Sheri Lau v. Accident Fund Insurance Company of America ( 2021 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
SHERI LAU, Individually and as Guardian of JAY UNPUBLISHED
LAU, PP, July 29, 2021
Plaintiff-Appellant,
v No. 354673
Wayne Circuit Court
ACCIDENT FUND INSURANCE COMPANY OF LC No. 20-007157-NO
AMERICA,
Defendant-Appellee.
Before: TUKEL, P.J., and SAWYER and CAMERON, JJ.
PER CURIAM.
Plaintiff Sheri Lau, individually and as guardian of Jay Lau, a protected person, appeals
the trial court’s order granting summary disposition in favor of defendant Accident Fund Insurance
Company of America. We affirm in part, reverse in part, and remand for further proceedings
consistent with this opinion.
I. BACKGROUND
In October 2002, Jay was injured in the course of his employment. Jay began receiving
benefits under the Worker’s Disability Compensation Act, MCL 418.101 et seq. (WDCA), and
Sheri became his guardian and caretaker. In August 2016, the parties entered into a voluntary
payment agreement, which was incorporated into an August 4, 2016 order that was entered by a
magistrate with the Workers’ Compensation Board of Magistrates. Part of the agreement required
Jay to enter a detoxification program at Accident Fund’s expense. Accident Fund believed that
Jay was addicted to opioids and that the program would decrease Jay’s need for continuing
treatment, attendant care, and wage loss benefits. In October 2017, Accident Fund suspended the
payment of Jay’s benefits after he failed to attend a detoxification program at the Cleveland Clinic.
In November 2017, Sheri filed an application for a hearing on Jay’s behalf, and the hearing
commenced in August 2018. In November 2018, the magistrate issued an opinion and order, which
required Accident Fund to resume paying benefits to Jay. The magistrate also ordered the parties
to “cooperate” so that Jay could attend the program at the Cleveland Clinic at the earliest possible
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date. In so ordering, the magistrate did “not find fault” with respect to the parties’ failure to put
the plan concerning Jay’s attendance and participation in the detoxification program “into action”
earlier.
In June 2020, Sheri filed an action in the trial court, asserting one count of “bad faith
breaches of statutory duties” and one count of intentional infliction of emotional distress (IIED)
against Accident Fund. Both claims were premised on allegations that Accident Fund had
improperly and illegally suspended Jay’s benefits. Accident Fund subsequently moved for
summary disposition under MCR 2.116(C)(7) (collateral estoppel), MCR 2.116(C)(8) (failure to
state a claim), and MCR 2.116(C)(10) (no genuine issue of material fact).1 The trial court granted
the motion, concluding that Sheri’s claim of bad faith conduct was barred by collateral estoppel
because the magistrate had determined that neither party was at fault. The trial court also
concluded that the IIED claim was untenable under Michigan law.2 This appeal followed.
II. STANDARDS OF REVIEW
“We review de novo a trial court’s decision to grant or deny a motion for summary
disposition[.]” Galea v FCA US LLC, 323 Mich App 360, 368; 917 NW2d 694 (2018). “A party
may support a motion under MCR 2.116(C)(7) by affidavits, depositions, admissions, or other
documentary evidence.” Id. (quotation marks and citation omitted). “However, a movant under
MCR 2.116(C)(7) is not required to file supportive material, and the opposing party need not reply
with supportive material. The contents of the complaint are accepted as true unless contradicted
by documentation submitted by the movant.” Id. (quotation marks and citation omitted).
“A motion under MCR 2.116(C)(8) tests the legal sufficiency of a claim based on the
factual allegations in the complaint.” El-Khalil v Oakwood Healthcare, Inc, 504 Mich 152, 159-
160; 934 NW2d 665 (2019). The “trial court must accept all factual allegations as true, deciding
the motion on the pleadings alone. A motion under MCR 2.116(C)(8) may only be granted when
a claim is so clearly unenforceable that no factual development could possibly justify recovery.”
Id. at 160 (citations omitted).
A motion under MCR 2.116(C)(10) on the other hand tests the factual
sufficiency of a claim. When considering such a motion, a trial court must consider
all evidence submitted by the parties in the light most favorable to the party
opposing the motion. A motion under MCR 2.116(C)(10) may only be granted
when there is no genuine issue of material fact. A genuine issue of material fact
exists when the record leaves open an issue upon which reasonable minds might
differ. [Id. (quotation marks and citations omitted).]
