Frequently Cited Michigan Statutes General Considerations in Insurance Claims Management  Automobile Insurance General Liability Considerations Miscellaneous Statutes   Significant Cases Pending before the Michigan Supreme Court

Significant Michigan Court Decisions Supreme Court Decisions  Employment Decision Premises Liability Decision Governmental Immunity Decision Other Significant Decisions Appellate Court Decisions Insurance Coverage Decisions UM/UIM Decisions Employment Decisions Premises Liability Decisions Governmental Immunity Decisions  Other Significant Decisions Federal Court Decision

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 FREQUENTLY CITED MICHIGAN STATUTES

• General Considerations in Insurance Claims Management

M.C.L.A. § 29.4

Reporting of Fires; Release of Information by Insurance Companies

Fire investigators and fire prevention officials may request an insurer investigating a fire loss of real or personal property release all information in possession of the agent relative to the loss.

If an insurer has reason to suspect a fire loss was caused by incendiary means, the insurer must notify the fire investigating agency and furnish them with all relevant material acquired during its investigation of the fire loss.

M.C.L.A. § 29.6

Fire Marshal Investigative Authority

State fire marshal may investigate and inquire into fire cause and origin that results in death or property damage, and without restraint or trespass liability.

M.C.L.A. § 257.1106

Death, Injury or Damages Caused by Uninsured Motorist; Application For Payment From Fund

Where the death of or personal injury or property damage to any person or property is occasioned by an uninsured motor vehicle, any person who would have a cause of action against the owner or driver of the uninsured motor vehicle in respect to the death or personal injury or property may make application for payment out of the Motor Vehicle Accident Claims Act fund for all damages in respect to the death or personal injury and for damages in excess of $200.00 in respect to property damage.

M.C.L.A. § 257.1123

Maximum Payments for Death, Injury or Property Damage

In respect to applications under the Motor Vehicle Accident Claims Act for payment of damages arising out of motor vehicle accidents, the secretary shall not pay out of the fund:

1. More than $20,000.00, exclusive of costs, on account of injury to or the death of one person, and, subject to such limit for any one person so injured or killed, not more than $40,000.00, exclusive of costs, on account of injury to or the death of two or more persons in any one accident; and
2. More than $10,000.00, exclusive of costs, for loss of or damage to property resulting from any one accident.

M.C.L.A. § 436.1801(3)

Liquor Liability

Right of action of person killed, injured, or damaged by unlawful sale or providing of alcohol to minor or visibly intoxicated person, if the unlawful sale is proven to be a proximate cause of the damage, injury or death.

M.C.L.A. § 500.2006

Timely Payment of Claims or Interest; Proof of Loss; Calculation of Interest; Exemptions

An insurer must pay on a timely basis to its insured the benefits provided under the terms of its policy, or, in the alternative, the insurer must pay to its insured twelve percent interest on claims not paid on a timely basis. Failure to pay claims on a timely basis or to pay interest on claims is an unfair trade practice unless the claim is reasonably in dispute.

An insurer shall specify, in writing, the materials that constitute a satisfactory proof of loss not later than thirty (30) days after receipt of a claim, unless the claim is settled within the thirty (30) days. If proof of loss is not supplied as to the entire claim, the amount supported by proof of loss shall be considered paid on a timely basis if paid within sixty (60) days after receipt of proof of loss by the insurer.

M.C.L.A. § 500.2026

Unfair Claims Practices

1. Unfair or deceptive acts or practices in the business of insurance include, but are not limited to,:
   1. Misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue;
   2. Failing to acknowledge promptly or to act reasonably and promptly upon communications with respect to claims arising under insurance policies;
   3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
   4. Refusing to pay claims without conducting a reasonable investigation based upon the available information;
   5. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; and
   6. Failing to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.

2. The failure of an insurer to maintain a complete record of all the complaints of its insureds which it has received since the date of the last examination is an unfair method of competition and unfair or deceptive act or practice in the business of insurance.

M.C.L.A. § 500.2845

Insured Real Property Fire Proceeds

If a claim is filed for a loss to insured real property due to fire or explosion and a final settlement is reached on the loss to the insured real property, an insurer shall withhold from payment twenty-five percent of the actual cash value of the insured real property at the time of the loss or twenty-five percent of the final settlement, whichever is less. For residential property, the twenty-five percent settlement or judgment withheld shall not exceed $6,000.00 adjusted annually beginning June 1, 1999, in accordance with the Consumer Price Index.

M.C.L.A. § 500.4503

Fraudulent Insurance Acts

In general, a person commits insurance fraud if they present or prepare any oral or written statement supporting an application or claim for insurance while knowing the statement is false, either in whole or in part.

M.C.L.A. § 500.4507

Release of Information to Authorized Agency or Insurer

Upon written request by an authorized agency, an insurer may release to the authorized agency, at the authorized agency's expense, any or all information that is considered important relating to any suspected insurance fraud. An authorized agency may release information on suspected insurance fraud to an insurer upon a showing of good cause. This information may include, but is not limited to, the following:

1. Insurance policy information relevant to an investigation, including any application for a policy;
2. Policy premium payment records that are available;
3. History of previous claims made by the insured; and/or
4. Information relating to the investigation of the suspected insurance fraud, including statements of any person, proofs of loss, and notice of loss.

M.C.L.A. § 500.4509

Report of Information Concerning Insurance Fraud

In the absence of malice in a prosecution for insurance fraud, any person who cooperates with an authorized agency or complies with a court order to provide evidence or testimony is not subject to civil liability with respect to any act concerning the suspected insurance fraud, unless that person knows that the evidence, information, testimony, or matter contains false information pertaining to any material fact or thing.

M.C.L.A. § 500.4511

Violations; Penalties

A person who commits insurance fraud is guilty of a felony punishable by imprisonment for not more than four years or a fine of not more than $50,000.00, or both, and restitution. A person who enters into an agreement or conspiracy to commit insurance fraud is guilty of a felony punishable by imprisonment for not more than ten years or by a fine of not more than $50,000.00, or both, and shall be ordered to pay restitution.

• Automobile Insurance

M.C.L.A. § 500.3009

Minimum Auto Insurance Limits

An automobile liability policy insuring against loss resulting from liability imposed by law for property damage, bodily injury, or death suffered by any person arising out of the ownership, operation, maintenance, or use of a motor vehicle shall not be issued to any motor vehicle unless the liability coverage is subject to a limit, exclusive of interest and costs of:

1. Not less than $20,000.00 because of bodily injury to or death of one person in any one accident, and subject to that limit for one person;
2. To a limit of not less than $40,000.00 because of bodily injury to or death of two or more persons in any one accident; and
3. To a limit of not less than $10,000.00 because of injury to or destruction of property of others in any accident.

M.C.L.A. § 500.3010

Loss or Damage Caused by Fire or Explosion to Motor Vehicle

An automobile insurer shall not pay a claim of $2,000.00 or more for loss or damage caused by fire or explosion to an insured motor vehicle until a report has been submitted to the fire or law enforcement authority designated and the insurer has received from the insured a copy of the report.

This section does not apply to accidental fires or explosions. If the insurer or the fire or law enforcement authority designated determines that the fire or explosion may not be accidental, the insurer shall notify the insured of the requirement for a report under this section by no later than thirty (30) days after the determination.

M.C.L.A. § 500.3105
Personal Protection Benefits; Accidental Bodily Injury

1. Under personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle.
2. Personal protection insurance benefits are due without regard to fault.
3. Bodily injury includes death resulting therefrom and damage to or loss of a person's prosthetic devices in connection with the injury.
4. Bodily injury is accidental as to a person claiming personal protection insurance benefits unless suffered intentionally by the injured person or caused intentionally by the claimant. Even though a person knows that bodily injury is substantially certain to be caused by his act or omission, he does not cause or suffer injury intentionally if he acts or refrains from acting for the purpose of averting injury to property or to any person, including himself.

