Michigan Court of Appeals; Docket #359519; Unpublished
Judges Kelly, Boonstra, and Swartzle; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Requirement That Benefits Were Unreasonably Delayed or Denied [§3148(1)]
Bona Fide Factual Uncertainty / Statutory Construction Defense [3148(1)]
Conduct Establishing Unreasonable Delay or Denial [3148(1)]
In this unanimous, unpublished, per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Tracy Alkasemi (as Guardian of Hannah Tabroksi, LIP) claim for attorney fees against Defendant Auto-Owners Insurance Company (“Auto-Owners”), and remanded for the Court to properly address Alkasemi’s claim for penalty interest. With respect to Alkasemi’s claim for attorney fees, the Court of Appeals held that Auto-Owners unreasonably delayed in making payment of Tabroski’s PIP benefits. Auto-Owners waited approximately one year after Tabroski was injured in a motorcycle-versus-motor vehicle accident to pay Tabroski’s PIP benefits, based on its adjuster’s belief that the burden of proof was on Tabroski to prove that she was not a constructive owner of the motorcycle involved in the accident, which she was traveling on as a passenger at the time. The Court of Appeals noted that “the law places the burden on defendant to justify a delay in coverage,” and that there was never any evidence to suggest that Tabroski was a constructive owner of the motorcycle.
In May of 2019, Tabroski was riding as a passenger on an uninsured motorcycle owned and operated by her boyfriend, Joshua Pretzer, when they crashed into a motor vehicle. Tabroski suffered catastrophic injuries, and on July 29, 2019, Tracy Alkasemi, Tabroski’s guardian, filed a claim for PIP benefits on Tabroski’s behalf with Auto-Owners, the insurer of the motor vehicle involved in the accident. Lynne Shelle, the Auto-Owners’ adjuster assigned to the claim, decided to withhold payment of Tabroski’s benefits until she could definitively rule out Tabroski as a constructive owner of the motorcycle, but there was never any actual evidence to suggest that was the case. The initial police report and Shelle’s discussions with Pretzer’s mother, Alkasemi, and Tabroski’s attorney turned up no evidence that “Tabroski ever used the vehicle in ways that comport with the concept of ownership.” Nonetheless,
“Shelle appeared to believe, and to have focused her investigation accordingly, that Tabroski was required to be eliminated as a potential constructive owner before coverage could be found; indeed, Shelle even referred to plaintiff as having a ‘burden of proof’ to show that she was not a constructive owner.”
When Auto-Owners still had not paid Tabroski’s benefits by December of 2019, Alkasemi filed suit. Alkasemi was deposed on June 29, 2020, and testified that Tabroski “did not own the motorcycle, had no driver’s license, never drove the motorcycle, and was not responsible for any of its maintenance.” Less than one month later, on July 17, 2020, Shelle wrote in her claim log that she had ‘completed’ her investigation into the motorcycle’s ownership, and on August 13, 2020, she paid the first benefits on Tabroski’s claim. Eventually, Alkasemi moved for summary disposition, asserting that she was entitled to attorney fees and penalty interest because Auto-Owners had unreasonably delayed in paying Tabroski’s benefits, and Auto-Owners responded by asserting that summary disposition should actually be granted in its favor, because there was a bona fide factual uncertainty as to whether Tabroski was the constructive owner of the motorcycle. The trial court initially denied both motions, but on reconsideration of Auto-Owners’ motion, granted summary disposition in Auto-Owners’ favor.
The Court of Appeals reversed the trial court’s summary disposition order with respect to Alkasemi’s claim for attorney fees. The Court of Appeals noted that there was never any evidence to suggest that Tabroski was a constructive owner of the motorcycle, and that Shelle’s stated justification for delaying in paying Tabroski’s benefits—that the ‘burden of proof’ was on Tabroski to prove that she was not a constructive owner of the motorcycle—was contrary to Michigan law. The sole evidentiary basis for Auto-Owners’ suspicion was the “fact that Tabroski was a passenger on the motorcycle,” and that was “an insufficient reason to delay defendant’s coverage determination for nearly a full year.”
“At Shelle’s deposition, Shelle could not identify any specific evidence that prompted the investigation into whether Tabroski was a constructive owner of the motorcycle, other than the fact that she was a passenger on the motorcycle and the motorcycle was uninsured; instead, Shelle merely repeated several times that she relied on the ‘claim file as a whole’ in initiating an investigation into Tabroski’s possible constructive ownership, and continuing that investigation for nearly a year. While there may have been questions about who was the owner of the motorcycle, there was absolutely no evidence that Tabroski ever used the motorcycle as an owner would, such as using it regularly and without supervision. Ardt, 233 Mich App at 690. Further, Shelle appeared to believe, and to have focused her investigation accordingly, that Tabroski was required to be eliminated as a potential constructive owner before coverage could be found; indeed, Shelle even referred to plaintiff as having a ‘burden of proof’ to show that she was not a constructive owner. The investigation was clearly not focused on Tabroski’s right to use the motorcycle, Twichel, 469 Mich at 530, but rather whether plaintiff or some other party could provide sufficient evidence to clear Tabroski of any suspicions of constructive ownership. But the law places the burden on defendant to justify a delay in coverage. Attard, 237 Mich App at 317. Defendant has not justified its choice to delay coverage for a significant amount of time based on nothing more than Tabroski’s status as a passenger on an uninsured motorcycle.
Under these circumstances, we conclude that defendant did not act diligently in investigating plaintiff’s claim. Griffin, ___ Mich at ___; slip op at 12. The fact that Tabroski was a passenger on the motorcycle was an insufficient reason to delay defendant’s coverage determination for nearly a full year. Attard, 237 Mich App at 317. The trial court therefore erred by finding that defendant had a reasonable basis for delaying payment of Tabroski’s benefits and that plaintiff was not entitled to attorney fees under MCL 500.3148(1).”
As for Alkasmi’s claim for penalty interest, the Court of Appeals observed that the trial court never actually addressed or decided that issue in disposing of the case. Accordingly, it remanded for a determination of when, specifically, Auto-Owners received “reasonable proof of the fact and of the amount of loss sustained.”