Michigan Court of Appeals; Docket #355448; Unpublished
Judges Cameron, O’Brien, and Swartzle; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Requirement that Benefits Were Unreasonably Delayed or Denied [§3148(1)]
Case Evaluation – Accept/Reject in PIP Cases
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed in part, and vacated in part, the trial court’s award of no-fault attorney fees in favor of Plaintiff Roderic Williams and against Defendant State Farm Mutual Automobile Insurance Company (“State Farm”), reversed the trial court’s award of prevailing-party costs to Williams, and vacated the trial court’s denial of State Farm’s motion for costs and fees related to post-trial work. As to the trial court’s award of attorney fees, the Court of Appeals held that the trial court failed to make an explicit finding regarding the unreasonableness of State Farm’s withholding of PIP benefits. As to the trial court’s award of prevailing-party costs, the Court of Appeals determined that, given the procedural history of the case, the prior version of MCR 2.403(O)(6) (which provided for case evaluation sanctions) applied to this case, and since Williams did not do 10% better at trial than the case evaluation award he rejected, he could not be deemed the ‘prevailing party,’ and thus could not recover prevailing-party costs.
Roderic Williams injured both his shoulders in a motorcycle-versus-motor vehicle collision and underwent two surgeries as a result—the first on September 25, 2015, and the second on April 14, 2017. Before Williams’s second surgery, State Farm hired a company to surveil Williams, which observed Williams performing normal activities of daily living and using his left arm while doing so. Approximately one month after Williams’s second surgery, Williams submitted a bill for a post-surgery therapeutic device to State Farm. State Farm questioned the legitimacy of the prescription, then ordered Williams to submit to an insurance medical examination (IME) in May of 2017. After the IME, the examiner, Dr. Paul Drouillard, opined that Williams should have recovered from both surgeries by the date of the IME. Accordingly, State Farm stopped paying Williams’s no-fault benefits in early June after receiving Dr. Drouillard’s report.
Williams proceeded to file the underlying first-party action against State Farm, seeking allowable expense benefits for his medical expenses and the attendant care he received, work loss benefits, and replacement services benefits. Williams’s surgeon, Dr. Robert Kohen, was deposed in March of 2018, during which he testified that he had, in fact, prescribed the post-surgery therapeutic device to Williams. State Farm continued to withhold payment for the device until seven months later, when it issued a check to Williams in the amount of $15,176.12 to cover the cost of the device plus interest. In the interim, the parties underwent case evaluation, with the case evaluators recommending an award of $95,000 in favor of Williams. Both parties rejected the award, the case proceeded to trial, and the jury ultimately awarded Williams $64,269.94 in unpaid PIP benefits. The trial court awarded case evaluation sanctions in State Farm’s favor—but not for any post-trial work—as well as no-fault attorney fees under MCL 500.3148, and prevailing-party costs under MCR 2.625, in Williams’s favor.
State Farm appealed the awards of no-fault attorney fees and prevailing-party costs to Williams, as well as the trial court’s decision to not factor in State Farm’s post-trial work in calculating the case evaluation award. The Court of Appeals first vacated in part, and affirmed in part, the trial court’s award of no-fault attorney fees in Williams’s favor. The Court held that the trial court failed to make explicit findings on the record regarding the unreasonableness of State Farm’s refusal to pay Williams’s PIP benefits in support of the award, which “alone warrants vacating the award.” With respect to the portion of the award which related to the post-surgery therapeutic device, however, the Court of Appeals held that the trial court did not err in finding that State Farm’s delay in paying for that device was unreasonable, given that it waited until seven months after Dr. Kohen testified regarding its medical necessity.
“The trial court acknowledged that to award attorney fees under the no-fault act, it needed to find that State Farm’s refusal to pay was unreasonable. But the trial court did not actually make an explicit finding on the matter. Instead, the trial court noted that this was a contentious case, the parties repeatedly appeared before it, and the jury awarded penalty interest to Williams. Accordingly, the trial court did not make any express findings related to whether State Farm’s denial of benefits or refusal to pay them timely was unreasonable. This alone warrants vacating the award of no-fault attorney fees. . . .