M.C.L.A. § 500.3107

Allowable Medical Expenses and Accommodations

Personal protection insurance benefits are payable for the following:

1. Allowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services, and accommodations for an injured person's care, recovery, or rehabilitation;
2. Work loss consisting of loss of income from work an injured person would have performed during the first three years after the date of the accident if he or she had not been injured. The statutory maximum is based upon a schedule which is periodically adjusted for inflation; and
3. Replacement services or expenses, not exceeding $20.00 per day, reasonably incurred in obtaining ordinary and necessary services in lieu of those that, if he or she had not been injured, an injured person would have performed during the first three years after the date of the accident, not for income but for the benefit of himself or herself or of his or her dependent.

M.C.L.A. § 500.3112

Payees of Personal Protection Benefits; Payments as Discharge of Liability

Personal protection insurance benefits are payable to or for the benefit of an injured person or, in case of his death, to or for the benefit of his dependents. Payment by an insurer of personal protection insurance benefits discharges the insurer's liability to the extent of the payments unless the insurer has been notified in writing of the claim of some other person. If there is doubt about the proper person to receive the benefits or the proper apportionment, the insurer and the claimant may apply to the circuit court for an appropriate order. In the absence of a court order the insurer may pay:

1. To the dependents of the injured person, the personal protection insurance benefits accrued before his death without appointment of an administrator or executor; and
2. To the surviving spouse, the personal protection insurance benefits due any dependent children living with the spouse.

M.C.L.A. § 500.3113

Persons Not Entitled to Personal Protection Benefits

A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident:

1. The person was using a motor vehicle or motorcycle which he or she had taken unlawfully, unless the person reasonably believed that he or she was entitled to take and use the vehicle;
2. The person was the owner or registrant of a motor vehicle involved in the accident and failed to maintain the security for payment of benefits under personal and property protection insurance; and/or
3. The person was not a resident of Michigan, was an occupant of a motor vehicle not registered in Michigan, and was not insured by an insurer which has filed a certification for nonresidents.

• General Liability Considerations

M.C.L.A. § 418.131

Employer-Employee Recovery; Remedies

The right to the recovery of workers’ compensation benefits shall be the employee’s exclusive remedy against the employer for a personal injury or medical condition resulting from the employment. An employer can be held liable for an intentional tort where an employee is injured as a result of a deliberate act of the employer and the employer specifically intended the injury. An employer is presumed to have intended to injure the employee if the employer had knowledge that an injury was certain to occur and willfully disregarded that knowledge.

M.C.L.A. § 600.1483

Medical Malpractice Damages Cap

In a medical liability action, total noneconomic damages recoverable by all plaintiffs against all defendants are limited to $280,000.00, adjusted annually for inflation, except in cases where the plaintiff is hemiplegic, paraplegic, or quadriplegic due to an injury to the brain or spinal cord, or where the plaintiff had permanently impaired cognitive capacity, or the plaintiff has had a permanent loss of or damage to a reproductive organ, then noneconomic damages shall not exceed $500,000.00.

M.C.L.A. § 600.2913

Parental Liability For Minor Child’s Willful Injury or Damage

Person can recover damages for maximum of $2,500.00 from parents of resident minor child of parents when the minor has willfully or maliciously caused injury or damaged property.

M.C.L.A. § 600.2922

Wrongful Death Actions

Whenever the death of a person is caused by a wrongful act, neglect, or fault of another and the act would have entitled the party injured to maintain an action and recover damages if death had not ensued, the party that would have been liable shall be liable to an action for damages. Every action under this section shall be brought by, and in the name of, the personal representative of the estate of the deceased. The people entitled to damages by being damaged by the death only include the decedent’s spouse, parents, children, descendants, grandchildren, brothers and sisters, grandparents, the children of the decedent’s spouse, and those who are devisees under the will of the deceased, and those entitled to share in the state under the laws of intestate succession.

M.C.L.A. § 600.2925a

Contribution Between Tortfeasors

When two or more persons become jointly or severally liable in tort for the same injury to a person or property, there is a right of contribution among them even if a judgment has not been recovered against all or any of them.

The right of contribution exists only in favor of a tortfeasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share. A tortfeasor against whom contribution is sought shall not be compelled to make contribution beyond his own pro rata share of the entire liability.

M.C.L.A. § 600.2946

Product Liability Actions

A manufacturer or seller is not liable unless a plaintiff establishes that the product was not reasonably safe at the time the specific unit of the product left the control of the manufacturer or seller and, according to generally accepted production practices at the time, a practical and technically feasible alternative production practice was available that would have prevented the harm without significantly impairing the usefulness or desirability of the product to users and without creating equal or greater risk of harm to others.

There is a rebuttable presumption that the manufacturer or seller is not liable if the aspect of the product allegedly causing the harm was in compliance with federal or state standards, or was in compliance with regulations or standards relevant to the event causing the death or injury promulgated by a federal or state agency responsible for reviewing the safety of the product.

M.C.L.A. § 600.2946a

Product Liability Actions; Caps on Damages

In an action for product liability, the total noneconomic damages shall not exceed $280,000.00, adjusted annually for inflation, unless the defect in the product caused either the person’s death or permanent loss of a vital bodily function, in which case the total amount of damages for noneconomic loss shall not exceed $500,000.00.

In awarding damages in a product liability action, the trier of fact shall itemize damages into economic and noneconomic losses. Neither the court nor counsel for a party shall inform the jury of the limitations. The court shall adjust an award of noneconomic loss to conform to the limitations.

M.C.L.A. § 600.2959

Comparative Fault

In a tort action, the court shall reduce the damages by the percentage of comparative fault of the person upon whose injury or death the damages are based. If the plaintiff’s percentage of fault is greater than the aggregate fault of the other person or persons, whether or not parties to the action, the court shall reduce economic damages by the percentage of comparative fault of the person upon whose injury or death the damages are based, and noneconomic damages shall not be awarded.

M.C.L.A. § 600.6304

Joint and Several Liability

The trier of fact must allocate liability among nonparties, even in medical malpractice cases where the plaintiff is not at fault, before joint and several liability is imposed on each defendant. Once joint and several liability is determined to apply, joint and several liability prohibits the limitation of damages to each defendant’s respective percentage of fault.

M.C.L.A. § 691.1407

Governmental Immunity From Tort Liability

A governmental agency is immune from tort liability if the governmental agency is engaged in the exercise or discharge of a governmental function.

An officer, employee, member, or volunteer of the governmental agency is immune from tort liability caused while acting on behalf of the government agency if the following three conditions are met:

1. The officer, employee, member, or volunteer is acting or reasonably believes he or she is acting within the scope of his or her authority;
2. The governmental agency is engaged in the exercise or discharge of a governmental function; and
3. The officer's, employee's, member's, or volunteer's conduct does not amount to negligence that is the proximate cause of the injury or damage.

• Miscellaneous Statutes

M.C.L.A. § 24.264

Declaratory Judgment Actions

Unless an exclusive procedure or remedy is provided by a statute governing the agency, the validity or applicability of a rule may be determined in an action for declaratory judgment when the court finds that the rule or its threatened application interferes with or impairs, or imminently threatens to interfere with or impair, the legal rights or privileges of the plaintiff.

M.C.L.A. § 600.2157

Waiver of Physician-Patient Privilege

In any personal injury suit, if the plaintiff produces a physician as a witness who has treated the patient for the injury or for any disease or condition for which the malpractice is alleged, that patient is considered to have waived the privilege provided in this section as to another physician who has treated the patient for the injuries, disease, or condition.

M.C.L.A. § 600.6303

Collateral Source Benefits; Subrogation

In a personal injury action in which the plaintiff seeks to recover expenses, evidence that the expense or loss was paid or is payable by collateral source is admissible. The collateral source provider is joined after a verdict for the plaintiff is rendered and before a judgment is entered on the verdict. If the court determines that all or part of the plaintiff’s economic damages are payable by a collateral source, the court will reduce the part of the judgment which represents damages paid or payable. This reduction shall not exceed the amount of the judgment for economic loss or that portion of the verdict which represents damages paid or payable by a collateral source.