1
Although Sheri argues that Accident Fund did not move for summary disposition under MCR
2.116(C)(10), this argument is without factual merit.
2
The trial court also determined that a portion of the IIED claim was barred because it was filed
several years after the statute of limitations had expired. Sheri does not challenge this ruling on
appeal.
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“[T]he application of legal doctrines, such as res judicata and collateral estoppel” are
questions of law that are typically reviewed de novo. Estes v Titus, 481 Mich 573, 578-579; 751
NW2d 493 (2008).
III. ANALYSIS
A. CLAIM FOR “BAD FAITH BREACHES OF STATUTORY DUTIES”
Sheri first argues the trial court erred when it granted summary disposition in Accident
Fund’s favor as to her “bad faith claim” on the basis of collateral estoppel. We agree.
Collateral estoppel requires a showing of the following three elements: “(1) a question of
fact essential to the judgment must have been actually litigated and determined by a valid and final
judgment; (2) the same parties must have had a full and fair opportunity to litigate the issue; and
(3) there must be mutuality of estoppel.” William Beaumont Hosp v Wass, 315 Mich App 392,
398; 889 NW2d 745 (2016) (quotation marks and citation omitted).
In this case, the trial court determined that Sheri’s bad faith claim was precluded by
collateral estoppel because the magistrate already had determined that none of the parties were at
fault. The trial court relied on the following, which was contained in the magistrate’s November
2018 opinion and order:
The last issue and the one that appears to have given rise to the trial of this
case is the need for [Jay] to attend and participate in a program of detoxification
from his opioid medicines in conjunction with a rehabilitation program. All the
physicians agreed that the type of program suggested at the Cleveland Clinic would
be both appropriate and in [Jay’s] . . . best interests. It would allow the potential
for improvement in both his physical and mental state, reduce the need for or [the]
amount of attendant care and perhaps even allow the return to some form of gainful
employment[.]
I do not find fault in the failure to put this into action, but a complete
stoppage of benefits does run the risk of seeing [Jay’s] condition and situation
deteriorate further. The dispute over the scheduling of the treatment arose due to
an intervening medical condition (Bell’s Palsy), and a miscommunication between
the parties resulting in the start of litigation and therefore the termination of the
scheduled program at the Cleveland Clinic.
While the magistrate did “not find fault,” we conclude that this statement was not made in
relation to “a question of fact essential to the judgment[.]” See Wass, 315 Mich App at 398.
Indeed, the magistrate acknowledged that his role was to determine whether (1) Jay had an injury
or disease arising out of or in the course of employment, and (2) whether the injury or disease had
placed a limitation on Jay’s wage-earning capacity in work suitable to his qualifications and
training. While the magistrate heard evidence relating to why Accident Fund ceased paying the
benefits, the magistrate acknowledged that “[t]he primary issue in dispute [was] disability with
related issues as to the appropriate care and treatment.” The fact that the magistrate did not award
sanctions under MCL 418.315(1) and MCL 418.801(2) does not change this conclusion because
neither statutory provision required the magistrate to consider whether Accident Fund was at fault
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or acted in “bad faith.” The trial court therefore erred by granting summary disposition on the
basis of collateral estoppel.
Nonetheless, summary disposition on the bad faith claim was proper because Sheri could
not recover emotional distress damages in relation to that claim. “[E]xemplary damages are
permissible in both legal and equitable actions where the plaintiff pleads malicious and wilful
conduct.” McPeak v McPeak (On Remand), 233 Mich App 483, 489; 593 NW2d 180 (1999).
“The purpose of exemplary damages is to make the injured party whole,” Unibar Maintenance
Servs, Inc v Saigh, 283 Mich App 609, 630; 769 NW2d 911 (2009), as opposed to punish, Kewin
v Massachusetts Mut Life Ins Co, 409 Mich 401, 419; 295 NW2d 50 (1980). Indeed,
[e]xemplary damages are a class of compensatory damages that allow for
compensation for injury to feelings. In order to justify an award of exemplary
damages, the act or conduct complained of must be voluntary and the act must
inspire feelings of humiliation, outrage, and indignity. The act or conduct must
also be malicious or so wilful and wanton as to demonstrate a reckless disregard of
[the] plaintiff’s rights. The theory is that the reprehensibility of the defendant’s
conduct both intensifies the injury and justifies the award of exemplary damages as
compensation for the harm done [to] the plaintiff’s feelings. [McPeak (On
Remand), 233 Mich App at 487-488 (citations omitted).]
