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Volume XXV, No. 7, March 27, 2013         

 

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

From the Co-Editors

James L. Borin & Simeon R. Orlowski

 

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New Michigan Court of Appeals case has major consequences for insurer’s coverage of conservator fees in no-fault cases

CO-CONTRIBUTORS – DANIEL S. SAYLOR and SUZANNE R. FANNING

 

The Michigan Court of Appeals has issued an important opinion on an insurer’s duty to pay for conservator fees under the Michigan No Fault Act.  Significantly, the Court held that fees incurred for a conservator’s services are not allowable expenses for the “care” of an injured person under MCL 500.3107(1)(a), but instead are considered replacement service expenses subject to the $20.00 per day and three year limitations under MCL 500.3107(1)(c).  The case is In Re Conservatorship of Deanna Theresa Cisneros, (unpublished) Court of Appeals No. 298922 (March 21, 2013).

The facts of the case will be familiar to those with no-fault conservator files.  Deanna Cisneros was badly injured in a motor vehicle accident and a conservatorship was opened on her behalf in the St. Clair County Probate Court.  The initial conservator was removed by the court and attorney Mark Fullmer, was appointed as successor conservator.  As conservator, Mr. Fullmer defended Ms. Cisneros in real estate and debt disputes and also assisted in her action to recover no-fault benefits from ACIA.  His attorney/conservator fees were presented to ACIA as a claim for “allowable expense” PIP benefits.  The probate court granted Mr. Fullmer’s request for reimbursement in the amount of $11,274.00, accepting the argument that these were reasonable expenses incurred for the “care” of Ms. Cisneros pursuant to §3107(1)(a).

ACIA appealed the decision, arguing that Mr. Fullmer’s services in managing the ward’s assets qualified, at best, as replacement services under §3107(1)(c), for which benefits are capped at $20.00 per day and limited to three years post-accident under the statute.  ACIA argued that Mr. Fullmer’s services as an attorney for Ms. Cisneros were not compensable under PIP coverage.  The Court of Appeals initially rejected ACIA’s arguments, affirming the probate court decision to approve the conservatorship fees.  Relying on a 2011 Court of Appeals decision, In re Carroll, 292 Mich App (2011), the Court reasoned that the expenses incurred by Mr. Fullmer in managing Ms. Cisneros’s business and legal affairs would not have been necessary but for the accident.  It followed, in the Court’s opinion, that the conservator fees therefore came under the definition of allowable expenses under §3107(1)(a).

ACIA filed appeals to the Michigan Supreme Court in both the Cisneros and Carroll cases.  The Supreme Court was at the time addressing two other cases concerning the distinction between no-fault replacement services and allowable expense “care” services, Douglas v Allstate Insurance Co, 492 Mich 241 (2012), and Johnson v Recca, 492 Mich 169 (2012), and thus held the Cisneros and Carroll applications in abeyance until decisions were issued in the preceding cases.

The opinions issued in Douglas and Johnson clarified the scope of services covered under §3107(1)(a) and §3107(1)(c) of the No Fault Act.  In Douglas, the Court held that allowable expenses do not include those incurred as replacement services since such ordinary and necessary services are “not for an injured person’s care, recovery or rehabilitation.” “Care” services compensable under §3107(1)(a) thus do not include services relating to ordinary matters not directly related to the injury.  (The Douglas case is summarized in greater detail in Law Fax Volume XXIV, No.13 August 21, 2012).  The distinction is reinforced in Johnson, in which the Michigan Supreme Court held that services required both before and after the injury, but after the injury can no longer be provided by the injured person himself or herself because of the injury, are replacement services, not allowable expenses.

Having thus clarified the distinction between “allowable expense” services and “replacement services” in Douglas and Johnson, the Supreme Court proceeded to vacate both Court of Appeals decisions in Carroll and Cisneros and remanded them to the Court of Appeals for reconsideration.  Although Carroll remains pending at this point, the Court of Appeals issued its new opinion in Cisneros on March 21, 2013, this time reversing the probate court’s approval of the claimed conservator fees and agreeing with ACIA’s position.

On reconsideration, the Cisneros court determined that the conservator’s activities in connection with real estate and debt disputes and pursuit of no-fault insurance benefits were not services directed at the ward’s care, recovery or rehabilitation.  Rather, they were activities of a sort that Ms. Cisneros would have provided for herself “but for” the limitations that resulted from her injuries.  Accordingly, the Court concluded that conservator fees are properly claimed as replacement expenses under §3107(1)(c), compensable up to $20.00 per day up to three years post-accident, rather than as unlimited allowable expenses under 3107(1)(a).

