April 25, 2016
In Gardner v State Farm Mut Auto Ins Co, the Court of Appeals affirmed the trial court’s award of attorney fees wherein the court determined that State Farm unreasonably refused to pay the Plaintiff and Intervening Plaintiff’s claims. Moreover, the Court of Appeals determined that the trial court did not err in calculating the amount of fees when it refused to reduce the amount of fees to reflect the fact that the jury ultimately awarded considerably less than what was sought by the Plaintiff and Intervening Plaintiff at trial.
In Gardner, the Plaintiff was involved in a motor vehicle accident on June 5, 2010. State Farm received a claim for PIP benefits in July 2010. After State Farm received medical records from the emergency room noting a cervical strain, a diagnostic test showing no soft tissue injury but a disk injury, and had conversations with the Plaintiff, State Farm put the claim under investigation. The claim representative questioned whether there was an actual injury sustained given the size of the vehicles involved in the accident (a Durango and a F-150). It was, in her opinion, unlikely the Plaintiff would have suffered an injury. The claim rep also believed the medical records conflicted regarding whether there was a soft tissue injury. Based on these questions, State Farm put the claim under investigation in August 2010.
State Farm then attempted to receive the records from the Plaintiff’s treating physician but those did not come in before the Plaintiff filed suit in February 2011. State Farm scheduled an IME in April 2011. The IME doctor opined that the Plaintiff did not suffer any injury and, even if she had, it would have been a cervical strain that would have healed in 4 to 6 weeks. The case proceeded to jury trial with a minimal verdict in favor of Plaintiff ($1,720 for replacement services, some mileage expenses, and a $400 medical bill) and an award of $7,500 for Intervening Plaintiff who had sought $63,974.21 for claimed services.
The trial court awarded Plaintiff over $52,000 in attorney fees and the Intervening Plaintiff over $46,000 in attorney fees. State Farm appealed this award arguing that the trial court did not make specific findings as to whether State Farm’s decision to deny payments was unreasonable under MCL 500.3148. The case was remanded for such a determination. The trial court held a hearing on remand, found that the initial denial in July 2010 was unreasonable and reinstated its award of attorney fees.
State Farm appealed again arguing (1) that its denial of payment of PIP benefits was not unreasonable; and (2) that the trial court abused its discretion in calculating the amount of attorney fees.
In reaching its decision to affirm the trial court’s award of attorney fees, the Court of Appeals recognized that there are two prerequisites to an award of attorney fees under MCL 500.3148(1), the “benefits must be overdue” and the insurer must have “unreasonably refused to pay the claim or unreasonably delayed in making proper payment.” Ultimately the Court of Appeals determined that State Farm’s denial was unreasonable. First the Court found that State Farms’ claim representative’s belief that the vehicles in question were so large that they would have protected their occupants from soft-tissue injuries was unreasonable because there was no record to support such a conclusion. Next, the Court determined that the medical records in State Farm’s possession at the time of its initial denial were insufficient to warrant a denial. The Court found the claim representative made no serious effort to investigate the purported contradiction in the emergency report and the subsequent diagnostic testing. The Court found that had the claim representative truly felt there was a conflict, then she would have made a serious effort to obtain all the medical records or obtain an independent medical examination. She did neither and, thus the Court found the denial to be unreasonable. The Court noted that at the time State Farm put this claim under investigation and denied payment it did not have the benefit of the IME opinion and, thus, that opinion could not be considered as to whether the denial was unreasonable.
The Court also rejected State Farm’s argument that the trial court should have reduced the fees to reflect the fact that the jury ultimately awarded the Plaintiff and Intervening Plaintiff less than what they were seeking at trial. The Court unequivocally held that a trial court does not have an obligation to reduce a fee simply because the jury awarded less than
the Plaintiff requested at trial. Rather the proper inquiry is whether the trial court abused its discretion when after considering all the relevant factors it determined that the particular fee awarded was reasonable.
Finally, the Court reasoned that the proper method for calculating attorney fees to be awarded under MCL 500.3148 is the test stated under Wood v Det Aut Inter-Ins Exchange, 413 Mich 573 (1982), as “fine-tuned” in Smith v Khouri, 481 Mich 519 (2008), but noted that this exact issue is before the Supreme Court in Pirgu v United Services Auto Assoc, wherein the Michigan Supreme Court specifically asked the parties to address whether Smith or Wood governs the proper calculation of fees under MCL 500.3148. We will keep you updated on the Supreme Court’s decision in Pirgu and whether there is any change to the method for determining no-fault attorney fees.
INDY CITY SEMINAR
Garan Lucow Miller, P.C. is pleased to present its seventh annual Indy City Seminar, covering both Indiana and Michigan law, as well as a full Deposition Boot Camp, on Thursday, May 19, 2016 at the Indianapolis Marriott Downtown, 350 West Maryland Street, Indianapolis, IN 46225, (317) 822-3500. The day will begin with a continental breakfast and registration at 8:30 a.m., followed by the morning program. Lunch will then be provided. In the afternoon, please join us for our Deposition Boot Camp program. Comprehensive written materials will be distributed to all seminar attendees.
If you are able to attend this complimentary client program, please register via e-mail with Eileen Carty at firstname.lastname@example.org or call Ms. Carty at (800) 875-7600. We hope to see you there!
8:30 – 8:55 a.m. Continental Breakfast and Registration
8:55 – 9:00 a.m. Welcome and Introduction
Speaker: Gregory M. Bokota, Esq.
9:00 – 9:40 a.m. Comprehensive Indiana Law Updates
Speaker: Gregory M. Bokota
9:40 – 10:00 a.m Uber and Self-Driving Vehicles: the Implications on Coverage and Liability from Developing Technology
Speaker: David A. Couch, Esq.
10:00 – 10:30 a.m Real Property Aspects of Michigan PIP Home Modifications
Speaker: Rachel A. Bissett, Esq.
10:30 – 10:45 a.m. Morning Break
10:45 – 11:30 a.m. Comprehensive Michigan First Party No Fault PIP Updates
Speakers: John W. Whitman, Esq. and Rachel A. Bissett, Esq.
11:30 – 12:00 p.m. Bad Faith Claims in Indiana and Illinois
Speaker: Jennifer E. Davis, Esq.
12:00 – 12:15 p.m. Question and Answer Session
12:15 – 12:45 p.m. Lunch Provided
12:45 – 3:00 p.m. Deposition Boot Camp
Speaker: John W. Whitman, Esq.
For inquires, upcoming seminars, or in-house seminar requests please contact Eileen Carty at email@example.com