De Etta Gardner v. State Farm Mutual Automobile Insurance Company

STATE OF MICHIGAN
COURT OF APPEALS
DE ETTA GARDNER, a/k/a DEETTA UNPUBLISHED
GARDNER, April 7, 2016
Plaintiff-Appellee,
and
THERAPY FIRST, LLC, d/b/a THERAPY 1ST,
Intervening Plaintiff-Appellee,
v No. 325606
Wayne Circuit Court
STATE FARM MUTUAL AUTOMOBILE LC No. 11-002164-NF
INSURANCE COMPANY,
Defendant-Appellant.
Before: M. J. KELLY, P.J., and CAVANAGH and SHAPIRO, JJ.
PER CURIAM.
This dispute over the award of attorney fees after a jury trial on the payment of first-party
no-fault benefits returns to this Court after an earlier appeal on the same issue.1 Defendant, State
Farm Mutual Automobile Insurance Company, again appeals by right the trial court’s orders
compelling it to pay the attorney fees of plaintiff, De Etta Gardner, and intervening plaintiff,
Therapy First, LLC, which does business as Therapy 1st. On appeal, State Farm argues that the
trial court erred by ordering it to pay the attorney fees because, in its view, the undisputed
evidence established that it reasonably refused to pay the claims by Gardner and Therapy First.
It also argues in the alternative that the trial court erred in calculating the fees. On appeal, we
conclude that the trial court did not err when it ordered State Farm to pay the attorney fees of
Gardner and Therapy First. Accordingly, we affirm.
1
See Gardner v State Farm Mut Auto Ins Co, unpublished opinion per curiam of the Court of
Appeals, issued June 17, 2014 (Docket No. 313351).
-1-
I. BASIC FACTS
On June 5, 2010, Phillip Allred drove his truck into the rear end of a car being driven by
Gardner. Although Gardner seemed alright after the accident, Allred conceded that his truck had
significant damage.
Karen Winters testified that she is a claim representative with State Farm. In June 2010,
State Farm first received a claim for first-party no-fault benefits by Gardner. Winters said State
Farm began to receive claims from health providers who treated Gardner in July 2010.
However, there was initially an issue as to whether Gardner was an eligible insured person.
Gardner was driving her boyfriend’s sister’s Durango at the time. Winters determined that
Gardner was a qualified insured in late August 2010. In early September 2010, she sent Gardner
various forms to use for making claims and a form to authorize the release of her medical
records. At that time, Winters had not made a determination as to whether Gardner was eligible
for benefits, but did list various potential expenses as compensable in State Farm’s digital logs.
She made those determinations on the basis of Gardner’s word alone.
Winters noted that Gardner went to her primary care physician in June 2010, but then
switched to a new physician, Aaron Goldfein, M.D., in July 2010. Gardner admitted at trial that
she was already scheduled to see Goldfein even before she met with her family physician about
her injuries and had already hired a lawyer. She did not treat with her family physician, she
stated, because he refused to handle automobile accident cases.
Winters stated that, as a result of her conversations with Gardner and her receipt of some
medical records, she “began to question if there was an actual injury that was sustained in this
accident.” She also believed that the size of the vehicles—Gardner was in a Durango and Allred
was in an F-150—made it unlikely that Gardner would suffer an injury. Accordingly, on August
31, 2010, Winters switched the entry for Gardner’s claims from compensable to under
investigation. She then sent out letters requesting more information. Winters got the medical
authorizations in October 2010. She sent out requests for Gardner’s medical records in early
November 2010, but she did not receive Gardner’s records from Goldfein.
Gardner sued State Farm for first-party no-fault benefits in February 2011.
Because Goldfein did not send the requested records, Winters stated, she hired a
physician to represent State Farm’s interests—what insurers commonly refer to as an
“independent” medical examiner or IME—and scheduled Gardner for an examination in April
2011. Neil Friedman, M.D., conducted the examination. Friedman opined in his report that
Gardner did not suffer any injury and, even if she had, it would have been a cervical strain that
would have healed in 4 to 6 weeks.
