Order Michigan Supreme Court
Lansing, Michigan
September 24, 2010 Marilyn Kelly,
Chief Justice
140120 & (124) Michael F. Cavanagh
Maura D. Corrigan
SHERI M. ANDERSON, Robert P. Young, Jr.
Stephen J. Markman
Plaintiff-Appellee, Diane M. Hathaway
Alton Thomas Davis,
v SC: 140120 Justices
COA: 277096
Wayne CC: 03-305800-NI
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Defendant-Appellant.
_________________________________________/
On order of the Court, the motion for miscellaneous relief is GRANTED. The
application for leave to appeal the August 25, 2009 judgment of the Court of Appeals is
considered, and it is DENIED, there being no majority in favor of granting leave to
appeal or taking other action.
CORRIGAN, J. (dissenting).
I respectfully dissent from the Court’s decision to deny defendant State Farm’s
application for leave to appeal. Defendant automobile no-fault insurer argues that
plaintiff insured will receive an unjustified $3.2 million because the jury verdict will
require two insurance companies to pay for duplicate benefits. The trial court precluded
the jury from hearing proof that plaintiff stood to recover nearly $675,000 per year by
receiving 22 facial injections twice a week. The trial court’s decision to exclude
evidence of collateral source benefits seems outside the range of principled outcomes. It
deprived the jury of facts highly relevant to its determination whether the facial injections
were reasonable and necessary, thus impeding the jury’s search for truth. Therefore, I
would grant leave to appeal to consider the showing required under Nasser v Auto Club
Ins Ass’n, 435 Mich 33 (1990), to admit evidence of collateral source benefits in order to
show malingering or motivation of financial gain, and to determine whether the trial court
abused its discretion when it excluded such evidence in this case.
I. UNDERLYING FACTS AND PROCEDURAL HISTORY
Plaintiff’s face and head were injured when she was involved in an accident in
December 1999 while riding in a vehicle insured under an uncoordinated no-fault policy
issued by defendant State Farm, which became liable for personal protection insurance
(PIP) benefits arising from the accident. As noted, plaintiff also had a health insurance
policy with Blue Cross Blue Shield. Plaintiff’s diagnosis of multiple sclerosis predated
2
the accident. After the accident, she allegedly experienced headaches and pain in her
face, head, neck and shoulders. Dr. Maurice Converse, an anesthesiologist, began
injecting plaintiff with steroids, an anesthetic, and a compound called Sarapin at the
MedBack Clinic in Ohio. Plaintiff’s medical records show, and Dr. Converse
acknowledged, that his injections of plaintiff were initially based on treating symptoms
associated with plaintiff’s multiple sclerosis, (hence not accident related).
The trial court precluded the jury from hearing that the MedBack Clinic was
closed after an FBI investigation and raid involving the MedBack Clinic’s healthcare
fraud. After the MedBack Clinic closed, Dr. Converse rented space at another clinic in
Ohio so he could continue injecting plaintiff. Remarkably, plaintiff was his only patient.
State Farm initially paid for the injections. State Farm paid plaintiff nearly
$300,000 for those treatments. Plaintiff eventually began receiving 44 injections per
week. In August 2001, State Farm initiated a fraud investigation of plaintiff’s claims,
which included a review of plaintiff’s medical files and an independent-medical
examination. Dr. Eugene Mitchell conducted the independent-medical examination and
concluded that the injection treatments should be stopped. As a result, State Farm ceased
paying plaintiff for the injections.
Plaintiff thereafter filed this no-fault action, and the case proceeded to a jury trial.
State Farm’s liability for plaintiff’s injections depended on the jury’s determination
whether plaintiff’s injuries for which she received the injections arose out of the
automobile accident or her multiple sclerosis, and whether the injections that Dr.
Converse administered were reasonable and necessary. The jury returned a verdict for
plaintiff, awarding her nearly $2.5 million in medical expenses and interest on the unpaid
benefits. The trial court entered a judgment that also included costs and attorney fees,
resulting in a total judgment of more than $3.2 million. The trial court denied State
Farm’s motion for judgment notwithstanding the verdict. The Court of Appeals affirmed.
In its application for leave to appeal to this Court, State Farm argues that the trial
court erred in granting plaintiff’s motion in limine to exclude evidence that plaintiff’s
medical benefits were uncoordinated and that Blue Cross was paying plaintiff’s medical
expenses.
II. ANALYSIS
Under MCL 500.3107(1)(a), a no-fault insurer is liable for “[a]llowable expenses
consisting of all reasonable charges incurred for reasonably necessary products, services,
and accommodations for an injured person’s care, recovery, or rehabilitation.” Plaintiff’s
motion to exclude evidence of the uncoordinated benefits was based on this Court’s
decision in Nasser. Like this case, Nasser was a no-fault action in which the trial court
granted the plaintiff’s motion to exclude all evidence of other insurance coverage. The
trial court ruled, and the Court of Appeals agreed, that evidence of other insurance
coverage was barred by the collateral source rule and MRE 403.
