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 Volume XXIII, No. 21, August 3, 2011

From the Law Offices of Garan Lucow Miller, P.C.

 

From the Co-Editors

James L. Borin & Simeon R. Orlowski

 

APPELLATE COURT ONCE AGAIN HOLDS THAT ATTORNEYS FEES AND PENALTY INTEREST ARE NOT OWED WHEN BENEFITS WERE NOT OVERDUE

 

CONTRIBUTOR – EMILY L. PARTRIDGE

 

In Karmol v. Encompass Prop and Cas Co, ___ Mich App ___ (2011), released for publication on July 26, 2011, the Court of Appeals reversed the trial court’s award of penalty interest, attorneys fees, and costs totaling $49,600.04 in favor of the Plaintiff.

On February 28, 2006, Justin Durand, a minor, sustained serious injuries in a motor vehicle accident. His medical expenses were paid by Paramount Care, Inc, the administrator for an ERISA controlled health benefit plan. On February 28, 2007, Paramount filed suit against Encompass, Mr. Durand’s no-fault insurer, in federal court in Ohio, seeking a declaratory judgment that Encompass was the primary insurer and reimbursement of medical expenses paid. On the same day, Kristine Karmol, as Next Friend of Justin Durand, filed suit in Michigan against Paramount and Encompass.

The lawsuit between Paramount and Encompass was eventually settled, as it is well-established that when there are two conflicting coordination of benefits clauses, a self-funded ERISA plan trumps a no-fault insurance policy. Auto Club Ins Ass’n v. Frederick & Herrud, Inc (After Remand), 443 Mich 358, 389 (1993).

Afterwards, Encompass moved for summary disposition, arguing that because the Plaintiff had not personally incurred any costs or expenses, the first party no-fault claim lacked a factual basis. Encompass supported its motion by filing a copy of Encompass’ check to Paramount for $155,580.72. The trial court denied the motion, apparently incorrectly focusing on the one-year statute of limitations contained in MCL 500.3145.

Per the Court of Appeals’ opinion, the lawsuit “took on a life of its own” at that point in time, with discovery disputes resulting in bilateral accusations of misconduct. Ultimately, the trial court sanctioned Encompass for discovery misconduct by entering an order granting a default judgment in favor of the Plaintiff, and subsequently ordering a judgment for attorneys fees and penalty interest in the amount of $49,600.04.

The Court of Appeals, in examining the issue, stated that per Proudfoot v. State Farm, 469 Mich 476 (2003), a claimant “incurs” an expense when the claimant becomes “liable” for the expense. This liability can occur in several different ways, such as paying the cost out of pocket or signing a contract for products and services. In other words, a claimant’s right to PIP benefits arises when the claimant finds himself “on the hook for an expense.”

The evidence in this case clearly showed that no medical bills had remained unpaid, that the Plaintiff had never been exposed to personal liability for the costs of the medical care, and indeed, that there was no evidence to suggest that payment of a single medical bill or other benefit had ever been delayed. Simply put, there was no evidence to suggest that Encompass delayed in paying no-fault benefits to the Plaintiff. As such, the Court of Appeals found the Plaintiff’s claim of entitlement to no-fault penalty interest and attorneys fees to be “perplexing.”

Accordingly, the Court of Appeals found that the trial court erred in denying Encompass’ motion for summary disposition and remanded the matter so that a judgment in favor of Encompass could be entered.

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CHERRY-ROUBAIX BICYCLE RACE

The 4th Annual Cherry-Roubaix bicycle race, sponsored by Garan Lucow Miller, P.C., will be held from August 12th through the 14th, 2011, on the streets of Traverse City, Michigan and neighboring Leelanau County, and will feature the 2011 State Road Race Championships. There will also be a charity fun ride out Old Mission Peninsula. Please see the event website at www.cherry-roubaix.com for more details.

Please mark your calendars to join us at this exciting event. Garan Lucow Miller will be hosting special VIP viewing areas at each race, please advise Peter Worden, in our Traverse City office at (231) 941-1611 or pworden@garanlucow.com, if you will be available to join in the festivities.

 

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GLM ANNUAL GOLF OUTING

CLIENT INVITATIONAL

EVENT: Garan Lucow Miller’s Annual Golf Outing

DATE: Tuesday, August 23, 2011

VENUE: Forest Akers West Golf course on the campus of MSU

Banquet dinner to be on campus at the University Club

RSVP to Eileen Carty at ecarty@garanlucow.com by August 4, 2011.

 

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BASICS OF NO-FAULT

Jim Borin will be teaching the Fundamentals of No-Fault (PIP) course on Monday evenings from September 12 through November 7, 2011. The classes will be held at the Lexington Hotel, 925 S. Creyts Road, Lansing, Michigan 48192 from 6:00 to 8:30 p.m. Please contact Denise Tedder at dtedder@garanlucow.com to register, or call at (800)875-7600.

 

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UPCOMING SEMINARS

The Troy Breakfast Seminar will be held on Thursday October 27, 2011 at the Troy Marriott.

Please watch Law Fax for further information.