This case has the potential of significantly curtailing no-fault’s payment of conservator fees, which up until now have proved to be a considerable, ongoing expense in catastrophic injury claims.  While unpublished, the Cisneros decision is consistent with the Michigan Supreme Court’s clarifying distinction between care services and replacement expenses.  Accordingly, the Cisneros opinion, together with its parent decisions in Johnson and Douglas, provide authority to  insurers to recalculate the way that conservator fees are paid.  These cases warrant rejection of claims for no-fault reimbursement of conservator fees that exceed the $20.00 per day allowance and/or the three year limitation for replacement services.

Unquestionably, professional conservators will assert the Cisneros opinion’s status as a non-binding decision and, moreover, will attempt to manipulate the description of the services provided for their wards seeking to bring their services within the purview of  “care, recovery and rehabilitation.”  It is imperative to address these issues at the probate court level when the conservator’s annual account is presented to the court for approval.  As an interested party, the no-fault insurer is entitled to notice of the petition for approval of the annual account and the conservator fees.  On the basis of these cases, we would recommend that insurers object to the approval of the conservator fees, to the extent no-fault reimbursement is claimed, in circumstances where the fees are beyond the three year limitation or exceed the daily allowance.

In light of Cisneros, it is also advisable for insurers to review all current no-fault conservator files to determine when the conservator’s annual account is due so that preemptive action can be taken to limit coverage for these fees where warranted.  In some cases, a petition to limit or deny coverage may be appropriate even before the account is due where replacement services are time limited.

 

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No Fault Insurers May No Longer Be Required To Offer Coordinated Policies

CO-CONTRIBUTORS – DAVID N. CAMPOS and TARALYNN T. VELTING

 

On December 20, 2012, Governor Snyder signed into law Public Act No. 454 which resulted in changes to the Michigan No Fault Automobile Act, MCL 500.3109a.

First, the new law provides that the annual notice required to be sent to policy holders may specify that information is available and will be provided upon request.  This information includes: how rates are determined, why they vary, confirming accuracy of premiums, appealing application of rating rules and determining if more favorable premiums are available among other rating plans.  Previously, insurance companies were required to send all of this information on an annual basis. Now, insurance companies may simply send a notice with a telephone number and internet address for the information request.  If requested, the information must be provided in either written or electronic form as requested by the policyholder.

Section 500.2216 was amended to provide that agents provide customers a “premium quotation” rather than the “lowest available premium quotation” previously required.  The Act also did away with the requirement that insurance agents “shall” provide additional premium quotations at the request of a customer if the agent represents additional insurers.  Instead, the agent “may” provide additional premium quotations as requested.

The $300 maximum deductible on coordinated policies, was raised to $500.  The Insurance Commissioner issued a bulletin on February 27, 2013, providing that coordinating deductibles could not be over $500.00.

Chapter 31 of the Michigan Insurance Code, MCL 500.100 et seq., permits automobile insurers to offer deductibles on personal injury protection coverage.  Two types of deductibles are available: a general deductible (MCL 500.3109(3)) and a deductible that is “reasonably related” to other health and accident coverage (MCL 500.3109a).  Both types of deductibles must be offered “at appropriately reduced premium rates.”  The type of deductible under Section 3109a is commonly referred to as a “penalty deductible.”  A penalty deductible is imposed when the insurer discovers, upon the insured making a claim, that the insured had attested that they had coordinated health or accident coverage (i.e., other health or accident coverage that will pay claims at least up to the coordinated coverage deductible amount shown in the personal auto policy) but, at the time of the accident or claim, does not actually have coordinated coverage.

Section 3109a of the Code requires penalty deductibles to receive prior approval from the Commissioner.  Penalty deductibles over $500 per accident will not be approved.

Perhaps most interesting among the changes to Michigan’s Automobile No Fault Statute, Section 3109a was amended to provide that an insurer “may” offer other appropriately reduced premium rates, deductibles and exclusions reasonably related to other health and accident coverage on the insured.  This provision previously required insurers to do so (“shall” offer).   The change in terminology from “shall” to “may” has resulted in different opinions as to the intention of the legislature.  Questions arise as to whether “may” refers to “appropriately reduced premium rates” or to the coordinated coverage option.

