Lewis v. Detroit Automobile Inter-Insurance Exchange , 426 Mich. 93 ( 1986 )

Williams, C.J.

In this opinion we consider the question whether the "one year back” limit on recovery of no-fault insurance beneñts contained in MCL 500.3145(1); MSA 24.13145(1) should be tolled from the date a claimant makes a specific claim for benefits to the date the insurer formally denies liability, provided the claimant pursues the claim with reasonable diligence. We hold that such tolling best reflects the purposes of the no-fault statute.

I. FACTS LEWIS

On November 13, 1978, Jessie Lewis, a pedestrian, was struck by an automobile driven by Larry Perkins and insured by defendant Detroit Automobile Inter-Insurance Exchange. The plaintiff’s guardian, Hattie Shaw, contacted the defendant regarding plaintiffs medical expenses. Because the accident report listed Ms. Shaw’s residence at 16151 Whitcomb as the plaintiffs address, the defendant told her to contact her own insurer for payment.¹ On March 10, 1979, Mr. Lewis’ attorney notified the defendant that his client would be making a claim for benefits under the no-fault act, MCL 500.3101 et seq.; MSA 24.13101 et seq. On March 15, 1979, the defendant, noting the plaintiffs statement of residence on Whitcomb, replied by letter, stating, "At this point it does not appear we will be in a position to afford pip benefits to Mr. Lewis.”² On May 5, 1979, plaintiffs attorney submitted to defendant an affidavit regarding his residence at the time of the accident.³ On May 8, 1979, defendant mailed plaintiff’s attorney an application for benefits and requested an additional affidavit stating plaintiffs residence at the time of the accident. Defendant also inquired as to the names of other household members and as to Mr. Lewis’ employment. On June 11, 1979, Lewis’ attorney returned the application for benefits which listed "medical bills to date” of $3,186.⁴

On June 19, 1979, defendant’s agent telephoned plaintiffs attorney, requesting further medical reports and the name of the insurer of automobiles at the Whitcomb address. In September and October, defendant responded to inquiries from the hospital by stating that it was awaiting necessary information from plaintiffs attorney. On November 14, 1979, plaintiffs attorney wrote defendant, asking if the claim was going to be paid. The letter stated that plaintiff had complied with all defendant’s requests and asked, if defendant was going to deny benefits, that the denial and the reasons therefor be in writing. On November 19, 1979, defendant responded by letter, stating, "The file has been reviewed by my supervisor, concerning possible payment. He has requested the name of the insurers of the autos housed at the Whitcomb street address.” On January 23, 1980, plaintiff submitted to defendant an affidavit stating that his residence at the time of the accident was 15887 Robson.

On February 22, 1980, plaintiff filed suit. The Department of Social Services intervened as plaintiff to recoup amounts paid pursuant to Medicaid. MCL 400.106; MSA 16.490(16). The defendant’s motion for accelerated judgment based on the one-year-back rule was denied. The jury returned a verdict for plaintiff of $27,120.70.

The Court of Appeals affirmed and certified, pursuant to Administrative Order No. 1984-2, that its decision in this case conflicted with the holding of another panel in Kransz v Meredith, 123 Mich App 454; 322 NW2d 571 (1983). By order of June 24, 1985, this Court granted leave to appeal. 422 Mich 930.

II. FACTS DIONNE

Plaintiff Lester Dionne was injured on July 9, 1975, when his motorcycle, insured by defendant daiie, collided with an automobile. The accident occurred on the premises of plaintiff’s employer. Mr. Dionne’s attorney notified defendant of the accident on July 2, 1976. On July 8, 1976, plaintiff’s attorney submitted a number of medical bills in connection with the claim. On October 16, 1976, defendant mailed plaintiff’s attorney a number of forms which were completed and returned on January 6, 1977. On March 31, 1977, defendant wrote to plaintiff’s attorney requesting further information regarding the claim. Plaintiff’s attorney did not respond. Over a year later, on July 7, 1978, plaintiff filed suit in Wayne Circuit Court. The court granted accelerated judgment to the defendant on the basis of the one-year-back rule. The Court of Appeals affirmed. We first held this case in abeyance pending decision in Welton v Carriers Ins Co, 421 Mich 571; 365 NW2d 170 (1984). By order of June 24, 1985, we granted leave to appeal. 422 Mich 929.

III. DISCUSSION

In Tom Thomas Organization, Inc v Reliance Ins Co, 396 Mich 588; 242 NW2d 396 (1976), this Court considered a provision in an insurance contract which limited the time for bringing suit on the policy to twelve months after loss or discovery of loss. We held there that the period of limitation was tolled from the time the insured gave notice of loss until formal denial of the claim. In In re Certified Question: Ford Motor Co v Lumbermens Mutual Casualty Co, 413 Mich 22; 319 NW2d 320 (1982), we applied a similar tolling concept to the limitation provision of a statutory fire insurance policy.

