June 10, 2013
On May 23, 2013, the Michigan Supreme Court issued a much anticipated decision in Admire v Auto-Owners Insurance Co., ____ v ___ (2013). Kenneth Admire sustained catastrophic injuries when his motorcycle collided with a motor vehicle insured by Auto-Owners in 1987. Requiring wheelchair accessible transportation for work, medical appointments and getting around the community, Auto-Owners paid the full cost of a modified wheelchair accessible van on three prior occasions. In December, 2006, the Plaintiff’s guardian notified Auto-Owners of the desire for a new modified van. In response, Auto-Owners advised that it was not obligated to pay the base price of the new van, but acknowledged that it would pay for reasonably necessary modifications should Mr. Admire purchase the van himself. The Plaintiff’s guardian purchased the van and, after the modifications were reimbursed, sought reimbursement for the base price of the vehicle from Auto-Owners.
Subsequent to suit being filed, Auto-Owners sought summary disposition of the Plaintiff’s claim which was denied and instead, summary disposition was granted in favor of the Plaintiff.
On appeal, the Court of Appeals affirmed in an unpublished decision, relying on its prior decision in Begin v Michigan Bell Telephone Co., 284 Mich App 581 (2009) which held that where a van and its modifications are “so blended…that whole cost is an allowable expense if it satisfies a statutory criteria for being sufficiently related to injuries sustained in a motor vehicle accident…” Id at 596-597. Having reasoned that a modified van is more like food consumed in a residential care facility than ordinary food eaten at home, the modified vehicle was required to be paid in its entirety. Admire, unpublished per curiam Opinion of the Court of Appeals, issued February 15, 2011 (Docket No. 289080).
Auto-Owners sought leave to appeal to the Michigan Supreme Court which was granted on the issue of whether the No Fault Act required reimbursement for the entire cost of the modified vehicle.
The Michigan Supreme Court began its analysis with a review of MCL 500.3107 (1)(a) which requires that in order for an expense to be payable, it must be reasonably necessary for the care, recovery, or rehabilitation of the insured person. Referring to the 2005 Michigan Supreme Court Decision in Griffith v State Farm, 472 Mich 521 (2005), the Court related that the terms “recovery” and “rehabilitation” had been given their dictionary definition, namely the “restoration or return to any former and better condition [especially] to health from sickness, injury, addiction, etc.,” and “to restore or bring to a condition of good health, ability to work, or productive activity,” respectively. Citing Griffith, the Supreme Court made it clear that the context of the term “care” used in the statute requires that it be related to the insured’s injuries. Admire, citing Griffith, 472 Mich App at 534. Further, the Court explained that an insurer should not be obligated to reimburse the insured for ordinary, everyday expenses that bear only a “remote relationship to the insured’s care.” Id. Referring to MCL 500.3107 (1)(a), the Court stated:
This language suggests that any product, service, or accommodation consumed by an uninjured person over the course of his or her everyday life cannot qualify because it lacks the requisite causal connection with effectuating the injured person’s care, recovery or rehabilitation. An ordinary, everyday expense simply cannot have the object or purpose of effectuated an injured person’s care, recovery, or rehabilitation because it is incurred by everyone whether injured or not. For instance, Griffith explained that [the food that Griffith consumed is simply an ordinary means of sustenance], rather than a treatment for his [care, recovery or rehabilitation] because [if Griffith had never sustained, or were to fully recover from, his injuries, his dietary needs would be no different than they are now.] In sum, an ordinary, everyday product, service, or accommodation is not compensable under MCL 500.3107(1)(a) because that expense cannot be for the claimant’s care, recovery, or rehabilitation.
Contrary to the decision in Hoover v Mich Mutual Insurance Company, 281 Mich App 617 (2008), the Court rejected the notion that a post-injury allowable expense should be reduced by the injured person’s pre-injury expense. The Court further rejected any simple comparison of an injured person post-accident expenses versus pre-accident expenses, stating that the “new expense must be of a wholly different essential character than expenses born by the person before the accident to show that it is for the injured person’s care, recovery, or rehabilitation. Admire, Id. And most notably, the Supreme Court held that where the expense is new in its essential character and actually for the injured person’s care, recovery, or rehabilitation, the Michigan No Fault Act requires that it be covered in full regardless of whether it is an increase or decrease from that injured person’s pre-accident expense. Admire, Id.
Then, in a reinterpretation of when an expense is allowable, the Court advised that special accommodations or modifications made to an ordinary item can fall into two categories. A “combined” product or accommodation is an ordinary product that is joined with an accommodation or product that is actually and specifically for the injured person’s care, recovery, or rehabilitation, which “can be separated easily, both conceptually and physically, so that the fact finder can identify which costs are the new character and thus for the injured person’s care, recovery or rehabilitation.” Admire, Id. On the other hand, an “integrated” product or accommodation is one that is so blended that the product or accommodation cannot be broken down into unit costs. The Supreme Court offered a medical insole as an example of a combined product. While the insole is undoubtedly an allowable expense as it is for the injured person’s care, recovery or rehabilitation, the actual shoe itself is an ordinary expense, easily distinguished as not being for the injured persons’ care, recovery or rehabilitation.
The Supreme Court held that an insurer is only required to pay for the cost of the modification unless the expense is so integrated that it cannot be easily separated into unit costs. Applying this concept, the Michigan Supreme Court held that because the modified van was a “combined” product such that the expense could be broken down into base price versus modification cost, only the cost of the modification was compensable as an allowable expense.
While this decision allows us to more easily evaluate claims for modified vehicles, we anticipate that it is not so easily applicable in claims for housing accommodations, particularly where the injured person did not own a home or have housing expenses at the time of the accident. Consequently, we anticipate further interpretation by Michigan appellate courts on that issue.
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