Michigan Court of Appeals; Docket #353079, 353080; Unpublished
Judges Shapiro, Borrello, and O’Brien; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Civil Judgments and Interest (MCL 600.6013)
Insurance Agents (Duty to Insured)
Sudden Emergency Doctrine
Underinsured Motorist Coverage
Uniform Trade Practices Act (UTPA – MCL 500.2001, Et Seq.)
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed judgments entered by the trial court in favor of Plaintiffs Brook Atkinson, Michael Falecki, and the Estate of Carolyn Manes, in their third-party action to recover underinsured motorist (“UIM”) benefits from Defendant American Alternative Insurance Corporation (“AAIC”), following a jury trial. The Court of Appeals reached multiple holdings in its opinion: first, the Court held that AAIC, in its motion for judgment notwithstanding the verdict (“JNOV”), could not argue that the plaintiffs failed to establish that AAIC was contractually liable for paying UIM benefits to them, because AAIC conceded as much during trial. Second, the Court held that, given the specific language of the subject AAIC policy, the sum of any damages found by the jury, plus case evaluation sanctions and penalty interest, could exceed the limits of UIM coverage available under the subject policy. Third, the Court held that, given the evidence in this case, the trial court did not err in ruling, as a matter of law, that the sudden emergency doctrine was not applicable. Fourth, the Court held that the trial court did not err in awarding penalty interest against AAIC under the UTPA—dating back to the filing date of each plaintiff’s complaint—because AAIC failed to explain to the plaintiffs what constituted “satisfactory proof of loss” under the policy prior to the filing of each lawsuit. The UTPA—MCL 500.2006(3), specifically—“places the onus on an insurer to provide the insured with an explanation of what is necessary to constitute a satisfactory proof of loss.” Since AAIC failed to do so, “any failure by plaintiffs to prove a satisfactory proof of loss was excused” and penalty interest under the UTPA began to accrue on the filing date of each complaint. However, the plaintiffs were not entitled to duplicative statutory prejudgment interest and UTPA penalty interest, and thus the Court of Appeals remanded for modification of the plaintiffs’ judgments.
The plaintiffs were all injured when an ambulance they were traveling in was struck by a motor vehicle driven by Tyler Kreilter. Prior to the crash, Kreilter’s passenger, Harmonic Keidel, informed Kreilter that he seemed to be suffering from a cerebral event which was impacting his driving. Kreilter repeatedly dismissed her concerns and ultimately kicked her out of the vehicle. He chose to continue driving and lost control of the vehicle shortly thereafter, crashing into the ambulance in which the plaintiffs were traveling. The vehicle Kreilter was driving was insured under a Liberty Mutual Insurance Company (“Liberty Mutual”) policy with liability limits of $50,000, and the ambulance plaintiffs were traveling in was insured under a policy issued by AAIC. The AAIC policy’s UIM endorsement provided for UIM benefits up to $1 million, and each of the plaintiffs were considered “insureds” under the endorsement. All three plaintiffs submitted claims to AAIC following the crash, and in response, AAIC’s adjustor only requested medical authorizations from the plaintiffs. AAIC withheld its consent to plaintiffs settling with Liberty Mutual for Kreilter’s policy’s liability limits, and never asserted, prior to the plaintiffs filing their separate complaints, that the plaintiffs had not presented satisfactory proof of loss for purposes of entitlement to UIM benefits under the AAIC policy. The case proceeded to trial, during which AAIC’s counsel conceded that the plaintiffs were entitled to some amount of money under the UIM endorsement, and that the only real dispute was the exact amount. After trial, the jury returned a verdict awarding the plaintiffs $1,445,000, collectively, in compensatory damages. AAIC then filed a motion for declaratory judgment, remittitur, and apportionment of damages, arguing that it should not have to pay more than $950,000, because $50,000 was available from Liberty Mutual for the same loss and that any interests, costs, and case-evaluation sanctions were subject to the $950,000 limit. AAIC also filed a motion for JNOV, arguing that the plaintiffs failed to present evidence at trial that established, preliminarily, that AAIC was actually contractually liable to them under the policy’s UIM endorsement. The trial court denied both motions, and entered awards for the plaintiffs for case evaluation sanctions, prejudgment interest, taxable costs, and penalty interest under the UTPA.