Within ten (10) days after a verdict for the plaintiff, plaintiff's attorney shall send notice of the verdict to all persons entitled by contract to a lien against the proceeds of plaintiff's recovery. If a contractual lienholder does not exercise the lienholder’s right of subrogation within twenty (20) days after receipt of the notice of the verdict, the lienholder shall lose the right of subrogation.

 

SIGNIFICANT MICHIGAN COURT DECISIONS

SUPREME COURT DECISIONS

• Employment Decision

Brewer v. A.D. Transp. Exp., Inc., 782 N.W.2d 475

Retroactive Scope of the Workers’ Compensation Amendment Over Out-of-State Injuries

Plaintiff Anthony J. Brewer, a Michigan resident and truck driver, sought Workers’ Compensation benefits for an injury he allegedly suffered in Ohio in 2003 while working for defendant, A.D. Transport Express, Inc. A magistrate dismissed the case due to lack of jurisdiction. The question before the court was whether the amendment to MCL 418.845, which allowed for jurisdiction over controversies arising out of injuries suffered outside of Michigan, applies to injuries occurring prior to the effective date of the amendment.

The court held that the amendment does not retroactively apply to injuries that occurred before the effective date of the amendment. The amendment contained no language that manifested a legislative intent to apply it retroactively. As a result, the court affirmed the magistrate’s decision.

• Premises Liability Decision

Woodman ex. Rel. Woodman v. Kera LLC, 785 N.W.2d. 1

Enforceability of Injury Liability Waiver Signed by Parent on Behalf of Child

Five-year-old Trent Woodman’s parents had his birthday party at an indoor play area operated by Defendant, Kera LLC. Before the party, Trent’s father signed a liability waiver on Trent’s behalf. During the party, Trent jumped off a slide and broke his leg. Trent, by his mother as next friend, filed suit against the defendant. Defendant sought summary disposition arguing that the liability waiver barred plaintiff’s claims.

The issue before the Supreme Court was whether the parental pre-injury liability waiver was valid and enforceable under the common law and, if not, whether the court should change the common law to enforce such a waiver. The court held that a parental waiver is unenforceable under Michigan’s common law because, absent special circumstances, a parent has no authority to bind his child by contract. The court further declined to change the common law rule.

• Governmental Immunity Decision

Robinson v. City of Lansing, 782 N.W.2d 171

Scope of Highway Exception to Governmental Immunity

Plaintiff was walking on the brick sidewalk adjacent to Michigan Avenue, a state highway in front of the Lansing Center, when she stepped into a depressed area of the sidewalk, lost her balance, and tripped on an uneven area of bricks. Plaintiff fractured her wrist, which required two surgeries. Plaintiff sued defendant under the highway exception to governmental immunity, claiming a breach of duty under MCL 691.1402(1) to maintain sidewalks in reasonable repair. Defendant answered by raising the “two-inch” rule found in MCL 691.1402a(2) as an affirmative defense, which provides that a discontinuity defect of less than two inches in a sidewalk creates a rebuttable inference that the municipality maintained the sidewalk in reasonable repair. The issue before the Supreme Court was whether the two-inch rule applies to sidewalks adjacent to state highways or only to sidewalks adjacent to county highways.

The Supreme Court held that the two-inch rule applies only to sidewalks adjacent to county highways, thus affirming the trial court and reversing the court of appeals. As a result, the defendant could not raise the two-inch rule as an affirmative defense against the plaintiff’s claim.

• Other Significant Decisions

Auto-Owners Ins. Co. v. Ferwerda Enterprises, Inc, 789 N.W.2d 491 (2010)

Attorneys’ Fees; Frivolous Claims or Defenses

A family suffered personal injuries after inhaling gases as a result of a buildup of chemicals at a pool operated by the Holiday Inn Express after a maintenance worker failed to turn off a pool chemical feeder system while making repairs to the pool's heating components. Auto-Owners initially paid benefits to the family, but then filed a declaratory judgment action arguing that it owed no duty to defend or indemnify Holiday Inn Express because the family's claim fell under a pollution exclusion within the insurance policy. Holiday Inn Express filed a counter-claim, alleging breach of contract, estoppel and waiver, and sought attorneys fees and penalty interest. 

The trial court granted summary disposition for Holiday Inn Express, finding that heating equipment exception applied and that Auto-Owners was required to defend and indemnify Holiday Inn Express with respect to the family's claims against the hotel. The trial court rejected Holiday Inn Express' assertion that Auto-Owner's claim was entirely without merit, but nonetheless granted Holiday Inn Express' request for attorney fees.

After a jury found for the family and Auto-Owners refused to pay the jury verdict, Holiday Inn Express filed a motion seeking attorney fees and penalty interest. The trial court ultimately found in favor of Holiday Inn Express and granted it attorney fees and costs. The trial court also awarded the family attorney fees and costs.

The Court of Appeals initially held that the trial court erred in finding that the heating equipment exception applied and in awarding attorney fees to Holiday Inn Express and the family. The Michigan Supreme Court reversed the Court of Appeals decision with respect to the heating equipment exception and remanded to the Court of Appeals for further determination as to whether the trial court properly assessed attorney fees and penalty interest against Auto-Owners. On remand, the Court of Appeals held that the trial court erred in assessing attorney fees and penalty interest against Auto-Owners because Auto-Owners' claim against Holiday Inn Express was reasonably in dispute and not frivolous.

In lieu of granting leave to appeal, the Michigan Supreme Court ordered a clarification of the trial court’s assessment of attorney fees, directing the court to "refer specifically to, and base its findings and rulings specifically upon, the provisions of MCR 2.625(A)(2) and MCL 600.2591, and, in particular, on the definitions of 'frivolous' contained in MCL 600.2591(3)(a)(i) through (iii)." Upon reviewing the trial court’s clarification, the Supreme Court ordered the Court of Appeals decision be vacated and the trial court's assessment of attorney fees against Auto-Owners be reinstated because the trial court properly found that Auto-Owners' claim regarding the pollution exclusion in the insurance policy was "inappropriate and devoid of arguable legal merit," and therefore frivolous.

Berkeypile v Westfield Ins. Co., 779 N.W.2d 793

UIM Coverage

Plaintiff was involved in a multi-car accident, and after settling her claim with several of the other parties, brought a UIM action for damages caused by hit-and-run drivers that were not parties to the original settlement. The trial court granted summary disposition in favor of Westfield, pursuant to MCR 2.116(C)(10). The court agreed with defendant that because plaintiff received well over the policy limit for her injuries in settlement payments, she was no longer entitled to any UIM benefits. On appeal by plaintiff, the Michigan Court of Appeals reversed and remanded, holding that defendant would be liable for the excess of any overall damages award over the sum of the settlement proceeds, subject to the policy limit and any allocation of fault determined by the trier of fact.

The Supreme Court of Michigan subsequently reversed the judgment of the Court of Appeals and reinstated the circuit court’s order of summary disposition for defendant. The Court of Appeals erred by not considering paragraph E(1)(a) of the policy which limited plaintiff’s maximum recovery to the highest policy limit of any single policy available. Because plaintiff already received well over the policy limit in settlement payments, she was not entitled to additional recovery under defendant’s UIM coverage policy.

Holman v. Rasak, 785 N.W.2d 98

HIPPA; Ex Parte Interviews

Defendant sought to interview plaintiff’s treating physician in response to a wrongful-death and medical-malpractice action. However, plaintiff refused to waive the physician’s confidentiality rights under HIPPA. Plaintiff did sign a waiver allowing release of medical records, but refused to provide a release for oral communications. In response, defendant moved for a qualified protective order to permit an ex-parte interview of plaintiff’s treating physician.

