REGENTS OF UNIV OF MICH V STATE FARM MUTUAL INSUR CO
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STATE OF MICHIGAN
COURT OF APPEALS
REGENTS OF THE UNIVERSITY OF
MICHIGAN,
UNPUBLISHED
January 29, 2002
APPROVED FOR
PUBLICATION
April 23, 2002
9:05 a.m.
Plaintiffs-Appellees/CrossAppellants/Cross-Appellees,
v
No. 224933
Washtenaw Circuit Court
LC No. 98-009599-CZ
STATE FARM MUTUAL INSURANCE
COMPANY,
Defendant-Appellee/CrossAppellee/Cross-Appellant,
Updated Copy
July 19, 2002
and
TRAVELERS INSURANCE COMPANY,
Defendant-Appellant/CrossAppellee.
Before: Fitzgerald, P.J., and Hoekstra and Markey, JJ.
PER CURIAM.
Defendant Travelers Insurance Company appeals as of right the order granting summary
disposition pursuant to MCR 2.116(C)(10) in favor of plaintiffs Regents of the University of
Michigan and granting partial summary disposition in favor of defendant State Farm Mutual
Insurance Company in this dispute over which of two no-fault automobile insurance companies
are obligated to pay for the treatment of George Estes that was provided by plaintiffs through
their University of Michigan Hospital and Health Center. State Farm cross appeals and
challenges the order requiring State Farm to pay attorney fees and interest to plaintiffs. Plaintiffs
also cross appeal and challenge the trial court's calculation of interest.
FACTS AND PROCEDURAL HISTORY
On November 30, 1990, George Estes, a passenger in an automobile driven by Bobby
Gibson and insured by State Farm, was involved in an automobile accident in Michigan. Estes
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was not a policyholder of any automobile insurance policy. Estes suffered serious injuries and
was hospitalized until he succumbed to his injuries on January 4, 1991. Estes' medical bills
totaled $325,802.71.
State Farm's investigation revealed that Estes had been domiciled in the Tennessee home
of his sister and brother-in-law, Lora Mae and Warren King. State Farm informed the Kings by
letter in December 1991 that their automobile insurer was obligated to pay personal protection
insurance benefits relating to Estes. The Kings forwarded the correspondence to Travelers in
January 1992.
On January 28, 1992, a Travelers claims representative forwarded
correspondence to State Farm indicating that Estes resided with the Kings and qualified for
Michigan no-fault benefits as a resident relative and that Travelers would assume responsibility
of any first-party benefits available to Estes. In July 1992, Travelers changed its position and
informed State Farm by letter that it was denying Estes' claim for personal protection insurance
benefits.
State Farm communicated its denial of benefits to plaintiffs in September 1993, but
continued discussions with plaintiffs in an attempt to resolve the claim. In 1994, plaintiffs
brought suit on behalf of the hospital against State Farm. That suit was later dismissed without
prejudice after plaintiffs and State Farm continued to pursue settlement options.
On April 15, 1998, plaintiffs filed the present suit against State Farm, Travelers, and the
Assigned Claims Facility.1 Plaintiffs alleged that Estes was not a policyholder of any automobile
insurance policy. Plaintiffs alleged that Estes was a passenger in an automobile insured by State
Farm at the time of the accident and that State Farm was obligated to reimburse plaintiffs for
Estes' medical expenses pursuant to MCL 500.3114(4), subsection 3114(4) of the no-fault
automobile insurance act, MCL 500.3101 et seq. In the alternative, plaintiffs alleged that Estes
was domiciled with the Kings and Traveler's was obligated to reimburse plaintiffs for Estes'
medical expenses pursuant to subsection 3114(1).
On December 21, 1998, Travelers moved for summary disposition under MCR
2.116(C)(8) and (10). Initially, Travelers argued that plaintiffs' claim was barred by the one-year
statute of limitations contained in MCL 500.3145(1). In the alternative, Travelers argued that
there was no question of fact that Estes was not domiciled with the Kings and had been living in
Mississippi. Travelers attached an affidavit of Joann Willbanks, the Kings' daughter and a
resident of Tennessee, which indicated that Estes had been living in Strickland, Mississippi.
Travelers also attached a letter dated July 15, 1992, advising State Farm that it was not
responsible for payment of benefits to plaintiffs.
