Michigan Court of Appeals; Docket # 337309; 338082; Unpublished
Judges Murray, Borrello, and Ronayne Krause per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
12% Interest Penalty on Overdue Benefits – Nature and Scope [§3142(2) (3)]
Penalty Attorney Fees on Appeal
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
CASE SUMMARY:
In this unanimous unpublished per curiam opinion, the Court of Appeals upheld the trial court’s grant of summary disposition in favor of the third-party plaintiff Jerry Shotley (“Shotley”) regarding the third-party defendant, Auto Club Insurance Association’s (“ACIA”), failure to provide proper notice of a policy cancelation; however, the Court reversed the trial court’s award of attorney fees and interest to the third-party plaintiff. The Court of Appeals upheld the trial court’s grant of summary disposition because there was undisputed evidence that the statutorily mandated language for cancelation was absent from the notice. The Court of Appeals reversed the trial court’s award of attorney fees and interest because it found the third-party plaintiff was not a claimant and the third-party Defendant had not delayed its payment.
Christine Delavega (“Delavega”) was injured while driving a motor vehicle owned and registered to her father Sholtey. Delavega sought no-fault PIP benefits from ACIA, Sholtey’s auto no-fault provider for 30 years. ACIA denied Delavega’s claim for no-fault benefits, asserting that it had cancelled Sholtey’s policy on January 3, 2012, for failure to pay the premiums. Sholtey claimed he never received ACIA’s cancellation notice. Delavega sought PIP benefits through the Michigan Assigned Claims Plan and was assigned to Citizens Insurance Company of Michigan (“Citizens”). Citizens paid Delvega PIP benefits and brought an action against Sholtey and ACIA, alleging that one of the two parties were responsible to it for recoupment. Citizens was ultimately granted summary disposition and removed from the action. The remaining dispute was between Sholtey and ACIA.
It was undisputed that the cancelation letter sent to Sholtey did not contain the necessary statutory language of MCL 500.3020(6). ACIA explained that a “red slip” was sent with cancelation letters, which did contain the statutorily mandated language of § 3020(6). ACIA used a third-party to send its mail out to its clients, Source HOV (“Source”). Source’s vice president, Rhonda Goosic (“Goosic”), was deposed and she explained that the cancelation letter sent to Sholtey contained two OMR marks. These OMR marks indicated that there was no other mailing that was required to be in the letter sent to Sholtey. Goosic’s testimony showed that no such red slip was sent to Sholtey because the two OMR marks indicated that no additional information was to be sent out with the letter. After the deposition, Goosic submitted three affidavits to support ACIA’s claim that the red slip was included in the cancelation notice. Because these affidavits directly contradicted Goosic’s earlier deposition, the trial court refused to consider them. The trial court thus granted summary disposition to Sholtey and awarded him attorney fees and interest. ACIA appealed the decision.
Improper Cancelation
The Court of Appeals upheld the trial court’s grant of summary disposition regarding improper notice for cancelation. The Court cited to Depyper v Safeco Ins Co of America, 232 Mich App 433, 438, (1998), which explained “effective cancellation requires strict compliance with the cancellation clause.” The Court found no evidence to support ACIA’s assertion that the statutory language was included with the cancelation letter. First, the Court concluded that notice of a cancelation is ineffective if it does not contain the language demanded by § 3020(6). Here, it was undisputed that the letter alone did not contain the statutory language. The deposition testimony of Goosic demonstrated that the red slip, which did contain the statutory language, was not included in the mailing that was sent to Sholtey. The Court reasoned Goosic’s deposition testimony was clear and unequivocal that no red slip was included in the mailing. Without the mandatory language, the cancelation notice was not effective, and Sholtey was still insured on the day of the accident.
“Thus, Goosic clearly and unequivocally testified that the only document in the envelope mailed to Sholtey was the cancellation notice. It is undisputed that this one-page document did not include the cautionary language mandated by MCL 500.3020(6). The omission of this mandatory warning rendered the cancellation notice ineffective.”
The Court of Appeals next upheld the trial court’s refusal to admit Goosic’s subsequent affidavits into consideration. The Court cited to Palazzola v Karmazin Prod Corp, 223 Mich App 141, (1997), which explained that “a party may not raise an issue of fact by submitting an affidavit that contradicts the party’s prior clear and unequivocal testimony.” Here, Gossic’s prior testimony was clear and unequivocal and the subsequent affidavits directly contradicted that prior testimony. Therefore, the trial court was correct in not relying on the affidavits because they were in direct contradiction to the previous testimony. The Court also rejected ACIA’s claim that two documents, “Mail Jobs Checklist” and a mailing manifest, demonstrated a customary practice of inserting red slips into the mailing. The Court found the mailing manifest to simply show that a mailing occurred, which was not an issue in dispute. The “Mail Jobs Checklist” did arguably create a rebuttable presumption of a customary practice. However, the Court found sufficient evidence to rebut this based on Gossic’s prior testimony. Finally, the Court also found that the trial court properly refused to allow two new pieces of evidence by ACIA because the motion had initially been decided.
“Goosic’s affidavits attesting to the presence of additional documents in the mailing to Sholtey, specifically, the red cautionary insert, directly contradicts her deposition testimony. As such, the trial court did not err when it refused to consider this contradictory evidence. “It is well settled that a party may not raise an issue of fact by submitting an affidavit that contradicts the party’s prior clear and unequivocal testimony.” Palazzola v Karmazin Prod Corp, 223 Mich App 141, 154-155; 565 NW2d 868 (1997) . . . . In any event, in this case, Sholtey came forward with sufficient evidence to rebut the presumption that the cautionary insert was included. Specifically, Goosic’s unequivocal deposition testimony was that the only document mailed to Sholtey on December 15, 2011, was the notice of cancelation, which did not include the cautionary language. Again, we do not believe ACIA may manufacture its own question of fact.”
Attorney Fees
The Court of Appeals next reversed the award of attorney fees and interest to Sholtey. The Court reviewed the language in MCL 500.3148(1) which provided: “An attorney is entitled to a reasonable fee for advising and representing a claimant in an action for personal or property protection insurance benefits which are overdue.” (emphasis added). The Court then reviewed Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich 191, (2017) and Allstate Ins Co v State Farm Mut Auto Ins Co, 321 Mich App 543 (2017) to define the word claimant. The Court concluded that a “’claimant’ is someone who has a right to payment of PIP benefits from the no-fault insurer.” Under this interpretation Shotley was not a claimant because he did not have a right to payment of PIP benefits. Instead, Delavega would be the claimant in this case. Thus, Shotley was not entitled to attorney fees because he was not a claimant. The Court also rejected the award of interest because Delavega had received payment within 30 days, thus meeting the requirements of MCL 500.3142(2).
“The foregoing decisions are instructive. In this case, as ACIA correctly notes, Sholtey’s daughter, Delavega, is the “claimant” because she is the only one who is entitled to assert a claim for and receive PIP benefits. Sholtey is not entitled to receive any PIP benefits. Simply put Sholtey does not qualify as a claimant under the act. As such, the trial court’s grant of an award of attorney fees against ACIA and in favor of Sholtey is contrary to the plain language of the statue. Accordingly, reversal is required. Further, as will be explained below, Sholtey was not entitled to an award of attorney fees because the benefits were not ‘overdue.’”
Thus, the Court of Appeals upheld the trial court’s grant of summary disposition for Sholtey regarding ineffective notice to cancel. The Court however reversed the trial court’s award of attorney fees and interest for Sholtey.
