United States Fid. Ins. & Guar. Co. v. Mich. Catastrophic Claims Ass'n

• Court: Michigan Supreme Court
• Writing for the Court: Opinion
• Citation: United States Fid. Ins. & Guar. Co. v. Mich. Catastrophic Claims Ass'n, 484 Mich. 1, 795 N.W.2d 101 (Mich. 2009)
• Decision Date: 21 July 2009
• Docket Number: 133468.Calendar No. 5.,Docket Nos. 133466
• Parties: UNITED STATES FIDELITY INSURANCE & GUARANTY COMPANY, Plaintiff–Appellee,v.MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION, Defendant–Appellant,andMichael Migdal, Individually and as Conservator for the Estate of Daniel Migdal, a Protected Person, Defendant. (On Rehearing)Hartford Insurance Company of the Midwest, Plaintiff–Appellee,v.Michigan Catastrophic Claims Association, Defendant–Appellant. (On Rehearing)

484 Mich. 1

795 N.W.2d 101

UNITED STATES FIDELITY INSURANCE & GUARANTY COMPANY, Plaintiff–Appellee,

v.MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION, Defendant–Appellant,andMichael Migdal, Individually and as Conservator for the Estate of Daniel Migdal, a Protected Person, Defendant. (On Rehearing)Hartford Insurance Company of the Midwest, Plaintiff–Appellee,

v.Michigan Catastrophic Claims Association, Defendant–Appellant. (On Rehearing)

Docket Nos. 133466

133468.Calendar No. 5.

Supreme Court of Michigan.

Argued Oct. 1, 2008.Decided July 21, 2009.

Plunkett Cooney (by Jeffrey C. Gerish and Gregory Gromek), Bloomfield Hills, for United States Fidelity & Guaranty Insurance Company.Stark Reagan, P.C. (by Ava K. Ortner), and Dykema Gossett P.L.L.C. (by Joseph K. Erhardt, Jill M. Wheaton, and K.J. Miller) for the Michigan Catastrophic Claims Association.Miller & Tischler, P.C. (by Milea M. Vislosky), Southfield, for Michael Migdal.Secrest Wardle (by Janet Callahan Barnes and John H. Cowley, Jr.) for Hartford Insurance Company of the Midwest.Speaker Law Firm, P.L.L.C. (by Liisa R. Speaker), and Sinas Dramis Brake Boughton & McIntyre P.C. (by George T. Sinas and Steven A. Hicks) for amici curiae the Coalition Protecting Auto No–Fault.Hackney, Grover, Hoover & Bean, P.L.C. (by John P. Lewis), Grandville, for amici curiae State Farm Mutual Automobile Insurance Company.Michael A. Cox, Attorney General, B. Eric Restuccia, Solicitor General, and William A. Chenoweth, Assistant Attorney General, for amici curiae the Commissioner of the Office of Financial and Insurance Regulation.John A. Lydick for amici curiae the Insurance Institute of Michigan.

Opinion

WEAVER, J.

This Court originally granted leave to appeal to consider whether MCL 500.3104(2) obligates the Michigan Catastrophic Claims Association (MCCA) to reimburse a member insurer for personal protection insurance (PIP) benefits paid to a claimant without regard to the reasonableness of the member insurer's payments of PIP benefits. This Court issued an opinion reversing the Court of Appeals and remanding for further proceedings, while holding that “when a member insurer's policy only provides coverage for ‘reasonable charges,’ the MCCA has authority to refuse to indemnify unreasonable charges.” ¹ Subsequently, plaintiffs United States Fidelity Insurance & Guaranty Company and Hartford Insurance Company of the Midwest filed motions for rehearing. We granted the plaintiffs' motions for rehearing, and these cases were resubmitted for decision without further briefing or oral argument.²

We now hold that the indemnification obligation set forth in MCL 500.3104(2) does not incorporate the reasonableness standard that MCL 500.3107 requires between claimants and member insurers. Furthermore, the powers granted to the MCCA in § 3104(7) are limited to adjusting the “practices and procedures” of the member insurers and do not encompass adjustment to the payment amount agreed to between claimants and member insurers. Moreover, we hold that the power granted to the MCCA under MCL 500.3104(8)(g) is limited to furthering the purposes of the MCCA and that determining reasonableness is not one of its purposes. Finally, although the MCCA has no right to directly challenge the reasonableness of a claim, the no-fault statute does provide the MCCA with safeguards against negligent actions of member insurers. Accordingly, we affirm the judgment of the Court of Appeals.

I. Facts and Procedural HistoryUnited States Fidelity Insurance & Guaranty Co v. MCCA

In the first case in these consolidated appeals, Daniel Migdal was injured in a 1981 car accident in which he sustained catastrophic injuries. His injuries included a traumatic brain injury with cerebral spastic quadriplegia, severe oral motor apraxia, and dysphasia. Because of the extent of the injuries, Daniel was prescribed, and received, 24–hour–a–day nursing care. In 1988, Michael Migdal (Mr. Migdal), Daniel's father and the conservator of Daniel's estate, sued the no-fault insurance provider, United States Fidelity Insurance & Guaranty Company (USF & G), to recover expenses paid for Daniel's care. In 1990, the parties entered into a consent judgment. Pursuant to the judgment, USF & G paid Mr. Migdal $35,000 in exchange for a release from all contractual liability for nursing care provided before May 10, 1989. Additionally, USF & G agreed to pay $17.50 an hour for Daniel's home nursing care for the following year.³ The payments would be made regardless of whether Daniel's parents provided the nursing care or a third party was brought in to provide the care. The hourly rate, fixed for the first year after the judgment, was subject to an annual increase of 8.5 percent. The increased rate would be compounded based on the previous year's rate.

