Russell Loiola v. Citizens Insurance Company of America ( 2020 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
RUSSELL LOIOLA, a legally incapacitated person, UNPUBLISHED
by JEFFREY FRIED, Personal Representative, August 6, 2020
Plaintiff-Appellee,
v No. 348670
Washtenaw Circuit Court
CITIZENS INSURANCE COMPANY OF LC No. 16-001044-NF
AMERICA,
Defendant,
and
CITIZENS INSURANCE COMPANY OF THE
MIDWEST,
Defendant-Appellant.
Before: METER, P.J., and BECKERING and O’BRIEN, JJ.
PER CURIAM.
In this no-fault insurance dispute, Jeffrey Fried, acting as a personal representative, 1 filed
suit against defendant, Citizens Insurance Company of the Midwest, on behalf of plaintiff, Russell
Loiola, seeking benefits under the no-fault insurance act, MCL 500.3101 et seq.2 The matter
1
Fried is identified in the caption as a “personal representative,” but according to his trial
testimony and the letters of guardianship in the lower court record, he is more accurately described
as a guardian.
2
With the enactment of 2019 PA 21, the Legislature substantially amended portions of the no-
fault insurance act effective June 11, 2019. However, because the current case commenced before
the effective date of that amendment, this case is controlled by the former provisions of the no-
fault act. See George v Allstate Ins Co, ___ Mich App ___, ___; ___ NW2d ___ (2019) (Docket
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proceeded to a jury trial, and the jury returned a verdict in Loiola’s favor in the amount of
$353,438.79 plus interest. After trial, the court concluded that Citizens’ denial of benefits was
unreasonable and awarded Loiola penalty attorney fees under MCL 500.3138. Citizens appeals as
of right. For the reasons explained in this opinion, we vacate the judgment in Loiola’s favor, we
vacate the award of attorney fees and costs, and we remand for a new trial.
I. BACKGROUND
Loiola was injured in a hit-and-run motor vehicle accident in January 2010. It is undisputed
that he suffered a traumatic brain injury, though the degree of the injury and the level of care
medically necessary for his injury were matters of debate among experts during trial. Loiola’s
claim was assigned to Citizens under the Michigan Assigned Claims Plan (MACP).
Following the accident, between 2010 and 2013, Loiola lived with his mother, and it
appears that Citizens paid benefits during this time. However, in 2013, Citizens began
investigating Loiola’s continued claims for benefits and requested an independent medical
examination (IME). In the meantime, Loiola’s living situation changed. He moved from his
mother’s home to a facility called Special Tree. In 2014, he moved from Special Tree to another
facility called Progressions, where Loiola lived more independently. Finally, and most relevant to
this case, in November 2015, he moved to a “semi-independent living” facility called
NeuroRestorative. He was still living in this facility during trial. Significant to the issues in this
case, the charges while at NeuroRestorative consisted of two categories: (1) per diem charges,
relating to things like food and room and board, and (2) additional charges for professional services
Loiola received. For a time while Loiola was at NeuroRestorative, Citizens paid for specific
therapies, but Citizens never paid the per diem charges, and it later stopped paying for any of
NeuroRestorative’s services.
In November 2016, Fried, who had been appointed Loiola’s guardian in October 2014,
filed this suit against Citizens on Loiola’s behalf, seeking payment of benefits under the no-fault
insurance act. The charges at issue relate to those incurred from November 2015 onward. In
particular, Loiola sought a total of $383,255.21 in benefits, which included (1) NeuroRestorative’s
bills, (2) charges for a “case manager,” (3) charges by Fried for acting as Loiola’s guardian, and
(4) the outstanding balance on a partially unpaid bill for a neuropsychological examination.
Citizens disputed its liability for these charges on several grounds. First, relying on its
IMEs and other evidence, Citizens asserted that long-term, semi-independent living at
NeuroRestorative was not reasonable and necessary for someone with Loiola’s level of injury,
particularly years after the accident. Second, also related to the extent of Loiola’s injuries and his
need for services related to the accident, Citizens asserted that many of Loiola’s ongoing
complaints—including anxiety, depression, and cognitive difficulties—existed, to some degree,
before the accident and that Loiola was exaggerating his post-accident symptoms as evinced by
his repeated failures on validity testing during neuropsychological examinations. Third, regardless
No. 341876); slip op at 3 n 3. Unless otherwise noted, references to the no-fault insurance act are
to the version in effect at the time this action commenced.
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of the level of Loiola’s injuries, Citizens asserted that there were certain charges by
NeuroRestorative that were not compensable under the no-fault insurance act as a matter of law,
including a food stipend and wages paid to Loiola. Finally, Citizens maintained that Loiola was
disqualified from receiving personal protection insurance (PIP) benefits under MCL 500.3173a(2)
because he made, or caused to be made, false statements in support of a claim for benefits under
the MACP.
