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Volume XXVI, No. 15, July 18, 2014    

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

From the Editor: Sarah Nadeau 

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 COURT OF APPEALS IN KOWALSKI CLARIFIES NO-FAULT PIP BENEFITS FOR LAWYER-CONSERVATOR FEES

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SUPREME COURT IN RAMBIN CLARIFIES UNLAWFUL TAKING EXCLUSION — “GUILTY MIND” REQUIRED

 

CONTRIBUTOR – Daniel Saylor

 

Two recently issued appellate decisions provide welcome clarity to a pair of issues that arise in no-fault personal protection insurance claims.  One of the issues, concerning the extent to which PIP benefits are payable for the services of an accident victim’s lawyer-conservator — an ever-present dilemma in many permanent injury claims — is addressed in Kowalski (by Conservator Darren Findling) v Auto Club Ins Assoc, unpublished opinion of the Michigan Court of Appeals (No. 314189, May 29, 2014) (request for publication pending).  The other, Rambin v Allstate Ins Co, 495 Mich 316 (May 20, 2014), clarifies the element of “intent” that must be established to exclude PIP benefits under the unlawful taking provision of the No-Fault Act.

Kowalski — Coverage of Attorney/Conservator Fees

Often in catastrophic injury cases in which the accident victim suffers a brain injury and has assets he or she can no longer manage, probate proceedings are required to establish a conservatorship for the protection of those assets.  The appointment of a conservator unavoidably leads to services performed by the conservator and, at least where the conservator happens to be an attorney, an inevitable claim for no-fault reimbursement of the hourly fees charged for the attorney-conservator’s services.

Since 1995, when the Court of Appeals issued Heinz v Auto Club Ins Assoc, 214 Mich App 195 (1995), it was widely understood that a fiduciary’s services (whether those of a conservator or a guardian) were covered as “allowable expenses” for the care of the injured person under MCL 500.3107(1)(a).  According to Heinz, where the guardianship or conservatorship itself was needed for the person’s care due to injuries sustained in a motor vehicle accident, it follows that all services performed by the conservator or guardian necessarily are for the injured person’s care.  Little scrutiny seemed to be required as to the particular nature of the service actually rendered.

This general rule was successfully challenged in the case of In Re Carroll (On Remand), 300 Mich App 152 (2013), which involved typical conservator services, all performed by the appointed lawyer-conservator and members of his law firm.  The services included management of the ward’s bank accounts, paying bills, purchasing and renewing insurance, and negotiating favorable terms on a cell phone contract.  Relying on Griffith v State Farm Mut Auto Ins Co, 472 Mich 521 (2005), the insurer contended that these services were not for an “injured person’s care” and thus not “allowable expense[s]” under §3107(1)(a).

In two recent cases the Supreme Court had just analyzed the important distinction between “attendant care” services and so-called “replacement services.”  The cases emphasize that household chores and other such ordinary services performed by a third-person in lieu of those the injured person would have performed but for his/her injuries are subject not to the unlimited coverage under §3107(1)(a) of the act, but only to the limited coverage available under §3107(1)(c) — $20 per day, up to three years post-accident.  The Court of Appeals applied this distinction in Carroll to hold, contrary to the long-standing premise of Heinz, that not all services performed by a conservator are necessarily for the “care” of the injured person.  Many services are merely “ordinary and necessary replacement services” that, but for the ward’s injury, he would have performed for himself (such as paying creditors, managing property and accounts, hiring brokers, and the like).  Noting that the ward would have other “estate-management needs as a result of his head injury,” the opinion seemed to relegate all other conservator services to the category of “allowable expenses” as being for the injured person’s care.

Kowalski provided the Court of Appeals with the opportunity to apply and clarify Carroll’s analysis, categorizing different services performed by the attorney-conservator for purposes of PIP reimbursement.  Some of the services in Kowalski involved probate court filings to establish and maintain the conservatorship itself.  Others, as in Carroll, involved typical asset management services.  Additionally, however, some services performed by the attorney-conservator in Kowalski centered around a slip and fall lawsuit on behalf of the ward — interacting with the personal injury attorney on behalf of the ward and even appearing in court on matters concerning the settlement; while others, very much in the capacity of “attorney,” pursued recovery of no-fault PIP claims on behalf of the claimant.  The probate court applied the pre-Carroll rule of Heinz and found all the at-issue services covered under §3107(1)(a) as allowable “care” expenses since, again, the conservatorship itself was necessitated by auto-accident injuries.

The Court of Appeals reversed the probate court’s decision in Kowalski and provided needed clarity for applying Carroll’s rule that coverage of conservator services depends on the precise nature of the service at issue.  The opinion divided the Kowalski conservator’s services into four categories:

Category 1 services — paying household bills, managing bank accounts, etc. — are reimbursed only as replacement services, per Carroll.

Category 2 services — professional-type services addressing matters (e.g., settling the slip and fall lawsuit) not causally connected to the ward’s auto-accident injuries — are not recoverable as allowable expenses under §3107(1)(a).

Category 3 services — establishing and maintaining the conservatorship itself (the opening petition, annual accountings, appearing in probate court) are services or accommodations for the injured person’s care and thus covered under §3107(1)(a).