Pursuant to the consent judgment, USF & G paid Mr. Migdal the consented-to hourly wage.⁴ Once the amount paid to Mr. Migdal had reached the statutory threshold amount of $250,000,⁵ the MCCA began to reimburse USF & G for payments made to Mr. Migdal that exceeded the threshold. However, after the hourly rate had increased significantly with the passage of time, the MCCA eventually refused to reimburse USF & G for amounts that USF & G paid Mr. Migdal under the consent judgment, on the ground that the amounts were unreasonable. In 2003, USF & G filed a complaint in the Oakland Circuit Court for a declaratory judgment that the MCCA must reimburse USF & G for the total amount that USF & G paid to Mr. Migdal under the consent judgment, regardless of the reasonableness of the amount. At the time, USF & G was paying $54.84 an hour to Mr. Migdal for Daniel's nursing care.⁶ The MCCA sought to only be required to reimburse USF & G at a rate of $22.05 an hour, arguing that the agreed-upon rate of $54.84 an hour was unreasonable and, therefore, the MCCA should not have to reimburse USF & G for the total amount. Meanwhile, USF & G sought to have the consent judgment with Mr. Migdal revised, arguing that circumstances had changed when Mr. Migdal hired a third party to care for Daniel instead of providing the nursing care himself. Mr. Migdal filed a motion for summary disposition for failure to state a claim. The court granted Mr. Migdal's motion.⁷

Likewise, the MCCA moved for summary disposition. It contended that there was no question of material fact that the payments made by USF & G to Mr. Migdal were unreasonable. Moreover, the MCCA argued that the no-fault act only required reimbursement of payments that are reasonable. In a countermotion for summary disposition, USF & G argued that the no-fault act required the MCCA to reimburse it for the full amount paid to Mr. Migdal, despite any unreasonableness regarding the amount paid. Alternatively, USF & G argued that there was a question of material fact concerning the “unreasonableness” of the consent judgment.

The trial court granted USF & G's motion for summary disposition, ruling that the MCCA must reimburse USF & G for its “ultimate loss,” ⁸ including the entire amount that USF & G had to pay Mr. Migdal regardless of whether the amount paid was reasonable. The trial court denied the MCCA's motion for summary disposition. The trial court entered a judgment requiring the MCCA to reimburse USF & G in the amount of $1,725,072 under the no-fault act and holding the MCCA liable for future payments consistent with the consent judgment. The parties agreed to stay the enforcement of the order while the MCCA appealed by right in the Court of Appeals.

Hartford Ins. Co. v. MCCA

In the second case of these consolidated appeals, Robert Allen was injured in a 2001 car accident in which he sustained catastrophic injuries. His injuries included right-sided pleuritic effusion, brain injuries, quadriparesis, bilateral frozen shoulder, and cardiopathy. Because of the extent of the injuries, Allen was prescribed, and received, 24–hour–a–day care by a licensed nurse. Hartford Insurance Company of the Midwest (Hartford), Allen's no-fault insurer, initially paid $20 an hour for the nurse. In 2003, Hartford agreed to pay an increased rate of $30 an hour for Allen's care. Soon thereafter, Hartford's payments for Allen's care exceeded the $250,000 statutory threshold.

The MCCA refused to reimburse Hartford for any payments above $20 an hour for the services rendered. Hartford filed a complaint for a declaratory judgment that would require the MCCA to pay Hartford $571,847.21 as reimbursement for payments exceeding the no-fault threshold. Additionally, Hartford sought a declaration that the MCCA must reimburse Hartford for the total payments above the $250,000 threshold, regardless of the reasonableness of the payments. After the initial filing, Hartford moved for summary disposition, arguing that the no-fault act required the MCCA to reimburse Hartford for the entire amount paid to Allen that exceeded the threshold, regardless of the reasonableness of that amount. The MCCA argued that it only had to reimburse Hartford for reasonable payments and that there was insufficient discovery concerning the reasonableness of the amount of the payments. The circuit court ruled that reasonableness was an element in determining how much the MCCA must reimburse Hartford and that there was insufficient discovery to determine if the payments were reasonable. Hartford immediately appealed the trial court's holding requiring the element of reasonableness to be considered.

The Court of Appeals Decision

The Court of Appeals consolidated the USF & G and Hartford cases and held that “ MCL 500.3104 does not incorporate a ‘reasonableness' requirement and requires the MCCA to reimburse insurers for the actual amount of PIP benefits paid in excess of the statutory threshold.” ⁹ (Emphasis in the original). The MCCA sought leave to appeal in this Court, and this Court granted leave.¹⁰ This Court issued an opinion reversing the Court of Appeals and remanding for further proceedings, while...