In the trial court, Citizens moved for summary disposition under MCR 2.116(C)(10), and
later filed a motion for judgment notwithstanding the verdict (JNOV) or a new trial, regarding
those charges that Citizens contended were not compensable as a matter of law. The trial court
denied both motions. Citizens also requested special jury instructions on (1) allowable expenses
and (2) fraudulent insurance acts under MCL 500.3173a(2). The trial court denied the instructions.
Following trial, the jury returned a verdict in Loiola’s favor, awarding $353,438.79 of the
$383,255.21 sought. After trial, the trial court also awarded Loiola penalty attorney fees under
MCL 500.3138. Citizens now appeals as of right.
II. ALLOWABLE EXPENSES
On appeal, Citizens first asserts that the trial court erred by denying its motions for
summary disposition, JNOV, and a new trial with regard to charges that were not allowable
expenses as a matter of law. Citizens contends that (1) a food stipend, (2) wages paid to Loiola by
NeuroRestorative, (3) a personal trainer, (4) nonmedical transportation, and (5) room and board,
including amenities such as utilities and cable, were not allowable expenses. We conclude that,
although the trial court did not err by submitting some of these charges to the jury, the trial court
erred by allowing the jury to consider the food stipend, wages, and personal trainer charges, which
were not allowable expenses as a matter of law.
A. STANDARD OF REVIEW
This Court reviews de novo a trial court’s grant or denial of summary disposition. Sisk-
Rathburn v Farm Bureau Gen Ins Co of Mich, 279 Mich. App. 425, 426-427; 760 NW2d 878 (2008).
“When reviewing a motion under MCR 2.116(C)(10), which tests the factual sufficiency of the
complaint, this Court considers all the evidence submitted by the parties in the light most favorable
to the non-moving party and grants summary disposition only where the evidence fails to establish
a genuine issue regarding any material fact.” Id. at 427. This Court also reviews de novo a trial
court’s decision on a motion for JNOV. Coble v Green, 271 Mich. App. 382, 389; 722 NW2d 898
(2006). “In reviewing a trial court’s denial of a defendant’s motion for JNOV, this Court should
examine the testimony and all legitimate inferences therefrom in the light most favorable to the
plaintiff. A trial court should grant a motion for JNOV only when there was insufficient evidence
presented to create an issue for the jury.” Attard v Citizens Ins Co of America, 237 Mich. App. 311,
321; 602 NW2d 633 (1999). In comparison, a trial court’s denial of a motion for a new trial is
reviewed for an abuse of discretion. Coble, 271 Mich. App. at 389. To the extent this case requires
interpretation of the no-fault insurance act, our review is de novo. Cruz v State Farm Mut Auto
Ins Co, 466 Mich. 588, 594; 648 NW2d 591 (2002).
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B. LEGAL PRINCIPLES
At issue in this case is Loiola’s request for allowable expenses. A claimant seeking
“allowable expenses” under the no-fault act must satisfy the requirements of two statutes: MCL
500.3105(1) and MCL 500.3107(1)(a). See Griffith ex rel Griffith v State Farm Mut Auto Ins Co,
472 Mich. 521, 530; 697 NW2d 895 (2005).
Under the first statute, MCL 500.3105(1), an insurer is liable to pay “benefits for accidental
bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a
motor vehicle . . . .” MCL 500.3105(1). As interpreted by our Supreme Court, this statute
mandates that “a no-fault insurer is liable to pay benefits only to the extent that the claimed benefits
are causally connected to the accidental bodily injury arising out of an automobile accident.”
Griffith, 472 Mich. at 531 (emphasis added).
The second statute, MCL 500.3107(1)(a), provides that PIP benefits are payable 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.”
To constitute an allowable expense, the “care” provided—like “recovery” and “rehabilitation”
services—must be “necessitated by the injury sustained in the motor vehicle accident.” Id. at 534-
535. In contrast, an “ordinary, everyday product, service, or accommodation is not compensable
under MCL 500.3107(1)(a) because that expense cannot be for the claimant’s care, recovery, or
rehabilitation.” Admire v Auto-Owners Ins Co, 494 Mich. 10, 26-27; 831 NW2d 849 (2013).
Whether a product or service is reasonably necessary for care, recovery, or rehabilitation under
MCL 500.3107(1)(a) must be determined from an objective prospective. Krohn v Home-Owners
Ins Co, 490 Mich. 145, 160; 802 NW2d 281 (2011). Each particular expense must be both
reasonable and necessary. Nasser v Auto Club Ins Ass’n, 435 Mich. 33, 50; 457 NW2d 637 (1990).
