PENALTY INTEREST AND ATTORNEY FEES: WHEN IS DELAYED PAYMENT UNREASONABLE?

The Michigan Court of Appeals recently approved for publication its decision in Beaumont Health v Michigan Automobile Insurance Placement Facility, et al. ___ Mich App ___ (6/22/23), which awarded penalty interest and attorney fees to a medical provider after finding that eligibility for benefits through the Michigan Automobile Insurance Placement Facility (“MAIPF”) was not reasonably disputed; and therefore, the delay in payment was unreasonable.

The Court of Appeals noted the analysis in cases such as this is fact-specific. Here, Beaumont Hospital provided emergency and inpatient medical care to Ruby Patrick, who was injured in a motor vehicle accident. After learning that Patrick had no auto insurance of her own, Beaumont filed an application for PIP benefits with the MAIPF to be reimbursed for the services it provided to Patrick. Beaumont made it clear in its application that the information it possessed did not extend beyond the police report and Beaumont’s medical records. Beaumont attached those documents to the application. The application was not signed by Patrick and left some questions unanswered, including Patrick’s address. Regarding the application questions related to whether the driver had permission to use the vehicle and the names of all individuals living in Patrick’s household at the time of the accident, Beaumont stated that it had no knowledge beyond what was contained in the police report.

After Beaumont filed its complaint in the trial court, the MAIPF advised that it could not process the claim until Patrick provided certain information. The MAIPF then attempted to depose Patrick, but she was uncooperative. In its show-cause motion, the MAIPF argued that it was statutorily prohibited from granting benefits until Patrick personally submitted a completed application for benefits. Beaumont then moved for partial summary disposition on the issue of whether a medical provider was a proper “claimant” under the statute, and arguing that it had met its burden of establishing eligibility for payment. Beaumont also requested penalty interest and attorney fees.

During the dispositive motion hearing, the MAIPF conceded that a medical provider may submit an application for benefits, and was therefore a “claimant,” but argued that the application was incomplete and must be completed by Patrick. The trial court and Court of Appeals disagreed. Relying on Griffin v Trumbull Ins Co, 509 Mich 484 (2022), the Court of Appeals found that Patrick was not solely responsible for providing all the necessary information to determine eligibility for benefits, recognizing that a claimant and insurer have reciprocal duties to investigate a claim and determine the priority of insurers. Here, the application was complete because the MAIPF never asked Beaumont to take any additional steps to fill out its application, and through the efforts of both parties, the MAIPF obtained all the information necessary to determine eligibility. Further, the Court determined that MAIPF became satisfied that Patrick was entitled to recover PIP benefits as of October 27, 2021, and so assigned an insurer to the claim on November 19, 2021, which insurer paid Beaumont PIP benefits on December 2, 2021.

Regarding the question of Beaumont’s entitlement to penalty interest and attorney fees, the Court noted that more than 30 days passed between when the MAIPF admitted that coverage for Patrick’s injuries was not disqualified and when the MAIPF notified Beaumont that MAIPF delayed payment because Beaumont’s application was incomplete. Thus, benefits were overdue unless MAIPF could show its decision to delay payment was caused by a legitimate question of statutory interpretation. The Court found the delayed payment was not reasonable under the facts of this case. Specifically, it found that “[t]he proposition that the injured person’s cooperation is required before an application can meet the threshold of completeness is not supported by the plain language of the statute.” Neither did MAIPF’s belated argument that Beaumont’s application did not fulfill the statutory requirement that a claimant must submit a completed application raise a reasonable question of statutory interpretation. Therefore, interest and attorney fees were calculated from the date that the MAIPF took the position that Beaumont must provide all the information required on the application because, on that date, Beaumont’s claim had been submitted for more than 30 day, the MAIPF never disputed the reasonableness of the proof or amount of Beaumont’s loss, and that was the date MAIPF’s actions began to prejudice Beaumont.

It is important to note that while this is a published case, the Court of Appeals opinion states that it is “debatable” whether in all cases submitting an application for benefits using Beaumont’s approach of attaching a police report and medical records will be enough to determine eligibility for benefits. The Court also noted that there is nothing in the statute to suggest the MAIPF would be outside its authority to require a claimant to resubmit an application that is filled out with more detail after the initial submission of the application.