Author(s): David Couch

MICHIGAN COURT OF APPEALS AWARDS NO-FAULT PENALTY INTEREST AND ATTORNEY FEES FOLLOWING DEFENSE DECISION TO VOLUNTARILY PAY LARGE OUTSTANDING MEDICAL BILLS ON THE EVE OF TRIAL

Taking a first party No-Fault case to trial can be intimidating. Even for litigators on both sides who have tried several such cases, the sheer volume of proofs relating to which allowable expenses were incurred, and when, can be daunting. Furthermore, the danger of overwhelming or confusing the jury is very real. For that reason, when a PIP case is headed to trial, the defense is usually best suited by streamlining the claims. One strategic reason is to appear reasonable in the eyes of the jury. For instance, an opening statement could then declare that the insurer has properly honored much of the claim, but that the claimant and his attorney are simply overreaching about what is left in dispute. Another reason is to avoid the jury poring over countless documents during deliberations, the fear being that they might conclude the case must have great value simply because of all of the bills they were given. The dangers of streamlining a PIP case are also very real, as evidenced by the October 29, 2009 unpublished opinion in the case of Byers v State Farm.

In Byers, the Plaintiff was seriously injured while operating a motorcycle and claimed his PIP benefits from State Farm as the insurer of the striking motor vehicle. At the time of his Complaint, Mr. Byers had not yet undergone knee surgery. As such, a broad reading of the Complaint suggested that only wage loss and replacement services were it issue. However, during the pendency of litigation, Mr. Byers had surgery performed and subsequently submitted several medical bill to State Farm for payment. Of importance is the fact that Mr. Byers’ Case Evaluation summary included the disputed medical bills. They were also part of the Defendant’s claims file.

State Farm had made two, partial payments on the surgery bill early on, but the lion’s share of the roughly $23,000 in medical bills remained unpaid until the very eve of trial, at which point they were paid in full. In response to the payment, which acted to compromise the Plaintiff’s case by greatly reducing the amount of damages that could be sought from the jury, the Plaintiff moved for partial summary disposition on the day before trial and also sought the award of penalty interest under MCL 500.3142 and attorney fees under Section 3148. The Plaintiff’s reason for doing so was simple: the Defendant had rejected the $40,000 Case Evaluation award and remained solely subject to sanctions. Paying a large amount of medical bills on the eve of trial essentially cut the Plaintiff’s damages claim in half, thereby all but erasing the likelihood of the Defendant having to pay Case Evaluation sanctions if the jury awarded a verdict.

In granting the Plaintiff’s motion, the Kent County Circuit Court noted that it was “disingenuous” of the Defendant to pay overdue benefits just prior to trial “to avoid paying attorney fees and to position themselves better at the trial . . ..” Notably, this strong language was cited by the Court of Appeals in their opinion which affirmed the entirety of the trial court’s rulings, save for Judge Trusock’s granting of attorney fees under both Section 3148 and the Case Evaluation Court Rule found at MCR 2.403.

In support of the post trial request for attorney fees, the Plaintiff argued that State Farm had not denied his medical benefits until he filed suit to collect his overdue wage loss and replacement services. Judge Trusock also noted that the Defendant had never obtained an Independent Medical Examination upon which to base its denial of the medical bills. The Court of Appeals commented that the Defendant failed to present any evidence at trial in support of its assertion that the medical bills were not related to the accident. These findings supported the award of No- Fault attorney fees. While the ultimate amount of attorney fees sought was reduced, the Court of Appeals upheld Judge Trusock’s granting of Plaintiff’s counsel’s attorney fees at $250 per hour.

Hindsight, of course, always being perfect, the opinion in Byers should not be looked at today as a criticism of what has long been a common trial strategy, i.e., paying some benefits shortly before trial that counsel knows there will be no defense to when in front of the jury. Usually, the voluntary payments, albeit overdue, are accompanied by an offer of penalty interest. By definition, that is “streamlining.” Byers stands for the position, though, that there are very real dangers in employing this strategy. The sanctions in Byers exceeded the amount of the $62,246.96 jury award.