Allowable Expense Benefits
The Causation Requirement Applicable to Allowable Expense Claim
In recent years, there has been increasing discussion and some uncertainty as to exactly what legal causation standard is applicable to the payment of allowable expense claims under Subsection 3107(1)(a) of the No-Fault Act. Many years ago, the causation issue was addressed in the context of entitlement to no-fault benefits under Subsection 3105(1).
One of the leading causation cases dealing with entitlement to benefits is the decision in Shinabarger v Citizens Insurance Co, 90 Mich App 307 (1979). In that case, the Court held that the language of Subsection 3105(1) making benefits compensable for injuries “arising out of the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle,” is satisfied “where use of the vehicle is one of the causes of the injury. . . even though there exists an independent cause. . . almost any causal connection or relationship will do. . .” Subsequent appellate decisions applied this Shinabarger standard in a variety of cases dealing with an injured person’s entitlement to benefits.
Over time, a question has developed as to whether the “arising out of” causation standard adopted by the Shinabarger case applied to determine the liability of a no-fault insurance company to pay allowable expenses under Subsection 3107(1)(a) of the Act.
This issue was decided by the Court of Appeals in the case of Scott v State Farm, 278 Mich App 578 (2008). In that decision, the Court of Appeals held that the Shinabarger causation standard applicable to the entitlement issues under Subsection 3105(1) also applies to the allowable expense claims under the provisions of Subsection 3107(1)(a). Therefore, if an auto-accident injury is one of the causes for a person’s need for medical services, the no-fault insurer is obligated to pay the entire amount of the claim, even though there may be other causes contributing to the need for those services.
The “Griffith Problem” and Its Impact on Allowable Expense Claim
On January 14, 2005, the Michigan Supreme Court decided the case of Griffith v State Farm, 472 Mich 521 (2005), which some insurance companies contend substantially impacts the types of products, services, and accommodations that are compensable under the No-Fault Act. Until the courts provide further clarification of the Griffith case, the legal interpretation of this decision by many insurance companies should be viewed cautiously and skeptically.To avoid an over-extension of the Griffith holding, it is important to understand the specific issue involved in the Griffith case and the Court’s ruling regarding that issue.
In Griffith, the Court held that a no-fault insurer was not responsible for paying the costs of non-medical/non-special dietary food expenses of a catastrophically injured person who was cared for at home, because the injured person’s dietary needs had not been altered in any way by the accident. In other words, the victim’s food needs after the accident were identical to what they were before the accident. As such, there was absolutely no relationship between the person’s injury and his food needs. In that situation, the Court held that the no-fault insurer had no obligation to pay for the victim’s in-home food expenses.
Insurance companies, however, frequently cite Griffith for the proposition that a no-fault insurer never has an obligation to pay for any products, services, or accommodations that the injured person would have needed had there not been an accident. No-fault insurers argue that, because most injured persons require some form of housing, transportation, and personal maintenance before an injury, the insurer should have no obligation to pay for such preexisting needs after an accident occurs.
A close reading of the Griffith decision indicates that Griffith should not be extended to cases where accident-related injuries have, in some way, affected the patient’s pre-accident needs. In other words, if a catastrophic injury affected a claimant’s housing needs so that the person’s housing needs are now different than they were before the accident, then there should be a sufficient causal relationship obligating a no-fault insurer to pay benefits for all of those preexisting, but now changed, needs. Such an analysis would be consistent with the earlier opinion of the Court of Appeals in Sharp v Preferred Risk Mutual Insurance Co, 142 Mich App 499 (1985).
A proper reading of the decisions in Scott v State Farm and Griffith v State Farm produce a simple three-part test that should be applied to determine an insurer’s liability to pay allowable expense claims under Subsection 3107(1)(a) of the Act. Under this three-part test, an insurer would be responsible to pay 100% of an allowable expense claim if the patient establishes the following elements:
(1) the patient’s injuries either materially affected his pre-accident need for the services at issue or the injuries were one of the reasons why the patient needs these services;
(2) the services at issue are reasonably necessary for the patient’s care, recovery, and rehabilitation; and
(3) the charge for the services is reasonable.