Michigan Court of Appeals; Docket No. 193387; Published
Judges Griffin, Doctoroff, and Markman; Unanimous; Opinion by Judge Griffin
Official Michigan Reporter Citation: 226 Mich App 75; Link to Opinion 
STATUTORY INDEXING:
Insurer’s Right to Penalty Attorney Fees for Fraudulent / Excessive Claims [§3148(2)]
Standards for Deductibility of State and Federal Governmental Benefits [§3109(1)]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
In this unanimous published Opinion by Judge Griffin, the Court of Appeals held in a case of first impression, that a no-fault automobile insurance carrier could not offset from its obligation to pay future personal protection insurance benefits, a judgment that it had obtained against its insured pursuant to offer of judgment sanctions in previous litigation.
Plaintiff was injured when she slipped and fell from a vehicle insured by Farmers. She sued Farmers for non-payment of certain no-fault automobile insurance medical and wage loss benefits. Shortly before trial, Fanners agreed to pay her outstanding medical expenses, but at trial, plaintiffs claim for wage loss benefits resulted in a no cause verdict. Pursuant to the offer of judgment sanctions rule contained in MCR 2.405, judgment was entered against plaintiff in favor of Farmers for $8,629 in offer of judgment sanctions.
Subsequently, plaintiff claimed that she was in need of knee and back surgery as a result of her injuries in the automobile accident. Although Farmers did not dispute its obligation to pay personal protection insurance benefits, it sought to set-off from its obligations the full amount of the previous judgment under offer of judgment sanctions that it had obtained against plaintiff. Plaintiff filed an affidavit in the lower court stating that she was indigent and unable to pay the offer of judgment sanctions until such time as she was able to return to work, and that she was unable to return to work until she received the necessary knee and back surgery. The trial court entered a declaratory judgment in favor of plaintiff, directing that Farmers pay all of her reasonable medical expenses related to the automobile accident without regard to any offset.
In addressing this issue of first impression, the Court of Appeals affirmed the trial court, and held that the basic goal of the no-fault system is to insure persons injured in motor vehicle accidents of assured, adequate and prompt reparation for certain economic losses.
The Court of Appeals acknowledged that absent a statutory mandate authorizing a set-off in a particular circumstance, set-off is a matter in equity. In the instant case, the Court of Appeals held that the provisions of §3148(2) providing for statutory offsets against PIP benefits for attorney fees incurred in defending fraudulent, excessive, or unreasonable claims, did not apply. In the present case, none of the statutory set-off provisions under the act are applicable. The attorney fees awarded against plaintiff did not result from any finding that plaintiff’s claims were "fraudulent or so excessive as to have no reasonable foundation." Further, the court found that under the principles of equity, Farmers' claim for a set-off should be denied. The set-off claim sought by Farmers is at odds with the overall goals and objectives of the no-fault act:
"Authorizing no-fault insurers to reduce PIP benefits by the outstanding unrelated debts of their insured would thwart the legislative goal of providing 'assured, adequate and prompt reparation for certain economic losses.'"
Here, because plaintiff cannot pay the offer of judgment sanctions at this time, and is unable to afford the needed surgery on her own, permitting the defendant to offset its judgment from its obligation to pay PIP benefits would seriously impede plaintiff’s ability to obtain reasonably necessary medical care and treatment.