The issue before the Supreme Court was thus whether HIPPA permits defense counsel to conduct an ex parte interview of a treating physician with a qualified protective order. The court held that ex parte interviews, which are permitted under Michigan Law, are also consistent with HIPPA regulations; provided, however, that “reasonable efforts have been made ... to secure a qualified protective order.” The court further specified that neither HIPPA nor Michigan law requires a covered entity to agree to an informal ex parte interview with defense counsel or to disclose protected health information during such an interview.

Ins. Inst. Of Mich. v. Comm’r of Fin. & Ins. Servs., Dep’t of Labor & Econ. Growth, 785 N.W.2d 67

Insurance Administrative Rules Challenge

The Commissioner promulgated administrative rules disallowing an insurance company from using credit scores to determine insurance rates. Several insurance companies brought an action for a declaratory and injunctive relief. Both parties appealed to the Supreme Court of Michigan. Defendant argues that plaintiffs were not permitted to bring an original declaratory judgment action in the trial court without having first requested a declaratory ruling from the Office of Financial and Insurance Services (OFIS). Plaintiffs challenged the scope of the Commissioner’s administrative rule-making ability.

The Supreme Court declined to rule on the issue regarding the right of plaintiffs to bring a declaratory action. The court reasoned that defendant has expressly waived any procedural issues by arguing that remand is unnecessary and asked the court to reach the substantive issues in the instant case.

First, the court held that the Commissioner exceeded her authority in promulgating rules. Defendant derived her authority from MCL 500.210, 500.2484, and 500.2674. However, the OFIS rules are not “within the matter covered by the enabling statute” because insurance scoring is permissible under the Insurance Code. By enacting a total ban on insurance scoring, a practice that may be employed in a manner that is consistent with the Insurance Code, defendant exceeded her authority as the OFIS Commissioner.

Second, the court held that insurance scoring may be used to establish a premium discount plan. MCL 500.2110a permits insurers to establish and maintain a premium discount plan, provided that the plan is “consistent with the purposes of this act and reflects reasonably anticipated reductions in losses or expenses” and is uniformly applied to all the insurer’s insureds. Evidence in both the administrative record and several affidavits submitted by plaintiffs in the lower court record supported the conclusion that there is a correlation between insurance scores and risk of loss. Plaintiffs anticipate that insurance score discounts will enable them to attract and retain more low-risk customers by offering them lower rates. Thus, insurance scoring satisfied the statutory requirements.

Finally, the court held that insurance scoring does not produce rates that are unfairly discriminatory. MCL chapters 21, 24, and 26 provide that rates shall not be unfairly discriminatory. Defendant argued that insurance scoring is not a reasonable classification system because credit reports are unreliable and their use therefore results in misclassification of policyholders. However, by requiring the Commissioner and other state agencies to obtain credit reports, the Legislature has effectively determined that credit reports are reliable. Because the Commissioner has no authority under the Insurance Code to ban a practice that the code permits, the OFIS rules exceed the scope of the Commissioner’s rulemaking authority.

McCormick v. Carrier, No. 136738, 2010 WL 3063150 (Mich. July 31, 2010).

Judicial Interpretation; No-Fault Insurance Act

Plaintiff broke his ankle when a coworker backed a truck into him. This injury required two surgeries. Prior to the incident, plaintiff worked at a General Motors Corporation plant as a medium truck loader approximately sixty hours a week. After sustaining the injury, he was never fully capable of returning to this job. As a result, he sought relief under MCL 500.3135 which is Michigan’s No-Fault Insurance Act. The trial court refused to grant relief on the basis that the plaintiff had recovered well and did not meet the “serious impairment” threshold of MCL 500.3135(1). The Court of Appeals affirmed the trial court’s decision.

The Michigan Supreme Court reversed the decision while also overruling its prior decision in Kreiner v. Fischer. The court set forth the proper test for determining whether there had been a serious impairment of a bodily function. First, the court must determine whether there is a factual dispute regarding the nature and extent of the person’s injuries, and if so, whether the dispute is material to determining if the serious impairment of body function threshold is met. If there is no factual dispute, or no material factual dispute, then whether the threshold is met is a question of law for the court. If the ultimate decision lies with the court, it must consider the following three prongs that are necessary to establish a “serious impairment of body function”: (1) an objectively manifested impairment (observable from actual symptoms or conditions); (2) of an important body function (a body function of value, significance, or consequence to the injured person); (3) that affects the person’s general ability to lead his or her normal life (influences some of the plaintiff’s capacity to live in his or her normal manner of living). The court also noted that this analysis is fact and circumstance specific and must be conducted on a case-by-case basis. Here, the court held that the plaintiff met the serious impairment threshold as a matter of law and reversed and remanded to the trial court.

Myers v. Muffler Man Supply Co., 775 N.W.2d 795

Employer Negligence in Injury at Work

Plaintiff’s arm was amputated after he attempted to clean a large machine during the course of his employment. The machine had been installed and maintained by a third party, who slightly altered the machine during the installation process by removing a guard and scraper. The circuit court denied defendant’s motion for summary disposition. The Michigan Court of Appeals reversed the circuit court’s denial. Specifically, the court found that defendant owed a duty to maintain and repair the machine and that duty was breached when defendant removed and failed to replace the guard and scraper. The court dismissed any claim plaintiff had based on defendant’s breach of its duty to maintain and repair the specific machine on proximate cause grounds, but did not grant defendant summary disposition on the entirety of plaintiff’s claims. Specifically, the Court of Appeals held that plaintiff’s negligence claim failed the “cause-in-fact” element.

Plaintiff appealed to the Supreme Court of Michigan to review whether the Court of Appeals erred in concluding that defendant was entitled to judgment as a matter of law on the question of whether defendant’s negligence was a cause-in-fact of plaintiff’s injuries. Following oral arguments, the Supreme Court denied the application. The court was not persuaded that “the question presented should be reviewed by this court.”

People of the State of Mich. v. Mardlin, No. 139146, 2010 WL 3037770 (Mich. July 31, 2010).

Admissibility of Evidence; Doctrine of Chances

Defendant was convicted of arson of a dwelling house and burning insured property. The Court of Appeals reversed concluding that the trial court improperly admitted evidence that associated the defendant with four previous home or vehicle fires in the 12 years preceding the most recent incident. Each incident involved an insurance claim and arguably benefited the defendant in some way. This evidence, argued the prosecution, rebutted the defendant’s claim that he did not intentionally set the fire that resulted in the charges.

On appeal, the Michigan Supreme Court held that the evidence was admissible because it was not offered to prove defendant’s bad character or his propensity to act in conformity therewith. Instead, the evidence was non-character evidence, which was admissible under the theory of doctrine of chances. This theory provides that as the number of incidences of an out-of-the-ordinary event increases in relation to a particular defendant, the objective probability that the charged act and/or the prior occurrences were not the result of natural causes increases. The court concluded that the frequency of past fires associated with the defendant suggested a lack of coincidence in the case at hand and was thus admissible.

Regents of the Univ. of Mich. v. Titan Ins.Co., 2010 WL 3037798 (Mich. July 31, 2010).

State Exemption From One-Year-Back Rule

A man was injured in an automobile accident and treated at the University of Michigan Health System. Because he was not covered under a no-fault insurance policy, he sought personal protection insurance benefits through the Michigan Assigned Claims Facility less than one year later. As a result, Titan Insurance Company was designated as the servicing insurer for his claims. In 2006, plaintiff filed suit seeking reimbursement for the cost of his hospitalization. The defendant argued the one-year-back rule of MCL 500.3145(1) barred recovery of damages. This rule provides that a plaintiff may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced. Plaintiff responded that MCL 600.5821(4) supersedes MCL 500.3145(1) and allows the state and its political subdivisions to file suit without limitation. The trial court dismissed the suit, and the Court of Appeals affirmed the decision based largely on the appellate case Liptow v. State Farm Mut. Ins. Co.