Our Supreme Court applied the requirements of MCL 500.3105(1) and MCL
500.3107(1)(a) in Griffith and held that an injured person living at home was not entitled to
payment of his ordinary, everyday food expenses. First addressing MCL 500.3105(1), the Court
explained that the food expenses were not “for accidental bodily injury”—meaning that the
expenses were not causally related to the insured’s (Griffith’s) injury—because it was not claimed
that Griffith’s “diet [was] different from that of an uninjured person, that his food expenses [were]
part of his treatment plan, or that these costs [were] related in any way to his injuries.” Griffith,
472 Mich. at 531.
The Griffith Court went on to explain that even if MCL 500.3105(1) were satisfied,
Griffith’s food expenses still were not compensable under MCL 500.3107(1)(a). It stated:
Griffith’s food costs here are not related to his “care, recovery, or
rehabilitation.” There has been no evidence introduced that he now requires
different food than he did before sustaining his injuries as part of his treatment plan.
While such expenses are no doubt necessary for his survival, they are not necessary
for his recovery or rehabilitation from the injuries suffered in the accident, nor are
they necessary for his care because of the injuries he sustained in the accident.
Unlike prescription medications or nursing care, the food that Griffith consumes is
simply an ordinary means of sustenance rather than a treatment for his “care,
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recovery, or rehabilitation.” In fact, if Griffith had never sustained, or were to fully
recover from, his injuries, his dietary needs would be no different than they are
now. We conclude, therefore, that his food costs are completely unrelated to his
“care, recovery, or rehabilitation” and are not “allowable expenses” under MCL
500.3107(1)(a). [Griffith, 472 Mich. at 535-536.]
Although Griffith dealt specifically with costs for food, its reasoning applies to any ordinary
expenses that are “the same for an injured and an uninjured person,” such as transportation,
clothing, toiletries, and housing. See Admire, 494 Mich. at 31; Griffith, 472 Mich. at 538-539.
The Griffith Court, however, did not rule that PIP benefits for items such as food or housing
are categorically non-compensable. As explained by our Supreme Court in Admire, for any
expense to be compensable, it must represent more than “[a] mere change in the injured person’s
postaccident expenses,” and instead “the new expense must be of a wholly different essential
character than expenses borne by the person before the accident to show that it is for the injured
person’s care, recovery, or rehabilitation.” Admire, 494 Mich. at 27. If an expense is new in its
essential character, then “it is fully compensable.” Id. at 28.
The Admire Court recognized that applying this rule to “[s]pecial accommodations or
modifications to an ordinary item present[s] a particular challenge.” Id. at 28. Our Supreme Court
explained that, in such a situation, the special accommodation or modification is always
compensable, but whether the ordinary item itself is compensable depends on whether the
accommodation or modification “can be separated easily, both conceptually and physically, so that
the fact-finder can identify which costs are of a new character and are thus for the injured person’s
care, recovery, or rehabilitation and which costs are ordinary, everyday expenses that are
unchanged after the accident.” Id. More fully, the Supreme Court explained this as a distinction
between a “combined” product or accommodation and an “integrated” product or accommodation:
A “combined” product or accommodation results from an ordinary expense,
unchanged as a result of the injury, being joined with an accommodation or product
that is actually for the injured person’s care, recovery, or rehabilitation. An
“integrated” product or accommodation involves the blending of an ordinary
expense with one that is for the injured person’s care, recovery, or rehabilitation in
a way that the resulting product or accommodation cannot be separated easily into
unit costs. Unlike an integrated product or accommodation, a combined product or
accommodation can be separated easily, both conceptually and physically, so that
the fact-finder can identify which costs are of a new character and are thus for the
injured person’s care, recovery, or rehabilitation and which costs are ordinary,
everyday expenses that are unchanged after the accident. As this Court suggested
in Griffith, MCL 500.3107(1)(a) requires the insurer to cover a truly integrated
product or accommodation in full because the entire expense, including the portions
that might otherwise be considered ordinary, is necessary for the injured person’s
care, recovery, or rehabilitation. But because a combined product or
accommodation can be easily separated into components related to the injured
person’s care, recovery, or rehabilitation and components unrelated to that care,
recovery, or rehabilitation, only the related expenses are actually compensable.
MCL 500.3107(1)(a) mandates this result because, when the product or
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accommodation can be easily separated into an ordinary expense and an expense
for care, recovery, or rehabilitation, requiring the insurer to pay for the ordinary
expenses would destroy the cost-containment aspect of the no-fault insurance act,
something of which this Court has long been mindful. [Id. at 28-29.]
