Mecosta County Circuit Court; Docket No. 80-4529-AZ; Unpublished
Judge Lawrence C. Root; Oral Opinion
Official Michigan Reporter Citation: Not Applicable; 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: Relevance of Sick and Vacation Pay [§3107(1)(b)]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
This transcribed oral Opinion from the bench is an appeal of the District Court's rulings reported as items 275 and 350 herein. The case dealt with a wage loss claim under §3107(b). Judge Root held that an employee injured in an automobile accident is entitled to be compensated by her no-fault insurer for the lost taxable fringe benefits but not for lost non-taxable fringe benefits. The employee in this case, a hospital worker, was totally off work for six months and when she returned, had to take a lower paying job. The insurer paid no-fault benefits based on the employee's basic wage loss, but refused to compensate the plaintiff for the value of fringe benefits she lost as a direct result of the auto accident Plaintiff sued in District Court, obtained a judgment and this appeal ensued.
Citing the workers' compensation case of Hite v Evart, 34 Mich App 247, as well as some federal cases defining "income" as used in the Internal Revenue Code, plaintiff argued that "work loss consisting of loss of income from work" as used in §3107(b) means anything of economic benefit conferred upon an employee, including fringe benefits. Defendant insurer argued that "income from work" is limited to the employee's take home pay. The Circuit Court struck a middle ground, holding that taxable fringes are included under §3107(b) but not non-taxable fringes. The Court noted that, by virtue of the third sentence of §3107(b), no-fault wage loss benefits are reduced by 15 percent to account for the taxes the employee would have paid on his income had he not lost it; and reasoned mat this reduction for tax savings would make no sense if the income the employee lost was not taxable anyway. The Court concluded that the legislature did not intend to include non-taxable fringe benefits in "income from work" the loss of which is compensable under the No-Fault Act. The particular claims were disposed of in the following way:
(a) Vacation Days — Although plaintiff’s employment contract entitled her to a certain number of paid vacation days, the District Court had denied compensation for such days on the reasoning that; since she was already receiving wage loss for every work day of the year; an allowance for vacation days would be duplicative recovery. Since plaintiff did not cross appeal on this issue, the trial court's holding on this point is final.
(b) Sick, Days — Under her employment contract, plaintiff was entitled to a certain number of sick days. Moreover, if at the end of the year she did not take some sick days, she would be entitled to part pay for the sick days not taken in addition to her usual daily wages. The trial court awarded these fringe benefits and the Circuit Court affirmed on the grounds that this was a taxable benefit.
(c) Health Insurance — As a result of the accident, plaintiff lost Blue Cross coverage which her employer had been paying for. The trial court held that this was compensable under no-fault, but the Circuit Court reversed on the grounds that this was a non-taxable benefit to the employee.
(d) Social Security – Plaintiff’s employer also made contributions to Social Security. The trial court granted no-fault benefits based on these contributions, but the Circuit Court reversed because the employer's contribution to Social Security is not taxable to the employee.
(e) Step Increases — Had Plaintiff continued to work, she would have also been entitled to automatic pay increases. The trial court granted benefits based on these increases, and the Circuit Court affirmed on the authority of Lewis v DAIIE (item number 200).
A final issue presented to the Circuit Court was whether the trial court's award of attorney fees in favor of plaintiff should be sustained. The Circuit Court held that the trial court's ruling that the insurer unreasonably refused to pay benefits was not specific enough to allow proper appellate review, and accordingly remanded for more specific findings. After remand, the Circuit Court, by an opinion rendered from the bench on November 3, 1981, affirmed the trial court's ruling that the insurer's failure to pay step increases and sick days was unreasonable, but reversed the trial court's ruling that the insurer's failure to pay Social Security and health insurance was unreasonable. The Circuit Court concluded by splitting the attorney fees awarded by the trial court in half. Also, on November 3,1981, the Circuit Court denied a rehearing on the fringe benefit issue.