The Court of Appeals, in Richards v American Fellowship Mutual Ins Co, 84 Mich App 629; 270 NW2d 670 (1978), lv den 406 Mich 862 (1979), applied the Tom Thomas rationale to the one-year-back rule contained in § 3145 of the no-fault act. The Richards panel held that the one-year limitation was tolled from the time the insured provided notice of loss until a formal denial of liability. Other panels of the Court of Appeals have declined to follow Richards, resulting in conflicting lines of authority in that Court. Compare Lansing General Hospital v Gomez, 114 Mich App 814; 319 NW2d 683 (1982), and Joiner v Michigan Mutual Ins Co, 137 Mich App 464; 357 NW2d 875 (1984) (following Richards) with Aldrich v Auto-Owners Ins Co, 106 Mich App 83; 307 NW2d 736 (1981), Allstate Ins Co v Frankenmuth Mutual Ins Co, 111 Mich App 617; 314 NW2d 711 (1981), English v Home Ins Co, 112 Mich App 468; 316 NW2d 463 (1982), and Kransz v Meredith, supra.

In Welton v Carriers Ins Co, supra, this Court considered a case in which the plaintiff was injured in a work-related motor vehicle accident in which the defendant insurance company was both the no-fault and the workers’ compensation carrier. The plaintiff urged this Court to adopt the Richards analysis tolling the § 3145 one-year-back rule. We declined to reach the Richards question, however, because of our holding that the plaintiffs notice to the defendant insurance company of his workers’ compensation claim was not sufficient to trigger tolling of his no-fault claim, even assuming the validity of the Richards tolling principle. The Welton opinion stated that, if such tolling were adopted, it would begin only when a claim for specific benefits was submitted to the insurer. In a footnote, the Court recognized that Tom Thomas and Ford permitted tolling as of the date of notice. The Court reasoned that "the peculiar nature of the statutory no-fault limitation provision” justified a more strictly tailored rule.

First, the fire insurance limitation provision operates as an absolute bar to suits not brought within one year of discovery (or inception) of the loss. Absent a tolling rule, the fact that either an insured has promptly notified the insurer of the loss or the insurer has already partially paid the claim would have no effect on that bar. With no-fault, the statute has a built-in "tolling” permitting later suit once notice is given or partial payment been made. Thus, the consequences of the one-year cutoff, and the corresponding need for relief by tolling as of the date notice is given, is more drastic in the case of fire insurance actions than with no-fault.

Second, the specified procedure for claim and recovery of fire insurance benefits includes greater built-in delays, shortening the insured’s already limited time to sue, than does the no-fault law. Following a covered fire loss, the insured generally has 60 to 90 days to file proof of loss, after which the insurer has 60 days to pay or settle the claim. Additional delays may arise when the insurer does not promptly submit proof of loss forms or promptly "accept” the proof of loss once submitted. See Tom Thomas, 396 Mich 592-593. The no-fault law simply provides that payment of a claim is overdue if not paid within 30 days after proof of loss is received by the insurer. MCL 500.3142(2); MSA 24.13142(2). Accordingly, the one-year period in which a fire insurance plaintiff may sue is more substantially curtailed by the recovery mechanism than is the no-fault limitation period, further warranting an earlier tolling date.

Finally, the fact that the Legislature has already provided a tolling provision for commencing a no-fault action, triggered by "notice of injury,” suggests both that notice of injury was intended to have no greater effect and that there is less justification for this Court to interfere with the statutory scheme. [Welton, supra, 580, n 4.]

We now reach the question that the Welton Court reserved and conclude that the one-year-back rule of § 3145 is tolled from the date of a specific claim for benefits to the date of a formal denial of liability. We believe this result effectively preserves the Legislature’s purpose. As Justice Boyle stated in Welton:

Tolling the statute when the insured submits a claim for specific benefits would not appear to detract from the policies underlying the one-year limitation on recovery. By submitting a timely and specific claim, the insured serves the interest in preventing stale claims by allowing the insurer to assess its liability while the information supporting the claim is relatively fresh. A prompt denial of the claim would barely affect the running of the limitation period, while a lengthy investigation would simply "freeze” the situation until the claim is eventually denied. In effect, the insured would be charged with the time spent reducing his losses to a claim for specific benefits plus the time spent deciding whether to sue after the claim is denied. [Id., 578-579.]

Most persons are confident that, in the event of a loss, their insurer will pay their claim without the necessity for litigation. It is only when an insurer denies liability that it is unequivocally impressed upon the insured that the extraordinary step of pursuing relief in court must be taken. A contrary result today would require the prudent claimant to file suit as a precautionary measure when the one-year deadline approached, regardless of the status of the claim. In addition to requiring a level of sophistication many claimants may not possess, such an approach would encourage needless litigation. One of the important reasons behind the enactment of the no-fault system was the reduction of automobile accident litigation. Cassidy v McGovern, 415 Mich 483, 501; 330 NW2d 22 (1982).

