Usf&G v. Mcca
| Decision Date | 06 February 2007 |
| Docket Number | Docket No. 260604.,Docket No. 271199. |
| Citation | 731 N.W.2d 481,274 Mich. App. 184 |
| Court | Court of Appeal of Michigan — District of US |
| Parties | UNITED STATES FIDELITY INSURANCE & GUARANTY COMPANY, Plaintiff-Appellee, v. MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION, Defendant-Appellant, and Michael Migdal, Individually and as Conservator for the Estate of Daniel Migdal, a Protected Person, Defendant. The Hartford Insurance Company of the Midwest, Plaintiff-Appellant, v. Michigan Catastrophic Claims Association, Defendant-Appellee. |
John A. Lydick, Bingham Farms, for the Insurance Institute of Michigan, amicus curiae.
Gross, Nemeth & Silverman, P.L.C. (by Mary T. Nemeth), Detroit, for Auto Club Insurance Association, amicus curiae.
Before: OWENS, P.J., and WHITE and HOEKSTRA, JJ.
These consolidated appeals concern the extent of the Michigan Catastrophic Claims Association's (MCCA) duty to indemnify its member insurance companies for losses incurred as a result of personal protection insurance (PIP) payments made to insureds who have suffered catastrophic injuries.
In Docket No. 260604, the MCCA appeals by right the Oakland Circuit Court's November 3, 2004, order granting summary disposition to plaintiff United States Fidelity Insurance & Guaranty Company (USF&G) under MCR 2.116(C)(10). The court interpreted MCL 500.3104 as requiring the MCCA to indemnify its members for the actual amount that each member paid in PIP coverage in excess of the $250,000 statutory threshold, rejecting the MCCA's argument that it is only required to indemnify its members for "reasonable" charges. We affirm.
In Docket No. 271199, plaintiff The Hartford Insurance Company of the Midwest (Hartford) appeals by leave granted the Oakland Circuit Court's June 6, 2006, order denying its motion for summary disposition under MCR 2.116(C)(9) and (C)(10). The court determined that the MCCA may challenge the reasonableness of a member's payments for PIP benefits as a defense to a claim for indemnification under MCL 500.3104. We reverse.
On August 22, 1981, Daniel Migdal, aged 17, was involved in an automobile accident that left him severely and permanently injured. Since then, Daniel has required constant nursing care. In 1988, Michael Migdal, Daniel's father and the conservator of his estate, sued USF&G to recover attendant care benefits for the care that he and his wife, Betty, provided to Daniel.1
In early 1990, the parties stipulated the entry of a consent judgment under which USF&G agreed to pay Michael a lump sum of $35,000 for attendant care services rendered before May 10, 1989. USF&G also agreed to pay, beginning January 25, 1989, $17.50 "per hour for nursing care services," for "a single nurse," for a maximum of 24 hours a day, with yearly increases of 8.5 percent, compounded annually, "during the period Daniel Migdal is residing in the family home." The judgment also provided that if the Migdals became unable or unwilling to continue providing Daniel's home care, USF&G would reimburse Michael for the costs of Daniel's care at the rate charged by the facility providing care. All personnel decisions, including hiring, firing, scheduling, and staffing, as well as all placement decisions, were at the Migdals' sole discretion.
USF&G maintained that its stipulation for the entry of the consent judgment was the product of its best judgment, appeared reasonable, and represented a compromise of various disputed factors, including Michael's claim that more than one nurse was needed to care for Daniel and the then-high inflation rate for medical care.2 Regardless according to USF&G, by July 2003 it had paid over $7 million in PIP benefits on Daniel's behalf. In 2003, USF&G paid $54.84 an hour for Daniel's nursing care services.3
Michael created a company (Migdal, doing business as Medical Management) to manage Daniel's care. He hired and paid nurses to care for Daniel through the company. In 2003, the nurses were paid, on average, $32 an hour, including benefits, and Michael kept as his compensation the approximately $200,000 difference between the costs of nursing care and the money paid by USF&G. To manage the company and Daniel's care, Michael would spend time with Daniel, nurses, and therapists; check equipment; prepare the payroll; talk to his accountant; review newspapers and magazines; interview, hire, and manage the company's nurses; and help move Daniel as needed.