With this distinction between a combined versus integrated expense in mind, the Admire
Court concluded that a modified van constituted a “combined” expense because the base cost for
the van was an ordinary transportation expense (“the essential character of [the] plaintiff’s
preinjury need for transportation has not changed”) that could be easily separated from the
compensable accommodation (the cost of the necessary modifications to the van). Id. at 31-32.
On this basis, the Admire Court held that the insurer was liable for the modifications to the van but
not for the base cost of the van. Id. at 31-34. In contrast to these “combined” transportation-
related charges, the Admire Court offered custom shoes as an example of an “integrated” product,
explaining: “When a medical products company produces a custom shoe, the shoe is an integrated
product because the medical nature of the shoe, which is for the injured person’s care, recovery,
or rehabilitation, cannot be separated from the ordinary need for shoes by an uninjured person.
Thus, the entire cost of the shoe is an allowable expense.” Id. at 30.
Also, and particularly relevant to the current case, both Griffith and Admire identified
hospital charges—encompassing things like housing and food—as an example of “integrated”
products and accommodations. In Griffith, when concluding that the injured party living at home
could not recover ordinary food examples, the Supreme Court contrasted his situation with that of
someone living in a hospital, explaining:
Food costs in an institutional setting are “benefits for accidental bodily
injury” and are “reasonably necessary products, services and accommodations for
an injured person’s care, recovery, or rehabilitation.” That is, it is “reasonably
necessary” for an insured to consume hospital food during in-patient treatment
given the limited dining options available. Although an injured person would need
to consume food regardless of his injuries, he would not need to eat that particular
food or bear the cost associated with it. Thus, hospital food is analogous to a type
of special diet or select diet necessary for an injured person’s recovery. Because
an insured in an institutional setting is required to eat “hospital food,” such food
costs are necessary for an insured’s “care, recovery, or rehabilitation” while in such
a setting. Once an injured person leaves the institutional setting, however, he may
resume eating a normal diet just as he would have had he not suffered any injury
and is no longer required to bear the costs of hospital food, which are part of the
unqualified unit cost of hospital treatment. [Griffith, 472 Mich. at 537-538.]
Citing to Griffith, the Admire Court elaborated on the integrated nature of hospital charges:
In its discussion of insurance coverage for hospital food during the insured’s
hospital stay, the Griffith Court stated that compensation was required because the
insured was required to eat “that particular food.” This is an example of an
integrated accommodation. The food, clothing, shelter, and any other ordinary
products that are provided by the hospital as part and parcel of the hospital stay are
not easily separated from the products, services, and accommodations provided by
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the hospital for the injured person’s care. Thus, the statute requires the insurer to
pay the entire cost. [Admire, 494 Mich. at 29-30.]
C. ANALYSIS
In the present case, Loiola is not a patient in a hospital, nor does he reside at home. He
lives in a semi-independent living facility that affords considerably greater freedom and choice—
like choice of food—than someone in a hospital would enjoy, but also receives supervision that he
would not otherwise receive living independently. In this semi-independent living context,
Citizens challenges all or part of the per diem changes as being not reasonably necessary for
Loiola’s care, rehabilitation, and recovery. Citizens’ argument has merit in part, and the trial court
erred as a matter of law by submitting certain costs to the jury that were not compensable as a
matter of law. We conclude that these errors, combined with the errors in jury instructions
discussed in the next section, necessarily warrant a new trial.
1. FOOD COSTS
We begin by addressing Citizens’ challenge to Loiola’s food stipend, and we agree with
Citizens that it was not compensable as a matter of law.
Each week, NeuroRestorative gives Loiola $75 and takes him to the grocery store, where
he purchases the food he wants to eat that week. Loiola can also use that money to eat at
restaurants, if he so chooses. There is no evidence that Loiola has a special diet or that the food
he eats has curative properties. Thus, as in Griffith, Loiola’s food costs are not compensable under
MCL 500.3107(1)(a) because “[t]here has been no evidence introduced that he now requires
different food than he did before sustaining his injuries as part of his treatment plan.” Griffith, 472
Mich. at 535-536. Loiola’s food costs represent “[a]n ordinary, everyday expense,” which “simply
cannot have the object or purpose of effectuating an injured person’s care, recovery, or
rehabilitation because it is incurred by everyone whether injured or not.” Admire, 494 Mich. at 26.
Because the food that Loiola consumes is not related to his injuries, it is not reasonably necessary
for his care, rehabilitation, and recovery, and so his $75 food stipend is not compensable under
MCL 500.3107(1)(a).
In contrast to this conclusion, Loiola and the trial court justified the food stipend on two
bases: (1) shopping was part of his treatment because he needed to be taught how to shop and (2)
the stipend formed part of the per diem, which was essentially a unit cost for NeuroRestorative.
