Michigan Court of Appeals; Docket No. 143223; Unpublished
Judges Shepherd, Holbrook, and MacKenzie; 2-1 (with Judge MacKenzie Dissenting); Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 
STATUTORY INDEXING:
PIP Liens Regarding Out of State Tort Claims [§3116(2)]
No Lien as to Noneconomic or Excess Economic Loss [§3116(4)]
TOPICAL INDEXING:
Private Contract (Meaning and Intent)
Workers Disability Compensation Act (MCL 418.1, et seq.)
CASE SUMMARY:
In this 2-1 unpublished per curiam Opinion (Judge MacKenzie dissenting), the Court of Appeals affirmed the trial court's ruling that plaintiff had not breached his obligation to protect defendant's subrogation rights by entering into a settlement with a third-party tortfeasor for non-economic damages, although economic damages were also released.
Plaintiff was injured in an out-of-state accident while in the course of his employment. He was disabled from his job and therefore received workers' compensation benefits. Defendant State Farm made a setoff from plaintiffs wage loss benefits in the amount plaintiff received in workers' compensation benefits. Plaintiff filed a third-party tort claim against the parties involved in the accident Plaintiff settled this lawsuit for an amount representing non-economic losses only, although defendants were released from all further liability, including economic loss.
Under Indiana law, plaintiff was required to reimburse the workers' compensation carrier out of the third-party tort recovery. Plaintiff then filed a claim for the work loss benefits that State Farm had not paid because of the workers’ compensation setoff. Defendant State Farm refused to pay the first-party wage loss benefits on the basis that plaintiff had breached the terms of the insurance contract by failing to protect defendant's subrogation rights to recover the amount of personal protection insurance benefits it paid to plaintiff from the third party tortfeasor. The trial court held that defendant did not have a lien on the third-party recovery and, therefore, was in breach of its obligation to pay the wage loss benefits.
The policy of insurance provides that with respect to the insurance company's right to subrogation, the insured will "keep these rights in trust" for the insurer. The Court of Appeals found this provision to be ambiguous as to the extent of the insured's obligation. Furthermore, the Court of Appeals would not construe the subrogation provisions to deny the insured the right to enter into a valid settlement for non-economic damages. As plaintiff settled his claim against the third-party tortfeasor for non-economic losses only, defendant does not have a right to reimbursement for no-fault first party benefits paid, even though the insurance policy provides that the insurer is entitled to reimbursement out of "any recovery." The court found this language to be contrary to the language of.§3116(4), which denies a no-fault carrier reimbursement out of a recovery for non-economic losses.
The defendant insurer claimed that an agreement was made with plaintiffs counsel that plaintiff would protect defendant's subrogation rights. The insurance company relied upon a letter sent by its adjuster to plaintiff’s counsel which contained the following paragraph:
"Please accept this letter as notice of our subrogation rights and protect our interests at the time of your settlement."
The court found that the above language did hot create a contractual agreement by plaintiff to protect defendant's subrogation rights.
Finally, defendant contested the attorney fees awarded to plaintiff because it was based upon the plaintiff’s one-third contingency fee arrangement with counsel. However, the Court of Appeals found the trial court's award of attorney fees here based on a one-third contingency arrangement to be appropriate, citing with approval the case of Bloemsma v ACIA (Item No. 1501).
Judge MacKenzie dissented and would have held that under the terms of the policy, plaintiff had an obligation to provide defendant with copies of all lawsuit papers filed in the third-party tort action and here, plaintiff had failed to advise defendant of his actions in this regard. Judge MacKenzie would hold that by entering into the third-party settlement agreement and releasing all rights to further recovery, plaintiff had compromised defendant's subrogation rights, and thereby breached the contract of insurance.