The Court of Appeals affirmed the trial court’s denials of AAIC’s motions. First, the Court held that the trial court did not err in denying AAIC’s motion for JNOV because AAIC never challenged its liability to the plaintiffs under the UIM policy, and even conceded at trial that they were liable to the plaintiffs under that policy. Therefore, the Court of Appeals remarked that it was “disingenuous for AAIC to argue in a posttrial motion, and now on appeal, that plaintiffs failed to establish that AAIC was contractually liable for paying UIM benefits.”
“In sum, the record shows that AAIC conceded that it was liable for paying any damages found by the jury. Not only did it not challenge its liability, either before or during trial, it in fact agreed at trial that the only issue for the jury to determine was the amount of damages owed to plaintiffs. Against this backdrop, it was disingenuous for AAIC to argue in a posttrial motion, and now on appeal, that plaintiffs failed to establish that AAIC was contractually liable for paying UIM benefits. To allow AAIC to claim error with regard to a matter that it deemed appropriate at trial would allow AAIC to harbor error as an appellate parachute, which this Court will not allow. See Auto-Owners Ins Co v Compass Healthcare PLC, 326 Mich App 595, 613; 928 NW2d 726 (2018). Accordingly, we reject AAIC’s claim that the trial court erred by denying its motion for JNOV.”
The Court of Appeals next held that the trial court did not err in ruling that, under the specific language in the AAIC policy, case evaluation sanctions, costs, and interest were not subject to the policy’s UIM limits. AAIC could have contractually limited their liability for litigation costs, but did not do so. Instead, the policy provided that the $1 million figure was “ ‘the most [AAIC] will pay for all damages resulting from any one accident,’ ” and also “that AAIC will pay all sums an insured is legally entitled to ‘recover as compensatory damages from the owner or driver of an ‘uninsured motor vehicle.’ ” Since interest, costs, and sanctions are not compensatory damages, they were not subject to the policy’s UIM limits.
“The thrust of AAIC’s argument is that the trial court erred by assessing case-evaluation sanctions under MCR 2.403 and penalty interest under the UTPA, and that the present case is distinguishable from both Estate of Hunt and Matich because those cases addressed the language of the standard interest clauses in the policies at issue in each case. We agree that AAIC’s policy does not contain a standard interest clause similar to the clauses at issue in Estate of Hunt and Matich. We further acknowledge that in both Matich and Estate of Hunt, the courts held that in an insurance policy with a standard interest clause, an insurer is responsible for the payment of prejudgment interest from the date of the filing of the complaint until judgment is entered, with the calculation of such interest to be made on the basis of policy limits, not the amount of the judgment, with the interest to be paid even if it exceeds policy limits. Matich, 430 Mich at 23; Estate of Hunt, 322 Mich App at 335. However, we find no reason to disturb the trial court’s ruling. The trial court properly recognized that AAIC was permitted to contractually limit the risk it assumes, but the language of the policy and the UIM endorsement do not indicate that AAIC contractually agreed that any liability for litigation costs was to be subject to its coverage limits. On the contrary, the Limit of Insurance clause in the UIM endorsement provides that the specified limit of insurance, which in this case is $1,000,000 per accident, is ‘the most we will pay for all damages resulting from any one accident.’ Additionally, Section A of the UIM endorsement provides that AAIC will pay all sums an insured is legally entitled to ‘recover as compensatory damages from the owner or driver of an ‘uninsured motor vehicle.’ ’ Viewed together, these provisions suggest that the specified coverage limit applies only to compensatory damages recovered by an insured. Litigation costs are not compensatory damages. Thus, the language of AAIC’s policy does not support its claim that litigation costs, including case-evaluation sanctions and penalty interest, are subject to the policy’s coverage limits.”
The Court of Appeals next held that the trial court did not err in denying AAIC’s motion for declaratory judgment with respect to AAIC’s claim that its exposure should be limited to $950,000, in light of Kreilter’s Liberty Mutual policy’s liability limits. The Court noted that, while “AAIC generally assert that the $50,000 was in fact tendered to plaintiffs, it is not clear from the record whether this amount was actually paid.” Therefore, since AAIC was not a party to the trial court proceedings, the Court of Appeals held that the trial court did not err in declining to declare Liberty Mutual’s rights without giving Liberty Mutual an opportunity to address the issue.