Both these assertions lack merit. As to the first basis, the cost at issue is the cost of Loiola’s food,
not the assistance that he received buying that food. To any extent that the services provided by
NeuroRestorative to assist Loiola in buying food and the food that Loiola bought could be
considered a singular “accommodation,” it is clearly a “combined accommodation”—the $75
stipend provided to Loiola “can be separated easily, both conceptually and physically,” from the
services rendered to help him shop. Id. at 28. That is, a factfinder can easily “identify which costs
are of a new character and are thus for the injured person’s care, recovery, or rehabilitation”—the
shopping assistance that Loiola received—“and which costs are ordinary, everyday expenses that
are unchanged after the accident”—Loiola’s food costs. Id. Simply stated, Citizens might be
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liable for the separate cost of paying someone to reteach Loiola to shop, but Citizens is not
responsible for Loiola’s ordinary, everyday grocery bill.3
As for the second basis, the trial court appeared to view the per diem charge as a singular,
indivisible charge. In other words, the trial court seemed to view NeuroRestorative as an
institution akin to a hospital that could charge for food within its unit price. But this idea that
NeuroRestorative’s “per diem” charge was unassailable has no basis in Griffith or Admire. To the
contrary, Admire unequivocally held that when
a combined product or accommodation can be easily separated into components
related to the injured person’s care, recovery, or rehabilitation and components
unrelated to that care, recovery, or rehabilitation, only the related expenses are
actually compensable. MCL 500.3107(1)(a) mandates this result because, when
the product or accommodation can be easily separated into an ordinary expense
and an expense for care, recovery, or rehabilitation, requiring the insurer to pay for
the ordinary expenses would destroy the cost-containment aspect of the no-fault
insurance act, something of which this Court has long been mindful. [Admire, 494
Mich. at 28-29 (emphasis added).]
The $75 per week food stipend is easily identifiable as a noncompensable, ordinary expense, and
it is easily severed conceptually from the rest of the per diem. Further, contrary to the trial court’s
reasoning, although Loiola is not living at home, he is also not in the in-patient hospital setting
described in Griffith and Admire as examples of integrated charges. In recognizing that food and
other everyday expenses may be compensable during a hospital stay, Griffith and Admire both
expressly contemplated situations in which a hospital patient was “required to eat that particular
food.” Admire, 494 Mich. at 29-30; Griffith, 472 Mich. at 537-538. Indeed, both Courts considered
hospital food akin to a special diet. Admire, 494 Mich. at 32; Griffith, 472 Mich. at 537. Loiola, in
comparison, was not required to eat any particular food. He enjoys considerable freedom in his
semi-independent living facility, including the ability to leave, go to the store, and purchase normal
food which he then prepared in his apartment. He was also free to go to restaurants and has in fact
used the food stipend for restaurants. Quite simply, Loiola is not eating “hospital food,” and his
everyday food expenses—in the form of a $75 per week food stipend—are not compensable.4 See
3
At trial, there was also evidence that Loiola used the stipend to purchase cat food and cleaning
products, items which NeuroRestorative asserted that it did not include in its bills to Citizens. To
the extent there was a factual question regarding how the food stipend was used, cat food and
cleaning products are also not compensable under the no-fault insurance act.
4
As a comparison, in addition to food, Griffith indicated that, while in the hospital, a patient may
also recover benefits for things like clothing and toiletries that are provided by the hospital and
included in the hospital’s unit price. See Griffith, 472 Mich. at 539. If NeuroRestorative is going
to be characterized as a “hospital” with a single unit charge, should Citizens also have to pay for
Loiola’s wardrobe and toiletries because he would receive such items at a hospital? Just as Griffith
rejected such a possibility for a person living at home, the idea that Loiola should receive a stipend
for wardrobe and toiletries is nonsensical, and indeed Loiola has not sought such benefits. But
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Admire, 494 Mich. at 27-30; Griffith, 472 Mich. at 535-538. The trial court erred as a matter of law
by submitting the food stipend charges to the jury and denying Citizens’ motion for JNOV on this
basis.
2. PERSONAL TRAINER
Citizens also specifically challenges charges for a personal trainer. The personal trainer
was a specific hourly charge of $145 per hour; it is not a charge included in the per diem. Notably,
the personal trainer is simply for exercise; Loiola does not receive physical therapy or physical
rehabilitation. Although we do not hold that a personal trainer is per se not an allowable expense
under the no-fault insurance act, on the basis of the evidence presented in this case, the trial court
erred by denying JNOV with regard to this expense. As with his dietary needs, Loiola needed
basic exercise both before and after the accident, and there was no evidence offered to establish
how his basic fitness needs changed as a result of the accident. That is, there was no evidence that
Loiola’s need for exercise after his accident was “new in its essential character,” so there was no
evidence that the exercise was “actually for the injured person’s care, recovery, or rehabilitation.”
