Proudfoot v. State Farm Mutual Insurance

Michigan Supreme Court

Lansing, Michigan 48909

Chief Justice Justices

Opinion
Maura D. Corrigan Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

FILED DECEMBER 23, 2003

EVELYN PROUDFOOT,

Plaintiff-Appellee,

V No. 123502

STATE FARM MUTUAL INSURANCE
COMPANY,

Defendant-Appellant.

_______________________________

PER CURIAM

Plaintiff sought no-fault benefits for injuries

suffered in a car-pedestrian accident in order to make

modifications to her house. The circuit court granted

judgment for plaintiff and ordered that certain sums be

paid to plaintiff and to the court. The Court of Appeals

affirmed in part and reversed in part. We reverse in part

the Court of Appeals decision and remand the case to the

Washtenaw Circuit Court for further proceedings consistent

with this opinion. In all other respects, we affirm.
I

Plaintiff sustained serious injuries in November 1995,

when she was struck by a car during a visit to Michigan

from her home in England. Her leg was amputated above the

knee, and, because of complications with her prosthesis,

the use of a wheelchair became necessary. In 1997,

plaintiff’s husband sent defendant no-fault insurance

carrier a letter stating that, on the basis of an

occupational therapy report, significant home modifications

were required and that an architect had been requested to

prepare plans and to estimate the cost.

The architect provided the plans to plaintiff, who

paid the architect’s bill ($815.101) and forwarded it to

defendant in March 1999. The estimated cost for the home

modifications, including the value added tax (VAT) of 17.5

percent, was about $250,000. Defendant had its own expert

evaluate the home, and, on the basis of that evaluation,

defendant claimed that plaintiff’s requests were

unreasonable. It also denied plaintiff’s request for

reimbursement of the architect’s bill.

Plaintiff sued for breach of contract and declaratory

relief. As the result of a mutually accepted mediation

1
The monetary figures have been converted from English
pounds to American dollars.

award, Washtenaw Circuit Judge Timothy P. Connors awarded

plaintiff partial judgment on January 28, 2000.2 By its

terms, the partial judgment did not dispose of plaintiff’s

claim for home modifications.

The court held a jury trial on the issues related to

the proposed home modifications.3 Responding to questions

on the jury form, the jury found that plaintiff had

incurred “allowable expenses” in the amount of $815.10 (the

architect’s bill) and that defendant had received

reasonable proof of the expenses on March 2, 1999. In a

portion of the form entitled “Declaratory Judgment,” the

jury found that the modifications to plaintiff’s home were

reasonably necessary, that the amount of the allowable

expense was $220,500 (plus the VAT), and that plaintiff had

supplied reasonable proof of those expenses on December 2,

1997.

Plaintiff moved for entry of a judgment that would

award her judgment interest, MCL 600.6013, no-fault penalty

interest, MCL 500.3142, and no-fault attorney fees, MCL

2
Plaintiff was awarded certain wage loss benefits,
attendant care benefits, mileage benefits, the cost of a
modified van purchase, and no-fault interest, judgment
interest, and attorney fees on all the benefits awarded.
3
At the time of trial, the modifications had not yet
been made.

500.3148(1). The January 5, 2001, judgment awarded

plaintiff the architectural services fee and no-fault

interest on that fee from April 1, 1999. The judgment also

provided:

IT IS FURTHER ORDERED AND ADJUDGED that
Plaintiff recover future home modifications as
awarded by the jury in the amount of $220,500.00
plus value added tax of 17.5% for a total future
home modification award in the amount of
$259,087.50 is awarded [sic], such amount to be
overseen by the Court as the expenses are
incurred under the no fault law.
IT IS FURTHER ORDERED AND ADJUDGED that no
fault interest on the home modification amount of
$259,087.50, from the date reasonable proof was
submitted, with the billing April 1, 1999 at the
rate of 1% per month until paid.