The Michigan Supreme Court reversed the appellate court’s decision, holding that the state and its entities listed in MCL 600.5821(4) may bring an action and recover costs despite the limiting provisions of MCL 500.3145(1), including the one-year-back rule. The court also overruled its decision in Cameron v. Auto Club Ins. Ass’n and the Court of Appeals decision in Liptow. In conclusion, the state or any entity listed in MCL 600.5821(4) may now recover any portion of the damages incurred more than 1 year before the date on which the action was commenced.

State Farm Mut. Auto. Ins. Co. v. Hudson, 780 N.W.2d 304

Service of Process and the “Diligent Inquiry” Standard

Following an automobile accident, plaintiff attempted and failed to locate and serve defendant. The trial court allowed alternative service, pursuant to MCR 2.105(I), at the home of defendant's brother who was also a party to the action. Defendant claims service was never received, and subsequently, default judgment was entered against defendant. Defendant moved to set aside the entry of default and default judgment. The circuit court denied defendant’s motion and the Michigan Court of Appeals affirmed, holding that defendant failed to demonstrate why this would not constitute a reasonable alternative service.

The Supreme Court of Michigan, in lieu of granting leave to appeal, reversed the Court of Appeals decision and remanded the case to the district court with directions to grant defendant’s motion to set aside the entry of default and default judgment. The court held that the district court abused its discretion by allowing the substituted service in the instant case. Specifically, it found that plaintiff did not demonstrate a “diligent inquiry” to discover defendant’s present address, as required by MCR 2.105(I)(2). Because defendant was not properly served and did not appear in court, the district court lacked personal jurisdiction over him.

APPELLATE COURT DECISIONS

• Insurance Coverage Decisions

Auto Club Group Ins. Co. v. Booth, No. 290403, 2010 WL 3418355, (Mich. Ct. App. Aug. 3, 2010).

Exclusion of Criminal Acts

Michael Bordo was injured when John Booth inadvertently shot him with an automatic handgun. Booth wrongly believed that the handgun was unloaded. Both men were socializing and admittedly intoxicated when the incident occurred. Booth pleaded no contest to a misdemeanor and was ultimately convicted. Bordo filed a personal injury lawsuit against Booth, but Auto Club Group Insurance Company filed its own action claiming the criminal act exclusion of the Booth’s homeowner’s policy did not cover this incident. The trial court concluded that the exclusion did not apply because a reasonable person would not have expected bodily harm to result when pulling the trigger of what the person believed to be an unloaded gun. It accordingly granted summary disposition in favor of the defendants.

The appellate court reversed the trial court’s decision. The court noted Booth’s no contest plea to the misdemeanor did not conclusively prove that he committed a crime. However, the facts sufficiently established that Booth acted carelessly. His carelessness proved that he committed a misdemeanor. As a result, the criminal acts exclusion applied.

Bradley v. State Farm Mutual Auto. Ins. Co., No. 292716, 2010 WL 3766883 (Mich. Ct. App. Sept. 28, 2010).

Requirement to Join All Tortfeasors

The plaintiff’s insurance policy with the defendant required her to join all tortfeasors. Her injuries occurred in an automobile accident with William Bowen driving the other automobile. She filed a complaint against Mr. Bowen as driver of the car and Sandra Bowen as owner of the car. However, Sandra’s policy with AIG specifically excluded Mr. Bowen from coverage. Sandra was dismissed, and the plaintiff obtained default judgment against Mr. Bowen for $50,000.00. She ultimately sued the defendant because it refused to pay benefits under her policy. It argued she failed to join Mr. Bowen and Sandra Bowen as parties to the action, which was a breach of contract. The trial court granted summary disposition in defendant’s favor.

The appellate court reversed that decision. First, it held the defendant must establish the plaintiff’s failure to join the parties actually prejudiced its position. With respect to the subrogation rights, Bowen was not released from liability and had a judgment entered against him for $50,000.00. The plaintiff’s policy limit was $25,000.00, so the court found no prejudice in the defendant’s subrogation rights. With respect to its right to defend, the plaintiff still had to prove her tort cause of action relative to the accident. The policy specifically held the defendant was not bound by judgment against any person other than the defendant. The case was therefore remanded for further proceedings.

 

Henry Ford Health Sys. v. Esurance Ins. Co., No. 288633, 2010 WL 2292084 (Mich. Ct. App. June 8, 2010).

No-Fault Insurance Benefits; Stolen Vehicles

Plaintiff Henry Ford Health System provided medical services to Travis Hamilton, who was severely injured when a stolen Jeep Cherokee in which he was a passenger struck a utility pole. Plaintiff filed an action against Esurance Insurance Company, the insurer of the stolen vehicle, to recover the cost of Hamilton’s medical treatment as a no-fault benefit under MCL 500.3101. The jury entered a judgment in favor of Esurance, finding that Hamilton was using the Jeep at the time of the accident, that he had unlawfully taken the vehicle, and that he did not reasonably believe that he was entitled to take and use the jeep. Plaintiff appealed the denial of its motion for summary judgment granting payment as a matter of law.

The appellate court reversed, holding that plaintiff was entitled to its claim for payment because there was a complete absence of evidence that Hamilton himself “had taken” the stolen vehicle as required to void no-fault benefits.

McNeel v. Farm Bureau Gen. Ins. Co., No. 285008, 2010 WL 2594636 (Mich. Ct. App. June 29, 2010).

Arson, Vacancy Clause, and Penalty Interest

This insurance coverage dispute stemmed from a fire that destroyed a farmhouse insured by defendant. Coverage was originally provided to Kathleen McNeel, but later transferred to Kathleen McNeel Revocable Living Trust. The farmhouse was destroyed as a result of arson, and defendant denied the claim on the basis of policy language that prohibited claims when a building is “vacant beyond a period of sixty consecutive days”, or is unoccupied “beyond a period of six-consecutive months.” The trial court ruled against the defendant, deciding the house was not unoccupied for the requisite time period to void the claim. The court also awarded penalty interest for a claim not timely paid according to the decision in Griswold, 276 Mich. App. 551. Defendant appealed, most notably, on the issues of improper jury instruction for the definition of “unoccupied” and the improper use of Griswold to award penalty interest.

The appellate court affirmed the trial court in denying the claim and awarding penalty interest. The court drew a distinction between vacant and unoccupied, and held Griswold was the proper standard for penalty interest. The appellate court also held that in order for the claim to be void, plaintiff’s house must have been unoccupied “beyond” the period of six consecutive months prior to the loss. Furthermore, one day of occupancy will end that time period and thus create a new time period.

Miller v. Citizens Ins. Co., No. 290522, 2010 WL 1926080 (Mich. Ct. App. May 13, 2010).

Proportionate Attorney Fees From Payment For No-Fault Medical Bills Reimbursement

Plaintiff as guardian and conservator for Ryan Scott Miller, filed a lawsuit against Citizens Insurance Company for no-fault benefits from an accident in which Ryan sustained severe and permanent injuries, including a spinal cord injury that rendered him a paraplegic and a severe closed head injury. Citizens had denied the application for no-fault benefits, stating the vehicle at issue was not to be used for business purposes and as such, the policy was void. Attorneys were retained to represent Ryan’s interests, and the trial court ordered Citizens to make payment to the medical providers of Ryan, including Detroit Medical Center. A portion of the amount granted to DMC from Citizens was reserved for plaintiff’s attorneys, and DMC appeals this proportionate reduction.

The appellate court held that plaintiff’s attorneys had a right to be paid for their services from the amount DMC recovered from Citizens. The court further reasoned that this decision was fair to medical providers because if not for plaintiff’s attorneys, DMC may have received no payment and/or would have incurred the costs of hiring legal representation.