Winters testified that, after Friedman sent her his opinion, she decided to approve
Gardner’s medical claims through July 31, 2010. She indicated that everything after that date,
which was the date by which Friedman opined Gardner would have healed if she had in fact
suffered a strain, would not be paid. She, however, rejected the claims for replacement services,
mileage, and attendant care. She rejected those claims because Friedman stated that Gardner
would not have needed those services even if she suffered a cervical strain.
-2-
Winters admitted that she received claims from Therapy First for services that it provided
to Gardner from June 29, 2010 through August 4, 2011. The total that Therapy First claimed for
services was $63,974.21.
The parties tried their dispute before a jury in late February and early March of 2012.
After hearing the evidence, the jury returned a verdict in favor of Gardner and Therapy First.
The jury found that Gardner sustained “an accidental bodily injury” in the accident, but found
that she did not incur any “allowable expenses.” The jury, however, found that she did incur
some “replacement services expenses” and awarded her $1,720, plus interest. It further found
that she incurred some mileage expenses and a medical bill of $400. The jury found that all
these expenses became overdue on October 7, 2010. On a separate verdict form, the jury also
found that Gardner sustained an injury that resulted in allowable expenses that were provided by
Therapy First. It awarded Therapy First $7,500 of its claimed expenses and found that those
expenses became overdue on October 7, 2010.
The trial court entered judgment in favor of Gardner in April 2012. It ordered State Farm
to pay Gardner $62,167.39, which included over $52,000 in attorney fees. In October 2012, the
trial court entered a judgment in favor of Therapy First. It ordered State Farm to pay $57,168.75
to Therapy First, which included over $46,000 in attorney fees.
State Farm appealed in this Court the trial court’s decision to award attorney fees to
Gardner and Therapy First. On appeal, this Court stated that the trial court did not make specific
findings as to whether State Farm’s decision to deny payments was unreasonable under MCL
500.3148; rather, it appeared to improperly rely on the fact that the jury found that there were
overdue payments.2 Because this Court did not have a sufficient record to properly review the
trial court’s decision to award attorney fees under MCL 500.3148, it remanded the case back to
the trial court. Id. at 6-7.
In July 2014, the trial court held a hearing on remand from this Court. At the hearing,
State Farm’s lawyer argued that State Farm could reasonably refuse to pay the claims at issue
after its independent medical examiner opined that Gardner did not suffer an injury, or, at most
suffered a sprain or strain that would have only required a few weeks of therapy. The trial court
expressed concern that State Farm refused to pay medical and therapy bills arriving as early as
July 2010, even though the independent medical examination did not occur until nearly a year
after the accident. The court noted that the emergency room had already diagnosed Gardner with
a sprain-strain in June 2010, and it wondered if it was reasonable to deny coverage for Gardner’s
sprain-strain injury without a medical opinion to contradict the hospital’s physician and
Gardner’s physician.
State Farm’s lawyer maintained that the decision to deny was reasonable even at that
time; specifically, he cited the evidence that State Farm’s adjuster, Winters, had conflicting
medical reports, which led her to believe that Gardner might not have suffered an injury:
2
See Gardner v State Farm Mut Auto Ins Co, unpublished opinion per curiam of the Court of
Appeals, issued June 17, 2014 (Docket No. 313351), slip op at 6.
-3-
“[S]he’s smart enough to know and experienced enough to know that when you have conflicting
diametrically opposed MRIs, you got an issue here.” It was, therefore, in State Farm’s lawyer’s
view, reasonable for its adjuster to hold off approving payment of the bills until the conflicting
evidence could be sorted out. Winters attempted to sort the matter out, he stated, by requesting
Goldfein’s records, which was also reasonable. Goldfein did not provide the records and State
Farm could reasonably refrain from taking further action until Gardner sued. After that point,
State Farm ordered the independent medical examination, which further justified its refusal.
