Michigan Court of Appeals; Docket # 332199; Unpublished
Judges Gleicher, M.J. Kelly and Shapiro; Unanimous, Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Penalty Interest on Overdue Benefits [§3142]
Penalty Attorney Fees [§3148]
Requirement That Benefits Were Unreasonably Delayed or Denied [§3148(1)]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous unpublished per curiam Opinion involving plaintiff’s claim for payment of home modification benefits, the Court of Appeals held the trial court properly awarded plaintiff penalty interest under MCL 500.3142 and attorney fees under MCL 500.3148 because defendant-insurer’s failure to pay benefits was unreasonable. Moreover, while the Court affirmed the trial court’s ruling, it remanded the matter for the calculation and imposition of additional attorney fees, but not additional penalty interest.
Plaintiff was seriously injured in an auto accident at age 14. It was not disputed that plaintiff requires housing accommodations and that defendant-Auto-Owners is liable for paying no-fault benefits. Auto-Owners paid to have plaintiff’s home modified to meet her needs. When the home was foreclosed upon in 2010, plaintiff and her mother moved to a mobile home. Because the mobile home could not be modified to suit plaintiff’s needs, for several years plaintiff and Auto-Owners worked to purchase a home that met plaintiff’s needs, or one that could be modified to meet her needs. No home purchase was ever finalized. After the Michigan Supreme Court decided Admire v Auto-Owners Ins Co, 494 Mich 10 (2013), Auto-Owners sent plaintiff a letter indicating it believed that, pursuant to Admire, it was no longer responsible for buying plaintiff a home. Rather, Auto-Owners said it was only responsible for modifying plaintiff’s current home, or another home that she purchased. In January 2014, plaintiff bought a home and its necessary modifications were estimated to cost $289,000. Auto-Owners did not pay. Plaintiff then brought this action, claiming Auto-Owners unreasonably refused to pay no-fault home modification benefits. The parties settled the issue of no-fault benefits. However, plaintiff’s additional claims for penalty interest under §3142 and attorney fees under §3148 were not resolved and proceeded to trial. In a bench trial, plaintiff was awarded $80,625 in attorney fees and $51,768.93 in penalty interest.
On appeal, Auto Owners argued that no penalty interest or attorney fees could be imposed under §3142 and §3148 because plaintiff did not “incur” any expense for the modification of the new home pursuant to MCL 500.3107(1)(a). Plaintiff cross-appealed, claiming she was entitled to additional attorney fees and penalty interest.
The Court of Appeals affirmed the award of attorney fees and penalty interest. In so ruling, the Court rejected Auto-Owners’ assertion that plaintiff did not “incur” any expense for the modification of the home.
According to the Court, plaintiff incurred expenses when she executed a contract for the home modifications. In particular, the Court pointed to the “estimate” that plaintiff had signed with the contractor which, according to the Court, “was an executed contract, obligating [the contractor] to renovate the home, and obligating [plaintiff] to pay for the renovations. Therefore, the expense was incurred within the meaning of MCL 500.3107(1)(a).” The Court rejected Auto-Owners’ argument that the document was nothing more than an estimate, since the work required under the contract was never performed. However, the Court found this fact was irrelevant because it did not establish that no contract existed.
The Court of Appeals also rejected Auto-Owners’ argument that the estimate was not a bill to be paid. A $50,000 down payment was required before work could begin, and Auto-Owners argued if an agreement for the home modifications had been reached, it should have been given a bill for $50,000. However, the Court noted that when an insurer is presented with a contract for services, rather than a paid bill, the insurer may, to protect itself, make the check payable to the insured and the contractor. Thus, when Auto-Owners was presented with the signed estimate, it could have protected itself by working the contractor to set a payment schedule and method of payment.
Further, the Court rejected Auto-Owners’ argument that the renovation expense was not reasonable, noting that Auto-Owners never presented any evidence at trial that the charges were unreasonable. The Court also rejected Auto-Owners’ argument that an architect’s charges had not been incurred by plaintiff because the bill was never sent to plaintiff. The fact the bill was not sent to plaintiff did not negate obligation to pay the architect, the Court reasoned.
The Court of Appeals continued by denying Auto-Owners’ assertion that the renovation plan could not be implemented. The Court wrote:
“Although the home had not passed inspections and an occupancy permit was not issued, it is likely that these problems would be cured once the renovations were complete. It was the implementation of the plan itself that would lead to [plaintiff’s] occupancy of the home, not vice-versa. In addition, Auto-Owners asserts that it was legally impossible to perform any work at the home. However, while it is true that the home could not be occupied in its current state, there is no evidence indicating that [plaintiff] would be legally prohibited from renovating the property. … [A]s the trial court recognized, [plaintiff’s] ‘architect and builder indicated that the structure could be modified and habitable and suitable for [her] needs. …’ Auto-Owners fails to demonstrate that this finding is clearly erroneous.”
Based on the foregoing, the Court of Appeals held that Auto-Owners’ owed penalty interest under §3142.
The Court continued by finding that Auto-Owners’ refusal to pay was unreasonable and, therefore, the trial court properly awarded plaintiff attorney fees under §3148. Auto-Owners never procured other estimates, even though it said it was going to do so, the Court observed. Moreover, its retained expert was never asked to provide an opinion regarding the estimate and Auto-Owners did nothing to consider whether to pay for the modifications prior to the case being partially settled, the Court explained.
In addition, the Court of Appeals rejected Auto-Owners’ argument that it was reasonable to conclude that plaintiff did not incur the expense because it only received the document labeled “estimate.” However, there was no evidence that that determination was actually made by Auto-Owners, since it never sent plaintiff a letter denying her claim on the grounds that she did not incur the expense.
Lastly, the Court of Appeals rejected Auto-Owners’ argument that attorney fees and interest should have been awarded based on the $50,000 that would have been required as a deposit, rather than the entire amount set forth in the “estimate,” at least until the work was performed. The Court disagreed, again noting that plaintiff incurred the entire expense by signing the “estimate.”
As to plaintiff’s cross-appeal, the Court agreed that plaintiff was entitled to additional attorney fees for the time her lawyer spent at trial, as opposed to only the fees incurred up until the settlement of her claim for benefits for home modifications. The Court noted that “[t]his action was not finally resolved until the bench trial concluded.” In rejecting Auto-Owners’ argument that no attorney fees could be awarded for services provided after settlement of the claim for benefits for home modifications or the date the order of partial dismissal was entered, the Court said:
“Auto-Owners posits that once either of these events occurred, the action was no longer one for overdue PIP benefits. While the settlement took away the dispute over the amount of benefits due to Guthrie, it did not resolve the entire case. By its express terms, the settlement did not resolve the question whether Guthrie was entitled to attorney fees or penalty interest. The key dispute with regard to whether attorney fees would be imposed was whether Auto-Owners had unreasonably delayed paying benefits that were overdue. The case retained the essential character of the type of disputes at issue in MCL 500.3148(1), i.e., a dispute over whether an insurer unreasonably refused or delayed paying benefits that were due. Pursuant to MCL 500.3148(1), Guthrie is entitled to reasonable attorney fees incurred in the entire action, and the trial court erred by not awarding attorney fees for the time Guthrie’s lawyer spent during trial.”
The Court of Appeals concluded by rejecting plaintiff’s argument that she was entitled to attorney fees for services provided before the date the agreement with the contractor was executed. The Court also rejected plaintiff’s claim that penalty interest should have begun to accrue prior to the date the agreement was executed.