After the consent judgment was entered, USF&G paid the rate stipulated therein, without continuing to review its reasonableness. USF&G submitted these claims to the MCCA for reimbursement. The MCCA reimbursed USF&G $22.05 an hour for nursing care services, which it considered a reasonable rate of reimbursement, not the hourly rate stipulated in the consent judgment.
On July 29, 2003, USF&G filed a complaint for a declaratory judgment, asking the court to declare that the MCCA was required to reimburse it for all amounts it paid under the consent judgment, without regard to the MCCA's assessment of the "reasonableness" of these payments.4 The MCCA moved for summary disposition of this claim under MCR 2.116(C)(10), arguing that the no-fault act only required it to indemnify its members for reasonable claims paid above the statutory threshold and that there was no question of material fact that the benefits paid by USF&G were unreasonable. USF&G filed a countermotion for summary disposition under MCR 2.116(C)(9) and (C)(10), arguing that a question of material fact existed concerning the reasonableness of the payments made to Michael and that, in any event, the no-fault act required the MCCA to reimburse it for the full amount of its "ultimate losses" over the statutory threshold.5
On November 3, 2004, the trial court granted USF&G's MCR 2.116(C)(10) motion for summary disposition and denied the MCCA's motion. The trial court found that nothing in the no-fault act prevented an insurer from entering a long-term settlement agreement to provide nursing care services to an insured person who was catastrophically injured in a motor vehicle accident. The court found that, because the statute requires the MCCA to reimburse USF&G for the total amount of its "ultimate loss," the real issue was whether the MCCA must reimburse USF&G for all its payments or merely for reasonable payments. After examining the language of the statute, the trial court found that "ultimate loss" was defined as an insurer's "actual loss," and that nothing in the statute required that amount to be reasonable. The court declined to inject any requirements in the statute that were not included by the Legislature and found no merit to the MCCA's argument that the payments provided by the consent judgment were unreasonable.
On January 12, 2005, a judgment was entered awarding USF&G $1,725,072 in reimbursement for PIP benefits paid to Michael through December 31, 2004. The parties preserved the MCCA's right to appeal and agreed to stay enforcement of the trial court's decision. This appeal followed.
On November 6, 2001, Robert Allen was involved in an automobile accident that left him severely and permanently injured. Allen's treating physicians prescribed constant attendant care by a licensed practical nurse. Allen's daughter apparently provides this care. Hartford initially paid Allen $20 an hour for attendant care. In June 2003, Allen retained an attorney and demanded that Hartford pay $37 an hour for attendant care. Allen and Hartford apparently reached a settlement in which Hartford agreed to pay $30 an hour for attendant care beginning May 6, 2003, with no rate increases until May 6, 2006.
The MCCA refused to reimburse Hartford for attendant care services paid at any amount above $20 an hour, questioning the reasonableness of the hourly rate, the qualifications of the service providers, and whether Allen still needed these services. By February 26, 2006, Hartford had paid $1,449,326.03 on Allen's behalf. Hartford claimed that the MCCA had reimbursed it for $627,478.82 in PIP benefits that it paid to Allen, but refused to reimburse it for an additional $571,847.21 in PIP payments.
On January 24, 2006, Hartford filed a complaint for declaratory judgment, alleging that under the no-fault act, the MCCA had a duty to reimburse Hartford for its net losses above the $250,000 statutory threshold. Hartford also sought a declaration that the MCCA had a duty to reimburse it for attendant care services paid at the rate of $30 an hour through May 6, 2006, as well as a declaration of any other matters necessary to provide complete relief.
Hartford then moved for summary disposition under MCR 2.116(C)(9) and (C)(10), arguing that the no-fault act required the MCCA to reimburse it for its actual losses above the statutory threshold without making an independent inquiry concerning the reasonableness of the payments. The MCCA argued that the no-fault act only required it to indemnify Hartford for reasonable claims paid above the statutory threshold. The MCCA also argued that Hartford's motion was premature because no discovery had been conducted concerning the reasonableness of the benefits paid to Allen.
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