Gardner’s lawyer argued in response that State Farm’s decision to deny the claims was
unreasonable. He maintained that the initial medical records were not inconsistent and showed
that Gardner suffered an injury. Moreover, Winters had every right to obtain Goldfein’s records
in support of his bill even without an authorization. As such, it was, in his view, unreasonable to
sit on the bills for months without taking steps to verify whether there was an actual dispute over
whether Gardner suffered an injury and whether the treatments were reasonably necessary to
treat that injury. Specifically, he argued that it was unreasonable to deny the claims without first
obtaining an independent medical examination, which State Farm only did after Gardner sued.
He also argued that State Farm’s claim that it could not order an independent medical
examination without Goldfein’s records was inapposite given that it ultimately ordered the
examination without those records.
After hearing the parties’ arguments, the trial court discussed the evidence from the trial.
It stated that State Farm had records establishing that Gardner had received medical treatment
and yet refused to pay the claims; it refused ostensibly because Winters had information that
suggested to her that Gardner’s claims were not legitimate. Despite Winters’ belief that there
was evidence that there was a problem with Gardner’s claims, the trial court noted, Winters did
not request an independent medical examination until almost a year later. In addition, the court
found it telling that State Farm elected to pay for physical therapy for the first six weeks on the
basis of Friedman’s opinion that, if Gardner suffered anything at all, she suffered a neck strain
that would have healed in that time. In the court’s view, this was potentially an admission that
State Farm should have paid the expenses that Gardner incurred during this timeframe. After
considering the evidence it found “that the insurer unreasonably refused to pay the claim and
unreasonably delayed making proper payments in this particular case.”
The trial court went on to state that it was again awarding Gardner her attorney fees and
awarding Therapy First its attorney fees. The court specifically related that it had considered all
the factors stated in our Supreme Court’s decision in Wood v Det Auto Inter-Ins Exchange, 413
Mich 573; 321 NW2d 653 (1982), and determined that Gardner’s attorney’s fees were
reasonable. As such, it again ordered State Farm to pay more than $52,000 in attorney fees to
Gardner. The trial court similarly reviewed the prior proceedings involving Therapy First’s
attorney fees and reiterated that it felt the modified fee that it earlier awarded was reasonable.
In September 2014, the trial court entered an order compelling State Farm to pay
$46,808.75 in attorney fees to Therapy First. The trial court entered an amended judgment in
favor of Therapy First in October 2014. In January 2015, the trial court entered a judgment in
favor of Gardner for $62,167.39.
State Farm now appeals again in this Court.
-4-
II. AUTHORITY TO AWARD ATTORNEY FEES
A. STANDARDS OF REVIEW
State Farm first argues that the trial court erred when it determined that State Farm’s
delay or refusal to pay claims was unreasonable within the meaning of MCL 500.3148. Whether
an award of attorney fees is warranted under MCL 500.3148 involves a mixed question of fact
and law. Moore v Secura, 482 Mich 507, 516; 759 NW2d 833 (2008). “ ‘What constitutes
reasonableness is a question of law, but whether the defendant’s denial of benefits is reasonable
under the particular facts of the case is a question of fact.’ ” Id., quoting Ross v Auto Club Gp,
481 Mich 1, 7; 748 NW2d 552 (2008). This Court reviews de novo a question of law, but
reviews a trial court’s findings of fact for clear error. Moore, 482 Mich at 516. A trial court’s
finding is clearly erroneous when this Court is left with the definite and firm conviction that a
mistake has been made. Id.B. NO-FAULT ATTORNEY FEES
The Legislature has determined that “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.” MCL 500.3148(1). In addition, the attorney’s fee “in an action for
personal or property protection insurance benefits which are overdue” “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.” Id.There are two prerequisites to an award of attorney fees under MCL 500.3148(1), the
“benefits must be overdue” and the insurer must have “ ‘unreasonably refused to pay the claim or
unreasonably delayed in making proper payment.’ ” Moore, 482 Mich at 517, quoting MCL
500.3148(1). An insurer has the burden to justify its refusal or delay in paying a claim. Ross,
481 Mich at 11. “The insurer can meet this burden by showing that the refusal or delay is the
product of a legitimate question of statutory construction, constitutional law, or factual
uncertainty.” Id. However, the jury’s ultimate decision that the insurer owed benefits to the
claimant does not alone establish the unreasonableness of the insurer’s initial decision. Univ
Rehab Alliance, Inc v Farm Bureau Gen Ins Co of Mich, 279 Mich App 691, 693; 760 NW2d
574 (2008). Rather, the trial court must examine the circumstances as they existed at the time
the insurer made the decision, and decide whether that decision was unreasonable at that time.
