10 Jul July 2018 HL Quarterly Update
No Recoupment for You
Many defendants and insurance carriers hope that if an accidental overpayment is made to a claimant, those funds can be recouped at a later date. A recent case handed down from the Worker’s Compensation Appellate Commission made recovery in those cases more difficult. In Fisher v. State of Michigan – Kalamazoo Regional Psychiatric Hospital, a clerical error resulted in an overpayment to the claimant of $595.11. The presiding magistrate held that precedential case law indicated voluntary payments made absent of fraud or misrepresentation should remain undisturbed, therefore the claimant would not have to reimburse the carrier. On appeal, defendant argued that separate case law indicated that the overpayment should in fact be repaid. However, the appellate commission examined defendant’s argument and held that the case cited involved a defendant who overpaid because they failed to coordinated the claimant’s disability pension pursuant to MCL § 418.354. As a result, this case was distinguishable and the decision of the magistrate was upheld.
Defendant in Fisher did argue that if the magistrate’s decision was to stand, it would have the effect of discouraging voluntary benefits of Worker’s Compensation benefits, while also causing unnecessary disputes and delays. The appellate commission simply responded by saying “. . . the Commission is of the opinion that defendants and employers are under a clear duty to make professional and prompt evaluation of workers’ compensation claims and apply the correct rate.” Going forward, it appears that any defendant who overpays based on a simple calculation error or other mistake will have a difficult time recouping that overpayment.
Innocent No More
A long-standing rule in No-Fault law known as the “innocent third-party rule” holds that car accident victims and the medical providers who treat them are entitled to personal injury protection (PIP) benefits, even if the insured driver engaged in fraud when purchasing the no-fault policy. This rule was abolished by the Michigan Court of Appeals over two years ago, but now the rule’s fate rests with the Michigan Supreme Court.
In Bazzi v. Sentinel Ins. Co., 315 Mich. App. 763 (2016), Plaintiff was injured while driving a car owned by his mother, but the insurer of that vehicle alleged that the policy was obtained fraudulently and rescinded it. Next, the insurer filed a motion to dismiss Bazzi’s claim for PIP benefits, which was denied by the trial court, but later granted by the Court of Appeals. At the heart of the Court of Appeals decision was the fact that the legislature did not create this rule, as it was instead created by the judiciary through years of case law precedent.
When striking down the innocent third-party rule in Bazzi, the Court of Appeals very clearly stated: “[I]f an insurer is entitled to rescind a no-fault insurance policy based upon a claim of fraud, it is not obligated to pay benefits under that policy even for PIP benefits to a third-party innocent of the fraud.” The Bazzi court also rejected the argument that the innocent third-party rule should stand as a matter of public po licy.
The Michigan Supreme Court heard arguments on the case months ago but is yet to issue a written opinion.
Too Little, Too Late
The Director of the Michigan Worker’s Compensation Agency, Mark Long, recently authored an opinion that addresses a rare but important issue: what happens when the Plaintiff dies? Even more to the point, what happens when the Plaintiff dies just a few days after settling their case?
Director Long’s decision was rendered in the case of Dunkerson v. General Motors Company. Plaintiff in Dunkerson injured his back in October 2001, and in January 2002, he became unable to work. As a result, Defendant voluntarily paid Plaintiff benefits until January 2010. At that time, Plaintiff’s weekly benefit amount was reduced, and litigation resulted. Litigation ended on October 2, 2013, when Plaintiff settled his case for $85,000. Only eight days later, on October 10, 2013, Plaintiff died of cancer. Just before the expiration of the 15-day appeal period, Defendant filed an appeal of the redemption order.
The previous Director of the Agency issued an opinion setting aside the redemption order in July 2014. Thereafter, the Appellate Commission vacated that opinion and remanded the case to the Magistrate level, because no one (attorney or otherwise) had formally represented the Plaintiff’s estate in the Worker’s Compensation hearings. This issue was remedied, and the presiding Magistrate, Jane Colombo in Detroit, held another redemption hearing on the matter. She affirmed the settlement order for a second time, and Director Long affirmed her decision.
Director’s Long’s reasoning in affirming the redemption order was multi-faceted. One of the things he repeatedly emphasized was the fact that Defendant had ample opportunity to review all of Plaintiff’s available medical information and ask questions regarding his status. However, at no point did the medical records mention that Plaintiff had cancer, and Defendant never asked. Director Long held that plaintiffs are not under any obligation to reveal additional medical information that is not the subject of the litigated worker’s compensation case, even if it was life-threatening in nature. Further, there was no evidence that Plaintiff’s death was imminent when the case was settled, so there was no realistic assertion to be made that this information was withheld from the Defendant. The other pillar of Director Long’s opinion was his finding that there was no mutual mistake of fact between the parties at the time of redemption, and there was no evidence of fraud or other misleading behavior on behalf of Plaintiff. As a result of these considerations, Director Long found no reason to disturb the redemption order. This case was handed down very recently, therefore it is unknown if this decision will be appealed.
Worker’s Compensation systems in other states often have procedures that differ wildly from our own. One positive example that Michigan might want to emulate comes from our neighbor Ohio.
Ohio employers routinely receive rebates paid by the state’s Bureau of Workers Compensation. This year they are likely to get $1.5 billion dollars in payments rebated, which is about 85% of what they paid into the system over the course of the year. Since 2011, Ohio employers have received rebates totaling $8 billion dollars. Further, this would be the largest single rebate in 20 years. It also appears that this system is not overly expensive to implement. Recently, Ohio was near the top of the list of highest rates charged for workers compensation insurance. Currently they have dropped to 11th on that list.
In order to highlight the success of this system, the rebate announcement was made at a small brewery that is expected to receive a roughly $9,000 rebate. The owners of the brewery have pledged that they will use the money to expand their business and, along with a separate grant, purchase two pieces of equipment that will create a safer work environment.
In addition to businesses getting the rebate, local governments and school districts will also be receiving money back as they too pay into the program.
Submitted by Jonathan Rea
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