Proudfoot v. State Farm Mut. Ins. Co.

• Decision Date: 26 March 2003
• Docket Number: Docket No. 232282.
• Citation: 658 N.W.2d 838,254 Mich. App. 702
• Parties: Evelyn PROUDFOOT, Plaintiff-Appellee, v. STATE FARM MUTUAL INSURANCE CO., Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

658 N.W.2d 838

254 Mich. App. 702

Evelyn PROUDFOOT, Plaintiff-Appellee, v. STATE FARM MUTUAL INSURANCE CO., Defendant-Appellant.

Docket No. 232282.

Court of Appeals of Michigan.

Submitted October 2, 2002, at Lansing.

Decided January 10, 2003, at 9:10 a.m.

Released for Publication March 26, 2003.

Logeman, Iafrate, Januszewski & Pollard, P.C. (by Robert E. Logeman), Ann Arbor, for the plaintiff.

Garan Lucow Miller, P.C. (by Daniel S. Saylor and Judith A. Moskus), Detroit, for the defendant.

Before: COOPER, P.J., and JANSEN and R.J. DANHOF¹, JJ.

COOPER, P.J.

Defendant appeals as of right from the trial court's imposition of prejudgment interest, M.C.L. § 600.6013; no-fault penalty interest, M.C.L. § 500.3142; and attorney fees, M.C.L. § 500.3148. We affirm in part, reverse in part, and remand.

I. Factual Background

In November 1995, plaintiff, a resident of England, was involved in an accident during a visit to Michigan. Plaintiff sustained serious injuries when she was struck by an automobile while crossing a street. As a result of these injuries, plaintiff was subsequently required to undergo the amputation of her right leg above the knee. Plaintiff was fitted for a prosthetic leg but encountered complications, mandating the use of a wheelchair. Defendant, plaintiff's insurer, compensated her for the majority of expenses arising out of the accident. However, a dispute arose over her request for home modifications.

On December 2, 1997, plaintiff's husband submitted a letter to defendant, with an occupational therapist's report, detailing the need for modifications to plaintiff's home. In the letter, he noted that he had contacted a local architect to prepare a proposal and an estimate for the necessary modifications. Plaintiff paid the architect $815² for the proposal. The architect's proposal, bill, and estimate were forwarded to defendant in March 1999. According to plaintiff's architect, it would cost approximately $250,000, including the value added tax of 17.5 percent, to make the necessary modifications.

A few months after receiving plaintiff's proposal, defendant sent its own occupational therapist to assess plaintiff's situation. On the basis of its therapist's findings, defendant claimed that the necessary modifications could be accomplished for substantially less money. Defendant denied plaintiff's reimbursement request for the architect's bill and failed to provide any money toward the home modifications she requested. Defendant conceded the necessity of home modifications but maintained that plaintiff's requests were unreasonable. At the time of trial, plaintiff's home remained unmodified.

The jury determined that plaintiff incurred allowable expenses as a result of the accident in the amount of $815 for the architect's bill. According to the jury, defendant received reasonable proof of this expense on March 2, 1999. The jury further found that modifications to plaintiff's home were reasonably necessary and that the amount of the allowable expense was $220,500, plus the value added tax. The jury stated that reasonable proof was supplied to defendant for the home modifications on December 2, 1997. On January 5, 2001, the trial court entered a judgment against defendant pursuant to the jury's verdict. The trial court awarded plaintiff $815 for the architect's bill and $259,087.50 for the home modifications.³ In addition, the trial court awarded plaintiff attorney fees and costs and assessed no-fault penalty interest from April 1, 1999, for the architectural services and the future home modifications. The trial court further assessed judgment interest against defendant on the architect's bill, the no-fault interest on the architect's bill, the future home modifications, the no-fault attorney fees and costs, and the no-fault interest on the home modifications. The judgment interest began to accrue November 27, 1997.

II. A Historical Examination of Michigan's No-Fault Act

To resolve the issues presented in this case, we must first discuss the history and purpose of the no-fault act. It has been held that "[t]he overall goal of the no-fault insurance system is to provide accident victims with assured, adequate, and prompt reparations at the lowest cost to both the individuals and the no-fault system." Williams v. AAA Michigan, 250 Mich.App. 249, 257, 646 N.W.2d 476 (2002).

Our Supreme Court upheld the constitutionality of the no-fault act in Shavers v. Attorney Gen., 402 Mich. 554, 621-622, 267 N.W.2d 72 (1978), noting the Legislature's rationale for abolishing tort remedies for personal injuries arising out of motor vehicle accidents. Specifically, the Supreme Court cited the Legislature's view that a change was necessary in part to reduce the heavy burden placed on the court system. The Supreme Court further noted that one of the operational deficiencies that the Legislature endeavored to change with the no-fault act was the fact that the former tort system "discriminated, in terms of recovery, against the uneducated and those persons on a low income scale." Id. at 622, 267 N.W.2d 72. The Supreme Court determined that the no-fault act's requirement of prompt payment would ease delays in the court system by decreasing the number of motor vehicle personal injury tort suits. Id. at 622-623, 267 N.W.2d 72. Additionally, the Supreme Court suggested that timely payments under the no-fault act would help to protect the disadvantaged or lower income individuals by relieving some of the pressures on them "to settle serious claims prematurely and for less than an equitable amount." Id. at 623, 267 N.W.2d 72.

