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Slocum v. Farm Bureau General Insurance Company of Michigan

Court of Appeals of Michigan

June 18, 2019

RACHEL A. SLOCUM, Plaintiff-Appellant/Cross-Appellee,
FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN, Defendant/Cross-Plaintiff-Appellee/Cross-Appellant, and UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant/Cross-Defendant-Appellee/Cross-Appellant. FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN, Plaintiff-Appellee/Cross-Appellant,
RACHEL A. SLOCUM, Individually and as Next Friend of NOAH J. SINKE SLOCUM, a Minor, Defendant-Appellant/Cross-Appellee, Conservator of DRAYKE SLOCUM and DAYJA SLOCUM, Minors, Defendant-Appellant/Cross-Appellee. And Conservator of DRAYKE SLOCUM and DAYJA SLOCUM, Minors, Defendant-Appellant/Cross- Appellee.

          Eaton Circuit Court LC Nos. 2017-000375-NF, 2017-000188-NF

          Before: Meter, P.J., and Jansen and M. J. Kelly, JJ.

          METER, P.J.

         In these consolidated cases, the parties challenge the trial court's orders requiring the insurers to pay certain survivor's loss benefits under the no-fault act, as well as penalty interest and attorney fees. In pertinent part, we are called upon to decide whether a deceased's dependents are entitled to the replacement cost of obtaining medical and dental benefits similar to those provided by the deceased's former employer or to the monetary value of the premiums paid by the former employer. Recognizing that the survivor's loss provisions of the no-fault act are designed to maintain the deceased's support of his dependents following his death, we conclude that the dependents are entitled to the cost of obtaining substantially similar policies to those provided them by the deceased's former employer. Finding no errors, we affirm the trial court's orders.

         I. BACKGROUND

         Robert Slocum was killed in a motorcycle accident on August 4, 2016. At the time of the accident, Robert[1] was married to Rachel Slocum. Rachel is the biological mother of one minor child, Noah, whom Robert had adopted. Robert also had two minor children-Drayke and Dayja-from his previous marriage to Amber Floyd. At the time of the accident, all three of Robert's children lived with him and Rachel. Rachel and the children depended on Robert for financial support and medical and dental insurance-among other support-which Robert received through his employer. Caroline Slocum is Robert's mother and the children's paternal grandmother; David Slocum is the children's paternal grandfather. Farm Bureau General Insurance Company and United States Automobile Association insured vehicles involved in the fatal accident.

         One week after the accident, Caroline filed a petition for guardianship over Drayke and Dayja. On August 18, 2016, Rachel submitted a claim to Farm Bureau and USAA for no-fault and survivor's benefits for her and all three children. Rachel requested that the insurers pay all benefits to her, indicating that all three children were living with her at the time and submitting documentation supporting her request for immediate payment of Robert's monthly after-tax income, $2, 097.33. Rachel also claimed entitlement to lost fringe benefits, including medical and dental insurance. Farm Bureau requested that Rachel authorize the release of Robert's medical records, which she completed in late August. The insurers did not immediately pay Rachel any benefit.

         Then, on October 5, 2016, Rachel sent Farm Bureau a follow-up letter with additional documentation of Robert's wages and the medical and dental insurance previously provided by Robert's employer. Rachel also included some information regarding the cost for replacing this insurance for her and each child. The letter indicated that Rachel was not the biological mother of Drayke and Dayja, whose paternal grandparents had recently been appointed temporary guardians over them. On October 21, 2016, however, the probate court[2] granted Floyd sole legal and physical custody of Drayke and Dayja and awarded Caroline and David grandparenting time with the children.

         Farm Bureau requested additional information regarding each dependent's Social Security benefits. In a November 16, 2016, letter, Rachel informed Farm Bureau that she was receiving Noah's $467 Social Security benefit, that she was not personally receiving any Social Security benefits, and that Floyd was receiving Drayke and Dayja's benefits. Rachel did not provide information regarding the amount of Drayke and Dayja's Social Security benefits.

