Michigan Court of Appeals; Docket Nos. 294875, 298661, and 299070; Published
Judges Gleicher, Sawyer, and Markey; 2-1 by Gleicher, (Markey Concurring in Part and Dissenting in Part)
Official Michigan Reporter Citation: Forthcoming; Link to Opinion:
Link to Dissent:
On October 22, 2012, the Michigan Supreme Court DENIED Leave to Appeal; Link to Order
STATUTORY INDEXING:
Allowable Expenses for Attendant Care [§3107(1)(a)]
Allowable Expenses: Reasonable Charge Requirement [§3107(1)(a)]
TOPICAL INDEXING:
Not applicable
CASE SUMMARY:
In this 2-1 published opinion, the Michigan Court of Appeals vacated the trial court’s judgment in favor of plaintiff, reasoning that the trial court abused its discretion by imposing an unjust and disproportionate sanction against ACIA. The Court of Appeals further held that, on remand, the evidence of agency rates constitutes a relevant probative measure of the general value of attendant care services, including attendant care services provided by family members.
In this case, the injured person, William Hardrick, sustained serious brain injuries in a motor vehicle accident that occurred in May of 2007. Once he was released from inpatient treatment, Hardrick’s psychiatrist ultimately recommended 24-hour attendant care for Hardrick’s supervision and safety. Hardrick’s parents ultimately provided the prescribed attendant care. It was undisputed ACIA was responsible to provide no-fault benefits to Mr. Hardrick. ACIA paid Mr. Hardrick’s 24-hour attendant care at a rate of $10.25 to $10.50 per hour. This hourly rate was based on ACIA classifying Hardrick’s parents as “home health aides.”
Hardrick ultimately filed this lawsuit seeking a determination his parents qualified as “behavioral technicans,” thereby entitling them to charge a higher hourly rate for their services. The only issue throughout the litigation was the determination of a reasonable hourly rate for the attendant care services provided. ACIA never contested the number of hours of attendant care claimed by Hardrick.
Prior to trial, the trial court determined that ACIA had violated its discovery orders by providing belated and incomplete responses to discovery requests. Hardrick pursued a default judgment against ACIA, but the court opted to impose the lesser sanction of precluding ACIA from presenting any witness or evidence at trial. As a result, ACIA was limited to cross-examining Hardrick’s witnesses and challenging his proffered evidence.
In regards to the discovery sanctions, the court ultimately reversed the trial court’s sanctions against ACIA. The court noted that the trial court correctly found that ACIA had violated the court’s discovery order by providing belated and incomplete discovery. However, the court disagreed with the trial court that Hardrick had suffered severe prejudice as a result of ACIA’s delay. Accordingly, the court reasoned that because the sanction was disproportionate and affected the entirety of the trial, it was appropriate to vacate the jury’s judgment in Hardrick’s favor.
In remanding the case for a new trial, the court then addressed the issue of the appropriate method of valuing family-provided attendant care services. The court ultimately held that the market rate for agency-provided attendant care services is relevant to establishing a reasonable charge for family-provided attendant care services claimed under MCL 500.3107(1)(a).
In reaching its holding that the market rate for agency-provided attendant care services is relevant to establishing a reasonable charge, the court rejected ACIA’s argument that the Court of Appeals decision in Bonkowski v Allstate Ins Co, 281 Mich App 154 (2008) is precedent for the proposition that evidence of agency rates for attendant care services is irrelevant to establishing the rate for family-provided attendant care. The court first rejected this argument on the grounds that the discussion of attendant care rates in Bonkowski was pure dicta. However, the court went on to explain that it disagreed with Bonkowski’s suggestion that agency rates are irrelevant to establish a reasonable charge for family-provided attendant care services. The court explained that the question presented was not whether an agency rate is per se reasonable under the circumstances, but whether evidence of any agency rate is relevant evidence on the basis that it may assist a jury in determining a reasonable charge for family-provided attendant care services. The court explained that an agency rate for attendant care services, which would otherwise be paid by the no-fault insurer, is a piece of the evidence that “throws some light, however faint,” on the reasonableness of the charge for the family-provided attendant care services. In this regard, the court specifically explained:
“. . . [I]n other words, an agency rate supplies one measure of the value of attendant care and is worthy of a jury’s consideration. A jury may ultimately decide that an agency rate carries less weight than the rate charged by an independent contractor, or no weight at all. But the fact that different charges for the same service exist in the marketplace hardly renders one charge irrelevant as a matter of law. Ultimately, the challenged evidence is relevant and the trial court properly rejected ACIA’s attempt to exclude it.”
