Michigan Court of Appeals; Docket #359660; Unpublished
Judges Rick, Shapiro, and Letica; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed in part, and vacated in part, the trial court’s order awarding attorney fees to Plaintiff Marvel McLaughlin, after finding that Defendant Allstate Fire & Casualty Insurance Company (“Allstate”) unreasonably delayed in paying McLaughlin’s work loss benefits and allowable expense benefits, as well as a lien asserted by McLaughlin’s health insurer. The Court of Appeals held, first, that the trial court did not err in finding Allstate’s approximately 11-month delay in paying McLaughlin’s work loss benefits “unreasonable,” where Allstate never communicated to McLaughlin what additional information it needed to process her claim, or even that it did, apparently, need additional information to process her claim. The Court of Appeals held, second, that the trial court did not err in finding Allstate’s 12-month delay in paying a lien asserted by McLaughlin’s health insurer “unreasonable,” where Allstate conceded at a pretrial hearing more than year after receiving notice of the lien that it did not know why the lein had not been paid. The Court of Appeals held, third, that the trial court failed to conduct a ‘fact-specific inquiry’ before determining that Allstate unreasonably delayed in paying McLaughlin’s other medical expenses. And the Court of Appeals held, fourth, that the trial court failed to follow the proper process for determining attorney fees under MCL 500.3148(1)—set forth in Pirgu v United Servs Auto Ass’n, 499 Mich 269 (2016)—before determining calculating the fee amount. Thus, the Court remanded to the trial court to conduct the aforementioned ‘fact-specific inquiry’ and to complete the Pirgu analysis before ordering an award.
Marvel McLaughlin was injured in a motor vehicle accident on June 19, 2020, and at the time of the accident, she maintained No-Fault insurance through Allstate, long-term disability coverage under a self-funded ERISA plan, and health insurance from Blue Cross Blue Shield of Michigan (“BCBSM”). Allstate was the primary payor for both McLaughlin’s work loss benefits and medical expenses, and on July 7, 2020, she sent a letter to Allstate requesting work loss benefits. Attached to the letter was an earning statement, disability certificate, and authorization forms to disclose medical records and employer information.
On September 15, 2020, BCBSM sent a lien notice to Allstate, seeking reimbursement for $53,878.64 that it had paid for McLaughlin’s accident-related treatment, and the following day, McLaughlin filed suit against Allstate for unpaid PIP benefits. After filing suit, in January of 2021, McLaughlin sent a second letter with additional documents to Allstate, again requesting work loss benefits. Allstate did not pay said benefits until May of 2021, and even then, it paid only for the period from January 2021 to May of 2021—not the period from June 2020 through December of 2020. Benefits covering the latter period were finally paid on August 6, 2021, but the BCBSM lien remained unpaid until October 26, 2021. On that date, Allstate acknowledged at a pretrial conference that it was responsible for the lien, but it could not offer an explanation as to why it had not been paid.
The parties eventually settled, but before settlement, McLaughlin moved for attorney fees under MCL 500.3148(1), arguing that Allstate unreasonable delayed in paying her work less benefits. The trial court found that Allstate unreasonably delayed in not only paying McLaughlin’s work loss benefits, but also in paying for her other medical expenses and satisfying the BCBSM lien, and thus awarded fees in McLaughlin’s favor on all three accounts.
On appeal, the Court of Appeals first held that the trial court did not err in finding that Allstate’s delay in paying McLaughlin’s work loss benefits was unreasonable. Allstate’s after-the-fact justifications for its delay included, for instance, the fact that it did not learn the particulars of McLaughlin’s disability coverage—i.e., that it was a self-funded ERISA plan, and that Allstate was therefore primary for payment of McLaughlin’s work loss benefits—until May of 2021, and the (alleged) fact that McLaughlin’s authorization forms were not legible. The Court of Appeals noted, however, that Allstate never asked McLaughlin to clarify what kind of disability insurance she had, and never asked her to provide clearer authorizations. Allstate’s adjuster failed to take any action to resolve her unanswered questions, and failed to even communicate to McLaughlin that she had unanswered questions. Accordingly, Allstate failed to ‘act diligently when investigating, responding to, and resolving the claim,’ as is required of insurers under Griffin v Tumbull Ins Co, 509 Mich 484 (2022).
“In this case, McLaughlin’s long-term disability coverage was a self-funded ERISA plan and thus defendant served as the primary insurer responsible for paying the wage-loss benefits. Defendant does not dispute this but argues that it obtained this information only in May 2021. Therefore, defendant contends, because there was a factual uncertainty of whether McLaughlin received coverage from other insurance, and whether defendant served as a secondary insurer, it did not unreasonably delay payment.
However, there was no factual dispute that needed to be resolved that would justify denial of payment. Defendant only needed to clarify information related to McLaughlin’s other insurance. Defendant does not dispute that an employment authorization form would be sufficient to review the wage-loss claims, but instead maintains that the form provided by plaintiff was not legible. This matter would have been resolved earlier had defendant requested plaintiff provide a clearer authorization form after first receiving the form in July 2020. But defendant did not do so. Defendant had another opportunity to obtain the necessary information after plaintiff sent a second request for wage-loss benefit payment in January 2021. The letter and an attachment from plaintiff’s employer informed defendant that McLaughlin had long-term disability benefits through her employer, not short-term disability. Although defendant’s claim adjuster, Amy Smith, testified that she still had unresolved questions after receiving this information, Smith admitted that other than checking with the litigation claims adjustor, she did not take any other actions to resolve her unanswered questions until May 2021 when she spoke with McLaughlin’s employer. It is unclear why this phone conversation did not occur much earlier. Still, even then, Smith approved only wage-loss payments to cover January 2021 to May 2021. Smith testified that she did not pay the wage-loss benefits owed for June 2020 to December 2020 because she still had unresolved questions related to McLaughlin’s disability coverage through her employer. Smith did not adequately explain why her conversations with McLaughlin’s employer satisfied her review for wage-loss payment between January 2021 to May 2021, but not for the other months.