On January 20, 1999, State Farm responded to Travelers' motion and filed a cross-motion
for summary disposition under MCR 2.116(C)(5), (7), and (10). Initially, State Farm argued that
Travelers was responsible for payment of benefits to plaintiff for two reasons. First, Travelers
was the responsible insurer because Estes was domiciled with the Kings. State Farm attached the
affidavit of employee Kristina Myslinski and an investigative report that included summaries of
statements obtained from Willbanks, Lora Mae King, and Carlette Hamm, another daughter of
1
The Assigned Claims Facility was dismissed by stipulation of the parties.
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the Kings. State Farm argued that these statements indicated that Estes had a room in the Kings'
home where he kept his personal belongings, including clothing. State Farm further argued that
there was evidence that Estes received his social security checks at the Kings' home and had been
in the King's home just before leaving on his trip. Second, State Farm argued that Travelers was
collaterally estopped from denying responsibility. State Farm relied on the January 28, 1992,
letter it received from Travelers indicating that Travelers would assume full responsibility for
payment of benefits because Estes resided with the Kings. State Farm also noted that Travelers
did not actually deny responsibility for payment of benefits until July 1992.
On January 22, 1999, plaintiffs also moved for summary disposition. Plaintiffs admitted
that Estes' domicile was a question of fact likely to preclude summary disposition. However,
plaintiffs argued that it was ultimately entitled to recover the medical expenses and attorney fees
and interest. Plaintiffs also responded to the motions for summary disposition filed by State
Farm and Travelers, arguing that their claim was not barred by the statute of limitations because
it was exempt from the statute pursuant to MCL 600.5821(4).
On May 6, 1999, the trial court granted plaintiffs' motion for summary disposition,
denied Travelers' motion for summary disposition, and granted in part State Farm's motion for
summary disposition. The trial court determined that subsection 5821(4) superseded the oneyear limitation period in subsection 3145(1). The court reasoned that plaintiffs collectively were
a political subdivision of the state of Michigan and brought this action to recover the cost of
providing hospital services to Estes. The trial court also found that there was no genuine issue of
material fact concerning Estes' domicile. After reviewing all the documentary evidence
submitted, the court determined that Estes was domiciled with the Kings. The court's
determination was based on evidence that Estes had his own room in the Kings' home, that he
kept his room locked, that the room contained his personal belongings, and that Estes used the
Kings' address on his Tennessee driver's license and received his social security checks at the
Kings' address. The court reasoned that evidence concerning Estes' trips to Mississippi was
insufficient to establish a genuine issue of material fact. The court also granted plaintiffs' request
for interest and attorney fees under subsections 3142(3) and 3148(1), MCL 500.3142(3) and
500.3148(1), on the ground that the insurers' actions were unreasonable.
Following the trial court's rulings, the parties entered into a partial settlement. The
parties agreed that the reasonable charge for the medical expenses was $300,000 and that the
reasonable amount for plaintiffs' attorney fees was $15,866 through August 23, 1999. The
parties also agreed to toll the interest from August 26, 1999, until plaintiffs filed the motion for
entry of judgment.
On September 27, 1999, plaintiffs moved for entry of judgment. Plaintiffs requested
interest and attorney fees under subsections 3142(3) and 3148(1) and interest under § 6013 of the
Revised Judicature Act, MCL 600.6013. Ultimately, the trial court concluded that Travelers and
State Farm were both liable for attorney fees under subsection 3148(1) in the amount of $21,641.
The trial court also concluded that Travelers was liable for interest under subsection 3142(3) in
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the amount of $279,616.2 The court also found that plaintiffs were entitled to interest from both
Travelers and State Farm at the fluctuating rate contained in MCL 600.6013(6).
I
Travelers first argues that the trial court erred in granting summary disposition in favor of
plaintiffs. In reviewing a motion under MCR 2.116(C)(10), this Court must determine whether
the evidence presented fails to establish a genuine issue of material fact entitling the movant to
judgment as a matter of law. Arias v Talon Development Co, 239 Mich App 265, 266; 608
NW2d 484 (2000). This Court should consider the pleadings, affidavits, depositions,
admissions, and other documentary evidence available to it. Weakley v Dearborn Heights, 240
Mich App 382, 384; 612 NW2d 428 (2000).
