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Owens and Herrick Memorial Hospital v Auto Club Insurance Association; (COA-UNP, 2/5/1992; RB #1532)


Michigan Court of Appeals; Docket Nos. 110442, 11043, 111599; Unpublished  
Judges Holbrook, Jr., Murphy, and Jansen; Unanimous; Per Curiam  
Official Michigan Reporter Citation:  Not Applicable; Link to Opinion alt   

Allowable Expenses: Reasonable Necessity Requirement [§3107(1)(a)]  
Standards for Deductibility of State and Federal Governmental Benefits [§3109(1)]  
Veterans / Military Benefits [§3109(1)]  
Coordination with Other Health and Accident Disability Insurance [§3109a]

Not Applicable   

In this unanimous per curiam Opinion, the Court of Appeals affirmed in part and reversed in part the decision of the trial court concerning plaintiff’s entitlement to wage loss and medical expense benefits arising from an automobile accident caused closed head injury. The issues below involved proof of reasonable and necessary medical expense benefits and government benefits setoffs.  

Plaintiff was injured in 1982 in a motor vehicle accident causing serious closed head injuries. At the time of the accident, plaintiff Owens was on active duty with the United States Coast Guard. Plaintiff’s medical care was initially paid for by the Coast Guard or the Veterans Administration. However, after plaintiff’s discharge from the Coast Guard approximately one and one-half years following the accident, plaintiff’s post-discharge medical expenses were not paid for by either the Coast Guard, the Veterans Administration, or plaintiff’s own no-fault insurance company. Subsequent to discharge from the hospital, plaintiff began receiving out-patient therapy and rehabilitation services from numerous sources. The Veterans Administration refused to pay for these expenses, since the Ann Arbor VA Hospital could have provided the same care. Defendant Auto Club refused to pay for these expenses on the basis of the governmental benefits setoff provided for under §3109. 

In addition to medical expense benefits, also at issue were wage loss benefits. Plaintiff received full wages from the Coast Guard until his discharge from the Coast Guard, and thereafter, received VA disability retirement pay, in addition to social security disability benefits.  

The first issue raised on appeal concerned whether Auto Club was entitled to a set-off under §3109 for the expense of medical treatment that could have been provided by the Veterans Administration. The Court of Appeals affirmed summary disposition in favor of the plaintiff on this issue, and held that §3109 does not require that a veteran go through the VA hospital system for medical treatment merely because he is entitled to do so.  

The next issue concerned whether the trial court properly granted summary disposition regarding plaintiff’s entitlement to medical expense benefits where the defendant Auto Club had contested the reasonable necessity of these expenses. Specifically, Auto Club relied upon a medical memorandum which questioned whether plaintiff required in-patient care. Auto Club contended that this memorandum created a factual issue as to whether the medical expenses were reasonably necessary. In reversing the trial court's grant of summary disposition in favor of the plaintiff, the Court of Appeals held that generally, a question of whether expenses are reasonably necessary if one of fact for the jury. The medical memorandum prevented the trial court from finding, with any degree of certainty, that the in-patient treatment was both reasonable and necessary. This was an issue for the jury under the decision of Nasser v Auto Club, 435 Mich 33 (1990).  

The third issue raised by Auto Club concerned whether Auto Club was entitled to a complete setoff under §3109(a) for VA disability benefits and Coast Guard wages received by plaintiff as against any work loss benefits owing under the no-fault policy. The Court of Appeals held that Auto Club was not entitled to a setoff of the VA disability benefits, and relied upon the Supreme Court decision in Tatum v Governmental Employees, 431 Mich 663 (1988), which held that VA medical benefits were a permissible setoff only if the injured had been offered a coordinated policy. The court stated, "following the logic of that holding, it follows that if an insured has an uncoordinated policy, then the insurer is not entitled to a setoff" of VA disability benefits.  

In a related issue, the court also addressed Auto Club's argument that it was entitled to a setoff on the basis that wage continuation benefits paid by the Coast Guard were governmental benefits within the meaning of §3109(1) which satisfied the test of Jarosz v DAIIE, 418 Mich 565, that such benefits serve the same purpose as no-fault benefits and are required to be provided as a result of this came accident. In agreeing with the contention of Auto Club, the Court of Appeals held that Auto Club was entitled to a governmental benefits setoff since the benefits were payable pursuant to a federal statute providing for wage continuation in the event of disability. Therefore, the Court of Appeals held that the trial court improperly denied Auto Club the setoff for the Coast Guard wage continuation benefits. 

Finally, the Court of Appeals upheld the trial court's grant of attorney fees under §3148 in favor of plaintiff and Herrick on certain medical expense benefits. Auto Club had refused to pay these benefits because of its belief that it was entitled to the governmental benefits setoff. The Court of Appeals held that the possibility of a future governmental benefits setoff was not a reasonable basis for denying plaintiff’s benefits in the first instance. Plaintiff’s bill should have been promptly paid and Auto Club could have sought whatever reimbursement it was entitled to at a later date. Therefore, the trial court's award of §3148 attorney fees was affirmed.  

In a related issue, the trial court reversed grant of attorney fees awarded to Herrick Memorial Hospital, on the grounds that Herrick was not a "claimant" as contemplated by the legislature when it enacted the penalty provision of the no-fault insurance act.  

Michigan auto accident attorney Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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