The rationale underlying the general rule that exemplary damages are not recoverable in
the context of a commercial contract is as follows:
Just as with that denying damages for mental distress, the theory underlying
the denial of exemplary damages in breach of contract cases is that the plaintiff is
adequately compensated when damages are awarded by reference only to the terms
of the contract. [Kewin, 409 Mich at 420.]
Therefore, “absent allegation and proof of tortious conduct existing independent of the
breach, . . . exemplary damages may not be awarded in common-law actions brought for breach of
a commercial contract.” Id. at 420-421. “[T]he conduct [that appellate courts] have found
sufficient to justify the award of exemplary damages has occurred in the context of the intentional
torts, slander, libel, deceit, seduction, and other intentional (but malicious) acts.” Veselenak v
Smith, 414 Mich 567, 575; 327 NW2d 261 (1982). See also McPeak (On Remand), 233 Mich App
at 488.
In Sheri’s amended complaint, she alleged that Accident Fund engaged in certain bad faith
conduct independent of the breach of the parties’ voluntary payment agreement. Specifically,
Sheri alleged that (1) Accident Fund violated certain provisions of the WDCA, (2) Accident Fund
violated certain provisions of the Uniform Trade Practices Act (UTPA), MCL 500.2001 et seq.,
and (3) Accident Fund failed to comply with the magistrate’s August 4, 2016 order, which required
payment of benefits consistent with the parties’ voluntary payment agreement. However, there is
no indication that Accident Fund’s alleged violations of the WDCA, the UTPA, and the
magistrate’s August 4, 2016 order could establish a claim in tort. Additionally, Sheri does not
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provide a meaningful explanation or authority to support otherwise.3 Because Sheri failed to plead
allegations to establish that Accident Fund committed an independent tort that was separate and
distinct from the alleged breach of the voluntary payment plan, we conclude that summary
disposition was proper with respect to Sheri’s claim for exemplary damages. Cf. Phillips v
Butterball Farms Co, Inc, 448 Mich 239, 251; 531 NW2d 144 (1995) (“Because this action sounds
in tort, the available damages are not limited by contract principles.”) (quotation marks and citation
omitted.) Consequently, it is not necessary for this Court to consider whether the trial court erred
by holding that Sheri was limited to the remedies set forth by the Legislature in the WDCA.4
Sheri also alleged that she was entitled to punitive damages with respect to Accident Fund’s
alleged violation of the WDCA and UTPA. Accident Fund argued in its motion for summary
disposition that Sheri’s claim for punitive damages should be dismissed because those statutory
schemes do not permit punitive damages. However, the trial court did not reach this argument
because it concluded that the doctrine of collateral estoppel applied. Having concluded that the
trial court erred in this respect, we decline to consider whether Sheri is entitled to punitive damages
with respect to the statutory violation claims and remand to provide the trial court an initial
opportunity to address those issues.5
B. IIED CLAIM
Sheri next argues that the trial court erred by granting summary disposition in Accident
Fund’s favor on the IIED claim. We disagree.
3
While Sheri appears to argue that Harbaugh v Citizens Tel Co, 190 Mich 421, 428; 157 NW 32(1916), establishes that a defendant engaging in “unlawful acts” can support a claim for exemplary
damages, this argument is without merit. Indeed, the Court in Harbaugh concluded that a plaintiff
must establish “that the defendant acted recklessly, negligently, or maliciously” in order to be
entitled to exemplary damages. Id. The Court further noted that a plaintiff may be awarded actual
damages, which are distinct from exemplary damages, if the plaintiff is able to show “annoyance
and inconvenience” as a result of the “defendant’s unlawful act.” Id. (noting that the plaintiff’s
“actual damages may . . . include a just compensation for . . . annoyance and inconvenience as he
may be able to show he suffered by reason of [the] defendants’ unlawful act”).
