FARMERS INS. v. South Lyon Community Schools

• Citation: 237 Mich. App. 235,602 N.W.2d 588
• Decision Date: 01 December 1999
• Docket Number: Docket No. 206054.
• Parties: FARMERS INSURANCE EXCHANGE, Plaintiff-Appellee, and Michigan Catastrophic Claims Association, Intervening Plaintiff-Appellee v. SOUTH LYON COMMUNITY SCHOOLS, Defendant-Appellant.
• Court: Court of Appeal of Michigan (US)

602 N.W.2d 588

237 Mich. App. 235

FARMERS INSURANCE EXCHANGE, Plaintiff-Appellee, and Michigan Catastrophic Claims Association, Intervening Plaintiff-Appellee v. SOUTH LYON COMMUNITY SCHOOLS, Defendant-Appellant.

Docket No. 206054.

Court of Appeals of Michigan.

Submitted December 1, 1998, at Detroit.

Decided August 17, 1999, at 9:10 a.m.

Released for Publication December 1, 1999.

Wheeler Upham, P.C. (by Gary A. Maximiuk and Kenneth E. Tiews), Grand Rapids, for Farmers Insurance Exchange.

Dykema Gossett PLLC (by Donald S. Young and Ronald J. Torbert), Detroit, for Michigan Catastrophic Claims Association.

Pollard & Albertson, P.C. (by Richard E. Kroopnick), Bloomfield Hills, for the defendant.

Before: DOCTOROFF, P.J., and SAWYER and FITZGERALD, JJ.

PER CURIAM.

Plaintiff Farmers Insurance Exchange (hereinafter plaintiff) brought the instant action seeking a declaration that defendant is responsible for paying for nursing services provided to one of its special education students, Benjamin Smith, during school hours and during Benjamin's transportation to and from school. Plaintiff also sought reimbursement of money that it had paid for such nursing services since Benjamin had returned to school in February 1994, after the July 1993 accident that had left him disabled. The Michigan Catastrophic Claims Association intervened as a plaintiff.¹ The parties agreed to waive their right to a jury and to submit the case to the trial court on a stipulated set of facts and evidentiary record. Defendant appeals as of right from the circuit court's order entering judgment in favor of plaintiffs. We affirm.

Benjamin Smith was injured in a bicycle-automobile accident in July 1993. As a result of the accident, Benjamin is quadriplegic, has a tracheostomy, and requires a ventilator to breathe. He requires nursing care twenty-four hours a day and must be monitored continuously. Benjamin's nurse must continuously monitor Benjamin's alignment in his wheelchair and the settings and operation of his ventilator, must periodically give him antibiotics and spasm medication, must feed him, must catheterize him every few hours, and must suction phlegm from his tracheostomy as needed, usually three to five times a day. During the suctioning of phlegm, the ventilator must be detached, an "Ambu bag" must be placed on the tracheostomy and manually squeezed to enable Benjamin to breathe, and a suction catheter must be carefully inserted through his tracheostomy into his throat. These services take place during school hours and while Benjamin is being transported to and from school. The services need not be performed by a medical doctor. After his accident, Benjamin returned to defendant's school as a special education student. Benjamin is a child with a disability within the meaning of the Individuals With Disabilities Education Act (IDEA), 20 USC 1400 et seq. See 20 USC 1401(a)(1), before its amendment by Pub L 105-17, tit. VI, § 1602.

Plaintiff is Benjamin's no-fault insurance carrier and has paid all expenses for his nursing services since the time of his accident at the rate of $32 an hour for school-time nursing services. In December 1994, plaintiff requested that defendant pay for Benjamin's nursing services during school hours and during the time Benjamin was transported to and from school, asserting that the IDEA required defendant to provide the nursing services. The IDEA authorizes federal financial assistance to states that fulfill certain conditions regarding the education of disabled children. See 20 USC 1412; Jenkins v. Carney-Nadeau Public School, 201 Mich.App. 142, 144, 505 N.W.2d 893 (1993). To qualify for the federal funds, a state must have in effect "a policy that assures all children with disabilities the right to a free appropriate public education." 20 USC 1412(1); Jenkins, supra. A "free appropriate education" is defined in 20 USC 1401(a)(16), before its amendment by Pub L 105-17 as "special education and related services." "Related services" are defined in 20 USC 1401(a)(17), before its amendment by Pub L 105-17. Plaintiff requested that defendant pay for the nursing services on the basis that the nursing services were "related services." After defendant refused the request, plaintiff filed the instant action.