Admire, 494 Mich. at 27. On this record, while basic exercise may be beneficial for Loiola (just as
it would have been before the accident), it is not necessary for his recovery or rehabilitation from
the injuries suffered in the accident, and it was not necessary for his care because of the injuries
he sustained in the accident. See Griffith, 472 Mich. at 535-536. Because there was no evidence
that Loiola’s basic fitness needs changed as a result of the accident, a personal trainer is completely
unrelated to his “care, recovery, or rehabilitation” and it is not an “allowable expense” under MCL
500.3107(1)(a). See Griffith, 472 Mich. at 535-536.
More generally, the inclusion of the personal trainer expense in its bills to Citizens evinces
NeuroRestorative’s blanket approach to both services and charges. In the trial court, particularly
in responding to Citizens’ motion for summary disposition, Loiola’s attorney seemed to take the
position that any service NeuroRestorative provided was compensable because Loiola had been
“institutionalized.” As discussed, this comparison to a hospital or other facility where patients
have no control over things like food does not necessarily hold true of the semi-independent living
at NeuroRestorative, where residents enjoy considerable freedom and choice. Indeed, at trial,
Susan Krygier, NeuroRestorative’s representative, denied that NeuroRestorative was an
“institution.” But, with regard to a personal trainer and other itemized charges (such as charges
for smoking cessation services), this “institutional” approach to billing is particularly unavailing.
The personal trainer is not included in the per diem; it is a separate, hourly charge, so it is not a
combined expense, and it is certainly not an integrated charge. See Admire, 494 Mich. at 28-29.
In these circumstances, Loiola cannot justify the personal trainer expense simply by offering
evidence that he needs to live in a semi-independent living facility. Instead, Loiola bore the burden
of proving that “each particular expense” was both reasonable and necessary. See Nasser, 435
Mich. at 50. Given Loiola’s failure to offer any evidence of a change to his basic fitness needs,
this comparison underscores the fact that the semi-independent living offered by NeuroRestorative
is not the same as a hospital. Given the distinctions between a hospital stay and semi-independent
housing, NeuroRestorative cannot claim that all the same services a hospital provides are also
reasonably necessary, without question, for all its semi-independent residents.
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Loiola did not meet his burden of proving that the particular charge for a personal trainer was
reasonably necessary. The trial court erred by denying Citizens’ motion for JNOV regarding this
expense.
3. WAGES
Next, Citizens challenges whether the trial court erred as a matter of law by allowing the
jury to consider the wages paid to Loiola by NeuroRestorative during prevocational rehabilitation,
which were included as part of the per diem NeuroRestorative charged Citizens. We again
conclude that the trial court erred by allowing these charges to be submitted to the jury as part of
the per diem.
Under MCL 500.3107(1)(a), “expenses for ‘recovery’ or ‘rehabilitation’ are costs
expended in order to bring an insured to a condition of health or ability sufficient to resume his
preinjury life.” Griffith, 472 Mich. at 534-535. Rehabilitation may include vocational
rehabilitation, i.e., education, training, and therapy to restore a person to useful and constructive
activity. Maxwell v Citizens Ins Co of America, 245 Mich. App. 477, 482-486; 628 NW2d 95
(2001). See also Bailey v Detroit Auto Inter-Ins Exch, 143 Mich. App. 223, 227; 371 NW2d 917
(1985). However, the services encompassed by vocational rehabilitation are only those needed to
restore a person to the ability to “perform useful and meaningful work and earn a living by it.”
Maxwell, 245 Mich. App. at 487. Services for vocational rehabilitation—as well as care and
recovery—do not encompass payments for assistance or transportation once the injured person has
returned to work. Id. at 486-487 & n 1. In other words, employment is the goal of rehabilitation;
employment is not itself rehabilitation.