4
Sheri argues that the trial court improperly granted summary disposition on her claim for
exemplary damages given that Accident Fund did not specifically move for summary disposition
on this ground. In so arguing, however, Sheri fails to provide any meaningful analysis or authority
to support the argument, thereby abandoning it. See Houghton ex rel Johnson v Keller, 256 Mich
App 336, 339-340; 662 NW2d 854 (2003). Even so, we note that a trial court is permitted under
MCR 2.116(I)(1) to “render judgment without delay” if it concludes that “a party is entitled to
judgment as a matter of law[.]” To the extent that Sheri argues that a due process violation
occurred, this argument would be without merit. See Al-Maliki v LaGrant, 286 Mich App 483,
485-486; 781 NW2d 853 (2009).
5
In so holding, we express no opinion as to whether Sheri has private causes of action under the
portions of the WDCA and UTPA that are cited in the amended complaint.
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“To establish a claim of intentional infliction of emotional distress, a plaintiff must prove
the following elements: (1) extreme and outrageous conduct, (2) intent or recklessness,
(3) causation, and (4) severe emotional distress.” Hayley v Allstate Ins Co, 262 Mich App 571,
577; 686 NW2d 273 (2004) (quotation marks and citation omitted). “It is for the trial court to
initially determine whether the defendant’s conduct may reasonably be regarded as so extreme and
outrageous as to permit recovery.” Id. However, if “reasonable individuals may differ, it is for
the jury to determine if the conduct was so extreme and outrageous as to permit recovery.” Id.“The test to determine whether a person’s conduct was extreme and outrageous is whether
recitation of the facts of the case to an average member of the community would arouse his
resentment against the actor, and lead him to exclaim, ‘Outrageous!’ ” Lewis v LeGrow, 258 Mich
App 175, 196; 670 NW2d 675 (2003) (quotation marks and citation omitted). This test is a
demanding one. Indeed, the necessary threshold for establishing that conduct is extreme and
outrageous has been described as “formidable.” Atkinson v Farley, 171 Mich App 784, 789; 431
NW2d 95 (1988).
It has not been enough that the defendant has acted with an intent which is
tortious or even criminal, or that he has intended to inflict emotional distress, or
even that his conduct has been characterized by malice, or a degree of aggravation
which would entitle the plaintiff to punitive damages for another tort. Liability has
been found only where the conduct has been so outrageous in character, and so
extreme in degree, as to go beyond all possible bounds of decency, and to be
regarded as atrocious, and utterly intolerable in a civilized community. [Id.
(quotation marks and citation omitted).]
In this case, Sheri’s IIED claim is based on allegations that (1) Accident Fund “denied all
benefits” beginning in October 2017 in violation of the WDCA and the August 2016 order,
(2) Accident Fund participated in the administrative proceeding in 2017 and 2018 despite knowing
that it had no basis for denying benefits, and (3) Accident Fund denied benefits despite knowing
that it was in control of Jay’s primary source of income and that he was susceptible to emotional
distress because of his traumatic brain injury.
The trial court concluded that it could not “find that [Accident Fund] committed an extreme
and outrageous act by cutting off and continuing to withhold [Jay’s] benefits.” We conclude that
this holding was not in error because it is well settled that an allegation that compensation benefits
were wrongfully terminated is insufficient to sustain a claim for IIED. See Lisecki v Taco Bell
Restaurants, Inc, 150 Mich App 749, 755; 389 NW2d 173 (1986) (holding that “an allegation by
the plaintiff that compensation benefits were wrongfully terminated by the defendants in order to
further some ulterior motive of the defendants rather than due to the plaintiff’s return to his pre-
injury wage-earning capacity” did not support that the defendants engaged in “outrageous or
atrocious” conduct). See also Hayley, 262 Mich App at 277 (“The failure to pay a contractual
obligation or insurance benefits does not amount to outrageous conduct, even if it is done in bad
faith or wilfully.”). Consequently, summary disposition on the IIED claim was proper.
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Affirmed in part, reversed in part, and remanded for further proceedings consistent with
this opinion. We do not retain jurisdiction.
/s/ Jonathan Tukel
/s/ David H. Sawyer
/s/ Thomas C. Cameron
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