Brown v Home-Owners Ins Co, 298 Mich App 678, 691; 828 NW2d 400 (2012).
On appeal, State Farm makes much of the fact that it had the right to contest a claim
without penalty where there is a reasonable dispute about the claim, citing Clute v Gen Accident
Assurance Co of Canada, 177 Mich App 411, 419-420; 442 NW2d 689 (1989), and that it had no
obligation to reconcile conflicting opinions, citing Moore, 482 Mich at 521-522. Both
propositions of law are correct, but both also depend on the reasonableness of the denial or delay
in light of the evidence available to the insurer at the time of its decision. Brown, 298 Mich App
at 691. As our Supreme Court stated in Moore, “an insurer need not resort to a ‘tie breaker’ to
resolve conflicting medical reports, but we note that an insurer acts at its own risk in terminating
[or denying] benefits in the face of conflicting medical reports.” Moore, 482 Mich at 522.
Stated another way, although an insurer has no obligation to resort to a “tie-breaker” to resolve a
-5-
conflict in the evidence, it does not necessarily follow that the insurer may invariably deny or
delay payment when there are conflicting reports. Every case must be judged on its own facts,
and it may be unreasonable to deny or delay paying a claim in whole or in part on the sole basis
that there appear to be conflicting medical reports.
In this case, the jury found that Gardner suffered an injury in the accident at issue, that
the injury caused certain expenses that were compensable under the no-fault act, and that State
Farm did not timely pay those claims. Thus, the sole question before the trial court was whether
State Farm’s decision to deny those claims was reasonable under the facts known to State Farm
at the time of its decision. In this case, State Farm’s adjuster, Winters, made the decision to deny
Gardner’s claim for replacement services and mileage, and to deny Therapy First’s claims for
rehabilitative services.
Winters testified that she decided to list Gardner’s status as “under investigation” in
August 2010. She did so because she believed that Gardner might not have suffered an injury in
the accident. She came to this belief on two primary grounds: she believed that it was unlikely
that Gardner would suffer an injury given the size of the vehicles involved and she felt that the
medical records that she had received from the emergency room and the scan results from
Gardner’s treatment with Goldfein conflicted. Because Winters made her initial decision to deny
the claims on the basis of this evidence, whether her decision was unreasonable must be
determined by examining the evidence available to Winters at that time. Brown, 298 Mich App
at 691. As such, State Farm’s reliance on Friedman’s opinion—which he gave months later—is
inapposite.
Winters’ belief that the vehicles in question were so large that they would have protected
their occupants from soft-tissue injuries was unreasonable under the facts. There is no record
evidence to support Winters’ belief; she merely speculated that that might be the case. And her
speculation was directly contradicted by the reports from the hospital and Gardner’s treating
physician and therapist. An adjuster’s speculation is not by itself sufficient to establish a bona
fide “factual uncertainty.” See Ross, 481 Mich at 11, citing Gobler v Auto-Owners Ins Co, 428
Mich 51, 66; 404 NW2d 199 (1987). However, Winters’ reliance on medical reports might,
depending on the circumstances, warrant a denial or delay in paying a claim pending further
investigation.
According to State Farm, the emergency room physicians ruled out every potential injury
from the accident except a soft-tissue sprain or strain. By contrast, it claims, the studies obtained
at Goldfein’s request several weeks later ruled-out a soft-tissue injury, but showed disc
problems. By her own admission, Winters was not a medical professional and was not qualified
to interpret medical tests or reports. As such, whether her decision was reasonable depends on
whether a person with her experience and training would conclude that there was a question as to
whether Gardner sustained a compensable injury on review of these records.
