Lawyers’ Corner: Penalty Interest in Bronson Health Care Group v Titan Insurance Company

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For First-Party trial attorneys, a top priority is getting clients paid quickly. But insurance companies are in no hurry to settle cases.  That’s why Michigan law includes a law awarding penalty interest which can make up for an auto insurer’s refusal to pay no-fault benefits.

The Michigan Court of Appeals seems to be setting a trend when it comes to medical provider no-fault claims. In 2015, the court decided two groundbreaking cases, Covenant Medical Center Inc v State Farm Mutual Automobile Insurance Company and Chiropractors Rehabilitation Group, P.C. v. State Farm Mutual Automobile Insurance Company, protecting doctors’ and hospitals’ rights to file independent no-fault benefits claims.

On March 15, 2016, Bronson Health Care Group, Inc v Titan Insurance Co continued that trend. This time, the Michigan Court of Appeals issued a published opinion enforcing a medical provider’s right to penalty interest, attorney fees and costs when an insurance company inappropriately delays paying their bill.

On May 9, 2013, Amber French was injured as a passenger in a vehicle driven by John Capp, and owned by yet a third person. When it appeared none of the parties involved had auto insurance, medical provider Bronson Health Care Group, Inc., sent its first party no-fault claim to the Michigan automobile insurance placement facility to receive benefits under the Michigan Assigned Claims Plan (MACP) on September 12, 2013. But Titan didn’t pay Bronson within 30 days.

Instead, it delayed the process, deposing Amber French on July 10, 2014. Ms. French confirmed the statements made in Bronson’s application to the MACP – that she did not have auto insurance, was not married, and was not living with relatives. Only then did Titan agree to pay Bronson’s $51,000 medical bill, but not the penalty interest.

When the matter went to court, Titan argued that it wasn’t liable for penalty interest because it paid Bronson’s claim within 30 days of concluding its investigation at the deposition. The trial court judge agreed, but the Court of Appeals did not.

Penalty Interest for Unpaid No-fault Benefits

Bronson filed its motion for penalty interest based on MCL 500.3142, which states:

  1. Personal protection insurance benefits are payable as loss accrues.
  2. Personal protection insurance benefits are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained. . . .
  3. An overdue payment bears simple interest at the rate of 12% per annum.

The court emphasized that nothing in this statute allows an insurance company to delay payments while performing its own investigation. It noted “the MACP only itself assigns a claim after reviewing a claimant’s eligibility.” Instead, the deadline for payment is set by receipt of “reasonable proof of the fact and of the amount of loss sustained.” In this case, that proof was the medical provider’s MACP application, which was received by Titan on September 24, 2013. The court ruled:

“Accordingly, the trial court erred in concluding that Titan’s initial position that French might be ineligible for assigned-claim benefits justified Titan’s failure to comply with MCL 500.3142(2) until it conducted enough discovery to satisfy itself that French was, indeed, eligible for benefits.”

Attorney Fees and Costs for Frivolous Defenses

The court didn’t stop at awarding penalty interest. It went so far as to rule Titan’s defense against that interest “frivolous” under MCL 600.2591. The court said a defense is frivolous when  “[t]he party’s legal position was devoid of arguable legal merit” and “not grounded in law or fact such as when it violates basic, longstanding, and unmistakably evident president.” (quoting Adamo Demolition Co v Dep’t of Treasury)

The court said Titan’s claim that it was allowed to complete its investigation before paying no-fault benefits to a medical provider was frivolous because “Michigan courts have repeatedly construed MCL 500.3142(2) in accordance with its plain language.” To claim otherwise was contrary to “basic, longstanding, and unmistakably evident precedent.” The court remanded the case to the trial court, instructing it to impose appropriate sanctions.

Protecting Penalty Interest for Medical Providers

The case gives clear direction to trial courts considering motions for penalty interest. Medical provider attorneys can protect their clients’ right to prompt payment by providing insurance providers prompt reasonable proof of the accident and the cost of medical expenses provided.

Attorneys representing injured motorists or medical providers can take heart in Bronson. As insurance providers continue to find new ways to contest claims and delay payments, Bronson promises that when all is said and done, plaintiffs will be compensated for their wait.

David Christensen of Christensen Law in Southfield, Michigan, is an auto accident attorney with over 20 years experience representing both injured motorists and medical providers. If your client is facing unreasonable delays after an auto accident, contact Christensen Law for a referral today.