No-fault attorney fees in the amount of $69,300.00 and

costs of $7,597.23 were awarded. The judgment also

provided:

IT IS FURTHER ORDERED AND ADJUDGED that
prejudgment interest or post judgment interest is
owed from November 27, 1997 at the rate of 12%
per annum compounded annually, on the architect’s
bill, the no fault interest on the architect’s
bill and the future home modifications, the no
fault attorney fees and costs, and the no fault
interest on home modifications until each of said
items are paid.

Defendant appealed, and the Court of Appeals affirmed

in part and reversed in part. 254 Mich App 702; 658 NW2d

838 (2003). The Court found that the trial court had

“appropriately ordered defendant to pay the total amount of

home modification benefits to the trial court for

distribution.” Id. at 711. It reasoned that declaratory

relief is not exclusive and that a money judgment may be

appropriate when the parties have had notice and a hearing

or when future damages are involved, Manley v Detroit

Automobile Inter-Ins Exch, 425 Mich 140; 388 NW2d 216

(1986).

The Court of Appeals also held that the grant of

attorney fees was appropriate with regard to defendant’s

failure to pay for both the architectural services and the

overdue home modifications. It reasoned:

[P]laintiff was forced to seek legal action
to establish defendant’s obligation to pay for
necessary home modifications. Defendant failed
to provide any assistance to plaintiff. Absent
independent financial means, plaintiff was unable
to commence or obligate herself for these
modifications. The record reveals a lack of any
realistic finalized plan that defendant was
prepared to implement at the time of trial.
Consequently, the trial court properly decided
that plaintiff was also entitled to attorney fees
because defendant's delay in proffering a
finalized alternative plan or payment was
unreasonable. [254 Mich App 715 (emphasis in
original).]
The Court found that defendant’s premise—“that an insured

must be able to pay for or have the economic ability to

obligate oneself for all benefits before they become due”—

would result in economic disparity wherein only
the wealthy or those with a healthy credit line

would be able to pursue a dispute with their
insurance company over benefits. [Id. at 716.]

For the same reasons, the Court also found the award of no-

fault interest to be proper.

Relying on MCL 600.6013(1) and the definition of

“future damages” in MCL 600.6301, the Court of Appeals

reversed the trial court on the issue of judgment interest

on the future home modifications. Judgment interest on the

architect’s fee, on the no-fault interest, and on the

attorney fees was upheld.

The Court of Appeals dissenter would have held that

the expenses for the home modifications were not overdue

because plaintiff had not incurred the expenses and because

the necessity of the modifications was a bona fide factual

dispute, which was ultimately settled by the jury. 254

Mich App 719. The dissenter reasoned that although

plaintiff would not need to pay the costs of the

modifications out of her own pocket in order to “incur”

them, she would need to “become liable for them; defendant

is not obligated to pay for modifications plaintiff may

never make.” Id. at 720. The dissenter noted that

plaintiff could “submit claims to defendant as they are

incurred.” Id. at 722 (emphasis in original). The

dissenter would have found that the expenses related to the

proposed modifications were not overdue, and that defendant

should have been required to pay only the attorney fees and

interest that were associated with the architect’s bill.

Defendant has applied to this Court for leave to

appeal.

Because this case involves questions of law and issues

of statutory interpretation, it is reviewed de novo. The

primary rule of statutory construction is to effectuate the

intent of the Legislature, and where the statutory language

is clear and unambiguous, it is generally applied as

written. Cruz v State Farm Mut Automobile Ins Co, 466 Mich

588, 594; 648 NW2d 591 (2002). A statute's language is

given its ordinary and generally accepted meaning.

Putkamer v Transamerica Ins Corp, 454 Mich 626, 631; 563

NW2d 683 (1997), citing Turner v Auto Club Ins Ass'n, 448

Mich 22, 27; 528 NW2d 681 (1995).

We agree with the Court of Appeals that plaintiff is

not entitled to judgment interest on the proposed home

modifications. MCL 600.6013(1) provides in part that, “for

complaints filed on or after October 1, 1986, interest is

not allowed on future damages from the date of filing the

complaint to the date of entry of the judgment.” (Emphasis

added.) MCL 600.6301 defines “future damages” as “damages

arising from personal injury which the trier of fact finds

will accrue after the damage findings are made . . . .”