The reports from Gardner’s emergency room visit were consistent with Gardner having
suffered a soft-tissue injury in the accident at issue. The physician’s notes state that Gardner had
“some tenderness to the cervical and upper thoracic spine, primarily on the spinous processes”
and that there was “some muscle spasm in the paraspinal regions.” The physician diagnosed her
with “thoracic strain/sprain type injuries” following a motor vehicle accident. The notes from
-6-
her CT scan also mention muscle spasms and note some mild degenerative changes to Gardner’s
spine. The hospital staff discharged Gardner with instructions to continue her pain-management,
continue wearing a c-collar, and to follow-up with a physician for her neck pain.
Although the results from the tests ordered by Goldfein from Basha Diagnostics did not
reveal a soft-tissue injury, the professionals who evaluated the tests also did not opine that
Gardner did not suffer a soft-tissue injury at the time of her accident; rather, the tests apparently
revealed disc problems that were not as clearly seen in the earlier studies from the emergency
room. In addition, there is no record evidence to suggest that the tests at issue would have
revealed a soft-tissue injury had there been one in the preceding weeks. As such, the reports and
test results from Gardner’s hospital visit and her subsequent treatment with Goldfein were not on
their face contradictory.
As Gardner’s lawyer correctly points out in Gardner’s brief on appeal, the testimony by
Goldfein and Friedman appear to support the conclusion that the reports from Gardner’s hospital
visit and from Basha diagnostics were not contradictory. We do not, however, need to address
that testimony because the doctors offered their opinions long after Winters made her decision.
For that reason, she could not have relied on their opinions. The key question is whether a lay
person with Winters’ experience and training could have examined the reports and reasonably
determined that Gardner did not suffer a compensable injury, or that the payment of the claims
ought to be delayed pending further investigation.
In evaluating this evidence, the trial court found it noteworthy that Winters did not make
any serious effort to investigate the purported contradiction in the evidence. This might, on the
surface, suggest that the trial court held State Farm to a higher burden—that it felt that State
Farm had a duty to secure the opinion of a tie-breaker, which duty our Supreme Court
specifically rejected in Moore. See Moore, 482 Mich at 522. However, a careful reading of the
trial court’s decision shows that it did not find that Winters breached some duty to further
investigate; rather, it simply found her rationale for initially denying the claims incredible:
What happens is we have early intervention, as I kind of go through the
chronology here. She [Winters] receives this information. Supposedly this big
red flag. We have originally the coverage issue which is, again, decided pretty
quickly after the accident occurs August or September within 2 to 3 months. Yet,
there’s still no payment. If she’s got these concerns, there’s no request for
[Gardner] to go in and check out an IME. There’s no request by State Farm to get
[Goldfein’s] record, which are being sent monthly at this point from Therapy
First, as well as Therapy First[’s] records I should say. [Goldfein’s] bills are
being submitted. Therapy First bills are being submitted, yet there is no request
for much of anything here. And the only real activity that ultimately occurred
was when [Gardner] ultimately intervened and had to file suit in February, then
the IME comes back. And it’s in essence one of these justifications for what
we’ve done previously to somewhat cover their tracks for prior denials.
[emphasis added.]
-7-
As the trier-of-fact at the hearing, it was for the trial court to determine the weight and
credibility to be afforded the evidence. MCR 2.613(C). And the trial court plainly did not
believe Winters’ assertion that she denied the claims because there was a conflict in the medical
evidence. Rather, in the trial court’s opinion, her statement was merely a later justification for
her denial. Had she truly felt there was a conflict, the trial court explained, she would have made
a more serious effort to obtain Goldfein’s records or otherwise resolve the conflict. It was in this
context that the trial court noted how long it took for Winters to secure an independent medical
examination. The trial court did not improperly impose a duty on State Farm to resolve a
purported conflict in the medical evidence.