Travelers first contends that the trial court should not have considered Myslinski's
affidavit because the affidavit did not meet the requirements of MCR 2.119(B)(1)(c). MCR
2.119(B)(1)(c) provides that if an affidavit is filed in support of or in opposition to a motion, it
must "show affirmatively that the affiant, if sworn as a witness, can testify competently to the
facts stated in the affidavit." Myslinski's affidavit stated:
1. That her investigative efforts in connection with the claim file involved
here lead [sic] her to make inquiries to determine where George Estes indicating
his residence was for purposes of the United States Government (i.e., The Social
Security Administration) and the state of Tennessee (i.e., for his drivers license).
2. That these investigations lead [sic] to documentation confirming that
for both of these purposes Mr. Estes listed his residence and mailing address as
the home of Lora Mae and Warren King.
3. That copies of the materials received in confirmation of these facts are
attached hereto as Exhibits A & B.
Myslinski stated in her affidavit that she investigated the address used by Estes for social
security and driver's license purposes. She obtained two documents indicating that Estes used
the Kings' address. Myslinski could testify to these facts. Accordingly, the affidavit did not
violate MCR 2.119(B)(1)(c).
Travelers also contends that the trial court improperly considered the investigative report
submitted by State Farm because the report is replete with inadmissible hearsay. Investigator
Jack Wallace wrote the report after he interviewed Willbanks, Lora Mae King, and Hamm.
Although the report contains inadmissible hearsay, MRE 801, any error in the admission of the
report was harmless in light of the fact that State Farm ultimately submitted the affidavits of Mr.
and Mrs. King, Willbanks, and Hamm within the one-week time limit imposed by the court.
2
The court held that State Farm was not liable for interest under the no-fault act because MCL
500.3142(3) awards interest only on payments that are overdue and, because payments from
State Farm were not overdue, it was not responsible for interest under the no-fault act.
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Last, Travelers argues that summary disposition was improperly granted because there is
a genuine issue of material fact regarding Estes' domicile. In granting the motion for summary
disposition, the trial court stated in pertinent part:
The evidence offered by Travelers and State Farm, evaluated in light of
the criteria used by the Michigan Supreme Court and the Court of Appeals in the
cases cited above, does not conclusively establish that Mr. Estes had a single,
permanent residence, with the Kings or otherwise. A number of indicia to
establish domicile, however, lead to the conclusion he was domiciled with the
Kings. There is evidence to suggest that beginning about six months before his
trip to Michigan and his death, Mr. Estes had another regular lodging place in
Mississippi, but it is insufficient, without more, to create a genuine issue of
material fact.
In Dairyland Ins Co v Auto-Owners Ins Co, 123 Mich App 675, 680; 333 NW2d 322
(1983), this Court explained the legal concept of domicile:
Workman v Detroit Automobile Inter-Ins Exchange, 404 Mich 477; 274
NW2d 373 (1979), is the only Michigan Supreme Court case interpreting the term
"domicile" for the purposes of the no-fault act. That decision began its analysis
by pointing out that for insurance purposes the term "domiciled in the same
household" has no absolute or fixed meaning, and must be viewed flexibly in the
context of the numerous factual settings possible.
The Court noted that several factors should be considered in determining domicile, and that these
factors should be weighed or balanced with each other because no one factor is determinative.
"Among the relevant factors are the following: (1) the subjective or
declared intent of the person of remaining, either permanently or for an indefinite
or unlimited length of time, in the place he contends is his 'domicile' or
'household' . . . ; (2) the formality or informality of the relationship between the
person and the members of the household . . . ; (3) whether the place where the
person lives is in the same house, within the same curtilage or upon the same
premises . . . ; (4) the existence of another place of lodging by the person alleging
'residence' or 'domicile.' Workman, pp 496-497. (Citations and footnote
omitted)." [Dairyland, supra at 680-681.]
In Farm Bureau Ins Co v Allstate Ins Co, 233 Mich App 38, 40; 592 NW2d 395 (1998), the
Court also found the following facts indicative of the accident victim's domicile: the accident
victim spent a significant amount of time at the home, the accident victim frequently slept there,
the accident victim had her public assistance checks mailed to her residence, and the school
where the accident victim's children attended had the telephone number for that residence in its
emergency contact information.
Here, Myslinski's affidavit indicated that Estes' driver's license listed the Kings' address.
