Bach v. State Farm Mut. Auto. Ins. Co., Docket No. 74083

• Decision Date: 09 November 1984
• Docket Number: Docket No. 74083
• Parties: Michael BACH, administrator of the Estate of Katherine Zwitzer, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, and Economy Fire & Casualty Company, an Illinois corporation, jointly and severally, Defendants-Appellants.
• Court: Court of Appeal of Michigan — District of US

Page 325

357 N.W.2d 325

137 Mich.App. 128

Michael BACH, administrator of the Estate of Katherine

Zwitzer, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois

corporation, and Economy Fire & Casualty Company,

an Illinois corporation, jointly and

severally, Defendants-Appellants.

Docket No. 74083.

Court of Appeals of Michigan.

Submitted July 18, 1984.

Decided Sept. 4, 1984.

Released for Publication Nov. 9, 1984.

Franklin, Petrulis, Bigler, Berry & Johnston, P.C. by Irene A. Bruce, Troy, for plaintiff-appellee.

Seavitt, Westcott & Stowe by Michael J. Yockey, Southfield, for defendants-appellants.

Before V.J. BRENNAN, P.J., and ALLEN and GRIBBS, JJ.

ALLEN, Judge.

Defendant Economy Fire & Casualty Company appeals as of right from the trial court's award to plaintiff of 12% penalty interest under M.C.L. § 500.3142; M.S.A. § 24.13142 and "overdue" attorney fees under M.C.L. § 500.3148(1); M.S.A. § 24.13148(1). We affirm.

On July 3, 1978, Katherine Zwitzer was struck by an automobile while she was crossing the street in Benton Harbor, Michigan. She suffered severe injuries, from which she died some time later. At the time of her injury, Ms. Zwitzer was a Florida resident whose residency was established through a prolonged stay with her son-in-law who lived in Florida. However, Ms. Zwitzer had recently returned to Michigan to visit her son in Benton Harbor.

Defendant Economy insured the driver of the automobile which struck Ms. Zwitzer. Defendant State Farm Mutual Automobile Insurance Company carried the policies insuring the son-in-law with whom Ms. Zwitzer resided in Florida and insuring the son she was visiting in Benton Harbor. Both insurers denied coverage, although neither denied that no-fault benefits were due. Instead, both argued that the benefits due were owed by the other.

As a result, plaintiff filed a complaint against both insurers and in April, 1980, State Farm was dismissed on motions for summary judgment filed by State Farm and plaintiff. Subsequently, this Court decided Mills v. Auto-Owners Ins. Co., 102 Mich.App. 105, 300 N.W.2d 757 (1980), and on the basis of that opinion State Farm was brought back into the case. On July 24, 1981, summary judgment was granted in favor of Economy. State Farm filed a claim of appeal and the matter was briefed and argued in the Court of Appeals. On June 28, 1982, the Supreme Court reversed the Court of Appeals decision in Mills v. Auto-Owners Ins. Co., 413 Mich. 567, 321 N.W.2d 651 (1982). On September 17, 1982, on the authority of the Supreme Court's decision in Mills, this Court remanded the matter to the trial court for entry of an order "directing the payment of appropriate no-fault benefits by Economy".

Following remand, further proceedings were held in April, 1983, and, on August 11, 1983, the trial court entered an order of summary judgment directing Economy to pay $26,473.28 in no-fault benefits, plus interest. In addition the trial court ordered:

"IT IS FURTHER ORDERED that Defendant ECONOMY FIRE & CASUALTY COMPANY shall pay to the Plaintiff No-Fault interest running from January 16, 1979 through June 1, 1983 in the amount of Sixteen Thousand Four Hundred Sixty Four ($16,464.00) Dollars;

"IT IS FURTHER ORDERED that Defendant ECONOMY FIRE & CASUALTY COMPANY shall pay reasonable attorney fees for the Plaintiff."

A hearing was held on August 19, 1983, regarding the amount of the attorney fees. Pursuant to that hearing, on September 9, 1983, the court entered an order for determination of attorney fees providing for a total of $13,096.

Economy appeals the award of penalty interest pursuant to the no-fault act and the award of attorney fees.

On appeal Economy argues that this Court's decision in Sharpe v. DAIIE, 126 Mich.App. 144, 337 N.W.2d 12 (1983), lays down the rule that no-fault penalty interest cannot be imposed upon a no-fault insurer who relies upon then-existing law, and since, at the time Economy declined to pay, this Court's opinion in Mills v. Auto Owners, supra, was the law, Economy should not be liable for punitive interest or punitive attorney fees as having "unreasonably refused to pay the claim". In short, Economy contends that it should not be punished because the Supreme Court subsequently reversed the then existing law.

Plaintiff argues that Sharpe is distinguishable and that the more apposite case is Nash v. DAIIE, 120 Mich.App. 568, 327 N.W.2d 521 (1982), lv. den. 417 Mich. 1088 (1983), which holds that it is irrelevant, under the statute regarding penalty interest, whether denial is in good faith. If there is a failure to pay benefits and it is later determined benefits are due, penalty interest must be assessed. As to attorney fees, a trial court's finding of unreasonableness will be reversed only if the finding is clearly erroneous, and, since the only dispute in the instant case was which of two insurers would pay, it was patently unfair to force a severely injured patient to wait six years for payment of benefits. Thus, the trial court's finding of unreasonableness was not clearly erroneous.

We agree with plai...