As the Supreme Court recently stated, ‘insurers who receive a claim for PIP benefits prior to expiration of the limitations period must act diligently when investigating, responding to, and resolving the claim[.]’ Griffin v Trumbull Ins Co, 509 Mich 484, 502; 983 NW2d 760 (2022). The record is clear in this case that defendant did not take sufficient action to seek clarification on the documentation provided by plaintiff. Accordingly, the trial court did not clearly err when it found defendant unreasonably delayed paying wage-loss benefits.”
The Court of Appeals held, second, that the trial court did not err in finding that Allstate’s delay in paying the BCBSM lien was unreasonable, given that Allstate acknowledged its responsibility for the lien and had no explanation for why it failed to pay it for over a year.
“As an initial matter, the trial court did not err by awarding attorney fees for the delay in defendant’s payment of the BCBSM lien. Once it has been established there was a delay in payment, the ‘burden [shifts to] the insurer to justify’ the delay. Attard, 237 Mich App at 317. Defendant did not satisfy its burden. When the trial court inquired why defendant failed to pay the lien, defendant conceded it was responsible for the lien and it was not sure why the lien was not paid. Defendant had notice of the lien long before it paid it off in October 2021 because BCBSM sent the letter requesting reimbursement to defendant over a year earlier on September 15, 2020. Plaintiff also notified defendant of the existence of the lien in the initial disclosures. Therefore, the trial court did not err when it found defendant failed to sufficiently justify its delay in paying the lien.”
The Court of Appeals then turned to the trial court’s finding that Allstate unreasonably delayed in paying Plaintiff’s other medical expenses, vacating that aspect of the trial court’s award because the trial court failed to identify any facts to support it.
“The trial court’s reference to the parties’ settlement on ‘the eve of trial’ indicates that the court assumed that because defendant paid the full outstanding medical expense amount, defendant also conceded it unreasonably delayed paying those expenses. However, this assumption is not supported by the record. At the pretrial hearing, the parties agreed there were discrepancies in the records concerning what claims were paid and which remained outstanding. The trial court did not address whether defendant’s position on the outstanding claims was unreasonable, or inquire whether the discrepancies were attributable to defendant. Rather, it appears the trial court relied on the settlement agreement to find defendant liable for the attorney fees. However, ‘the scope of inquiry under § 3148 is not whether the insurer ultimately is held responsible for a given expense, but whether its initial refusal to pay the expense was unreasonable.’ McCarthy v Auto Club Ins Ass’n, 208 Mich App 97, 105; 527 NW2d 524 (1994). Further, we have held that ‘[c]lear error will be found where a trial court does not focus on the facts surrounding the disputed expenses, but instead concludes that the refusal to pay was unreasonable because the jury awarded the claimed expenses.’ Bonkowski v Allstate Ins Co, 281 Mich App 154, 171; 761 NW2d 784 (2008). Although in this case there was a settlement and not a jury determination, we find this caselaw applicable given the implicit similarity. Therefore, we remand the case to allow the trial court to conduct a fact-specific inquiry on the reasonableness of defendant’s delay in paying the outstanding medical costs, other than the BCBSM lien.”
The Court of Appeals also held, lastly, that the trial court failed to complete the three-step analysis for calculating attorney fees under MCL 500.3148, set forth in Pirgu:
“First, the trial court “must begin its analysis by determining the reasonable hourly rate customarily charged in the locality for similar services.’ Second, having determined the proper hourly rate, ‘[t]he trial court must then multiply that rate by the reasonable number of hours expended in the case to arrive at a baseline figure.’ Third, ‘the trial court must consider all of the remaining [factors set forth in Wood v Detroit Auto Inter-Ins Exch, 413 Mich 573; 321 NW2d 653 (1982), and in MRPC 1.5(a)] to determine whether an up or down adjustment [of the baseline fee] is appropriate.’ ”
In this case, the trial court completed the first two steps, but failed to consider, on the record, all the factors set forth in Workman to determine whether the amount of the fees should be increased or decreased.
“We agree with defendant, however, that the trial court failed to complete the Pirgu analysis by considering the abovementioned factors to determine if the baseline amount should be reduced or increased. See Pirgu, 499 Mich at 282 (‘In order to facilitate appellate review, the trial court should briefly discuss its view of each of the factors above on the record and justify the relevance and use of any additional factors.’). The trial court may have assumed it satisfied step three when it adjusted plaintiff’s claimed amount by going through counsel’s time log closely. The trial court stated: ‘[Plaintiff’s counsel] indicated every single entry, what the entry was for, the amount of work spent, and I have reduced it by the amount appropriate.’ However, the adjustment merely served to arrive at a baseline amount. Therefore, by failing to consider the Pirgu factors to determine appropriate final adjustments, if any, to the amount of attorney fees awarded, the trial court erred. Id. Accordingly, we vacate the awarded amount and remand to the trial court to review the Pirgu factors and determine if an adjustment to the baseline figure is necessary.”