3
In Nasser, we held that evidence of other insurance coverage is inadmissible for
the purpose of mitigating damages under the collateral source rule, but recognized an
“exception to the general rule of exclusion,” where evidence of collateral source benefits
would establish malingering. Nasser, 435 Mich at 58-59. We noted that evidence of
collateral source benefits should be admitted “‘only if it appears to the trial judge from
other evidence that there is a real possibility that plaintiff was motivated by the receipt of
collateral source benefits to remain inactive as long as he did.’” Id. at 59, quoting 22 Am
Jur 2d Damages, § 967, p 1004. Having reversed the decision of the trial court on other
grounds and remanded for further proceedings, we declined to decide whether the
“exception” to the collateral source rule applied. Id. at 62. We directed the trial court,
however, to consider on remand whether the evidence was “offered to prove malingering
or exaggeration of injuries by plaintiff, rather than in mitigation of damages.” Id. at 63.
In this case, the trial court precluded the jury from hearing that plaintiff was
making nearly $675,000 per year by receiving 22 injections twice a week. At the hearing
on plaintiff’s motion in limine to exclude evidence of collateral source benefits, defense
counsel argued that “the possibility of putting in your pocket the same amount of money
that the doctor would put in his pocket if he were being paid by Blue Cross is a motive to
undergo these treatments . . . .” Transcript of Motion Hearing, April 7, 2005, p 30.
Defense counsel also argued
All I have to do in any case is to be able to show that this person’s
activities may or may not be motivated by what you would think a person
normally goes to a doctor for in this case. . . . She goes for almost three
years now and undergoes these treatments, and she’s going to make $ 2
million off of this treatment. [Id.]
The trial court granted plaintiff’s motion to exclude the evidence, ruling that “the
fact that certain doctors may not be able to understand [] plaintiff’s response or lack of
response to certain injections” would not lead it to determine that, under Nasser, plaintiff
was malingering. Id. at 47-48.
The Court of Appeals held that the trial court did not abuse its discretion in
excluding evidence of plaintiff’s receipt of collateral source benefits because defense
counsel failed to present independent evidence of malingering and therefore failed to
“meet its foundational burden under Nasser.” Anderson v State Farm Mut Auto Ins Co,
unpublished opinion per curiam of the Court of Appeals, issued August 25, 2009 (Docket
No. 277096), pp 3-4. I believe that the circumstances on this record reflect an adequate
foundation to show plaintiff was engaged in malingering.
Defendant clearly sought to admit the evidence of collateral source benefits to
show that plaintiff was motivated by financial gain, rather than by a need for medical
treatment. Plaintiff’s receipt of nearly $675,000 a year for facial injections was surely a
4
sufficient foundation to admit proof of the collateral source benefits. The erroneous
exclusion of this evidence appears inconsistent with substantial justice and affects a
substantial right of State Farm1 because the evidence was critical to the jury’s
determination whether the injections administered by Dr. Converse were “reasonable and
necessary” under MCL 500.3107(1)(a). The trial court’s ruling precluded the jury from
considering the plausible alternative explanation that plaintiff continued to receive 44
injections in her face per week not because they relieved her pain, but because she stood
to gain $295 per injection – or $12,980 per week – from continuing the treatment. I
would grant State Farm’s request that this Court review what occurred here and consider
whether the lower courts’ rulings were consistent with Nasser. In addition, I question
why the verdict was not reduced under MCL 600.6303(1),2 the collateral source rule.
YOUNG and MARKMAN JJ., join the statement of CORRIGAN, J.
KELLY, C.J., not participating. I am not participating because of a close familial
relationship with one of the witnesses.
1
A trial court’s decision to admit or exclude evidence is reviewed for an abuse of
discretion, but “any error in the admission or exclusion of evidence will not warrant
appellate relief ‘unless refusal to take this action appears . . . inconsistent with substantial
justice,’ or affects ‘a substantial right of the [opposing] party.’” Craig v Oakwood Hosp,
471 Mich 67, 76 (2004) (citations omitted).
2
MCL 600.6303(1) provides:
In a personal injury action in which the plaintiff seeks to recover for the expense
of medical care, rehabilitation services, loss of earnings, loss of earning capacity, or other
economic loss, evidence to establish that the expense or loss was paid or is payable, in
whole or in part, by a collateral source shall be admissible to the court in which the action
was brought after a verdict for the plaintiff and before a judgment is entered on the
verdict. Subject to subsection (5), if the court determines that all or part of the plaintiff's
expense or loss has been paid or is payable by a collateral source, the court shall reduce
that portion of the judgment which represents damages paid or payable by a collateral
source by an amount equal to the sum determined pursuant to subsection (2). This
reduction shall not exceed the amount of the judgment for economic loss or that portion
of the verdict which represents damages paid or payable by a collateral source.
I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
September 24, 2010 _________________________________________
p0921 Clerk