Michigan Court of Appeals; Docket No. 58988; Published
Judges Maher, Bronson, and Snow; Unanimous
Official Michigan Reporter Citation: 121 Mich App 766; Link to Opinion 
STATUTORY INDEXING:
Work Loss Benefits: Calculation of Benefits [§3107(1)(b)]
Liability for Excess Economic Loss Caused By Insured Tortfeasors [§3135(3)(b)]
12% Interest Penalty on Overdue Benefits – Nature and Scope [§3142(2), (3)]
Requirement That Benefits Were Unreasonably Delayed or Denied [§3148(1)]
Conduct Establishing Unreasonable Delay or Denial [§3148]
TOPICAL INDEXING:
Legislative Purpose and Intent
Workers Disability Compensation Act (MCL 418.1, et seq.)
CASE SUMMARY:
In this significant unanimous Opinion by Judge Bronson, the Court of Appeals specifically disagreed with another panel of the Court of Appeals in the case of Krawczyk v DAIIE, item number 546. In rejecting Krawczyk, the Court held thai fringe benefits which are paid in lieu of salary may be a proper element of "income" under §3107 and thus recoverable as part of no-fault work loss benefits. The Court noted that the terms "wage" and "earnings" in the worker's compensation law have been previously interpreted by the Court of Appeals as including an employer's pension payment and group insurance payments. Both workers' compensation and automobile insurance are remedial no-fault systems and, accordingly, it is reasonable to interpret similar provisions in these statutes in the same light. In support of its conclusion, the Court noted that under the Internal Revenue Code, the term "income" is broader than the term wages, with wages merely being one form of income. The Court felt the federal tax definition of income was a strong indication that the common and approved usage of the term "income" encompasses more than just wage and salary income. The Court also noted that to prevent plaintiff from recovering loss of fringe benefits as part of first party no-fault wage loss benefits, would result in the injured person not being able to recover such benefits in tort against the tortfeasor, for the reason that §3135(2)(c) only permits recovery of those elements of "work loss" as defined in §3107(b) in excess of the daily, monthly, and three year limitations. The Court stated that it could not accept the conclusion that the legislature intended that injured persons absorb the real economic loss engendered by the loss of fringe benefits.
As to specific kinds of fringe benefits, the Court held as follows: First, an employer's contribution to an employee's pension plan should be considered income where the employee's rights in the plan are vested. The Court did not decide the question as to what arises when an employee's rights are not vested. Second, the Court held that the loss of employer paid health insurance premiums is to be included in income. However, the best measure of such a loss is the amount of payment made by the employer on the employee's behalf to secure such coverage, as opposed to what the employee must pay for such benefits after discontinuation of his employment Third, the Court rejected plaintiff’s argument that his work loss benefits should include the value of the loss of his employer's federal social security tax payment on plaintiff's wages which was terminated after discontinuation of work. The Court held that an employee's interest in such payments is too speculative to be considered income.
The Court also affirmed the trial court's ruling that plaintiff was entitled to recover, as part of work loss benefits under §3107(a), the amount of step increases in plaintiff’s wages which plaintiff would have received had he continued to work. In addition, the Court reversed the trial court's denial of an award of attorney fees on this portion of the plaintiff’s no-fault benefits and ordered an award of actual attorney fees regarding this aspect of the claim.
"Where reasonable proof of step increases in plaintiff’s wages were supplied, yet defendant refused to pay, plaintiff is entitled to attorney fees pursuant to MCLA 500.3148(1). . . .Defendant did not present any reasonable legal excuse for its failure to pay benefits based on the step increases. . . .Unless a question is presented concerning plaintiff’s presentation of proof of loss, the trial judge should aware attorney fees for recovery of benefits for the loss of the wage increases."
Finally, relying on the opinion in Cook v DAIIE (Amended Opinion), item number 501, the Court held that the reasonableness of a defendant's failure to pay no-fault benefits is irrelevant for purposes of awarding interest under §3142, provided that the plaintiff presented reasonable proof of the loss.
[Author's Comment: The Court's analysis with regard to the attorney fee question is interesting. The Court seems to be de-emphasizing the plaintiff’s burden of proving that an insurer's conduct was unreasonable in favor of shifting the burden to the insurer to prove its conduct was in fact reasonable. The analysis employed above seems to indicate that if plaintiff presents reasonable proof of the losses in that question and there is no dispute concerning the presentation of that proof, attorney fees should be awarded unless the insurer proves that its conduct was not unreasonable. This seems to be philosophically consistent with the analysis employed by the Court of Appeals in the recent decision in Combs v Commercial Carriers, item number 540.]