Mother of John Doe v. Citizens Ins. Co. of America, No. 288776, 2010 WL 293791 (Mich. Ct. App. Mar. 23, 2010).

Exclusion of Sexual Abuse

A young boy was sexually abused in a public bathroom by a teenager. The boy’s parents sued the teenager for false imprisonment and his caretaker for negligent supervision. The parents then filed an action seeking determination of obligations of the defendant insurance company. The court, finding that “sexual molestation” was specifically excluded in the policy, concluded that the insurance company was not liable for the plaintiff’s claims. The court also reasoned that the exclusion did not require an abusive act performed solely by an adult nor did it require the act to be performed with a requisite level of intent.

Progressive Mich. Ins. Co. v. Smith, No. 287505, 2010 WL 933991 (Mich. Ct. App. Mar. 16, 2010).

Named Driver Exclusion

The appellants in this case were injured in an automobile accident when a truck driven by defendant Smith crossed the centerline and struck their vehicle. Smith had no driver’s license when he purchased the truck. In order to obtain license plates and insurance, he included his friend Sheri Harris on the title to the truck. Harris obtained insurance from Progressive, and Smith paid for it. The question before the court was whether appropriate measures were taken to satisfy the “excluded” driver statute, MCL 500.3009(2), effectively making “all liability coverage…void.”

The appellate court concluded that although the declaration page of the insurance policy contained the necessary, exact language for an excluded driver according to the statute, the warning on the face of the policy and on the certificate of insurance did not. Thus, the named driver exclusion in the policy was invalid because it did not strictly comply with MCL 500.3009(2). The insurance policy used the word “responsible” rather than the statutorily-required word “liable.”

Tinnin v. Farmer’s Ins. Exch., No. 286141, 2010 WL 364187 (Mich. Ct. App. Feb. 2, 2010).

Unreasonable Cancellation of Coverage Based on IME; Attorney Fees

A car struck plaintiff as he crossed the street, and he was subsequently treated for bone fractures in his right leg and a possible closed head injury. A neuropsychological evaluation revealed that he suffered from mild mental retardation and borderline intelligence and that he suffered a mild closed head injury in the accident. For approximately two and one-half years, defendant reimbursed plaintiff for the cost of attendant care services and PM&R, but discontinued all coverage after receiving the results of two independent medical evaluations. Although the jury found cancellation of attendant care services was reasonable, the jury determined plaintiff was entitled to payment for PM&R. In addition, because it was unreasonable to cancel the PM&R payments, plaintiff was also awarded attorney fees and taxable costs in excess of 65,000 dollars. Farmer’s appealed these fees as excessive.

The appellate court affirmed the attorney fees, finding defendant acted unreasonably by not clarifying the results of the solitary IME from which it based the coverage cancellation decision. In addition, the attorney fees satisfied the Wood test outlined by the Michigan Supreme Court for what constitutes a “reasonable” attorney fee under MCL 500.3148(1).

United Servs. Auto Ass’n v. Mich.Catastrophic Claims Ass’n, No. 289579, 2010 WL 2505916 (Mich. Ct. App. June 22, 2010).

No-Fault Insurance Coverage; Registered Out-of-State Vehicle

Mr. Raaoul Farhat had insured five vehicles through plaintiff’s no-fault auto insurance policy. However, the underwriting department had mistakenly omitted the vehicle involved in the accident from the policy. After the accident, plaintiff retroactively reformed Mr. Farhat’s insurance policy to include coverage, paid a judgment for PIP benefits to Farhat, and then sought to recover from defendant the excess $250,000.00 that it paid on behalf of Farhat. Plaintiff argued that Farhat properly insured the vehicle under Michigan law, and MCL 500.3104(2) mandates indemnification. Defendant contested that it was not required to reimburse plaintiff because the vehicle was purchased and registered in Florida, and indemnification was only possible for Michigan vehicles that are registered in Michigan.

The court ruled that under MCL 500.3104(2), the defendant must indemnify an insurer when the insurer paid benefits pursuant to a policy written in Michigan that provided for the required security under MCL 500.3101(1) for a vehicle required to be registered in Michigan. The court concluded Mr. Farhat’s vehicle was not required to be registered in Michigan since it was not operated in Michigan. Therefore, defendant was not required to reimburse plaintiff.

• UM/UIM Decisions

Dancey v. Travelers Prop. Cas. Co., No. 288615, 2010 WL 1328952 (Mich. Ct. App. Apr. 6, 2010).

“Insured” and Sufficient Physical Nexus Necessary

Plaintiff was involved in a single vehicle accident after hitting a ladder lying in the roadway. Plaintiff filed a complaint seeking UIM benefits from defendant insurance company under a policy issued to Maryland Electric Company. Defendant moved for summary disposition on the grounds that plaintiff was not an “insured” as defined in the policy for UIM coverage, and also that there was no evidence the accident was caused by a driver of an “uninsured motor vehicle.” The trial court denied the motion, ruling plaintiff’s vehicle was covered and there was at least a genuine issue of material fact as to whether the driver of an uninsured vehicle caused the accident. Defendant appealed.

The appellate court affirmed the rejection of defendant’s motion for summary disposition, but found that the trial court erred in finding that the vehicle was covered since there was an issue of fact concerning if plaintiff was really an “insured.” The court also remanded the issue of whether the accident was caused by the driver of an uninsured motor vehicle, to be determined based on whether there was a substantial physical nexus between the hit-and-run vehicle and the ladder.

Ulrich v. Farm Bureau Ins., No. 289467, 2010 WL 1727475 (Mich. Ct. App. Apr. 29, 2010).

UM/UIM Contractual Limitations Period

The Office of Financial and Insurance Services (OFIS) issued a notice and order of prohibition barring no fault automobile insurance forms with contractual limitations periods of less than three years for UM claims. Farm Bureau had issued the plaintiff a policy with a one-year limitation period prior to this order. This policy renewed every six months without modification.

The appellate court held that the order only prohibits the issuance, advertisement, and delivery of policies with one-year limitations periods, but does not prohibit their renewal or re-issuance. Because this policy was in effect prior to the date of the order, its one-year limitations period was enforceable. The appellate court also held that a UM claim could not be considered timely by relating it back to the original complaint. The court reasoned the relation back doctrine applies only to statutory limitation periods, not contractual limitation periods.

• Employment Decisions

Johnson v. Detroit Edison Co., No. 289763, 2010 WL 2390196 (Mich. Ct. App. June 15, 2010).

Employer Intentional Tort; Alleging Employer Knew Injury Was “Certain to Occur”

Plaintiffs, who were employed as power plant operators of defendant, Detroit Edison Co., were emptying bottom ash from an industrial furnace when the boiler exploded resulting in serious and minor burns. Defendant’s motion for summary disposition, alleging plaintiffs did not meet their burden for asserting an employer intentional tort, was denied. Defendant appealed.

The appellate court affirmed, holding that a jury may conclude an employer knew an injury was “certain to occur,” thus fulfilling one portion of MCL 418.131(1), when (1) the employer subjects an employee to a continuously operative dangerous conditions that it knows will cause an injury, (2) that the employer knows that its employees are taking insufficient precaution to protect themselves again that danger, and (3) that the employer does nothing to remedy the situation.

Ward v. Titan Ins. Co., No. 284994, 2010 WL 934005 (Mich. Ct. App. Mar. 16, 2010).

Personal Protection Provision; Proper Coverage

The plaintiff was injured in an automobile accident. He requested benefits, under a personal protection provision in the insurance policy, for wage loss, penalty interest, attorney fees, and housing expenses. Plaintiff appealed the trial court denial of work loss benefits, attorney fees, and penalty interest, while defendant, Titan Insurance, cross-appealed the award of housing expenses.