Because the medical reports were not inherently contradictory, the trial court could
reasonably find that Winters’ stated ground for initially refusing to pay the claims was not
worthy of belief.3 This Court defers to the trial court’s superior ability to judge the testimony
and evidence. MCR 2.613(C). On this record, we are not left with the definite and firm
conviction that the trial court erred when it found that State Farm’s decision to deny the claims at
issue was unreasonable under the totality of the circumstances. See Ross, 481 Mich at 11.
Consequently, we affirm the trial court’s decision to award attorney fees under MCL
500.3148(1).
III. AMOUNT OF ATTORNEY FEES
A. STANDARDS OF REVIEW
On appeal, State Farm argues in the alternative that the trial court erred when it awarded
Gardner and Therapy First their attorneys’ fees using the method provided under our Supreme
Court’s decision in Smith v Khouri, 481 Mich 519; 751 NW2d 472 (2008). Instead, State Farm
maintains that the trial court should have applied the multi-factor approach discussed by our
Supreme Court in Wood v Det Auto Inter-Ins Exchange, 413 Mich 573; 321 NW2d 653 (1982),
and that it should have done so at a hearing held for that purpose. More specifically, State Farm
believes the trial court should have reduced the fees to reflect the fact that the jury ultimately
awarded Gardner and Therapy First considerably less than what they were seeking at trial. This
Court reviews a trial court’s selection of an amount of attorney fees to award under MCL
500.3148 for an abuse of discretion. Moore, 482 Mich at 516, citing Smith, 481 Mich at 526
(opinion by TAYLOR, C.J.). This Court reviews de novo whether the trial court properly
interpreted and applied the relevant statutes. Moore, 482 Mich at 516.
3
It is also noteworthy that Winters ultimately approved payment to Therapy First for the
treatments it provided to Gardner in the first few weeks after her accident, but refused to pay
Gardner her mileage for attending those therapy sessions. See ZCD Transp, Inc v State Farm
Mut Auto Ins Co, 299 Mich App 336, 343; 830 NW2d 428 (2012) (“[I]t has long been
recognized that the cost of transportation and mileage to and from medical appointments are
allowable expenses.”). This evidence also supports the trial court’s conclusion that State Farm’s
later actions were attempts to justify its earlier unreasonable decision to deny Gardner no-fault
benefits.
-8-
B. ANALYSIS
Although State Farm frames this issue as one involving whether the trial court
erroneously applied Smith rather than Wood, the trial court stated that it applied the factors from
Wood, and the decisions in Smith and Wood do not conflict. Indeed, the lead opinion in Smith
approvingly cited the factors listed by the Court in Wood, along with other factors, and stated
that it was merely fine-tuning that approach. Smith, 481 Mich at 529-530 (opinion by TAYLOR,
C.J.). The lead opinion did state that factor 3 from Wood should not be applied to the fee
shifting-provision established under MCR 2.403(O), because that would be inconsistent with the
purpose of the rule. See Moore, 481 Mich at 534 n 20 (opinion by TAYLOR, C.J.). But it follows
that the lead opinion still felt that factor 3 should be applied in other contexts, and the remaining
justices stated that this factor should apply even in that context. See Smith, 481 Mich at 543
(opinion by CORRIGAN, J.), and 544 (opinion by CAVANAGH, J.). Therefore, Wood still applies
and factor 3, which takes into consideration the results achieved, should be considered when
determining whether a fee is reasonable. Wood, 413 Mich at 588; see also Univ Rehab, 279
Mich App at 698-700. It appears then that State Farm’s real claim of error is that the trial court
abused its discretion by not reducing the fees substantially on the basis of the jury’s award as a
percentage of the total claims requested. Our Supreme Court has not adopted a categorical rule
requiring trial court’s to reduce an award of attorney fees on the basis of such a mathematical
formula. And this Court has specifically rejected the contention that a trial court must apportion
an award of attorney fees on the basis of the jury’s award. See Tinnin v Famers Ins Exch, 287
Mich App 511, 522; 791 NW2d 747 (2010). Under the decision in Wood, the key question is
whether the fee was reasonable under the totality of the circumstances. Id.Here, the trial court took the Wood factors under consideration and rejected State Farm’s
contention that the fees should be adjusted downward because the jury awarded Gardner and
Therapy First less than the amount they felt was due. With regard to Gardner’s lawyer, the trial
court specifically noted that he handled the case for “a two year period of time” and through a
jury trial; given these circumstances, and “taking into account all of the Wood factors,” it
concluded that Gardner’s lawyer’s fee was reasonable. The trial court stated a similar rationale
in support of its decision to again award Therapy First its fees. The trial court recognized that
there was an issue with fees awarded to an intervening party’s lawyers, but it determined that
each fee should be assessed on its own merits and the various plaintiffs should not be lumped
together and forced to split a fee. For that reason, it assessed the merits of the work performed
by Therapy First’s lawyers and determined that their fee too was reasonable, as adjusted prior to
the remand.