It also indicated that Estes received his social security checks at the Kings' home. Further, the
affidavits of the Kings, Willbanks, and Hamm indicated that Estes had a room at the Kings'
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home and received his mail at that address. Willbank's affidavit indicated that Estes was a
resident of Mississippi before the accident. Willbank's affidavit, however, is insufficient to
create a genuine issue of material fact. Although the affidavit suggests that Estes was present in
Mississippi for a period before the accident, the affidavit does not provide any facts in support of
a finding that Estes was or intended to be domiciled in Mississippi.
II
Travelers next argues that plaintiffs' claim should be barred by the one-year statute of
limitations for personal protection insurance benefits specified in subsection 3145(1). The trial
court held that subsection 5821(4) superseded subsection 3145(1) and, therefore, plaintiffs' claim
was not barred. Whether plaintiffs' claim is statutorily time-barred is a question of law for this
Court to decide de novo. Ins Comm'r v Aageson Thibo Agency, 226 Mich App 336, 340-341;
573 NW2d 637 (1997).
MCL 500.3145(1) provides in part:
An action for recovery of personal protection insurance benefits payable
under this chapter for accidental bodily injury may not be commenced later than 1
year after the date of the accident causing the injury unless written notice of injury
as provided herein has been given to the insurer within 1 year after the accident or
unless the insurer has previously made a payment of personal protection insurance
benefits for the injury. If the notice has been given or a payment has been made,
the action may be commenced at any time within 1 year after the most recent
allowable expense, work loss or survivor's loss has been incurred. However, the
claimant may not recover benefits for any portion of the loss incurred more than 1
year before the date on which the action was commenced.
MCL 600.5821(4) provides:
Actions brought in the name of the state of Michigan, the people of the
state of Michigan, or any political subdivision of the state of Michigan, or in the
name of any officer or otherwise for the benefit of the state of Michigan or any
political subdivision of the state of Michigan for the recovery of the cost of
maintenance, care, and treatment of persons in hospitals, homes, schools, and
other state institutions are not subject to the statute of limitations and may be
brought at any time without limitation, the provisions of any statute
notwithstanding. [Emphasis added.]
There is no dispute that plaintiffs are collectively a political subdivision of the state of
Michigan or that plaintiffs are seeking recovery of costs for Estes' care and treatment while Estes
was hospitalized. Therefore, plaintiffs have satisfied the requirements of subsection 5821(4).
Travelers and State Farm argue, however, that plaintiffs cannot rely on the exemption from the
statute of limitations in subsection 5821(4) because of the specific statute of limitations in
subsection 3145(1).
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The primary goal of statutory interpretation is to give effect to the intent of the
Legislature. The first step in that determination is to review the language of the statute itself. If
the statute is unambiguous on its face, the Legislature will be presumed to have intended the
meaning expressed, and judicial construction is neither required nor permissible. Should a
statute be ambiguous on its face, however, so that reasonable minds could differ with respect to
its meaning, judicial construction is appropriate to determine the meaning. In re MCI
Telecommunications Complaint, 460 Mich 396, 411; 596 NW2d 164 (1999).
Subsection 5821(4) specifically states that it applies, "the provisions of any statute
notwithstanding." The language of the statute clearly indicates that the Legislature intended to
exempt the state and its political subdivisions from all statutes of limitation. Thus, subsection
5821(4) exempts plaintiff from the statute of limitations contained in subsection 3145(1). This
reading of the statute is also consistent with common law. "At common law, the sovereign was
exempt from the operation of statutes of limitation and remains exempt to this day in the absence
of statutory authority." In re Konke Estate, 98 Mich App 249, 252; 296 NW2d 226 (1980).
Travelers and State Farm also argue that MCL 600.5821(4) does not apply in this case
because plaintiffs' claim derives from Estes and Estes is subject to MCL 500.3145. We disagree.
Although plaintiffs may have derivative claims, they also have direct claims for personal
protection insurance benefits. See, e.g., Munson Medical Center v Auto Club Ins Ass'n, 218
Mich App 375; 554 NW2d 49 (1996) (under the no-fault act, when a person is injured in an
automobile-related accident, a hospital that provides medical care is to be reimbursed by the
injured person's no-fault insurance company); LaMothe v Auto Club Ins Ass'n, 214 Mich App
577, 585-586; 543 NW2d 42 (1995). Further, nothing in subsection 5821(4) limits the statute to
"direct actions."