The avowed overall goals and purpose of the no-fault act are defeated if no-fault insurers are allowed to unreasonably deny benefits, thereby requiring their insureds to seek recourse in the legal system. See Lakeland Neurocare Ctrs. v. State Farm Mut. Automobile Ins. Co., 250 Mich.App. 35, 42-43, 645 N.W.2d 59 (2002). To encourage no-fault insurers to promptly pay an injured party, the Legislature enacted penalty provisions allowing for the payment of attorney fees on unreasonably denied claims and interest on overdue payments. Univ of Mich. Regents v. State Farm Mut. Ins. Co., 250 Mich.App. 719, 739, 650 N.W.2d 129 (2002).

III. Standard of Review

The interpretation and application of statutes are questions of law that are reviewed de novo on appeal. Lincoln v. Gen. Motors Corp., 461 Mich. 483, 489-490, 607 N.W.2d 73 (2000). The primary goal when construing a statute is to ascertain and give effect to the intent of the Legislature. Frankenmuth Mut. Ins. Co. v. Marlette Homes, Inc., 456 Mich. 511, 515, 573 N.W.2d 611 (1998). When determining the Legislature's intent, this Court must first look to the statute's specific language. Gauntlett v. Auto-Owners Ins. Co., 242 Mich.App. 172, 177, 617 N.W.2d 735 (2000). Judicial construction is unnecessary if the meaning of the language is clear. Sun Valley Foods Co. v. Ward, 460 Mich. 230, 236, 596 N.W.2d 119 (1999). However, judicial construction is appropriate when reasonable minds can differ regarding the statute's meaning. Gauntlett, supra at 177, 617 N.W.2d 735. Terms contained in the no-fault act are read "`in the light of its legislative history and in the context of the no-fault act as a whole.'" Id. at 179, 617 N.W.2d 735, quoting Gobler v. Auto-Owners Ins. Co., 428 Mich. 51, 61, 404 N.W.2d 199 (1987). Further, courts should not abandon common sense when construing a statute. Marquis v. Hartford Accident & Indemnity (After Remand), 444 Mich. 638, 644, 513 N.W.2d 799 (1994). Given the remedial nature of the no-fault act, courts must liberally construe its provisions in favor of the persons who are its intended beneficiaries. Spencer v. Citizens Ins. Co., 239 Mich.App. 291, 300-301, 608 N.W.2d 113 (2000).

IV. Declaratory Judgment versus Money Judgment

Defendant initially characterizes the judgment entered by the trial court as a money judgment, rather than a declaratory judgment for plaintiff's future home modifications, and by implication indicates that a trial court may not establish an escrow account to enforce its judgment. However, defendant fails to explain or offer any authority for its position that a trial court is without the authority to establish such an account. See Chapdelaine v. Sochocki, 247 Mich.App. 167, 174, 635 N.W.2d 339 (2001). A declaratory judgment is unique in that it is neither completely legal nor equitable in nature. See Coffee-Rich, Inc. v. Dep't of Agriculture, 1 Mich.App. 225, 135 N.W.2d 594 (1965); see also 9 Michigan Pleading & Practice, Declaratory Judgments, § 69.03, p. 797.

In Michigan, courts of record have the authority to declare the rights of an interested party seeking a declaratory judgment. MCR 2.605(A)(1). "Declaratory judgments have the force and effect of, and are reviewable as, final judgments." MCR 2.605(E). Damages may also be granted after the entry of a declaratory judgment. Durant v. Michigan, 456 Mich. 175, 208-209, 566 N.W.2d 272 (1997); see, generally, 20 Michigan Law & Practice (2d ed.), Judgment, § 86, p. 93. However, such supplemental relief requires reasonable notice and a hearing. MCR 2.605(F). Conversely, a money judgment simply requires the immediate payment of a sum of money as opposed to directing an act to be completed. In re Forfeiture of $176,598, 465 Mich. 382, 386, 633 N.W.2d 367 (2001).

In this case, the trial court entered the following judgment with regard to plaintiff's future home modifications:

IT IS FURTHER ORDERED AND ADJUDGED that Plaintiff recover future home modifications as awarded by the jury in the amount of $220,500.00 plus value added tax of 17.5% for a total future home modification award in the amount of $259,087.50 is awarded, [sic] such amount to be overseen by the Court as the expenses are incurred under the no-fault law.

In Manley v. DAIIE, 425 Mich. 140, 388 N.W.2d 216 (1986), the Supreme Court ruled that a trial court may enter a declaratory...