NeuroRestorative provided Loiola with prevocational training, which included training and
education on things like punctuality, appearance, and following directions. On a showing that
such services were reasonably necessary for Loiola’s rehabilitation, this vocational rehabilitation
is generally compensable under the no-fault insurance act. However, NeuroRestorative did not
simply provide therapy and training to rehabilitate Loiola; NeuroRestorative also paid Loiola a
wage for janitorial work at NeuroRestorative. Payment of these wages is clearly not an allowable
expense under the no-fault insurance act. To the extent the wages signal a return to work, the
wages are not compensable because a return to work is the goal of rehabilitation, not part of
rehabilitation. Further, although the wages paid to Loiola were considered part of the
comprehensive per diem charged to Citizens, the wages were easily identifiable and easily
separated conceptually from the other costs for NeuroRestorative’s services; Citizens had the
receipts of the wages paid to Loiola, and that amount could be readily subtracted from the amount
NeuroRestorative charged Citizens. Because the wages were noncompensable under the no-fault
act and could be readily separated from the per diem both literally and conceptually, the trial court
erred as a matter of law by allowing NeuroRestorative to include the wages as part of the per diem
it charged Citizens. See Admire, 494 Mich. at 27-30.5
5
Alternatively, if the wage does not evince a return to work, Loiola is essentially being paid to
participate in therapy; but the no-fault insurance act makes no provision to pay injured persons a
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4. NONMEDICAL TRANSPORTATION
Citizens next challenges whether the trial court erred by failing to recognize that
nonmedical transportation is not an allowable expense under MCL 500.3107(1)(a). We agree with
Citizens that nonmedical transportation is clearly not an allowable expense, but conclude that the
trial court did not err by allowing this cost to be included in the per diem charges submitted to the
jury.
Generally, under the no-fault insurance act, medical transportation for things such as
doctors’ appointments is an allowable expense, while nonmedical transportation, including
transportation to maintain “preinjury quality of life,” is not an allowable expense. ZCD Transp,
Inc v State Farm Mut Auto Ins Co, 299 Mich. App. 336, 342-343; 830 NW2d 428 (2012). As
explained by the Michigan Supreme Court, medically necessary transportation constitutes an
allowable expense because such “transportation needs represent a change in character from
plaintiff’s preinjury requirements because the trips would not have been necessary in a life
unmarred by injury.” Admire, 494 Mich. at 32. In contrast, a general need for transportation that
does not change as a result of the accident is not an allowable expense. Id. at 32-33.
Loiola received transportation services from NeuroRestorative for both medical purposes
and nonmedical services, such as visiting his mother and other personal activities. Under Admire
and ZCD Transp, Inc, the nonmedical transportation services provided by NeuroRestorative do
not constitute an allowable expense. In the context of discussing hospitals (which again,
NeuroRestorative is not), Admire and Griffith identified everyday items like food, clothing,
toiletries, and shelter as things that are “part and parcel” of a hospital stay that cannot be easily
separated from products and services provided by the hospital for the injured person’s care. See
Admire, 494 Mich. at 29; Griffith, 472 Mich. at 538. Transportation is not included in either Admire
or Griffith as something that is “part and parcel” of institutional care, and for good reason:
transportation is conceptually and physically distinct from the basic shelter, food, and clothing
items that are part of a stay at an institution. See Admire, 494 Mich. at 28-29. In other words, no
one would suggest that it is “part and parcel” of hospital treatment to receive transportation to run
personal errands or to visit friends. Transportation is conceptually distinct from the room-and-
board-related expenses inherent in hospital care, and nothing in Admire or Griffith supports the
conclusion that an insurer must pay for all of a person’s transportation expenses—medical and
nonmedical—simply because he or she lives in an institutional setting. Instead, under Admire and
ZCD Transp, Inc, only medically necessary transportation expenses are allowable expenses.
Though nonmedical transportation is not an allowable expense, it was included as part of
the per diem. Unlike with Loiola’s food stipend or wages which can be easily identified and
separated conceptually from the per diem charged by NeuroRestorative, the cost of Loiola’s
nonmedical transportation cannot—nothing in the record shows the separable cost of
wage to participate in rehabilitation. Instead, wages are compensable under the no-fault insurance
act, if at all, only as work-loss benefits. See MCL 500.3107(1)(b); Griffith, 472 Mich. at 540. In
trying to seek payment for wages paid to him by NeuroRestorative, Loiola is essentially seeking
wage-loss benefits to which he is not entitled. See Griffith, 472 Mich. at 540.
-11-
NeuroRestorative’s nonmedical transportation. That is, a fact-finder could not identify which costs
included in the $225 per diem were for allowable expenses, and which were for the ordinary,
everyday expense of nonmedical transportation. See Admire, 494 Mich. at 28. And if that is the
case, a fact-finder could not say whether excluding the nonmedical transportation cost would
reduce the per diem by $5 or $50. We therefore conclude that the nonmedical transportation cost
included as part of the per diem more closely resembles that of an “integrated” accommodation,
in that the accommodation “cannot be separated easily into unit costs.” Id. Because the
nonmedical transportation was “integrated” with the per diem cost, the trial court did not err by
allowing this cost to proceed to the jury.