The appellate court reversed the trial court’s grant of summary disposition for the defendant regarding plaintiff’s claim of work loss benefits because factual questions existed with respect to plaintiff’s employment. The appellate court also found that plaintiff’s work loss benefits were not forfeited because his employer did not comply with the earnings documentation in MCL §500.3158 nor were they forfeited because plaintiff did not pay income taxes on his wages. The court did, however, reduce the amount awarded for housing expenses. The court held that plaintiff was not entitled to compensation in the full amount he paid for rent, but only for expenses that increased as a result of his injury. The attorney fees and penalty interest claims were remanded to the trial court for further proceedings.

• Premises Liability Decisions

Hadden v. McDermitt Apartments, LLC, 782 N.W.2d 800 (Mich. Ct. App. 2010).

Duty to Keep Common Areas Fit For the Use Intended by the Parties

A tenant resided on the second floor of an apartment building. As the tenant walked up the stairs, she slipped on black ice and fell, fracturing her hip. The record was unclear whether she noticed snow or ice on the stairway prior to her fall, but she testified that she did not see the ice prior to her fall because the stairway was too dark and it was black ice. The tenant brought suit against the landlord and claimed the landlord failed to comply with MCL 554.139, which protects lessees and licensees of residential property by stating that the lessor or licensor of a residential premises covenants “that the premises and all common areas are fit for the intended use by the parties.” The trial court denied the landlord’s motion for summary judgment, and the landlord appealed.

The Appellate Court held that the primary purpose of a stairway is walking, so a “snow and ice-covered stairway may not have been fit for its intended use at the time of plaintiff’s fall.” Thus, the issue was a question of fact for the jury.

Jones v. Daimlerchrysler Corp., No. 285099, 2010 WL 46900 (Mich. Ct. App. Jan. 7, 2010).

Owner’s Liability For Workplace Hazard

Plaintiff was injured when he fell through a trapdoor opening in a mezzanine walkway. This walkway was located in defendant’s Sterling Heights plant. At the time of the accident, plaintiff was working for Durr Systems, who defendant had hired to change over a multitude of conveyor components used on the paint line of the assembly plant. On the night of the incident, plaintiff’s co-worker had walked up the stairs to inspect and open a section of grating so that a conveyer could be lifted through to the next level. Unbeknownst to the co-worker, plaintiff had followed behind him up the stairs to distribute paychecks. The co-worker had opened the hinged grating, and it was not open for more than 10 seconds before plaintiff walked right by him into the hole. Plaintiff appeals the trial court’s grant of summary disposition in favor of defendant.

The appellate court affirmed the summary disposition with respect to the dangerous condition created by the open trapdoor, holding that defendant could not, nor should not have known of the dangerous condition created by plaintiff’s co-workers. The court reversed summary disposition, however, on the general issue of presence, location, and design of the trapdoor. The court remanded the question of whether or not sufficient warning or safeguards should have been provided to all by defendant given the location and design of the trapdoor.

Skrine v. Vanderbeek, No. 290469, 2010 WL 3418433 (Mich. Ct. App. Aug. 31, 2010).

Duty of Care; Actual or Constructive Knowledge of Dangerous Condition

Plaintiff fell in defendants’ parking lot and subsequently sued, alleging that she fell on “uneven” or “broken” pavement at the defendants’ dental office. However, the plaintiff later testified that she fell when the cement curb crumbled. The trial court granted summary disposition to the property owners on the basis that no material fact existed regarding whether they knew or should have known of any defect with respect to the curb. It also granted summary disposition to the lessees of the property because no evidence was presented to support that these defendants owed the plaintiff a duty of care.

The appellate court affirmed the summary disposition with respect to all defendants. It held that the existence of a duty of care is dependent on the knowledge of a dangerous condition. As a result, the sole issue was whether any defendant knew or should have known of the dangerous condition. The court concluded that no defendant had actual or constructive knowledge of the condition. The court focused on the fact that the plaintiff acknowledged during her testimony that she had no evidence concerning defendants’ knowledge of the curb’s condition and no evidence how long it existed. In addition, she had testified that the parking lot looked smooth on the day of the incident and “very safe.”

• Governmental Immunity Decisions

Blue Harvest, Inc. v. Dept. of Transp., No. 281595, 2010 WL 1727620 (Mich. Ct. App. Apr. 29, 2010).

Sovereign Immunity; Trespass-Nuisance Exception

Plaintiffs, who work as commercial blueberry farmers, sued the Department of Transportation alleging that the salt used on the roadways was damaging the blueberry bushes on their property. The trial court granted summary disposition in favor of plaintiffs on the trespass nuisance claim because it found a limited trespass-nuisance exception to governmental immunity under MCL § 691.1407(1).

The appellate court reversed and found no trespass-nuisance exception existed for suits against the state. The court distinguished Hadfield v. Oakland Co Drain Comm’r, 430 Mich 139, 147-149 (1988) overruled by Pohutski v. City of Allen Park, 465 Mich 675 (2002), because the immunity discussed in those cases only pertained to the local government and not the state.

Dextrom v. Wexford County, 789 N.W.2d 211 (Mich. Ct. App. 2010).

Landfills; Proprietary Function Exception to Governmental Immunity

This case arises from defendants Wexford County, Wexford County Landfill, and the Wexford County Department of Public Works' operation of a landfill. Plaintiffs are property owners who allege that contaminants from the landfill entered their groundwater, causing property damage and other economic injuries. Defendants asserted a defense of governmental immunity. The trial court found that, although defendants' unlicensed operation of the landfill was not ultra vires and therefore within the protection of immunity, there were still questions of material fact concerning whether the operation fell within the proprietary function exception to governmental immunity. Defendants appealed the trial court’s denial of their motion for summary disposition because of Governmental Immunity.

The appellate court affirmed the trial court, concluding that although landfills are generally a governmental function and thus covered by governmental immunity, there were questions of material fact relating to whether or not the landfill operation fell within the proprietary function exception to governmental immunity. The case was remanded for further proceedings.

Dybata v. County of Wayne, Nos. 283413 & 283414, 2010 WL 1135975 (Mich. Ct. App. Mar. 25, 2010).

“Sewage Disposal Event” Exception; Requisite Notice

Plaintiffs sued the city and the county to recover damages that resulted when sewage backed into their homes following a significant rainfall. Section 17 of the Governmental Tort Liability Act (GTLA), MCL 691.1417, provides an exception to the doctrine of governmental immunity allowing individuals to sue for damages resulting from a “sewage disposal event” when certain conditions are met. The issue before the court was whether plaintiffs’ claims were barred because they did not provide written notice of their claims directly to the county as mandated by the GTLA, MCL 691.1419(1).

The appellate court held that the notice condition, although not technically fulfilled under 691.1419(1), was sufficiently satisfied based on the fact the county received notice that an event had occurred, and was also provided with a list of names, addresses, and telephone numbers of the affected houses.

Lameau v. City of Royal Oak, Nos. 290059 & 292006, 2010 WL 2756971 (Mich. App. Ct. July 13, 2010).

Denial of Governmental Immunity; “Guy Wire” Death

Plaintiff died when, while riding a gas scooter, he struck a “guy wire” of defendant Detroit Edison Co. that was strung across defendant Royal Oak’s sidewalk. The “guy wire” was a thick, steel cable running down from a telephone pole and anchored to the ground for support. Defendant Gaglio was responsible for constructing the sidewalk according to the path set out by Royal Oak in paint and stakes. Although the guy wire was directly in the path of the sidewalk, Gaglio followed instructions of Royal Oak to fill asphalt around the wire and barricade that portion of the sidewalk to prevent use by pedestrians. However, pedestrians consequently removed the barricades to gain access to the sidewalk, and numerous requests to Detroit Edison to move the wire were not acted upon before the death at issue. Defendant City of Royal Oak appealed the trial court’s denial of their motion for summary disposition on the basis of governmental immunity according to the highway exception, MCL 691.1401.

The appellate court affirmed the trial court’s denial of summary disposition on the basis of governmental immunity. The court held the anchor and guy wire were part of the sidewalk such that Royal Oaks can be found liable for harm caused by failure to remedy the defect.