The legislative history provides some limited insight.  The Senate Fiscal Agency bill analysis noted the following:

Currently, an insurer providing personal protection insurance benefits must offer, at appropriately reduced premium rates, deductibles, and exclusions reasonably related to other health and accident coverage on the insured.  The bill would permit, rather than require, the insurer to offer these deductibles and exclusions.

The legislative analysis from the House Fiscal Agency reported that this amendment was part of recommendation no. 27.   The report said:

For the most part, private health and accident policies do not cover auto accident related injuries. So, auto No Fault insurers have been forced to sell the auto insurance policies at a discount, but have not been able to reduce their costs.

A question arises as to whether this new provision, if interpreted as not requiring insurers to lower rates on coordinated policies, violates public policy.  At this point, GLM cannot offer any conclusive advice to an insurer wanting to take advantage of this provision.  We suspect that the new language was drafted with the intention of eliminating the requirement that insurers offer coordinated coverage, but the legislative history is not necessarily what we expected when reading the revised statute.  It remains to be seen how this revised statute will be interpreted by courts.

 

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Bad Weather May Excuse Bad Driving

CONTRIBUTOR – CHANEL R. SHAMOUN

 

The posted speed limit is 45 mph and it is snowing hard. Your insured is traveling 35 mph and has her eyes on the road. Traffic comes to a sudden halt and aside from pumping and slamming on her brakes, your insured rear ends the car in front of them. You’re thinking, “she did the rear-ending, so she is at fault,” right? Wrong. According to a recent unpublished Court of Appeals case, you might just have an argument after all.  In prior cases, it was always understood that weather conditions, such as snow or icy roads, were never an excuse for rear-ending someone. However, that is no longer the case. Weather conditions may now be taken into consideration as a defense to the assured-clear-distance ahead statute.

In Bajju v State Farm (Docket #307365, rel’d 2/15/13), the court determined that the mere violation of the assured-clear-distance ahead statute is not enough to constitute negligence and all facts and circumstances, such as weather conditions, may be considered in determining whether a driver was negligent as a matter of law.

In Bajju, defendant Laura Brown was driving and rear-ended Plaintiff Emad Bajju. Brown testified that it had been snowing and she did not realize traffic had come to a stop in front of her because she was going around a curve. Brown stated that as soon as she realized traffic had come to a stop, she slammed on her brakes and then she began to pump her brakes to get her vehicle to stop. However, the pumping did not help, so she pushed down on her brakes once again. Her brakes locked up and she  rear-ended the Plaintiff. Brown also stated that due to weather conditions, she was going 40mph and “using more than ordinary care” because she was going on the slower side and assumed she must have been on black ice because she couldn’t think of any other reason why her vehicle wouldn’t stop.

During trial, Plaintiff’s attorney moved for a directed verdict and argued that Defendant Brown was negligent as a matter of law for violating two statutes, specifically for failing to keep an assured-clear-distance ahead and rear-ending Plaintiff.

According to MCL 257.627(1) (the assured-clear-distance ahead statute):

A person operating a vehicle on a highway shall operate that vehicle at a careful and prudent speed not greater than nor less than is reasonable and proper, having due regard to the traffic, surface, and width of the highway and of any other condition then existing. A person shall not operate a vehicle upon a highway at a speed greater than that which will permit a stop within the assured, clear distance ahead.

Further, according to MCL 257.402(a):

In any action, in any court in this state when it is shown by competent evidence, that a vehicle traveling in a certain direction, overtook and struck the rear end of another vehicle proceeding in the same direction, or lawfully standing upon any highway within this state, the driver or operator of such first mentioned vehicle shall be deemed prima facie guilty of negligence. This section shall apply, in appropriate cases, to the owner of such first mentioned vehicle and to the employer of its driver or operator.

Both the trial court and the Court of Appeals disagreed.  Plaintiff argued that Brown violated both statutes and could not use weather conditions as a defense. Plaintiff cited Jackson v Coeling, 133 Mich App 394, 399 (1984), where the court found “the existence of weather conditions affecting the road surface cannot be an excuse for violating a statute [such as MCL 257.627] which requires a driver to take just those conditions into account in regulating her speed.”

However, the Court of Appeals found that despite a violation of the assured-clear-distance statute, the triers of fact were entitled to consider weather conditions as a defense, citing the Michigan Supreme Court case  of Patzer v Bowerman-Halifax Funeral Home, 370 Mich 350 (1963). Specifically, the court stated that situations under which collisions occur are numerous and infinite in complexity, and to accomplish justice in particular cases, there must be exceptions to the statute and the jury shall be allowed to take the facts and circumstances of each accident into consideration, opposed to finding the party negligent based solely on the strict and literal violation of the statute.