Travelers asserts, nonetheless, that the doctrine of laches applies to bar plaintiffs'
untimely claim. For laches to apply, Travelers must prove (1) a lack of diligence on plaintiffs'
part and (2) prejudice to the defendant. Jackson v Thompson-McCully Co, LCC, 239 Mich App
482, 494; 608 NW2d 531 (2000). Here, the record indicates that plaintiffs exercised due
diligence in attempting to resolve this matter. In correspondence dated January 28, 1992,
Travelers indicated that it was responsible for payment of no-fault benefits because Estes was
domiciled with the Kings. Travelers later recanted and also denied responsibility in 1992.
Plaintiffs brought suit against State Farm in 1994. That suit was dismissed, without prejudice,
because plaintiffs and State Farm were involved in settlement discussions. Eventually, questions
arose concerning Estes' domicile and State Farm denied responsibility, leading to this suit against
both State Farm and Travelers in April 1998. Under these circumstances, we conclude that the
doctrine of laches does not apply.
III
Travelers next contends that the trial court improperly awarded $279,616 in penalty
interest under MCL 500.3142. Section 3142 provides:
(1) Personal protection insurance benefits are payable as loss accrues.
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(2) Personal protection insurance benefits are overdue if not paid within
30 days after an insurer receives reasonable proof of the fact and of the amount of
loss sustained. If reasonable proof is not supplied as to the entire claim, the
amount supported by reasonable proof is overdue if not paid within 30 days after
the proof is received by the insurer. Any part of the remainder of the claim that is
later supported by reasonable proof is overdue if not paid within 30 days after the
proof is received by the insurer. For the purpose of calculating the extent to
which benefits are overdue, payment shall be treated as made on the date the draft
or other valid instrument was placed in the United States mail in a properly
addressed, postpaid envelope or, if not so posted, on the date of delivery.
(3) An overdue payment bears simple interest at the rate of 12% per
annum.
No-fault interest is awarded as a penalty for the insurer's misconduct and is not intended
to compensate the insured for damages. Attard v Citizens Ins Co of America, 237 Mich App 311,
320; 602 NW2d 633 (1999). To recover interest, a plaintiff is not required to prove that the
defendant acted arbitrarily or unreasonably delayed in payment of benefits. Fortier v Aetna
Casualty & Surety Co, 131 Mich App 784, 793; 346 NW2d 874 (1984). Instead, the statute
"only requires that the insured present the insurer with reasonable proof of loss. If the insurer
does not pay the claim within 30 days after receiving this proof, it becomes liable for interest."
Id.
Here, Travelers acknowledged in a January 28, 1992, letter that it received notification of
the automobile accident and even assumed the responsibility of payment of these benefits. This
letter states, in part:
We received a copy of your letter to our insured, dated December 11,
1991. Through our investigation we have established that the deceased, Mr.
George Estes, resided with our insured and, therefore, qualifies for Michigan NoFault Benefits.
Our insured indicated that he has no further information concerning any of
the medical bills, funeral expenses, etc. . . . Please advise if you have any of this
information and/or if payment has been made for any of these services. Our file
will assume the responsibility of any first party benefits available to the deceased
Mr. Estes.
This letter indicates that Travelers received reasonable proof of the fact that a loss was sustained,
but also indicates that Travelers was not advised of the amount of the loss sustained. Subsection
3142(2) requires both to be present to allow an award of interest. Plaintiffs have presented no
other evidence, besides this letter, that would allow this Court to conclude that Travelers was
advised of the amount of loss before April 15, 1998, when this suit was filed. Hence, we
conclude that plaintiffs are entitled to penalty interest under § 3142(3) calculated only from April
15, 1998. Accordingly, we vacate that portion of the order awarding interest under § 3142 and
the case is remanded to the trial court for calculation of interest in accordance with this opinion.
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IV
Travelers and State Farm maintain that the trial court erred in finding that Travelers and
State Farm acted unreasonably and awarded attorney fees to plaintiffs pursuant to MCL
500.3148(1), which provides:
An attorney is entitled to a reasonable fee for advising and representing a
claimant in an action for personal or property protection insurance benefits which
are overdue. The attorney's fee shall be a charge against the insurer in addition to
the benefits recovered, if the court finds that the insurer unreasonably refused to
pay the claim or unreasonably delayed in making proper payment.