Defendant argues that the circuit court erred in concluding that it had jurisdiction over plaintiff's claim because plaintiff failed to exhaust the administrative remedies provided by the IDEA before bringing this suit to determine whether the IDEA requires the school district to pay for the nursing services required by Benjamin during school hours and during his transportation to and from school. We disagree. Whether the circuit court had subject-matter jurisdiction is a question of law that we review de novo. Specht v. Citizens Ins. Co. of America, 234 Mich. App. 292, 294, 593 N.W.2d 670 (1999).

The circuit court correctly determined that it had subject-matter jurisdiction over plaintiff's claims. Circuit courts are courts of general jurisdiction, and have original jurisdiction over all civil claims and remedies "except where exclusive jurisdiction is given by the constitution or by statute to some other court or where the circuit courts are denied jurisdiction by the constitution or statutes of this state." MCL 600.605; MSA 27A.605; Manning v. Amerman, 229 Mich.App. 608, 610, 582 N.W.2d 539 (1998). Contrary to defendant's argument, plaintiff's claims were not brought under the IDEA, but were brought under subsection 3109(1) of the no-fault act, M.C.L. § 500.3109(1); MSA 24.13109(1), which provides that "[b]enefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury." The purpose of subsection 3109(1) is "to reduce the basic cost of insurance by requiring a setoff of those government benefits that duplicate no-fault benefits and coordinating those benefits a victim may receive." Sibley v. DAIIE, 431 Mich. 164, 168, 427 N.W.2d 528 (1988). Government benefits must be offset against no-fault benefits under § 3109 if they serve the same purpose as the no-fault benefits and are provided or required to be provided as a result of the same accident. Id. at 169, 427 N.W.2d 528.

Here, the parties do not dispute that benefits available under the IDEA serve the same purpose as the no-fault benefits provided to Benjamin during school hours. Thus, the remaining question is whether the benefits are "required to be provided" by the school district pursuant to the IDEA. The "required to be provided" clause of subsection 3109(1) means that the injured person is obliged to use reasonable efforts to obtain payments that are available from the government. Perez v. State Farm Mut. Automobile Ins. Co., 418 Mich. 634, 645, 648, 344 N.W.2d 773 (1984) (Levin, J). In other words, where government benefits are available, but the injured person does not exercise reasonable efforts to obtain them, an insurance company is still entitled to the setoff provided by subsection 3109(1). Id. at 646, 344 N.W.2d 773. "Where workers' compensation benefits are available, but the injured worker does not exercise reasonable efforts to obtain them, the particular purpose of § 3109(1) to contain the cost of no-fault insurance prevails and the workers' compensation benefits are required to be subtracted from the no-fault benefits." Id. at 648, 344 N.W.2d 773.

Defendant contends that plaintiff cannot show that the benefits are required to be provided by the school district under the IDEA because Benjamin's eligibility under the IDEA for the nursing services can be determined only through administrative procedures provided by the IDEA, and plaintiff has no standing to commence such procedures. The IDEA requires that an individual education program (IEP) be developed for each child with a disability, which enumerates the "related services" the child requires to benefit from the prescribed special education program.² 34 CFR 300.342; Allstate Ins. Co. v. Bethlehem Area School Dist., 678 F.Supp. 1132, 1134 (E.D.Pa., 1987). In addition, states are required to provide an administrative appeals procedure for the review of decisions regarding the "identification, evaluation, or educational placement, or the provision of a free appropriate public education." 20 USC 1415(b)(1)(E); Jenkins, supra at 144, 505 N.W.2d 893. Before administrative decisions may be appealed to a state or federal court, administrative remedies must be exhausted. 20 USC 1415(e)(2); Jenkins, supra.

Here, the parties agree that plaintiff did not have standing to challenge defendant's refusal to pay for Benjamin's care in the administrative forum because only Benjamin's parents or guardians and defendant had standing to instigate administrative proceedings. 20 USC 1415(b)(1); 34 CFR 300.506. It is undisputed that neither the school district nor Benjamin's parents have requested that the nursing services be included in Benjamin's IEP. However, it is important to note that the present action was not brought by plaintiff to seek to have the nursing services included in Benjamin's IEP. An action to modify Benjamin's IEP can be brought only by Benjamin's parents after having exhausted the administrative remedies provided by the IDEA. 20 USC 1415. Rather, plaintiff brought the instant action seeking a determination of its rights under subsection 3109(1).

Furthermore, the purpose of the IDEA's requirement that administrative remedies be exhausted is to allow the school district to employ its educational expertise in developing a special educational plan and to develop a factual record. See Moubry v. Independent School Dist. No. 696(Ely), 951 F.Supp. 867, 888 (D.Minn., 1996). Here, defendant has stipulated that Benjamin requires nursing services during the school day and during transportation to and from school and that, without such services, he...