McLean v. Phenix, No. 290781, 2010 WL 3389275, (Mich. Ct. App. Aug. 26, 2010).

Governmental Immunity; “Medical Care or Treatment” Exception

Plaintiffs filed suit against the defendants after their daughter died unexpectedly. She suffered from multiple physical and mental illnesses and had an extensive psychiatric history that included several suicide attempts. The complaint alleged ordinary negligence, gross negligence, intentional misconduct, and civil conspiracy on the part of the defendants. The defendants moved for summary disposition arguing they were entitled to governmental immunity. Defendant Hiawatha Behavioral Health is a community mental health services agency. The defendants’ claimed that the “medical care or treatment exception” to governmental immunity under MCL 691.407(4) did not apply to mental health care or treatment. The trial court denied the defendants’ motion on the basis that mental health treatment falls within the “medical care or treatment” exception. Defendants appealed the trial court’s decision on this issue.

The appellate court affirmed the trial court’s holding. The court based its decision on the plain language of the exception that uses the broad phrase “medical care or treatment” and the omission of any language restricting or limiting the exception to only treatment for physical illnesses. The court remanded to the trial court for further proceedings.

Ward v. Mich. State Univ., 782 N.W.2d 514 (Mich. Ct. App. 2010).

Governmental Immunity; State Universities

Plaintiff was struck with a puck while at a Michigan State University college hockey game. Plaintiffs claimed the University’s failure to use plexiglass to protect spectators made it liable. The University argued that it was not liable because it was immune from tort liability pursuant to MCL §691.1413. The statute gives tort immunity to governmental agencies engaged in governmental functions, but allows an exception to immunity if the function is proprietary. The trial court ruled in favor of defendant, and plaintiffs appealed.

The appellate court affirmed the trial court’s decision. The appellate court held that the University was a governmental agency, and that intercollegiate athletes are government functions. The court further held that the activity did not fall into the proprietary exception because the University was not operating the ice hockey program primarily to make a profit.

• Other Significant Decisions

Duffy v. Grange Ins.Co of Mich., No. 290198, 2010 WL 3655979 (Mich. Ct. App. Sept. 21, 2010).

Applicability of Amendment to No-Fault Statute

In an accident while operating her off road vehicle (ORV), plaintiff sustained injuries that ultimately left her paralyzed. The defendant insured her under a no-fault automobile policy, but refused to pay under that policy. The defendant then moved for summary disposition pursuant to MCL 500.3101(2)(e), which excludes ORVs from the definition of motor vehicles. The legislature added that language in 2008. The ultimate issue was whether the amendment applied prospectively or retroactively. The trial court decided it applied retroactively and granted summary disposition in defendant’s favor.

The appellate court reversed, holding the amendment to the statute applied prospectively. The legislature did not include any clear, unequivocal language that it applied retroactively. It also knew that Michigan courts held for over 20 years that ORVs fit into the definition of a “motor vehicle” under the no-fault act. Thus, the retroactive application of MCL 500.3101(2)(e) was improper, and the case was remanded for further proceedings.

Holland v. Trinity Health Care Corp., No. 280657, 2010 WL 933975 (Mich. Ct. App. Mar. 16, 2010).

Interpretation of “Usual and Customary Charges”

Plaintiff presented for care but was uninsured and subsequently signed an agreement in which she promised to pay for all services rendered at “usual and customary charges.” Plaintiff then refused to pay the charges as listed under defendant’s index of undiscounted charges, claiming that “usual and customary charges” meant she would receive the same discounted payments accepted from others with insurance and other third party payors. The trial court ruled in favor of defendant, and plaintiff appealed arguing the terms at issue are ambiguous.

The appellate court affirmed the trial court’s decision, finding the language unambiguous in that such a clause reasonably refers to the amount listed under the index of undiscounted charges, rather than the amount defendant accepts as payment from the majority of its clients. 

Nuculovic v. Hill, 783 N.W.2d 124 (Mich. Ct. App. 2010).

Metropolitan Transportation Authorities Act; Statute of Limitations

In September 2005, plaintiff was driving a vehicle northbound on Harper Avenue, at an intersection with a highway entrance ramp, when defendant Hill, driving a bus owned by defendant Smart Bus, turned left in front of her vehicle, causing a collision. In 2006, plaintiff sued defendants alleging negligence. The trial court granted summary disposition for both defendants since plaintiff failed to provide notice within 60 days of the accident in compliance with the Metropolitan Transportation Authorities Act relevant statute of limitations MCL 124.419. Plaintiff appealed.

The appellate court affirmed, holding that the statute of limitations applied to any and all claims in connection with the transportation authority. The court rejected plaintiff’s arguments that the statute of limitations was only intended to apply to claims by phantom bus passengers, or that the statute only applies to claims against common carrier parties and thus defendant Hill should not have been dismissed.

State Farm Mut. Ins. Co. v. Broe Rehab. Servs. Inc., No. 289230, 2010 WL 2867859 (Mich. Ct. App., July 22, 2010).

Statutory Right of Insurance Company to Medical Records of Insured

This case involves a “complaint for discovery” by plaintiff Insurance Company seeking medical records for certain of its insureds that had been provided services by defendants. The trial court denied defendants motion for summary disposition that argued there was no real dispute between the parties.

The appellate court affirmed, holding there was a real dispute since what plaintiff sought was really a declaratory judgment concerning the extent of the rights and responsibilities of parties under MCL 500.3158 and MCL 500.3159 under the no-fault act, and the equitable relief of an order compelling discovery. The court affirmed the statutory right of plaintiff to demand copies of medical records from providers who have rendered treatment or services “in relation to” an insured’s claim, regardless of whether the services be billed or payment be outstanding. The court remanded, however, the issue of whether the right to demand medical records requires insureds to waive privilege or any notice requirement that records have been released.

FEDERAL COURT DECISION

Binay v. Bettendorf, 601 F.3d 640 (6th Cir. 2010).

Governmental Immunity; Excessive Force

A family sued police officers alleging that the officers used excessive force when they handcuffed the family at gunpoint while they searched the family’s home. The appellate court affirmed the trial court’s denial of governmental immunity for the officers.  

To grant governmental immunity for intentional torts, the officers must establish that: (1) the employee undertook the acts during the course of his employment and believed he was acting within the scope of his authority; (2) the officers undertook the acts in good faith; and (3) the acts were discretionary. The officers were not entitled to immunity because it should have been immediately apparent to them that the residence was not a drug house and that the family posed no immediate threat to the officers.

 

SIGNIFICANT CASES PENDING BEFORE THE MICHIGAN SUPREME COURT 

Idalski v. Schwedt, 486 Mich. 916; 781 N.W.2d 803

Uninsured Motorists Benefits

In Rory v Continental Ins Co, 473 Mich 457, 461 (2005), the court found that “unambiguous contracts, including insurance policies, are to be enforced as written unless a contractual provision violated law or public policy.” The Rory Court held that an insurance contract provision that imposed a one-year limitations period on claims for uninsured motorist benefits did not violate public policy and would be enforced. The Michigan Supreme Court asked the parties to address at oral argument whether Rory should be reconsidered.

Plunkett v. Dep’t of Transp., appealed from 286 Mich. App. 168; 779 N.W.2d 263

Highway Exception to Governmental Immunity

MCL 691.1402 provides an exception to immunity such that establishes the duty to maintain highways in "reasonable repair." Michigan courts have cited policy concerns regarding the statute, including keeping highways “reasonably safe and convenient for public travel.” The Michigan Supreme Court has asked the parties to brief “whether the highway exception to governmental immunity, MCL 691.1402(1), applies to an alleged failure to maintain a highway to correct rutting that allegedly resulted in the accumulation of water on the rutted portion of the pavement, causing hydroplaning and the loss of control of the vehicle that led to the fatal accident.”