Travelers first argues that whether defendants "unreasonably refused to pay the claim or
unreasonably delayed in making proper payment" was a question for the jury and should not
have been decided by the trial court. We disagree. Subsection 3148(1) specifically provides that
the court should determine whether an insurer unreasonably refused to pay or unreasonably
delayed in making payment. Thus, this was not a question for the jury.
Defendants next argue that a legitimate question existed concerning Estes' domicile and,
therefore, their actions were not unreasonable and attorney fees should not have been awarded.
"When determining whether attorney fees are warranted for an insurer's delay to make payments
under the no-fault act, a delay is not unreasonable if it is based on a legitimate question of
statutory construction, constitutional law, or factual uncertainty." Attard, supra at 317.
Similarly, "[a]n insurer's delay in making payments to an insured is not unreasonable where the
delay is the product of a legitimate question of statutory construction, case law or a bona fide
factual uncertainty." Butt v DAIIE, 129 Mich App 211, 220; 341 NW2d 474 (1983). However,
when the only question is which of two insurers will pay, it is unreasonable for an insurer to
refuse payment of benefits. Darnell v Auto-Owners Ins Co, 142 Mich App 1, 12; 369 NW2d 243
(1985); Bach v State Farm Mut Automobile Ins Co, 137 Mich App 128; 357 NW2d 325 (1984);
Kalin v DAIIE, 112 Mich App 497; 316 NW2d 467 (1982). In Kalin, this Court explained:
Defendant Michigan Mutual, arguing that a delay in payment is not
unreasonable "where it is the product of a legitimate question of statutory
construction, constitutional law, or even a bona fide factual uncertainty," insists
that the trial court erred in ordering the payment of half of plaintiffs' reasonable
attorney fees. Although we concede that a "legitimate question" existed, we
cannot agree with defendant's contention that the delay in payment was the
"product" of a legitimate question. Plaintiff was undoubtedly entitled to no-fault
benefits; the only legitimate dispute was between the two defendant insurance
companies. Under these circumstances insurance companies can avoid liability
for attorney fees by sharing the payment of such a claimant's no-fault benefits and
then settling their differences among themselves. A claimant who is clearly
entitled to no-fault benefits should not be forced to hire an attorney merely
because the circumstances of his accident create problems of priority among
insurers. [Kalin, id. at 509-510.]
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Because the only dispute concerned Estes' domicile, and because there is no dispute that Estes
was entitled to no-fault benefits, the trial court's finding that defendants acted unreasonably was
not clearly erroneous. We find no error in the award of attorney fees to plaintiffs.
Travelers suggests that attorney fees cannot be awarded to plaintiffs because an attorney
is entitled to a reasonable fee for representing a claimant and plaintiffs collectively are not a
claimant. In support of this suggestion, Travelers relies on Darnell, where this Court determined
that the Assigned Claims Facility was not a "claimant" and therefore could not recover attorney
fees. In Darnell, this Court explained:
The statute makes it clear that the attorney who is entitled to fees is the
attorney advising and representing the claimant in an action for PIP benefits
which are overdue. By simply representing the assigned claims facility, it was not
representing a "claimant" in an action for personal or property protection
insurance benefits which were overdue. More importantly, the policy underlying
the penalty provisions of the no-fault act do not support State Farm's claim.
It is clear that the purpose of the penalty provisions of the no-fault act was
to insure that the injured party was promptly paid. In an effort to encourage such,
the Legislature enacted the penalty provisions allowing for both the payment of
attorney fees (where payment is unreasonably delayed) and the payment of 12%
interest on the overdue payment. We do not believe that the Legislature
contemplated payment of such under the circumstances inasmuch as the purpose
of the penalty provisions is served by awarding attorney fees to the claimant, not
the assigned claims facility representative. [Id. at 14-15 (citations omitted).]
In Darnell, State Farm was representing the interests of the state Assigned Claims
Facility and tried to argue that it was in a different position than if it were representing its own
interests as an ordinary no-fault insurer. Id. at 13. The present case is clearly distinguishable.
Plaintiffs are seeking recovery of costs paid for treating Estes while Estes was in the hospital.
Further, payment of attorney fees to plaintiffs does not thwart the purpose behind the penalty
provisions of the no-fault act. Plaintiffs, after the death of Estes, sought recovery of money
expended for the medical care of Estes and essentially became the claimant. The insurance
companies in this case substantially delayed in paying plaintiffs. Thus, requiring these insurance
companies to pay attorney fees would fulfill the purpose behind the no-fault act.