As for State Farm’s actions, State Farm denied Williams’s claim for PIP benefits on June 13, 2017. At that time, State Farm had surveillance of Williams and Dr. Drouillard’s independent medical examination that suggested Williams’s complaints of shoulder pain and disability were exaggerated. Dr. Douillard opined that Williams should have already healed and that he could immediately return to work without any restrictions. ‘[A]n insurer may reasonably rely on the medical opinion of its physicians and the [independent medical examinations] the physicians perform . . . .’ Tinnin v Farmers Ins Exch, 287 Mich App 511, 516; 791 NW2d 747 (2010). See also Moore, 482 Mich at 522. Although the jury ultimately concluded that State Farm erred by denying Williams’s claim for benefits, that conclusion does not mandate that State Farm’s failure to pay those benefits timely was unreasonable. The reasonableness of State Farm’s actions hinges on a factual determination of how much it should have relied on its surveillance of Williams and Dr. Drouillard’s independent medical examination. The trial court failed to make any factual findings on the matter and, because we are an error-correcting court and not a fact-finding court, Jawad A Shah, MD, PC v State Farm Mut Auto Ins Co, 324 Mich App 182, 210; 920 NW2d 148 (2018); Zgnilec v Gen Motors Corp, 239 Mich App 152, 160; 607 NW2d 755 (1999), we lack a sufficient record to decide this issue. On remand, the trial court must make a factual determination regarding whether State Farm’s actions were unreasonable and explain the rationale behind its decision.
That said, Williams does appear to be entitled to some no-fault attorney fees. Related to the Game Ready System, State Farm conceded in the trial court that its seven-month delay in paying the bill for that system, after hearing from Dr. Kohen that he prescribed the device, was unreasonable and entitled Williams to attorney fees. That portion of the trial court’s attorney-fee award was not erroneous.”
Next, the Court of Appeals reversed the trial court’s award of prevailing-party costs under MCR 2.625 in favor of Williams, after preliminarily determining that, based on the unique facts regarding the way in which this case was litigated, the prior version of MCR 2.403—which provided for sanctions against a party that rejected a case evaluation award but did not improve its position by 10% at trial—applied to this case.
“State Farm improved its position by more than 10% after trial and, therefore, was entitled to case-evaluation sanctions under the prior version of MCR 2.403(O). Both parties made strategic decisions throughout this case based on the prior subsection (O) that permitted case-evaluation sanctions. If we were to apply the current version of MCR 2.403, State Farm would not be entitled to any case-evaluation sanctions. That result would materially prejudice State Farm for filing the appeal in this case. Additionally, State Farm filed its appeal based, in part, on the prior version of MCR 2.403. It may not have appealed at all and incurred those corresponding costs if the current rule was already in effect at that time. Additionally, Williams filed his brief more than four months after the current version of MCL 2.403 came into effect, and he did not argue that we should use the current version of the rule. In fact, Williams did not address the amendment at all. Accordingly, we will use the prior version of MCR 2.403 because Williams has not argued that we should use the current version and using the current version would have ‘consequences under the new rules that were not present under the old rules.’ Id.”
The prior version of MCR 2.403(O)(6) defined ‘prevailing party’ for purposes of MCR 2.625 as the party entitled to recover actual costs under the former MCR 2.403(O)(6). Since State Farm was the party entitled to recover actual costs under the former MCR 2.403(O)(6), the Court held that State Farm was the prevailing party in this case.
“Under MCR 2.625(A)(1), ‘[c]osts will be allowed to the prevailing party in an action, unless prohibited by statute or by these rules or unless the court directs otherwise, for reasons stated in writing and filed in the action.’ The prior version of MCR 2.403(O)(6) provided that ‘[f]or the purpose of determining taxable costs under this subrule and under MCR 2.625, the party entitled to recover actual costs under this rule shall be considered the prevailing party.’ State Farm is the party entitled to recover costs under the prior version of MCR 2.403. Accordingly, Williams is not entitled to any prevailing-party costs, and the trial court erred by concluding otherwise.”
Lastly, the Court of Appeals vacated the trial court’s decision to not include State Farm’s post-trial work in its calculation of the case evaluation award, because the trial court failed to explain why it was refusing to do so.
“The trial court declined to award any posttrial costs to State Farm, noting that its decision was discretionary. It did not provide a further explanation for its decision. ‘An appellate court cannot review a decision for abuse of discretion unless it knows how and why the discretionary decision was made.’ Houston v Southwest Detroit Hosp, 166 Mich App 623, 631; 420 NW2d 835 (1987).1 See also People v Norfleet, 317 Mich App 649, 664; 897 NW2d 195 (2016); Woodington v Shokoohi, 288 Mich App 352, 356-357; 792 NW2d 63 (2010). It appears that at least some of State Farm’s posttrial fees were incurred in pursuit of case-evaluation sanctions. Accordingly, State Farm is arguably entitled to at least some posttrial fees. The trial court failed to explain why it concluded otherwise. Consequently, we vacate the trial court’s order denying State Farm’s motion for posttrial case-evaluation sanctions.”