Examining the trial court’s actual application of the law to the facts, we conclude that it
did not abuse its discretion in reaching either award or in refusing to hold a hearing. The trial
court had already examined the factors and reiterated them at the new hearing on remand from
this Court. Moreover, State Farm’s position was not that the hourly rates were unreasonable or
that there was inflated billing; rather, its position was that the trial court should reduce the fees
on the basis of the jury’s award and because an insurer should not have to pay duplicative
attorney fees for intervening plaintiffs. As such, the trial court reasonably determined that it was
unnecessary to hold a hearing to further address the amount of the fees. The trial court properly
applied the factors from Wood to the awards at issue.
-9-
Notwithstanding our belief that there is no conflict between our Supreme Court’s
decisions in Wood and Smith, and that the trial court properly applied Wood, we acknowledge
that there is some uncertainty in this area of the law. Our Supreme Court is considering an
application for leave to appeal from this Court’s decision in Pirgu v United Services Auto Assoc,
unpublished opinion per curiam of the Court of Appeals, issued December 16, 2014 (Docket No.
314523). The Supreme Court specifically asked the parties to address whether Smith or Wood
governs the proper calculation of fees under MCL 500.3148(1), and whether the trial court
abused its discretion in calculating the fee. It has also since held oral argument on the
application. See Pirgu v United Services Auto Assoc, 498 Mich 860; 865 NW2d 35 (2015).
Nevertheless, unless our Supreme Court clearly alters the existing framework for calculating
attorney fees, we conclude that the proper method for calculating attorney fees to be awarded
under MCL 500.3148(1) is the test stated under Wood, as “fine-tuned” in Smith, which the trial
court properly applied to the facts of this case. Contrary to State Farm’s contention on appeal, a
trial court does not have an obligation to reduce a fee simply because the jury awarded less than
the plaintiff requested at trial. Rather, the relevant inquiry is whether the trial court abused its
discretion when—after considering all the relevant factors—it determined that the particular fee
awarded was reasonable. In this case, the trial court’s awards fell within the range of reasonable
and principled outcomes. Moore, 482 Mich at 516. Consequently, it did not abuse its discretion
as to either award.
III. CONCLUSION
The trial court did not clearly err when it found that, under the totality of the
circumstances, State Farm’s initial decision to deny the claims at issue was unreasonable. The
trial court also did not err when it applied Wood to the calculation of the attorney fees and did
not abuse its discretion when it refused to substantially discount the fees on the sole basis that the
jury awarded Gardner and Therapy First a fraction of the damages they believed they were owed.
Because State Farm’s claim that the fees should be reduced did not depend on evidence beyond
that already presented to the trial court at trial and in the record, the trial court also did not abuse
its discretion when it determined that there was no need for a further hearing on the award of
fees.
Affirmed. As the prevailing parties, Gardner and Therapy First may tax their costs.
MCR 7.219(A).
/s/ Michael J. Kelly
/s/ Mark J. Cavanagh
/s/ Douglas B. Shapiro
-10-