Michigan Court of Appeals; Docket No. 84937; Published
Judges Bronson, R. B. Burns, and Townsend; 2-1; Per Curiam
Official Michigan Reporter Citation: 154 Mich App 186; Link to Opinion 
STATUTORY INDEXING:
Work Loss Benefits: Nature of the Benefit [§3107(1)(b)]
Work Loss Benefits: Calculation of Benefits [§3107(1)(b)]
Work Loss Benefits: Self-Employed Persons [§3107(1)(b)]
Applicability of Limitations Period to Claims by Insurers Against Injured Persons [§3145]
TOPICAL INDEXING:
No-Fault Insurer Claims for Reimbursement
CASE SUMMARY:
In this 2-1 per curiam Opinion, Judge Townsend concurring in part and dissenting in part, the Court of Appeals addressed the proper method for calculating work loss benefits for a self-employed claimant. Plaintiff was injured in a motor vehicle accident in 1983 which left him permanently disabled. He was a self-employed cosmetologist who worked as an independent contractor, paying 41% of his weekly gross revenue as chair rental to the shop in which he worked. As an independent cosmetologist, plaintiff was also required to pay all of his own business expenses including expenses for supplies and materials.
Based upon records received from plaintiff, defendant insurance company approved payment of 85% of plaintiff’s average daily gross receipts as work loss benefits. Subsequently, defendant determined that it had been overpaying the plaintiff and terminated further payments, contending that plaintiff was only entitled to 85% of his net as opposed to his gross revenue.
Plaintiff contended that he was entitled to recover work loss benefits under §3107(b) based on the entirety of the gross receipts from the operation of his business, unreduced by any of the costs of doing business. The trial court agreed with defendant's interpretation of §3107(b) that work loss benefits should be based solely on the profit plaintiff received from his business. The trial court ruled that some, but not all, of plaintiff's business expenses should be deducted in determining work loss benefits.
In this case of apparent first impression, the Court of Appeals upheld the trial court ruling that plaintiff’s business expenses should be deducted from his gross receipts in determining his lost income. However, the Court of Appeals rejected defendant's argument that the trial court should have automatically deducted all of claimant's business expenses as reported on Schedule C of his tax returns in determining work loss benefits under the No-Fault Act. The trial court had determined that only certain costs of doing business should be subtracted from plaintiff’s gross receipts. These included, chair rental, materials and supplies, advertising, laundry and cleaning, accounting services, utilities, telephone, license and office expenses. There were a number of other business- related expenses that plaintiff reported on his Schedule C which the trial court did not consider to be legitimate business expenses for purposes of the No-Fault Act. The decision concerning whether certain business-related expenses should be deductible business expenses for purposes of determining work loss benefits, is primarily a factual question. In this case, the Court of Appeals could not say that the trial court's decision as to which business expenses should be subtracted was clearly erroneous.
The Court of Appeals also addressed the issue of the insurance company's entitlement to reimbursement of overpayments. The Court of Appeals rejected the plaintiff’s argument that, since there is no section of the No-Fault Act which entitles insurers to maintain actions against insured to recover overpaid work loss benefits, the defendant is therefore not entitled to reimbursement for any overpayments. The Court of Appeals held that where a "mistake of fact" occurs, defendant would be entitled to reimbursement unless plaintiff could establish some detrimental reliance.
Finally, the Court of Appeals ruled that the one year statute of limitations contained in §3145(1) did not apply in this situation, and held the general six year statute of limitations applicable to defendant's claim for recovery of overpayments. Judge Townsend concurred in the result, except as to the portion of the decision dealing with the period of limitation applicable to defendant insurance company's claim for reimbursement for overpayment. Judge Townsend would hold that §3145 and §3146 of the No-Fault Act established a special one year statute of limitation for commencing actions to recover nb-fault benefits whether by the insured, or by the insurer, for reimbursement or recovery.
[Author's Comment: In reaching its conclusion in this case, the Court of Appeals did not set forth any test or provide any additional direction as to what types of business expenses should be subtracted from a claimant's gross receipts for purposes of the No-Fault Act. Apparently this has been left for later decision.]