Finally, Travelers argues that the claim for attorney fees was barred by the one-year
statute of limitations in subsection 3145(1). The trial court disagreed with Travelers' argument:
It is true that MCL 600.5821(4) does not expressly exempt a hospital's
claims for no-fault attorney fees and interest from the operations of the statute of
limitations or include them in the definition of what claims are exempt. Neither,
however, does it require or even suggest that a court scrutinize each item of
damages in an action by a hospital to determine whether it is part of the cost of
treating a patient. In any event, the statute preserves actions "for the recovery of
the cost of maintenance . . . of . . . hospitals." Attorney fees incurred in an effort
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to recover the cost of treating a patient constitute part of the cost of maintaining a
hospital, as demonstrated by the present case.
Travelers disputes the result reached by the trial court. Travelers asserts that the trial court
misinterpreted the statutory language of MCL 600.5821(4), which provides:
Actions brought in the name of the state of Michigan, the people of the
state of Michigan, or any political subdivision of the state of Michigan, or in the
name of any officer or otherwise for the benefit of the state of Michigan or any
political subdivision of the state of Michigan for the recovery of the cost of
maintenance, care, and treatment of persons in hospitals, homes, schools, and
other state institutions are not subject to the statute of limitations and may be
brought at any time without limitation, the provisions of any statute
notwithstanding. [Emphasis added.]
Subsection 5821(4) exempts "actions brought" by the state or its political subdivisions
from the statute of limitations "for the recovery of the cost of maintenance, care, and treatment of
persons in hospitals . . . ." Indeed, statutes of limitation and exemptions apply to causes of
action, not to types of damages. Therefore, Travelers' argument that plaintiffs cannot recover
attorney fees because attorney fees are not exempt under the statute is nonsensical. It would be
absurd to think that a prevailing party would not be entitled to attorney fees because it was not
specifically listed as exempt from the statute of limitations. Thus, given the longstanding rule of
statutory construction, that statutes should be construed to prevent absurd results, injustice, or
prejudice to the interests of the public, Camden v Kaufman, 240 Mich App 389, 395; 613 NW2d
335 (2000), we reject Travelers' argument.
V
State Farm argues that the trial court erred in concluding that MCL 500.3148(1) allowed
the court to order State Farm and Travelers jointly liable for plaintiffs' attorney fees despite the
fact that Travelers was ultimately determined to be the insurer responsible for payment of
benefits. We disagree.
In Kalin, supra, defendants DAIIE and Michigan Mutual, two insurance companies, each
argued that the other was responsible for payment of no-fault benefits to the plaintiff. This Court
concluded that defendant DAIIE was the responsible insurer. Kalin, supra at 508. However, this
Court affirmed the trial court's decision to require both defendant DAIIE and defendant
Michigan Mutual to share equally the plaintiff 's reasonable attorney fees. Id. at 509-510.
State Farm argues that Kalin was wrongly decided. However, State Farm cites no
authority for this proposition. Further, this Court in Darnell, supra, relied on Kalin to reach the
same result. In Darnell, defendant Auto-Owners complained that the trial court required it to
pay attorney fees, along with defendant Dairyland. Darnell, supra at 11. This Court explained:
Initially, we note that, in light of our holding that Auto-Owners
improperly rescinded plaintiffs' policy of insurance under the facts of the instant
case, its argument that it was ultimately correct and therefore justified in denying
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benefits is inapposite. In any event, Kalin, supra, instructs that, even where an
insurer prevails on the primary issue on appeal after having attorney fees levied
against it pursuant to § 3148, it is not automatically free from liability for the
payment of the attorney fees. Problems of priority among insurers should not
cause delay in payment of benefits to which the claimant is entitled. . . .
The trial court in the instant case found that defendants "definitely had a
place in the priority sections" and that payment should have been made because
plaintiff was entitled to no-fault benefits from someone. In light of Kalin, supra,
we agree. The lower court's finding of unreasonableness as to Auto-Owners was
not clearly erroneous. [Id. at 12-13.]
VI
Last, plaintiffs argue on cross appeal that interest should have been ordered at the fixed
twelve percent interest rate that is applicable to written instruments pursuant to MCL
600.6013(5) rather than at the floating rate provided in MCL 600.6013(6).