The court went on to address the argument raised in the dissent that family-provided attendant care should be paid at the relevant “market rate,” which includes the rate the family members would be able to receive in the open market for providing similar services. In rejecting this approach, the court noted that neither the No-Fault Act nor Michigan’s vast body of no-fault cases mentioned the term “relevant market.” The court noted that the term “relevant market” appears in anti-trust cases and is further defined in Michigan’s Anti-Trust Reform Act, MCL 445.771, et seq, wherein the term is defined as “the geographical area of actual or potential competition in a line of trade or commerce, all or any part of which is within this state.” In considering this definition of “relevant market,” the court noted that to the extent that the market for a particular service bears on the reasonableness of the charges for that particular service under MCL 500.3107(1)(a), the parameters of the relevant market ultimately present questions for the jury. The court further explained that viewed through the definition of “relevant market” under anti-trust laws, the relevant market for attendant care services rendered under MCL 500.3107(1)(a) includes agency-provided services, family-provided services, and independently contracted care. The court found it implausible that a “relevant market” may exclude real life competitors from precisely the same services. The court noted that a true “market approach” looks to the actual marketplace rather than an artificial construct restricted to but one choice.
The court went on to explain that in other no-fault cases, Michigan appellate courts have repeatedly rebuffed efforts by both providers and insurers to circumscribe a factfinder’s reasonable charge determination. In this regard, the court discussed the case of Hofmann v Auto Club Ins Ass’n, 211 Mich App 55 (1995), wherein the Court of Appeals rejected the argument that the “customary fee” obtained by a provider for patients insured by Blue Cross/Blue Shield of Michigan defined a “reasonable charge” for the service. Likewise, the court addressed Mercy Mt. Clemens Corp v Auto Club Ins Ass’n, 219 Mich App 46 (1996), wherein the Court of Appeals extended Hofmann by holding that the amount paid by Medicare, Medicaid, workers’ compensation insurers, and BCBSM “is not admissible to prove the customary charge that defendant must pay under MCL 500.3157.” The court ultimately concluded that these precedents demonstrate that the No-Fault Act does not confine a provider’s reasonable charge to the amount the provider customarily receives from third-party payors.
In order to further clarify the issues that are relevant to determining a “reasonable charge” for family-provided attendant care services, the court went on to explain what other evidence is relevant to the determination of this issue. The court ultimately held that any evidence bearing on fair compensation for the particular services rendered constituted relevant evidence. Under this perspective, the court noted that the rates charged by a commercial nursing agency would be relevant, as would be the rates earned by the employees who work at those agencies. Furthermore, the court noted that evidence of overhead charges that are incurred, or not incurred, by family members providing attendant care is also relevant to calculating a reasonable charge. Moreover, the court also explained that evidence of loss “opportunity cost” is also relevant. In this regard, the “opportunity cost,” which is the amount that is sacrificed when one person chooses to do one activity over another, could also be relevant to the determination of a reasonable charge under MCL 500.3107(1)(a). The court ultimately concluded that under the “reasonable charge” language of MCL 500.3107(1)(a), the Legislature empowered the jury to assess a variety of economic value choices in determining the charges that an insurer is liable to pay under MCL 500.3107(1)(a).
The court went on to explain that the trial court properly rejected ACIA’s proposed jury instruction that instructed the jury that “amounts charged by health care agencies cannot be considered in determining reasonable compensation.” The court further explained that ACIA’s alternative jury instruction properly recognized the multifaceted nature of determining a reasonable charge under MCL 500.3107(1)(a). This proposed jury instruction specifically stated:
“Plaintiff can recover benefits for care provided by family members of plaintiff’s family at its reasonable market value. In determining the reasonable market value of such care, you are to consider:
(1) the type and amount of care plaintiff reasonably needed;
(2) the various types of in-home care available from outside care providers;
(3) the duties performed by outside care providers;
(4) the customary billing and payment practices of outside care providers; and
(5) the type and amount of services being performed by the members of Plaintiff’s family.
There is evidence that rates charged by home care agencies are higher than the amounts paid to the employees who actually render care. The difference between the rates charged by agencies and the amounts paid to its employees include agency overhead, such as Social Security contributions, malpractice insurance, health insurance, disability insurance, office clerical staff, rent, legal fees, accounting costs and office supplies, in addition to profit for the agencies. In determining the amount owed for care rendered by members of Plaintiff’s family, you are to consider whether any additional amounts charged by home care agencies are also necessary for the family member to provide care to Plaintiff.”
Judge Markey concurred with regard to the court’s holding regarding the discovery sanctions. However, he dissented from the court’s holding regarding the factors that should be considered in determining a “reasonable charge” for family-provided attendant care services. Judge Markey would ultimately hold that a reasonable charge for family-provided attendant care services is determined by what the family member could receive in the open market for providing similar services.