Category 4 services — services performed in the capacity as an attorney for the ward — can, in limited situations, be covered as §3107(1)(a) allowable expenses where, as in In Re Geror, 286 Mich App 132 (2009), the attorney services were undertaken to ensure the ward was receiving necessary care from the court-appointed guardian and thus were “directly related to the petitioner’s care,” but if the conservator-attorney fees are unrelated to auto-accident injuries they are not covered.  Otherwise, fees incurred in pursuing recovery of overdue no-fault benefits may be awarded, as in any PIP action, under the act’s attorney fee provision, MCL 500.3148(1), provided the requirements of that provision are met.

The end result of the Kowalski opinion is a helpful analytic framework for determining whether, and under what category, a professional conservator’s services are covered under no-fault personal protection insurance.  Although it was issued as an “unpublished” opinion, a formal request to have the opinion published is currently pending.

Rambin — the Unlawful Taking Exclusion

Where an injured person otherwise would be entitled to recover PIP benefits for injuries sustained in a motor vehicle accident, one section of the Act disqualifies a person altogether if it is established that the person, when injured, was using a vehicle he or she had “taken unlawfully,” unless the person reasonably believed he or she was entitled to take and use the vehicle.  MCL 500.3113(a).  Simply put, if one is guilty of taking another’s vehicle “unlawfully,” that person is excluded from entitlement to PIP benefits, except where, despite the unlawful taking, the person “reasonably believed” he or she was allowed to use it.

Close review of this statutory provision leads to a perplexing question.  If a person takes a vehicle “unlawfully,” how can he “reasonably believe” he was entitled to take it?  And conversely, if the person was in fact reasonable in believing he was entitled to take and use the vehicle, how could the taking have been “unlawful” in the first place?

Allstate challenged this construction of the statute in a case involving a stolen motorcycle, a motorcycle gang member injured while riding the stolen motorcycle, and the person’s testimony that he simply did not know the motorcycle had been stolen.  In August 2009, Scott Herzog’s motorcycle was stolen from his home in Macomb County.  Two weeks later Lejuan Rambin was badly injured riding the motorcycle at midnight on a Detroit freeway, allegedly after being cut-off by a passing car.  After the motorcycle was traced back to its owner, Mr. Herzog, Rambin claimed entitlement to no-fault PIP benefits from Herzog’s auto insurer, Allstate.  Although it was firmly established that the motorcycle had been stolen, Rambin maintained that he had borrowed it from a motorcycle gang acquaintance and believed this person to be the vehicle’s actual owner.

Several facts weighed against the notion that Rambin was entirely innocent with respect to his use of the motorcycle, not the least of which was his telling police officers, only hours after the accident (they had appeared at the hospital emergency room to question Rambin), that he was struck and dragged by an automobile while walking home from a bar near the freeway — i.e., he denied having any connection to the stolen motorcycle found by the police.  (He eventually recanted the story, claiming that he had lied only to avoid getting a ticket for driving on a suspended license.)  Nevertheless, on the basis of his direct testimony that he innocently borrowed the motorcycle from one he believed to be the vehicle’s rightful owner, the Court of Appeals concluded the taking was not “unlawful” and thus held Rambin fully entitled to PIP benefits.  Allstate appealed to be Supreme Court.

In the Supreme Court Allstate asserted that it was immaterial what Rambin “reasonably believed” for purposes of his “taking” to be unlawful.  Since he clearly lacked that actual owner’s permission to take the motorcycle,  it was unauthorized and therefore “unlawful.”  Allstate contended that, while a conviction under the penal code’s felony joyriding statute requires both an unauthorized taking and guilty knowledge, the code’s misdemeanor joyriding statute is worded differently and should be applied as a “strict liability” crime.  At a minimum, Allstate argued, this should be rule for purposes of the §3113(a) exclusion in the No-Fault Act, since a claimant still can assert his or her “reasonable belief” under the second phrase of the statute and thus avoid being disqualified from coverage.

The Supreme Court rejected Allstate’s position, but nevertheless vacated the Court of Appeals’ decision based on the facts.  The Supreme Court held that both of the penal code’s joyriding statutes, the felony provision and the misdemeanor provision alike, carry a “guilty knowledge” element that prevents a truly innocent mistake from giving rise to a criminal conviction.  And if the “taking” is not violative of a provision in the penal code, then it is not an “unlawful taking” within the meaning of the No-Fault Act exclusion.  Thus if it turns out a person did, in fact, reasonably believe he or she was entitled to take and use a car or motorcycle, the taking seemingly would never be “unlawful” in the first instance; query whether the second half of §3113(a) is rendered superfluous by the Court’s construction.

Notwithstanding the Court’s ruling that “guilty knowledge” must be established before a person can be found to have taken a vehicle “unlawfully,” Rambin still may ultimately be excluded from benefits.  This is because the Court also concluded that circumstantial evidence may be sufficient to prove a person’s guilty knowledge.  Relying on the suspicious facts surrounding Rambin’s relationship with the stolen motorcycle (the fabricated story told to police, the fact that he simply abandoned the motorcycle on the freeway following the accident without calling police or even EMS, and later could not clearly identify the person who purportedly loaned him the motorcycle), the Court held that a jury reasonably could conclude not only that Rambin did in fact lack the true owner’s permission to be using the motorcycle that night, but that Rambin knew he lacked the true owner’s permission.  If so, the §3113(a) “unlawful taking” exclusion will apply to disqualify his entitlement to recover PIP benefits.

 

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SAVE THE DATE | TROY BREAKFAST SEMINAR

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