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Proudfoot v State Farm Mutual Insurance Company; (MSC, 12/23/2003, RB #2389)

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Michigan Supreme Court; Docket No. 123502
Unanimous; Per Curiam
Official Michigan Reporter Citation: 469 Mich. 476, Link to Opinion


STATUTORY INDEXING: 
Allowable Expenses for Home Accommodations [3107(1)(a)] 
Accrual of PIP Benefits [3110(4)] 
12% Interest Penalty on Overdue Benefits – Nature and Scope [3142(2) (3)] 
Requirement That Benefits Were Overdue [3148(1)] 
Requirement That Benefits Were Unreasonably Delayed or Denied [3148(1)]

TOPICAL INDEXING: 
Revised Judicature Act – Miscellaneous Provisions


CASE SUMMARY: 
In this per curiam opinion, the Supreme Court affirmed in part and reversed in part the Court of Appeals decision concerning the legal duty and penalty sanctions liability on a claim for residential accommodations under section 3107(1)(a) of the No-Fault Act.

The plaintiff in this case sustained severe injuries in a motor vehicle accident which resulted in the amputation of her right leg above the knee. As a result of her injury, plaintiff’s home required certain modifications. On December 2, 1997, plaintiff submitted a letter to defendant with an occupational therapist’s report detailing the need for modifications to plaintiff’s home. Plaintiff also contacted a local architect to prepare a proposal and estimate for the necessary modifications. The architect charged $815 for the proposal. The architect’s proposal, estimate and bill were forwarded to the defendant in March, 1999. Thereafter, a dispute arose in which the defendant claimed that the home modifications could be accomplished for substantially less money. The insurance company refused payment of the architect’s bill and failed to pay any money whatsoever toward the home modifications. As of the time of trial, no modifications had been performed. A jury determined that the home modifications were reasonably necessary and an Order was entered for the home modifications, the architect’s bill, penalty interest under section 3142, and no-fault attorney fees under section 3148.

On appeal, the Court of Appeals affirmed the trial court’s rulings regarding the accommodations issues, and rejected the insurance company’s argument that it was not obligated to pay no-fault benefits until plaintiff became liable for the home modifications. The Court of Appeals, however, did agree with defendant that plaintiff was not entitled to RJA interest on future home accommodations, because those were future damages as defined in MCL 600.6013.

In addressing these issues, the Supreme Court reversed in part, and affirmed in part, the decisions of the Court of Appeals. The court agreed with the Court of Appeals that plaintiff was not entitled to judgment interest on the proposed home modifications under MCL 600.6013(1), because under that statute, interest is not allowed on “future damages from the date of filing the complaint to the date of entry of the Judgment.” The Supreme Court also upheld the Court of Appeals decision awarding judgment interest on the architect’s fee, on the penalty interest on that fee, and on the attorney fees that were associated with the award of the architectural services fee.

The Supreme Court reversed the Court of Appeals judgment that ordered defendant to pay the total amount of future home modification expenses to the trial court for distribution. The court reasoned that the expenses in question have not yet been incurred within the meaning of MCL 500.3107, which provides that personal protection insurance benefits are payable for the following:

“(a)  Allowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services, and accommodations for an injured person’s care, recovery, or rehabilitation.”

The court also relied upon the language of MCL 500.3110(4) which provides:

“Personal protection insurance benefits payable for accidental bodily injury accrue not when the injury occurs but as the allowable expense, work loss, or survivor’s loss is incurred.”

The court stated that to “incur” means “to become liable or subject to, especially because of one’s own actions.” The court held that at the time of the judgment, plaintiff had not yet taken action to become liable for the costs of the proposed home modifications, and therefore, those expenses had not yet been “incurred.” Therefore, the Court of Appeals erred in ordering defendant to pay the total amount to the trial court.

The court also reversed the award of penalty interest on the future home modification expenses, because those expenses were not yet “overdue” within the meaning of MCL 500.3142(2).

With regard to attorney fees, the court held that attorney fees are payable only on overdue benefits for which the insurer has unreasonably refused to pay or unreasonably delayed in paying. Since the claims for modification expenses were not yet “overdue,” because they had not yet been “incurred,” the court held that at an attorney fee was not properly awarded as to any expenses other than the architect’s fee.

The court affirmed the Court of Appeals judgment denying RJA interest on the future home modifications, but affirmed the award of RJA interest relating to the architect’s fee, as well as the no-fault interest on that fee and the attorney fee award on that fee.


Lansing car accident lawyer 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 SinasDramis.com.

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