Claims for work-loss benefits under § 3107 of the no-fault act are par for the course in personal injury protection (PIP) litigation. Two common defenses to this type of claim are insufficient proof of employment and fraud, but courts often conclude that the trier of fact must decide these issues. The Michigan Court of Appeals came to a similar conclusion in Baum v Auto-Owners Ins Co (Docket No. 352763), holding that the trial court erred when it granted summary disposition based on fraud. Nevertheless, the Court still affirmed the trial court’s dismissal of the plaintiff’s work-loss claim. The defense that won the day was the plaintiff’s failure to mitigate damages.
Background on Baum
In December 2017, James Baum was driving when he encountered a deer, swerved, and collided with a tree. After the accident, he filed a claim for PIP benefits under the Home-Owners Insurance Company policy that covered the vehicle he was driving. Based on the information that Baum provided regarding his work history and a return-to-work release issued by his physician, Home-Owners paid Baum work-loss benefits between the date of the accident and the date his doctor lifted his work restrictions.
Baum then filed a complaint against Home-Owners, seeking additional PIP benefits (including work loss). Through Baum’s discovery responses and deposition testimony, Home-Owners learned that he actually wasn’t employed at the time of the accident. So Home-Owners moved for summary disposition under MCR 2.116(C)(10) on two grounds: (1) Baum committed fraud when he claimed that he had a job at the time of the accident, and (2) Baum failed to mitigate his damages by making no effort to find new employment, even after his physician concluded that he could return to light-duty work. The trial court agreed with both arguments. Baum appealed.
The Appellate Court’s Opinion
The Michigan Court of Appeals affirmed the trial court’s decision, but not based on fraud.
First, the Court of Appeals concluded that summary disposition was improper on the grounds that Baum made material misrepresentations about his employment that voided the Home-Owners policy. Reviewing the evidence, the Court determined that a question of fact existed as to whether Baum knowingly misrepresented the status of his employment at the time of the accident.
However, on the issue of Baum’s failure to mitigate his work-loss damages, the Court of Appeals affirmed the trial court’s ruling. The common-law duty to mitigate damages applies to no-fault work-loss benefits. Defendants bear the burden of proving this affirmative defense. In general, the trier of fact must decide whether an employee reasonably declined to seek employment or reasonably declined to accept a particular job. Here, though, the Court of Appeals held that there were no questions of material fact on this issue.
Home-Owners satisfied its burden by presenting unrebutted evidence that Baum did not seek any employment after the accident, even after his doctor released him to light-duty work. The evidence showed that his failure to seek employment was not related to a physical inability to work. Instead, it was related to his “untested belief” that a light-duty job required work with computers, for which, he believed, he was unqualified. Baum, unpub op at 6. The Baum Court emphasized that the common-law duty to mitigate work-loss damages requires an individual to make reasonable efforts (considering the circumstances) to find a new job. The duty is broader than simply looking for a position that is similar to the one they had at the time of the accident. Accordingly, the Court of Appeals affirmed the trial court’s grant of summary disposition based on Baum’s failure to pursue any type of employment after his doctor lifted his work restrictions.
Reminder for Insurers and Their Counsel
Baum filed an application for leave to appeal in the Michigan Supreme Court. Insurers and their counsel should keep an eye on the docket to see if the Court grants review.
In the meantime, Baum provides a helpful reminder that insurers and their attorneys should think past their usual defenses and always consider whether a claimant has mitigated their work-loss damages. To determine if the summary disposition is viable on this issue, counsel should seek detailed discovery related to a claimant’s work restrictions (if applicable) and any efforts the claimant has made to find employment.
If you have questions about viable grounds for summary disposition in no-fault cases, please feel free to contact the author, Gina M. Derderian. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.