In addition to the above-cited Michigan insurance cases, there is precedent in the case law for the principle of judicial tolling. In American Pipe & Construction Co v Utah, 414 US 538, 559; 94 S Ct 756; 38 L Ed 2d 713 (1974), the United States Supreme Court stated:

These cases fully support the conclusion that the mere fact that a federal statute providing for substantive liability also sets a time limitation upon the institution of suit does not restrict the power of the federal courts to hold that the statute of limitations is tolled under certain circumstances not inconsistent with the legislative purpose.

See also Steele v Bliss, 166 Mich 593; 132 NW 345 (1911). Although the facts in these cases are dissimilar to those of the instant case, they do stand for the proposition that limitation statutes are not entirely inflexible, allowing judicial tolling under certain compelling circumstances.

To the rule enunciated in Richards, we add the caveat that the insured must seek reimbursement with reasonable diligence or lose the right to claim the benefit of a tolling of the limitations period. Such a condition should alleviate the defendant’s fear that adoption of the tolling principle will result in "open-ended” liability in cases in which the claimant, having made a specific claim for benefits, thereafter refuses to respond to the carrier’s legitimate requests for more information needed to process the claim.

IV. OTHER ISSUES LEWIS

Defendant in Lewis raises two other issues for our consideration. Daiie argues that the jury’s verdict must be overturned because of plaintiffs failure to file a witness list as required by Wayne Circuit Court Rule 301.3(d). On the first day of trial, the court denied defendant’s motion to bar the plaintiff from presenting testimony because of the failure to comply with this rule. The witnesses called by plaintiff were all listed on defendant’s witness list. Defendant does not claim to have been surprised or prejudiced by plaintiffs admitted neglect, and we can perceive no error in the trial court’s decision to allow the plaintiff to proceed.

Finally, the defendant argues that the jury should have reduced its award because $23,460.70 of plaintiffs debt was discharged by a Medicaid payment of $18,940. We first note that the figure of $18,940 was not presented to the jury. Walter Stacey, director of reimbursement for the Mount Carmel Mercy Hospital, testified that although $23,460.70 of Mr. Lewis’ bill was discharged through the Medicaid program, Medicaid did not pay individual accounts, but reimbursed the hospital for a certain percentage of allowable expenses. Mr. Stacey estimated that where $23,000 was recognized as a Medicaid-covered expense, the hospital would actually receive "roughly $18,900” from the Department of Social Services.⁵ He also stated that if the hospital were presented with payment of plaintiff’s entire obligation of $26,753.20, it would reimburse Medicaid and keep the rest. If, as defendant claims, the jury’s award of the entire amount of plaintiff’s bill⁶ resulted in a windfall for the plaintiff, it was not clearly established at trial. We therefore find that the jury’s award was supported by the testimony presented.

CONCLUSION

In Lewis, the record shows that the plaintiff pursued his claim with reasonable diligence. We therefore affirm the decision of the Court of Appeals. In Dionne, we reverse the decision of the Court of Appeals and remand the case to the Wayne Circuit Court for reconsideration of defendant’s motion for accelerated judgment under the standard announced in this case.

Levin, Cavanagh, Boyle, and Archer, JJ., concurred with Williams, C.J.

1 Mr. Lewis had apparently given conflicting information regarding his address, listing his sister’s home on Whitcomb as his mailing address, but claiming to have been living with a friend at the time of the accident. If the plaintiff had been living with his sister, her no-fault policy would have covered his injuries. MCL 500.3114; MSA 24.13114. Mr. Lewis was not personally insured.

2 In its brief, defendant claims to have formally denied plaintiff’s claim by this letter. Plaintiff points out that the statement in the letter is equivocal and conflicts with the trial testimony of defendant’s employee, Colleen Campbell, who stated that defendant had never denied plaintiff’s claim. Plaintiff also notes that negotiations regarding plaintiff’s claim continued after the letter was mailed. We need not decide whether the statement in the letter could be regarded as a formal denial, because defendant did not claim before the trial court or the Court of Appeals that it had formally denied plaintiff’s claim. This issue may thus be regarded as waived.

3 This affidavit was mentioned in testimony, but is not a part of the record.

4 Corrine Lenard, supervisor of receivables for Mount Carmel Mercy Hospital, testified at the trial that Mr. Lewis’ total hospital bill was $26,753.20. She stated that the Department of Social Services paid $23,460.70, the patient paid $106.50, and the remaining $3,186 was outstanding.

5 Defendant’s brief in this Court states, "The exact amount paid by Medicaid is $18,940, as shown by the attached letter of Bernard Rosner, dated September 1, 1982.” Defendant does not further identify Mr. Rosner, and no such letter is attached. In any event, a party may not enlarge the record on appeal. Dora v Lesinski, 351 Mich 579; 88 NW2d 592 (1958).

6 The jury actually awarded plaintiff $27,120.70, some $367.50 over the amount of the hospital bill. Defendant does not contest this discrepancy.