“We also agree with the trial court that a declaratory judgment limiting AAIC’s maximum exposure under its policy limits to $950,000 was not warranted. AAIC argues that its policy limit of $1,000,000 should be reduced to $950,000 given the $50,000 payment from Liberty Mutual under its policy. As the trial court recognized, however, Liberty Mutual was not a party to the lower court proceedings, and it is not clear from the record what Liberty Mutual had paid on behalf of its insured, Kreilter. The trial court declined to ‘declare the rights . . . of an interested party seeking a declaratory judgment’ as requested by AAIC by interpreting its policy provisions without giving Liberty Mutual an opportunity to also address the issue. The specific language of AAIC’s insurance policy provides that ‘[AAIC] will not make a duplicate payment under this coverage for any element of ‘loss’ for which payment has been made by or for anyone who is legally responsible.’ Although AAIC generally asserts that the $50,000 was in fact tendered to plaintiffs, it is not clear from the record whether this amount was actually paid. Because it is unclear from the record what Liberty Mutual in fact tendered to plaintiffs, we are not persuaded that the trial court erred by declining to rule on this issue.”
The Court of Appeals next held that the trial court did not err in granting the plaintiffs’ motion to strike AAIC’s reliance on the sudden emergency doctrine, even though “plaintiffs’ challenge to the invocation of the sudden-emergency doctrine was presented in the context of a motion to strike an affirmative defense,” and Supreme Court precedent has established that the sudden-emergency doctrine is not an affirmative defense. The Court of Appeals held that reversal was not necessary despite the fact that “it would have been more appropriate for the trial court to consider the applicability of the sudden-emergency doctrine in the context of a motion for summary disposition,” because, based on the evidence, the sudden-emergency doctrine was not applicable in this case. While AAIC presented affidavits from two medical experts opining that Tyler Kreilter lost control of the vehicle and crashed into the ambulance plaintiffs were traveling in as a result of a “ ‘sudden unexpected cerebral event,’ ” the testimony from the lone passenger in the vehicle with Kreilter before the collision established that the cerebral event began some time before the crash, and that Kreilter consciously chose to continue driving after his passenger warned him that it was causing him to drive erratically. Therefore, “because there was no question of fact that Tyler continued driving after being advised of his condition and its effect on his driving, his condition at the time of the collision cannot be considered a sudden emergency that was unexpected and not the product of Tyler’s own choices.”
“Tyler’s passenger before the accident, Harmonic Keidel, testified that for 10 to 15 minutes before the accident, Tyler was driving unsafely and erratically, that she told him as much, and that she eventually screamed and told Tyler to let her out of the car because his driving was so erratic. Specifically, Keidel testified that right after Tyler picked her up, they almost ended up in a ditch while Tyler was reversing out of her driveway, and then when he started to drive forward, he hit her neighbor’s mailbox. Once on the road, Tyler swerved and almost went into a ditch, speed over a set of train tracks, and kept swerving to the right as he was driving. After Tyler swerved so badly that Keidel had to grab the steering wheel, she started screaming because she was so scared, and then, at a stop sign, got out and called her mother to come pick her up. Throughout this time, Keidel repeatedly inquired whether Tyler felt safe to drive, and Tyler was responsive, lucid, articulate, and able to engage verbally with Keidel. When she finally told Tyler that she wanted to get out of the car because of how poorly he was driving, he told her angrily to get out, and she saw the car swerving more as he drove away. While Keidel also noticed that Tyler’s face was drooping during this time, lending factual support for a conclusion that Tyler may have experienced an unexpected medical event that impacted his driving, the evidence also demonstrated that he was repeatedly informed of his condition and its impact on his driving, and thus had ample opportunity to act as a reasonably prudent person under the same circumstances to simply stop driving. As the trial court observed, the evidence demonstrated that Tyler, who was fully conscious and engaging with Keidel to the point of yelling at her as she got out of the vehicle, ‘chose to continue to drive and it was shortly after that when the accident occurred.’ ”
Lastly, the Court of Appeals held that the trial court did not err in awarding penalty interest to the plaintiffs under the UTPA, dating back to the filing date of each plaintiff’s complaint. Relying on Supreme Court precedent from Nickola v Mic Gen Ins Co, 500 Mich 115 (2017), the Court of Appeals noted that, based on the plain language of MCL 500.2006(4), penalty interest accrues on UIM benefits if they are not paid on a timely basis. This is because MCL 500.2006(4) provides that:
“If benefits are not paid on a timely basis, the benefits paid bear simple interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum, if the claimant is the insured or a person directly entitled to benefits under the insured’s insurance contract.”
