COURT OF APPEALS ADDRESSES WHETHER A COMPLAINT IS FRIVOLOUS

Regina A. Berlin

On October 10, 2019, Breanne Bauer-Rowley was driving a motor vehicle that was rear-ended. Ameliah Rowley was a passenger in that vehicle. The subject vehicle was insured by Auto Owners. Plaintiffs lived with Betty Rowley, who had insurance with Farm Bureau, although questions existed whether they were domiciled with her at the time of the accident. Plaintiffs submitted claims for no-fault benefits to Auto Owners and Auto Owners denied the claims on the basis that they were not highest in the order of priority under either pre- or post-amendment MCL 500.3114. Plaintiffs then submitted claims to the MAIPF who advised that Auto Owners was highest in the order of priority. On September 28, 2020, Plaintiffs filed suit against Auto Owners and the MAIPF. Plaintiffs later amended the Complaint to add Farm Bureau as a defendant.

Auto Owners filed a motion for summary disposition on the basis that Plaintiffs’ Complaint was not supported by law or fact and was frivolous. Auto Owners sought attorney fees and costs under MCR 1.109(E) and MCL 600.2591. Plaintiffs argued they had a good faith basis to believe that Auto Owners was in the order of priority based on communications from the MAIPF as well as a DIFS order which prohibited insurers from processing claims in accordance with the amended MCL 500.3114 until they submitted revised insurance forms and rates for approval, and prohibits MAIPF/MACP from providing coverage under amended MCL 500.3114 unless DIFS approved the forms. Plaintiffs also relied on the fact that Farm Bureau would not admit that they were highest in the order of priority. The trial court granted Auto Owners’ motion and awarded attorney fees and costs, the amount to be determined at a later hearing. Plaintiffs appealed.

In Bauer-Rowley v Humphreys, et al, ___ Mich App ___ (10/27/22), the Court of Appeals found that the trial court erred by determining Plaintiffs’ pleadings were frivolous. In doing so, the Court of Appeals evaluated the conflicting information that was presented to Plaintiffs’ counsel, specifically the 2019 changes in the No-Fault Act, contradictory orders from DIFS, the information received from the MAIPF, and Farm Bureau’s refusal to admit liability. The Court of Appeals observed that dismissing Auto Owners prior to a legal finding that it was not highest in the order of priority would be irresponsible and could have exposed Plaintiffs’ counsel to a malpractice claim. In its ruling, the Court of Appeals did not reverse the trial court’s finding as to priority and granting of summary disposition in favor of Auto Owners, but did reverse the trial court’s findings that Plaintiffs’ first amended complaint was frivolous and sanctions were warranted.