         In January 2017, Rachel's counsel emailed Farm Bureau additional documentation pertaining to Rachel's appointment as personal representative of Robert's estate. The emails indicate that Drayke and Dayja were currently in Caroline and David's custody. Approximately three weeks later, on February 13, 2017, Farm Bureau filed a complaint for declaratory relief, asking the trial court for a determination of the proper payees of the survivor's loss benefits and how to distribute the benefits among Robert's dependents. The complaint identified Floyd as Drayke and Dayja's next friend.

         Farm Bureau acknowledged that it was responsible for paying survivor's loss benefits under MCL 500.3108 and agreed that Rachel provided sufficient proof to determine after-tax income and replacement-services benefits. Farm Bureau alleged, however, that Rachel did not provide proof of Robert's employer's contribution to the medical- and dental-insurance policies covering Robert and his four dependents or adequate proof of the amount of Social Security benefits Robert's dependents' received. Rachel later filed a complaint against Farm Bureau and USAA. Rachel alleged that Farm Bureau and USAA failed to pay each dependent the survivor's loss benefits and requested penalty interest and reasonable attorney fees connected to the refusal. The two actions were consolidated by the parties' agreement.

         In June 2017, Floyd's attorney contacted counsel for Farm Bureau, indicating that Floyd was granted custody of Drayke and Dayja that month. Floyd was encouraged to enter her appearance and participate in the case, but did not do so. In July 2017, the probate court appointed Caroline as Drayke's and Dayja's conservator. Eventually a default judgment was entered against Floyd and Caroline was appointed next friend for Drayke and Dayja in October 2017. That same month, by Farm Bureau and USAA's stipulation, the trial court ordered that each insurer was in equal priority to pay any survivor's loss benefits owed to Robert's four dependents.

         As of late October 2017, however, the insurers claimed that they still did not know how to apportion the survivor's loss benefits or who to pay the benefit to, given that Caroline had yet to file her appearance. The insurers asked the trial court to allow them to pay the total amounts owed to the trial court until the proper payees and apportionment could be determined. In early November, Rachel's counsel entered his appearance as Caroline's attorney and filed a response proposing an apportionment of the wage-loss benefits between the four dependents and asking the trial court to order the insurers to pay the amount necessary for the dependents to obtain equivalent policies for the dependents. The insurers disagreed, arguing that they were required to pay only the amount Robert's previous employer contributed to the medical- and dental-insurance policies, not the cost to replace the policies. The trial court ordered the insurers to pay the amounts that were not disputed to the court pending final resolution of the dispute.

         Subsequently, Rachel and Caroline filed a motion for partial summary disposition, arguing that they were entitled to statutory penalty interest and attorney fees on the overdue wage benefits. Farm Bureau responded that, while it did not dispute its liability for survivor's loss benefits, it should not be liable for statutory interest or attorney fees because it did not know what benefits to pay to which parties, a question that remained unanswered to date. For its part, USAA argued that it should not be liable for statutory interest or attorney fees because Farm Bureau was the lead insurer and because questions still existed regarding what benefits to pay which parties.

         In December 2017, the trial court apportioned the money the insurers previously paid to the trial court pursuant to its November 2017 order, with $4, 000 in replacement service benefits and $7, 345.38 in lost after-tax wages going to Rachel and $793.38 of lost after-tax wages going to each of the three children. Then, in January 2018, the trial court addressed the parties' arguments regarding medical and dental insurance, penalty interest, and attorney fees.

         The trial court determined that the custody issue, which arose after Rachel submitted the initial claim for benefits, raised a question about who should have been paid benefits on behalf of Drayke and Dayja, so the trial court limited the award of penalty interest to the first undisputed payment owed in the amount of $2, 097.33. The trial court agreed with the insurers that "the custody matter complicated this case greatly," but commented that the custody issue did not arise until after the original claim was made. The trial court concluded that Farm Bureau was liable for reasonable attorney fees incurred by Rachel in connection with the initial delayed payment only.

         Regarding medical and dental benefits, the trial court noted that the custody dispute and the procurement of separate policies were the result of the deceased's death and that only one medical and one dental policy would have been necessary had the accident not occurred. The trial court concluded that the "contributions of tangible things of value" that each dependent received from Robert were the actual medical and dental benefits, not the premiums paid for those benefits. Accordingly, the trial court found that the insurers were liable for the "replacement cost ...

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