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October 30, 2020
GLM’s own Daniel Saylor won a big victory for ACIA overturning a judgment in the amount of $182,112.64 in favor of NGM Insurance Company (Florida). The behind-the-scene story is important and underscores the benefit, at least on high exposure cases, of getting an appellate attorney involved at the trial court level. In this instance, it obviously was a game changer.
Let me start by sharing with you one of my few remaining memories from law school, a memory which has stayed with me because the important lesson learned (and the consequences of failing to apply it) has been reinforced time and time again during my career. In 1975, Professor Littlejohn taught the first year evening torts class at Wayne State Law School. Even after all these years, I still remember that first day when, after he had made some introductory comments, he asked if there were any questions. The class was filled with high academic achievers who had just finished their undergraduate degrees. Literally the first question, and I must admit that I was surprised because I had been in the real world for three years before starting law school, was: “What do I need to do to get an “A.” He started to smile because I am sure that he had heard this question in every first class he had ever taught. He paused for a minute and then said “if you can spot the issues, I’ll give you a “C” which of course to most of the students (I include myself in that group) did not mean anything at the time. When pressed for more details, he politely declined to elaborate.
Fast forward to Dan’s efforts in this case. He was asked by the outside trial attorney to review his rough draft response to NGM’s summary disposition motion. The only argument he was running was that NGM’s lawsuit, filed approximately eighteen months after the accident, was ACIA’s first notice of the claim and thus was barred by the applicable one-year statute of limitations. MCL 500.3145(1). Dan recognized that it was not as simple as that. Being familiar with the Supreme Court decision in Perkovic v. Zurich American Insurance Company, 500 Mich 44 (2017), he knew the information ACIA did have within several months after the accident about the injured party’s PIP claim, although filed with NGM, might be sufficient to defeat that limitation defense.
Putting aside that defense, Dan recognized (i.e., spotted the issue) that NGM’s claim, even though not labeled as such, was really one for equitable subrogation and that the evidence was not there to satisfy the elements needed to recover under that legal theory. With Dan’s assistance, that issue was briefed in defendant’s response (and more significantly preserved for appellate review) and, as will be discussed below, was the winning argument.
On November 6, 2014, Oliver Ravenell was struck by a motor vehicle while walking in the Motor City Casino parking lot. The striking vehicle was insured by ACIA. Ravenell made a claim for PIP benefits with NGM Insurance Company, a Florida commercial auto insurance carrier of three vehicles listed on a policy issued to Omega Appraisals, LLC, a company for which his wife was the resident agent. NGM started paying PIP benefits and continued to do so until it had paid over $331,000. Apparently the light bulb went on at that time. NGM realized that Omega Appraisals, LLC was the only named insured on the policy. There were no additional named insureds nor was there a reference anywhere in the Declaration Certificate to Oliver Ravenell or his wife Rhona. Simply put, the Ravenells were not covered by this policy, either as named insureds or insureds by contract definition.
As part of this awakening, NGM realized that it was not in the order of priority under MCL 500.3114(1). It had no obligation whatsoever to pay Mr. Ravenell PIP benefits. Instead, ACIA as the insurer of the vehicle which struck Ravenell was the only insurer responsible for those benefits. In an attempt to recover what it had paid out, it sued ACIA on May 16, 2016, approximately 18 months after the accident.
If the lawsuit was the first notice of Oliver Ravenell’s no-fault claim, the one-year statute of limitations should have been an absolute defense. Based on his reading of Perkovic, Dan was not so sure. Although not discussed in the Court of Appeals opinion, Dan’s Appellant Brief provided additional factual information. Within two weeks after the accident, attorney Cliff Paskel, who had been retained by Oliver Ravenell to represent him on his BI tort claim, sent a letter to Thaddeus Stec, the driver of the striking vehicle, courtesy copy to ACIA. That letter of course provided a date of accident, basic facts about the accident, and a description of the injuries Oliver Ravenell suffered as a result. On December 3, 2014, the ACIA claim representative wrote a letter to Mr. Paskel acknowledging receipt of the BI claim, and requesting additional information which he would need to discuss settlement. He also advised Mr. Paskel of the new federal Medicare rules potentially impacting a liability insurer’s settlement payments. Writing in response, Mr. Paskel reiterated the merits of his client’s liability claim, and also advised him that his client’s insurer NGM would be paying all related bills so that a Medicare lien should not be a problem in resolving the tort claim. This letter confirmed what the ACIA claim representative already knew in that as part of his initial investigation he had ordered an ISO Report which showed that Mr. Ravenell had filed a PIP claim against NGM. After getting that information, the ACIA claim representative then spoke with the NGM claim representative who confirmed that an “active and valid” PIP claim had been opened and that NGM was covering the claim.
