Michigan Court of Appeals; Docket No. 309616; Unpublished
Judges M.J. Kelly, Cavanagh, and Murray; 2-1 (with M.J. Kelly dissenting in part); Per Curiam
Official Federal Reporter citation: Not Applicable; Link to Opinion 
Link to Dissent
STATUTORY INDEXING:
Requirement That Benefits Were Overdue [§3148(1)]
Requirement That Benefits Were Unreasonably Delayed or Denied [§3148(1)]
12% Interest Penalty on Overdue Benefits – Nature and Scope [§3142(2) (3)]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unpublished 2-1 per curiam Opinion regarding plaintiff’s claims for work-loss benefits and statutory attorney fees, the Court of Appeals held that: (1) the Plaintiff was entitled to receive work-loss benefits for “pass-through” income he received from his profitable subchapter-S corporation because the pass-through income constituted “income from work” under MCL 500.3107(1)(b); and (2) that the Plaintiff was not entitled to no-fault attorney fees for recovering penalty interest on wrongfully-withheld work-loss benefits because “penalty interest cannot be considered an overdue benefit for purposes of MCL 500.3148(1).”
The plaintiff in this case was injured in a motorcycle accident and made a claim for work loss benefits under MCL 500.3107(1)(b). At the time of the accident, he was the sole owner and sole shareholder of a profitable subchapter S corporation. As such, he received an annual income in two forms: (1) employee wages reported annually on an IRS W-2 form; and (2) “pass-through” or “flow through” income received directly from his corporation. Both forms of income were reported and taxed annually. Home-Owners initially began paying plaintiff work loss benefits in an amount reflecting both of these forms of income. However, Home-Owners later took the position that plaintiff’s “pass-through” income was not compensable as work loss for purposes of §3107(1)(b) under the Supreme Court decision of Ross v Auto Club Group, 481 Mich 1 (2008), which held that “the losses of a subchapter S corporation cannot be considered in the calculation of work loss benefits.” Home-Owners then suspended all benefit payments, including payments for plaintiff’s W-2 income, in order to recoup amounts previously paid for plaintiff's “pass-through” income. Home-Owners voluntarily ended its full suspension of all benefits approximately six months later and paid the plaintiff in full for all past-due benefits attributable to the W-2 portion of his annual income. However going forward, Home-Owners refused to pay any work-loss benefits for the “pass through” portion of his annual income. Thereafter, plaintiff retained counsel and asserted a claim to recover work-loss benefits for the “pass through” portion of his income, and to recover penalty interest for the suspended benefits that were later repaid.
The parties filed cross motions for summary disposition on the issue of whether Plaintiff was entitled to receive work-loss benefits for the pass-through portion of his annual income. The trial court held that the Supreme Court decision of Ross, supra, did not preclude the plaintiff from receiving work loss benefits for the “pass-through” portion of his annual income and awarded Plaintiff benefits for his pass-through income. The trial court further awarded penalty interest for all unpaid benefits and rendered a full, unapportioned award of no-fault attorney fees on the basis that Plaintiff’s attorneys expended time to recover penalty interest for the suspended benefits. This appeal followed.
While this appeal was pending, the Court of Appeals decided the published decision of Brown v Home-Owners Ins Co, 298 Mich App 678 (2012), which resolved the issue of whether the owner of a profitable subchapter-S corporation could receive work-loss benefits for the “pass-through” portion of his annual income. The Brown case further held that reliance on the Ross decision in initially refusing to pay work loss benefits for plaintiff’s “pass-through” income was not “unreasonable” for purposes of awarding attorney fees under §3148.
Applying the Brown case, the Court held that the plaintiff was entitled to receive work-loss benefits for the pass-through portion of his annual income. However, the Court went on to hold that the Plaintiff was not entitled to receive no-fault attorney fees for recovering penalty interest on the wrongfully-withheld suspended work-loss benefits. In so holding, the court reasoned:
“Here, other than plaintiff’s claim that his income from Commnorth should have been included in his work-loss benefit calculation, plaintiff did not have any “benefits which are overdue” at the time he retained counsel and filed this action. See MCL 500.3148(1) (Emphasis supplied). The statute uses the present tense verb “are,” not the past tense verb “were,” with regard to the “overdue” status of PIP benefits. Plain statutory language must be enforced as written. Echelon Homes, LLC v Carter Lumber Co, 472 Mich 192, 196; 694 NW2d 544 (2005). Although defendant had wrongfully withheld work-loss benefits based on plaintiff’s W-2 wages for a short period of time, those withheld benefits were refunded well before plaintiff retained counsel and filed this action. Thereafter, defendant paid plaintiff work-loss benefits based on his W-2 forms and only disputed the payment of work-loss benefits which included consideration of plaintiff’s income from Commnorth. And although plaintiff’s counsel assisted plaintiff in obtaining an award of penalty interest with regard to the improperly withheld work-loss benefits, the payment of penalty interest is not a PIP benefit; thus, penalty interest cannot be considered an overdue benefit for purposes of MCL 500.3148(1).”
Judge M.J. Kelly concurred in the majority’s decision to affirm the trial court’s award of work loss benefits. However, Judge Kelly dissented in part with respect to the majority’s reversal of the trial court’s award of attorney fees. In this regard, Judge Kelly explained:
“I concur in the result reached by the majority that the trial court did not err in granting summary disposition in plaintiff’s favor on the issue of his work loss benefits. I further concur that the decision in Brown v Home-Owners Ins Co, 298 Mich App 678; 828 NW2d 400 (2012), which was released while this case was on appeal, is dispositive and that, finally, because the wage loss benefits were, at the time, reasonably in dispute, plaintiff was not entitled to an award of attorney fees on that basis. However, I respectfully dissent from the majority’s determination that plaintiff is not entitled to an unapportioned attorney fee under MCL 500.3148(1) for the recovery of statutory penalty interest which defendant had failed to pay prior to plaintiff’s lawyer’s involvement in the case.”
