff would be submitting certain claims with respect to which the statute of limitations defense might be applicable.

Fifth, the court affirmed the trial court's refusal to award interest on most of plaintiff’s claims under §3142 for the reason that there was considerable dispute as to whether plaintiff had provided "reasonable proof of the fact and the amount of the loss." However, the court did award interest on that portion of the claim that dealt with the apartment rental and agreed with the long line of cases which held that the availability of interest under §3142 is not conditioned upon a showing of unreasonableness.

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