In its motion for partial summary disposition, NGM argued that it was not in the statutory order of priority, that ACIA was the only insurer obligated pay, and that it had mistakenly paid Ravenell PIP benefits which it now sought to get back from ACIA in an amount in excess of $330,000. In response, ACIA argued that the claim was time barred and that any information provided to the ACIA claim representative did not satisfy the PIP “written notice of injury” statutory requirement [MCL 500.3145(1)] because the information related to Mr. Ravenell’s BI tort claim only. Its second response was that even if the lack of notice argument was unsuccessful, ACIA should still prevail because NGM’s only potential theory of recovery was equitable subrogation and it would not be able to prove that cause of action.
In deciding the motion, the trial court, without addressing ACIA’s equitable subrogation argument, ruled that ACIA had timely notice of the claim, that it was the highest order of priority insurer, and that it was obligated to reimburse NGM for PIP benefits it had paid to Mr. Ravenell although the exact amount was not determined at that time. In a later hearing, following briefing on the issue in which NGM did not contest the application of the one-year back rule, a judgment was entered in its favor in the amount of $182,112.64.
On appeal, Dan focused solely on the issue that NGM had no right of subrogation against ACIA to recover the PIP benefits it had mistakenly paid Mr. Ravenell. The Court, in an unanimous unpublished per curiam opinion released on October 15, 2020, agreed, ruling that NGM was not entitled to the reimbursement it sought from ACIA and that the trial court had erred as a matter of law in granting NGM that relief. Further, the Court of Appeals remanded the matter back to the trial court for entry of summary disposition in favor of ACIA pursuant to MCR 2.116(I)(2).
The Court first found that where a no-fault automobile insurer pays personal protection insurance benefits to an accident victim, then seeks to be reimbursed for such payments from another insurer believed to be the insurer ultimately responsible for the benefits, the action necessarily is one of equitable subrogation. Titan Insurance Company v. North Point Insurance Company, 270 Mich App 339, 343-344 (2006); Amerisure Cos v. State Farm, 222 Mich App 97, 102-103 (1997).
Having established the correct nature of the claim, the next question was whether the undisputed evidence supported a viable claim of equitable subrogation. Of course, ACIA’s answer was no. Its position was that NGM was a “mere volunteer” not entitled to reimbursement.
The Court agreed. In doing so, it discussed several cases in defining equitable subrogation. Quoting from Esurance Prop & Cas Ins Co v Michigan Assigned Claim Facility, ___ Mich App ___ (2019), it wrote:
In other words, equitable subrogation is available only to those who are compelled to pay a debt, not to mere volunteers. To avoid being a volunteer, a subrogee [NGM] must be acting to fulfill a legal or equitable duty. Accordingly, an insurer [NGM] who pays expenses on behalf of its insured is not a mere volunteer. The rationale is that an insurance company that pays a claim that another insurer may be liable for is protecting its own interest and not acting as a volunteer.
The Court concluded:
Because NGM takes the position that Ravenell was not a named insured under the commercial-automobile-insurance policy that it issued to Omega Appraisals, and that it did not owe Ravenell PIP benefits, NGM’s equitable-subrogation claim necessarily fails. Without a policy, plaintiff [NGM] would have paid benefits not to its insured, but to an individual with whom it had no relationship. Without any legal or equitable duty to pay PIP benefits, plaintiff [NGM] is a mere volunteer — one who accidentally paid PIP benefits. As a mere volunteer, plaintiff [NGM] cannot seek equitable subrogation.
This case reinforces the harsh lesson that an insurance company must be sure that by statute or contract it owes PIP benefits because if it does not, and it pays anyway, it is not going to get any help from the Court in terms of recovering what it would characterize as mistaken payments. Another lesson of course to the attorneys who read this report is that you have to be able to spot and brief all of the issues in order to maximize the potential of obtaining a winning summary disposition motion result.