Plaintiffs argue that the twelve percent interest rate contained in subsection 6013(5)
applies because an insurance contract is a written instrument. Subsections 6013(5) and (6)
provide in part:
(5) For complaints filed on or after January 1, 1987, if a judgment is
rendered on a written instrument, interest shall be calculated from the date of
filing the complaint to the date of satisfaction of the judgment at the rate of 12%
per year compounded annually, unless the instrument has a higher rate of interest.
...
(6) Except as otherwise provided in subsection (5) and subject to
subsection (11), for complaints filed on or after January 1, 1987, interest on a
money judgment recovered in a civil action shall be calculated at 6-month
intervals from the date of filing the complaint at a rate of interest that is equal to
1% plus the average interest rate paid at auctions of 5-year United States treasury
notes during the 6 months immediately preceding July 1 and January 1, as
certified by the state treasurer, and compounded annually, pursuant to this section.
Interest under this subsection shall be calculated on the entire amount of the
money judgment, including attorney fees and other costs. . . .
In Yaldo v North Pointe Ins Co, 457 Mich 341; 578 NW2d 274 (1998), the Court was
presented with the issue whether an insurance contract was a written instrument under subsection
6013(5). The Court remarked:
We note that the Legislature did not define the term "written instrument"
when it enacted MCL 600.6013; MSA 27A.6013. Nevertheless, we find the
expression clear and unambiguous. An insurance policy is a written instrument.
-12-
We refuse to rewrite the language of the statute effectively to limit "written
instrument" to "negotiable instrument." [Id. at 346 (emphasis added).]
The trial court, however, distinguished Yaldo on the ground that Yaldo involved an
insurance policy issued on a land contract. The trial court held that subsection 6013(5) was not
applicable, explaining:
The present case indisputably involves a written contract: if the Kings had
not entered into a written insurance policy with defendant Travelers, Travelers
would not be liable to the Hospital. The Court agrees with Travelers, however,
that because the heart of the claim for liability as between the insurers was a
function of statute and not of the policy, and neither the hospital nor Mr. Estes
was a party to the signed contract, interest on the judgment in the present case
should be calculated at the floating interest rate, MCL 600.6013(6).
The trial court failed to consider Auto Club Ins Ass'n v State Farm Ins Cos, 221 Mich
App 154; 561 NW2d 445 (1997). In that case, Jennifer Schneider was injured in an automobile
accident while she was a passenger in an automobile insured by Auto Club. Id. at 157. Jennifer
was living with her mother at the time of the accident and her mother did not have no-fault
insurance. Id. However, Jennifer's father had no-fault insurance through State Farm and also
had medical coverage for Jennifer through a health plan provided by Omega Communications
and governed by the Employee Retirement Income Security Act, 29 USC 1001 et seq. Auto
Club, supra at 157-158. In determining which insurer was responsible for coverage, this Court
concluded that Auto Club and Omega shared responsibility for Jennifer's insurance coverage. Id.
at 160. This Court then went on to consider the appropriate interest rate to be applied when
calculating interest and stated:
This Court held in Yaldo [v North Pointe Ins Co, 217 Mich App 617, 621;
552 NW2d 657 (1996)] that the term "written instrument" contained in § 6013(5)
constitutes an agreement or understanding reduced to writing as a means of giving
formal expression to an act or contract, which includes an insurance policy. The
purpose of the prejudgment interest statute is to compensate the prevailing party
for the delay in recovering money damages. We therefore find that plaintiff 's nofault plan and Omega's ERISA-based health-care plan are "written instruments"
and that judgment herein is based upon the language contained in those written
instruments . . . . Therefore, we conclude that the trial court correctly awarded
plaintiff twelve percent prejudgment interest . . . . [Auto Club, supra at 169-170
(emphasis added and internal citations omitted).]
The trial court erred in concluding that judgment in this case was not based on an
insurance policy. While the trial court was required to examine the no-fault act to determine
which insurer was primarily liable for benefits, that liability would not have existed without the
insurance policy. Therefore, the twelve percent interest rate applies. We vacate that part of the
order awarding interest under subsection 6013(6) and remand for entry of an order awarding
interest under subsection 6013(5).
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Affirmed in part, vacated in part, and remanded for further proceedings consistent with
this opinion. Jurisdiction is not retained.
/s/ E. Thomas Fitzgerald
/s/ Joel P. Hoekstra
/s/ Jane E. Markey
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