Kondratek v. AUTO CLUB INS. ASSOCIATION

163 Mich. App. 634 (1987) 414 N.W.2d 903

KONDRATEK
v.
AUTO CLUB INSURANCE ASSOCIATION

Docket No. 90966.

Michigan Court of Appeals.

Decided July 27, 1987.

Harold I. Gach, and Wayne J. Miller, for plaintiff.

Brandt, Hanlon, Becker, Lanctot & McCutcheon (by John B. Geen), and MacArthur, Cheatham, Acker & Smith, P.C. (by James G. Gross), Attorneys of Counsel, for defendant.

Before: R.M. MAHER, P.J., and McDONALD and H.E. DEMING,^[*] JJ.

PER CURIAM.

Defendant appeals as of right from a February 18, 1986, judgment awarding plaintiff $11,669.29 for benefits, attorney fees, costs and statutory interest in this no-fault insurance action. MCL 500.3107(a); MSA 24.13107(a).

On July 6, 1983, plaintiff filed a complaint against defendant insurer and Linda Cardinale, a claims representative, seeking a declaratory judgment that vocational rehabilitation is a covered benefit under the no-fault act and that certain future rehabilitation expenses would be payable when incurred. Cardinale was later dismissed as a party defendant. Mediation was held on October 9, 1984, and the panel recommended an award to plaintiff of $19,500. Plaintiff accepted the mediation award; defendant rejected it.

A bench trial was held in August, 1985. The facts presented are not in substantial dispute. In May, 1976, plaintiff was seriously injured in an automobile accident. Plaintiff's back was injured and her lungs and vocal cords were crushed. For three years plaintiff was unable to talk. At trial plaintiff was able to speak in a hoarse whisper. The medical prognosis was that plaintiff's vocal cords were permanently deformed and that her voice would never return to normal. It is undisputed that plaintiff's no-fault insurer, defendant, received notice of the accident and, except for vocational rehabilitation expenses, paid what it determined to be covered benefits.

The trial court denied defendant's motion for the involuntary dismissal of plaintiff's complaint and for summary disposition under MCR 2.116(C)(9) and (10).

After closing arguments the trial court entered an oral opinion. Relying on a 1983 Attorney General opinion and a recent decision of this Court holding that "allowable expenses" as contained in § 3107(a) of the no-fault act include vocational rehabilitation expenses, the trial court held that plaintiff was entitled to reasonably necessary vocational rehabilitation expenses. Bailey v DAIIE, 143 Mich App 223; 371 NW2d 917 (1985), lv den 424 Mich 867 (1986). OAG 1983-1984, No 6129, p 50 (February 24, 1983). The trial court found that defendant's conduct, taking a rigid approach in rejecting plaintiff's claim for vocational rehabilitation counselling, was unreasonable, and thus awarded plaintiff attorney fees. In addition, the court entered a declaratory judgment granting plaintiff tuition expenses estimated at $6,490 to be incurred upon her enrollment in a sign language interpreter program at Madonna College.

Defendant raises several issues on appeal. Defendant first urges us to reject Bailey, supra, and find that vocational rehabilitation expenses are not "allowable expenses" within the meaning of the no-fault act. We decline to do so as we feel Bailey was properly decided.

Defendant next requests this Court to adopt "definite operational guidelines" for determining the fact and extent of a claimant's entitlement to vocational rehabilitation. Section 3107(a) sets forth the standard for determining the fact and extent of a claimant's entitlement to benefits. Allowable expenses are "all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation." Thus two requirements are evident: (1) products, services and accommodations must be "reasonably necessary"; and (2) charges must be reasonable. We believe such a determination is a factual question best left to the trial courts, and therefore decline to set "definite operational guidelines." Moreover, a review of the record in the instant case indicates that the trial court's factual findings regarding the reasonableness of plaintiff's claim were not clearly erroneous.

Defendant next contends that the trial court erred in awarding plaintiff attorney fees. Section 3148 of the no-fault act permits a prevailing claimant to recover attorney fees if the court finds that the insurer unreasonably refused to pay the claim or unreasonably delayed in making proper payment. Defendant challenges the trial court's determination that it unreasonably refused to pay plaintiff's claim. The trial court's finding of unreasonableness was based on three factors: (1) defendant steadfastly took a position that vocational rehabilitation expenses were not covered under the no-fault act despite a February, 1983, Attorney General opinion to the contrary; (2) defendant was aware of the decision reached in Bailey v DAIIE, supra, by the circuit court and by this Court in 1984 and 1985 respectively; and (3) despite defendant's observation of plaintiff's voice impairment during a November, 1983, deposition, defendant failed to take any action to investigate alternative proper rehabilitation programs for plaintiff.

A trial court's finding of unreasonable refusal or delay will not be reversed on appeal unless it is clearly erroneous. Nelson v DAIIE, 137 Mich App 226; 359 NW2d 536 (1984). We cannot say that the trial court clearly erred in awarding plaintiff attorney fees in the instant case.

Defendant next claims that the trial court erred in awarding plaintiff attorney fees under both the no-fault act and the mediation court rule, MCR 2.403(O). We agree, but on grounds different from those offered by defendant.

Defendant contends that an award of attorney fees under both the statute and court rules constitutes a double recovery for a single element of damages, and improperly allows plaintiff a windfall. We disagree. The award of attorney fees under the no-fault act serves a purpose separate and distinct from that served by awarding fees under the mediation court rule. The attorney fees awarded under the no-fault act represent a penalty for an insurer's unreasonable refusal or delay in making payments. It is clear that the purpose of the penalty provision is to insure that the injured party is promptly paid. Darnell v Auto-Owners Ins Co, 142 Mich App 1; 369 NW2d 243 (1985). In comparison, the policy behind MCR 2.403(O) is to place the burden of litigation costs upon the party who insists upon trial by rejecting a proposed mediation award. Bien v Venticinque, 151 Mich App 229; 390 NW2d 702 (1986). Therefore, because each provision serves an independent policy and purpose, recovery of fees under both provisions may be appropriate. In the instant case, however, we find the award of attorney fees under the mediation court rule was erroneous.

A rejecting defendant may be assessed attorney fees and costs under MCR 2.403(O), unless he improves his position on the mediation award by more than ten percent. Here, in calculating the amount of the judgment recovered by plaintiff, the trial court included the $6,490 future expenses contained in its declaratory judgment. We find such an inclusion to be improper. These expenses have not yet been incurred, do not constitute a money judgment, and may vary in amount when and if they are actually incurred. Absent inclusion of the $6,490, the judgment is more than ten percent below the mediation award. Therefore, the trial court erred in awarding plaintiff attorney fees under the mediation court rule.

Although defendant claims error in the trial court's calculation of prejudgment interest, the parties have since stipulated to the correct calculation and, therefore, we need not address this issue on appeal.

Remanded for modification of the judgment pursuant to this opinion.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.