Let it be noted, however, that defending an insured on the basis that she was not negligent as a matter of law due to horrible weather conditions does not necessarily guarantee a successful defense, but does allow the defense to make that argument, which is a step in the right direction. As the Court of Appeals stated:  “Where, at one time, the application of the statute (assured clear distance) was strictly construed and applied, recent cases indicate that the statute must be reasonably construed and exceptions to the statute have been created to accomplish justice. Lucas v Carson, 38 Mich App 552 (1972).”

The next time you receive a claim in which your insured has rear-ended someone, review the weather conditions and know that there just might be a defense after all.

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Garan Lucow Miller, P.C., is offering a traveling Deposition Boot Camp

This complimentary Deposition Boot Camp would be presented to a group of 10 or more in your office, half day session.  Please contact Eileen Carty at ecarty@garanlucow.com or (248)641-7600.

For our clients in Indiana or Ohio, please contact Eileen Carty at ecarty@garanlucow.com  or (248)641-7600 to schedule a complimentary in house presentation in early summer.

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GARAN LUCOW MILLER

GRAND RAPIDS SPRING BREAKFAST SEMINAR

April 18, 2013 at Frederik Meijer Gardens and Sculpture Park

The Grand Rapids office of Garan Lucow Miller P.C. is pleased to present its Annual Spring Breakfast Seminar on April 18, 2013 at the Frederik Meijer Gardens and Sculpture Park, located at 1000 East Beltline, NE in Grand Rapids (616) 957-1580. Comprehensive written materials will be distributed to all who attend.  After the seminar, feel free to enjoy all of the open indoor and outdoor garden areas as our guest, including the exciting Butterfly Exhibit!

If you are able to attend this complimentary annual event, please register via e-mail to: lbeatty@garanlucow.com  or phone Lynn Beatty at (616) 742-5500 or (800) 494-6312 for reservations.  We look forward to seeing you!

8:00 – 8:20 am Registration and Continental Breakfast

8:20 – 8:25 am Welcome and Introduction

David N. Campos, Moderator

8:25- 8:55 am Trial Technology – Using the CSI Factor To Your Advantage

Speaker: John J. Gillooly

8:55 – 9:25 am Premises Liability Update

Recent extension of the Open and Obvious Doctrine beyond cases involving premises owners and invitees as well as other updates on how to successfully defend a premises liability claim that a plaintiff calls “negligence” in an effort to avoid Lugo v Ameritech.

Speaker: David A. Couch

9:25 – 9:45 am Update on Catastrophic Claims Cases

Attendant Care Claims Post Douglas v Allstate

Speaker: Tara L. Velting

9:45 – 10:15 am Third-Party Auto Threshold & Renewed Importance of Surveillance

Life After “McCormick”   Surveillance and “The Pay Off”

Speaker: L. Ladd Culbertson

10:15 – 10:30 am Break

10:30 – 11:00 am Handling Assigned Claims Cases

Speaker: David N. Campos

11:00 – 11:10 am Housekeeping of a Claims File

Discoverability     Strategy for Including Information

Speaker: Timothy M. Swan

11:10 – 11:30 am Returning to Work – Aspects of Labor & Employment Law

For Injured Claimants

Statutes & Agreements that Allow Faster Return to Work

Including FMLA and ADA

Speaker: Thomas R. Paxton

11:30 – 12:15 pm Michigan Auto No-Fault Update

Case Law Update    Year in Review and Anticipated

Future Case Law Development

Speaker: Emily L. Partridge

12:15 – 12:30 pm Questions and Answers

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Adam Gordon and Nicholas Draugelis Re-Locating to GLM’s Ann Arbor Office.

Beginning Monday, April 8th, both Adam Gordon and Nicholas Draugelis will re-locate to the Ann Arbor office.  They will continue to service their Detroit and Wayne County clients as well as service Washtenaw County.

The new contact information for Adam and Nick is as follows:

Adam Gordon
101 North Main Street
Suite 460
Ann Arbor, MI  48104
agordon@garanlucow.com
Direct Dial: 734-663-7717

Nicholas Draugelis
101 North Main Street
Suite 460
Ann Arbor, MI  48104
ndraugelis@garanlucow.com
Direct Dial: 734-663-7697