Michigan Court of Appeals; Docket #321853; Unpublished
Judges Murray, Meter, and Riordan; Unanimous; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 
STATUTORY INDEXING:
Allowable Expenses: Reasonable Necessity Requirement [§3107(1)(a)]
Insurer’s Right to Penalty Attorney Fees for Fraudulent/Excessive Claims [§3148(2)]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous unpublished per curiam Opinion involving a physical therapy provider’s claim for benefits, the Court of Appeals held the provider was properly sanctioned with penalty attorney fees under MCL 500.3148(2), because plaintiff’s claim was “’so excessive as to have no reasonable foundation’” within the meaning of the statute.
Defendant State Farm issued a no-fault policy to Roger Bonds, who was in an auto accident. Plaintiff Therapy First provided Bonds physical therapy services after the accident. Plaintiff filed suit to recover approximately $60,000 in services it had provided Bonds, allegedly for the injuries he received in the accident. There was conflicting expert testimony at trial regarding whether Bonds’ physical therapy treatment was reasonable and necessary. A jury found that Bonds had suffered an injury arising from the accident, but that plaintiff had not incurred allowable expenses. The trial court entered a judgment for defendant and awarded defendant $56,152 in attorney fees pursuant to §3148(2).
The Court of Appeals affirmed the attorney fee award, finding the jury properly found that plaintiff’s services were not allowable expenses arising from the accident.
Regarding whether the services rendered by plaintiff were reasonable, the Court of Appeals noted there was conflicting expert testimony on this issue. In this regard, the court said:
“The jury verdict signals its finding that none of the approximately $60,000 in expenses for which plaintiff sought reimbursement qualified as a ‘reasonable charge incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation.’ … The trial court recognized that the jury’s verdict indicated that it found plaintiff’s reimbursement request ‘not reasonable.’ Additionally, the trial court expressed its own conclusion that ‘the services that were eventually rendered were unnecessary.’ Thus, we reject plaintiff’s argument that the trial court’s factual findings were incomplete and conclude, given the context of its statements, that the trial court amply explained the basis for its decision to award defendant attorney fees. … [T]he trial court’s statements on the record reveal that the trial court also concluded that ‘the services that were eventually rendered were unnecessary’ because ‘that’s what it seemed like,’ and ‘[t]hat’s how it came out,’ based on the evidence presented at trial. Additionally, the fact that the jury awarded plaintiff no damages on a claim requesting more than $60,000 further supports the conclusion — but does not conclusively establish on its own — that plaintiff’s claim was ‘so excessive as to have no reasonable foundation.’”
The Court of Appeals further held the trial court did not err by allowing defendant to recover attorney fees for paralegal services that were rendered. However, the court did find that the trial court erred by failing to hold an evidentiary hearing on the fees.
Regarding the paralegal fees, the Court of Appeals said:
“Once the trial court determined that plaintiff’s claim was ‘fraudulent or so excessive as to have no reasonable foundation,’ it could award defendant ‘a reasonable sum against [plaintiff] as an attorney’s fee for the insurer’s attorney.’ … The Legislature did not define the term ‘attorney’s fee’ for purposes of MCL 500.3148, but, as stated, MCR 2.626 expressly provides for the inclusion of the time and labor of legal assistants in an award of attorney fees. When their language does not conflict, statutes and court rules relating to the same subject matter should be read harmoniously. … Here, MCL 500.3148(2) and MCR 2.626 relate to the same subject matter, i.e., attorney fees, and do not conflict. Thus, in reading the statute and court rule harmoniously, paralegal fees are recoverable as attorney fees in this matter, as long as the requirements of MCR 2.626 are satisfied.”
Regarding the evidentiary hearing, the Court of Appeals said:
“[W]e conclude that plaintiff challenged in the trial court defendant’s requested attorney fees arising from paralegal services and the number of hours spent defending this case. As such, the trial court’s failure to hold an evidentiary hearing on these issues was in error. … Consistent with plaintiff’s limited request for relief, we vacate in part the trial court’s award of attorney fees and remand for an evidentiary hearing specifically limited to the attorney fees previously awarded that may have arisen from paralegal services or work performed on unrelated cases. … After considering the additional evidence, the trial court shall determine the appropriate amount of attorney fees to which defendant is entitled.”
In conclusion, the Court of Appeals held:
“The trial court did not abuse its discretion in awarding defendant attorney fees under MCL 500.3148(2). However, due to the trial court’s failure to hold an evidentiary hearing, the record is insufficient to determine whether attorney fees were properly awarded for paralegal services and whether attorney fees were awarded for work performed on unrelated matters.”