The award of judgment interest on the architect’s fee, on

the no-fault interest on that fee, and on the attorney fees

that were associated with the award of the architectural

services fee, was appropriate.

We also affirm the Court of Appeals holding concerning

the declaratory judgment that the modifications to

plaintiff’s home were reasonably necessary, that the amount

of the allowable expense was $220,500 (plus the VAT), and

that plaintiff had supplied reasonable proof of those

expenses on December 2, 1997. Likewise, the judgment

awarding plaintiff the architectural services fee that

plaintiff has already paid is affirmed.

However, we reverse that portion of the Court of

Appeals judgment that ordered defendant to pay the total

amount of future home modification expenses to the trial

court for distribution because the expenses in question

have not yet been incurred.

MCL 500.3107 provides in part:

(1) Except as provided in subsection (2),
personal protection insurance benefits are
payable for the following:
(a) Allowable expenses consisting of all
reasonable charges incurred for reasonably
necessary products, services and accommodations
for an injured person’s care, recovery, or
rehabilitation. [Emphasis added.]

MCL 500.3110(4) provides that “[p]ersonal protection

insurance benefits payable for accidental bodily injury

accrue not when the injury occurs but as the allowable

expense, work loss or survivors' loss is incurred”

(emphasis added).

To “incur” means “[t]o become liable or subject to,

[especially] because of one’s own actions.”4 A trial court

may enter "a declaratory judgment determining that an

expense is both necessary and allowable and the amount that

will be allowed[, but s]uch a declaration does not oblige a

no-fault insurer to pay for an expense until it is actually

incurred.” Manley, supra at 157. At the time of the

judgment, plaintiff had not yet taken action to become

liable for the costs of the proposed home modifications.

4
Webster’s II New College Dictionary (2001). An
insured could be liable for costs by various means,
including paying for costs out of pocket or signing a
contract for products or services. Should the insured
present a contract for products or services rather than a
paid bill, the insurance company may, in order to protect
itself, make its check payable to the insured and the
contractor.

Because the expenses in question were not yet “incurred,”

the Court of Appeals erred in ordering defendant to pay the

total amount to the trial court. See Nasser v Auto Club

Ins Ass'n, 435 Mich 33, 50; 457 NW2d 637 (1990).

Similarly, we reverse that portion of the no-fault

interest awarded on the future home modification expenses.

Twelve percent simple interest is payable only on “overdue”

personal protection insurance benefits. MCL 500.3142(3).

Generally, "benefits are payable as loss accrues.” MCL

500.3142(1). MCL 500.3142(2) provides in part that

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.
[Emphasis added.]

Because plaintiff has not sustained a loss associated with

the actual home modifications (other than the architect’s

fee), the future home modification benefits are not

“overdue,” and interest is not payable. Therefore,

plaintiff was entitled to interest on the architect’s fee

only, and the award of no-fault interest on the home

modification amount is reversed.

With regard to attorney fees, MCL 500.3148(1) provides

that

[a]n 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. The attorney's fee
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. [Emphasis added.]

Thus, attorney fees are payable only on overdue benefits

for which the insurer has unreasonably refused to pay or

unreasonably delayed in paying. Here, plaintiff was

entitled only to those reasonable attorney fees that were

attributable to the $815.10 architect’s fee. Claims for

the modification expenses are not yet “overdue” because

they are not yet “incurred.”

Therefore, we affirm the portion of the Court of

Appeals judgment denying judgment interest on the future

home modifications and affirming the award of judgment

interest relating to the architect’s fee, the no-fault

interest on that fee, and the attorney fees award

associated with that fee. We also affirm the declaratory

portion of the judgment establishing the amount of future

home modification benefits, but we vacate the portion of

the Court of Appeals judgment that orders defendant to

immediately pay the future home modifications expenses to

the trial court. We also vacate that portion of the

judgment affirming the award of no-fault interest and

attorney fees on the future home modification expenses. We

remand this case to the Washtenaw Circuit Court for further

proceedings consistent with this opinion. We do not retain

jurisdiction.

Maura D. Corrigan
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

Proudfoot v. State Farm Mutual Insurance

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