Insurers Facing Suits Under No-Fault Provisions

November 25, 2010 (Press-News.org) Those injured in Michigan car accidents know how difficult it is to deal with insurance companies. For those who have suffered serious injuries, the situation becomes even more complicated. Insurers will fight to keep from paying out large sums of money, even if a person is entitled to that compensation. Recent case law has changed the way insurance companies will be able to do business with those who have been injured, meaning that there are potentially millions of unpaid insurance claims throughout the state.

Michigan is a no-fault insurance state. This means that the insurance you have pays for your medical expenses, wage loss and household services without regard to fault. The statutes require the insurance companies to reimburse injured parties for "all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation." This includes family or friend provided care for seriously injured family members. Insurers must also provide compensation for missed work, as well as a maximum of $20 a day for expenses incurred within the first 3 years of the date of the accident.

The Michigan no-fault insurance laws contain a provision which limit recovery for reasonable and necessary expenses to one-year back from when the action was filed against the insurance carrier for unpaid benefits. This particular provision has caused several problems, and recent cases have been winding through the court system centered on the interpretation of this rule. Until recently, minors, those with brain injuries and those who are mentally incompetent were not subject to the one-year back rule. In addition, people who were mislead or lied to by their insurance carriers were not subject to the one year back rule. Recently, the Michigan Court of Appeals has had three cases upholding the one-year back rule for those mislead or those who were incompetent overturned. The most recent case is Johnson v. Wausau Ins. Co, which dealt with the interplay between the one-year back rule and a common-law fraud claim. Fraud was alleged because the insurer did not tell the victim's caregiver that she was entitled to additional compensation. This is noteworthy because a prior case, Cooper v. Auto Club Ins. Association, held that damages under a fraud claim were not subject to the one-year back rule.

In the Johnson case, the victim, Nancy Eastman, was 10 months old when she was seriously injured in a car accident. After she was released from the hospital, she required intensive medical care. Her parents were unable to provide this care for her. Dorothy Bencheck became Eastman's guardian and caregiver.

Eastman's father had an insurance policy with Wausau Insurance. The company paid Eastman $37,500 to settle any claims she may have had against her father. This money was held by the probate court to distribute for Eastman's care. The insurer also paid Bencheck $20 a day.

Bencheck called the insurer on several occasions, as she believed that the insurer owed her additional benefits for the care she was providing. On each occasion, she was turned down, or told to ask the probate court to release more money to her. The insurer never informed Bencheck that she was entitled to attendant care payments as part of the "all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation" statutory language. After some time, Bencheck left and Tammy Johnson took over caring for Ms. Eastman.

Johnson eventually sued Wausau Insurance due to the company breaching its contract with her. She also added a claim of fraudulent misrepresentation, alleging that the company did not tell her she was eligible to receive additional compensation. The insurance company contended that Johnson was barred from recovery due to the one-year provision of the no-fault act, and additionally, that Johnson would be unable to show that any fraud occurred.

Johnson's claim was dismissed by the Michigan Court of Appeals. Her recovery would be limited by the one-year back rule, and the court also stated that the insurer had not committed any acts of fraud. The Michigan Supreme Court vacated the decision of the Court of Appeals, and remanded the case back to the Genesee Circuit Court for reconsideration based upon the decision in Titan v. Michigan, which overturned prior Michigan case law dealing with the one-year back rule.

The Johnson case would never have made it to this point if not for the insurance company's refusal to pay attendant care. The company would have had to pay first Bencheck and later Johnson a fair market rate for providing home care to Eastman. By wrongfully refusing to acknowledge that it owed these payments, it made itself vulnerable to an extremely costly lawsuit.

This case is crucial to insureds across the state. It allows those that have been misled by insurance companies to proceed with claims against insurers, and not be limited to the one-year back rule. Insurance companies that withheld compensation from victims could be facing multi-million dollar verdicts. If you have been injured in a car accident in Michigan, contact an experienced attorney to learn about the compensation that may be available to you.

Article provided by Thomas, Garvey, Garvey & Sciotti, PLLC
Visit us at www.tggslaw.com