Thus, because a UIM claimant is an “insured or a person directly entitled to benefits under the insured’s insurance contract,” penalty interest under MCL 500.2006 accrues even if the claim for UIM benefits is reasonably in dispute. MCL 500.2006(4) provides that penalty interest does not accrue if an insurer delays payment to a third-party tort claimant if the claim is reasonably in dispute, but the Nickola court held that UIM claimants are not third-party tort claimants.
In this case, AAIC did not dispute that the plaintiffs were “insureds” or other “persons directly entitled to benefits under the insured’s insurance contract.” Rather, AAIC simply argued “that plaintiffs did not submit a demand or claim for benefits, amounting to a ‘satisfactory proof of loss’ under MCL 500.2006(4), before filing their lawsuits.” The Court of Appeals rejected this argument, noting that MCL 500.2006(3) “places the onus on an insurer to provide the insured with an explanation of what is necessary to constitute a satisfactory proof of loss.” In this case, the AAIC adjustor requested only medical authorizations and a sworn statement from one of the plaintiffs, but never informed the plaintiffs, prior to each filing suit, that AAIC had not yet received satisfactory proof of loss. Therefore, the Court of Appeals held that AAIC excused “any alleged failure by plaintiffs to prove a satisfactory proof of loss” and that the trial court did not err in holding that UTPA penalty interest began to accrue on the date each plaintiff filed its complaint.
“At the hearing below, counsel for Falecki advised the trial court that Falecki had submitted a claim to AAIC following the accident, and that on February 13, 2017, AAIC’s adjustor corresponded with counsel for Falecki in writing, advising that AAIC required medical authorizations as well as a sworn statement. Counsel for Falecki further explained that ‘[a]t no time thereafter did we ever get a notice from AAIC that we had not satisfied the proof of loss.’ Counsel for Falecki also represented that all three plaintiffs had submitted claims to AAIC, which led to AAIC’s adjustor sending written correspondence seeking medical authorizations from all three plaintiffs and acknowledging receipt of the claims. Counsel for Falecki also stated that plaintiffs had unsuccessfully attempted to settle their claims against Kreilter, AAIC had withheld its consent regarding the proposed settlement, and these facts demonstrated ‘there was never an argument ever that there was not a satisfactory proof of claim or proof of loss[.]’ Counsel for Manes agreed with these arguments and assertions by counsel for Falecki, characterizing AAIC’s argument that it did not receive a proof of loss as ‘disingenuous.’ Counsel for Manes also stated his opinion that interest under the UTPA would begin to run from the date when Manes filed his complaint. Counsel for Atkinson also agreed with ‘everything that [counsel for Falecki] said,’ and agreed with counsel for Manes that AAIC owed penalty interest under the UTPA as of the date Atkinson filed her complaint.
The judgments for plaintiffs provide that UTPA interest began to accrue as of the date each plaintiff filed their complaint. Notably, while AAIC argues that plaintiffs failed to provide satisfactory proof of loss, it did not submit any documentary evidence to demonstrate that it had notified plaintiffs of the materials that would suffice as a satisfactory proof of loss under MCL500.2006(3). Counsel for AAIC also did not challenge the recitation of events by counsel for Falecki in which counsel explained that AAIC had not challenged the filing of plaintiffs’ claims on the basis that plaintiffs had not provided a satisfactory proof of loss. Accordingly, because AAIC failed to demonstrate that it informed plaintiffs of the materials needed to constitute a satisfactory proof of loss, any alleged failure by plaintiffs to prove a satisfactory proof of loss was excused. Griswold, 275 Mich App at 565; Angott, 270 Mich App 486. Therefore, the trial court did not err by holding that UTPA penalty interest should be awarded against AAIC in favor of plaintiffs, beginning to accrue as of the dates plaintiffs filed their complaints.”
The Court remanded back to the trial court for modification of the judgments, however, because the plaintiffs could not collect statutory prejudgment interest that was duplicative of UTPA penalty interest.