Author(s): James L. Borin

THE MCCA BULLETIN – CLEARING THE AIR

Our initial reaction to the Bulletin2 was one of confusion and consternation. We envisioned bureaucratic delays, unreasonable intrusion in the litigation process and a ruse to circumvent the Supreme Court’s ruling in USF&G v MCCA. However, recent reports from insurers, defense counsel and case facilitators belie those concerns. Indeed, based upon my own recent experience, it appears that the MCCA’s intentions and practices are entirely consistent with its statutory responsibilities.

In my case, the plaintiff was catastrophically injured in 1990 and returned to his parents home in 1991. His mother provided 24 hour care continuously until his death in 2004. In the interim, a claim was submitted for a much higher hourly rate than the insurer was voluntarily paying. Suit was instituted in 2004 and the insurer chose to aggressively defend the litigation, even though it had reached MCCA retention many years before.

A motion was filed to limit claims to one year prior to suit under MCL 500.3145(1). The trial judge sat on the motion for more than four years, notwithstanding the Supreme Court’s 2006 decision in Cameron v ACIA.

Based upon Cameron, the insurer maintained a reserve of $250,000-$300,000. Ultimately, the trial judge issued his opinion in March 2009 denying Defendant’s motion. Following that ruling, the insurer raised its reserves to $800,000, although the MCCA denied receiving that communication.

With a trial date approaching in late March 2010, the parties agreed to facilitate. In November 2009, the insurer tendered an Offer of Judgment in the amount of $500,000. Plaintiff did not respond. The case was facilitated on January 15, 2010 and a conditional settlement, subject to MCCA approval, was reached for $1.385 Million. Several days thereafter, the settlement agreement , facilitation summaries and portions of the claim and litigation files were forwarded to the MCCA for consideration and approval. In response, the MCCA requested additional documentation and a meeting to discuss the resolution of the claim. That meeting was held on January 28, 2010, same attended by Joseph Erhart, counsel for the MCCA, representatives of the MCCA, the insurers litigation manager and myself.

The tone of the meeting was courteous, professional and entirely non-confrontational. Mr. Erhart expressed his belief that the insurer had not fulfilled its statutory obligation to inform the MCCA of important information about the claim, relying upon MCL 500.3104(7)(b):

(b) Establish procedures by which members shall promptly report to the association each claim that, on the basis of the injuries or damages sustained, may reasonably be anticipated to involve the association if the member is ultimately held legally liable for the injuries or damages. Solely for the purpose of reporting claims, the member shall in all instances consider itself legally liable for the injuries or damages. The member shall also advise the association of subsequent developments likely to materially affect the interest of the association in the claim. {Emphasis added}

Specifically, Mr. Erhart felt that the trial judge’s opinion denying the “one year back” limitation was material and should have been transmitted to the MCCA. Likewise, it was suggested that the increase in reserves, from $300,000 to $800,000, was information of importance to the MCCA. As previously indicated, there remains an unresolved question as to whether the insurer provided both items.

In respect to compliance with the Bulletin, the MCCA commented as follows:

1. Since the Offer of Judgment was made after issuance of the Bulletin, it was subject to pre-approval by the MCCA.

2. Whatever settlement authority was extended to defense counsel prior to facilitation, it too was subject to MCCA pre-approval.

3. The conditional Settlement Agreement executed at the conclusion of the facilitation was insufficient to satisfy the pre-approval mandate of the Bulletin.

Interestingly, the MCCA did not express a concern about the amount of the settlement, other than the fact that it was greatly in excess of its reserve on the claim.

In summary, the MCCA requests timely reporting on developments which are “likely to materially affect the interest of the association in the claim”. That can be done telephonically with the representative of the MCCA assigned to the claim. This would include rulings of the trial court, appellate decisions affecting the value of the claim, reserve adjustments, case evaluation awards and demands for settlement. This mandate applies to pre-suit and litigated claims.

Furthermore, the MCCA wants to be involved in the process of evaluating claims prior to initiating an offer of judgment, offer of settlement, acceptance of case evaluation or extending authority to negotiate settlement through facilitation or mediation. The MCCA seeks to establish a dialogue with the insurers to better understand its potential exposure and to assure consistent claim handling practices among the members of the association. The settlement in my case was approved with the admonition that the MCCA expected better compliance on future cases.

One final comment. Plaintiff attorneys routinely subpoena the MCCA claim files. Thus, you should carefully consider the manner and method of your reports to the MCCA. It is strongly suggested that you not disclose the substance of discussions, emails or written correspondence of your defense counsel. This could compromise the attorney-client or work product privilege. Likewise, the substantive opinions of experts, IME reports, peer reviews and investigation results should be protected unless you anticipate producing same in litigation. You should confer with counsel if you are concerned that disclosure to the MCCA may compromise your potential defense of the claim.