5. HOUSING
Citizens lastly challenges the trial court’s decision to allow the jury to consider
NeuroRestorative’s general housing-related expenses reflected in the per diem charge, and we
conclude that the trial court did not err. As noted, under Griffith and Admire, ordinary, everyday
expenses are not compensable unless the new expense is of a “wholly different essential character
than expenses borne by the person before the accident.” Admire, 494 Mich. at 27. The essential
character of the expenses associated with NeuroRestorative is semi-independent living in which
Loiola receives a certain amount of supervision, including nursing care and other safety measures.
Though there were questions of fact regarding whether Loiola needed the level of care afforded in
a semi-independent living environment, semi-independent housing is nonetheless of a “wholly
different essential character” than living independently without any supervision, as Loiola claimed
he had before the accident.6 Id. Moreover, under Admire, the fact that Loiola would have needed
housing regardless of his injury does not preclude charges for NeuroRestorative’s housing
expenses because the essential character of the semi-independent housing is “wholly different”
than independent living. See id. at 28 (explaining that “if a product, service, or accommodation
satisfies the statutory criteria, it is fully compensable”).
Recognizing that the essential character of NeuroRestorative’s service is semi-independent
living, it follows that expenses that are “part and parcel” of housing, such as utilities or cable, are
integrated costs that cannot be isolated from the overall housing-related charges. See id. at 29;
Griffith, 472 Mich. at 537. That is, to receive the supervised, semi-independent living offered by
NeuroRestorative, Loiola has no choice but to live in one of NeuroRestorative’s apartments, and
part and parcel of the apartment provided are the included amenities such as utilities and cable.
Like a hospital patient forced to eat hospital food and to sleep in a hospital room in order to receive
hospital care, Loiola has no choice but to accept the apartment as is, including utilities and cable,
in order to receive the supervision and care offered by semi-independent living. See Griffith, 472
Mich. at 537. Although it is true that he would need housing regardless of his injuries, he would
not need the particular apartment, and he would not have to bear the particular expenses of the
apartment, at NeuroRestorative. See id. Because housing of an essentially different character—
6
Whether Loiola lived completely independently before the accident was a disputed factual
question at trial. But even if he lived with his mother before the accident, there was no evidence
that she provided supervision or care for Loiola before the accident. This need for semi-
independent or semi-supervised living is thus wholly different than his pre-accident life.
-12-
and the integrated expenses such as cable and utilities—may constitute allowable expenses, and
because there were questions of fact whether Loiola needed this level of care, the trial court did
not err by denying summary disposition and JNOV on this basis.
To summarize, the trial court erred by allowing the jury to consider charges that were not
allowable expenses as a matter of law, including a food stipend, wages paid to Loiola by
NeuroRestorative, and charges for a personal trainer. Given the jury’s lump sum verdict, which
was less than the full amount requested by Loiola, we cannot determine whether the jury awarded
expenses that are not compensable as a matter of law nor can we determine the jury’s assessment
of the reasonable value of any particular charge.7 In these circumstances, when the only issues
were whether Loiola incurred allowable expenses and the amount of those expenses, the inability
to determine how the jury arrived at its award necessitates vacating the jury’s verdict and
remanding for a new trial, particularly when coupled with the jury instruction errors discussed
below. On remand, the trial court shall not allow the jury to consider the charges that were not
allowable expenses as a matter of law.
III. JURY INSTRUCTIONS
Next, Citizens argues that the trial court erred by denying its requests for special jury
instructions regarding (1) allowable expenses and (2) fraudulent insurance acts. We largely agree
with Citizens, and conclude that these instructional errors, combined with the legal errors discussed
in the previous section, warrant a new trial.
A. STANDARD OF REVIEW
We review a claim of instructional error de novo. Hilgendorf v St John Hosp & Med Ctr
Corp, 245 Mich. App. 670, 694; 630 NW2d 356 (2001). However, determinations regarding
whether a particular instruction applies are reviewed for an abuse of discretion. Id.; Silberstein v
Pro-Golf of America, Inc, 278 Mich. App. 446, 451; 750 NW2d 615 (2008). “Instructional error
warrants reversal if the error resulted in such unfair prejudice to the complaining party that the
failure to vacate the jury verdict would be inconsistent with substantial justice.” Cox ex rel Cox v
Bd of Hosp Managers for City of Flint, 467 Mich. 1, 8; 651 NW2d 356 (2002) (quotation marks
and citation omitted).
B. ANALYSIS
Jury instructions “should include all the elements of the plaintiff’s claims and should not
omit material issues, defenses, or theories if the evidence supports them.” Case v Consumers
Power Co, 463 Mich. 1, 6; 615 NW2d 17 (2000). When requested, a standard jury instruction must
be given, provided that “if it is applicable and accurately states the law.” Chastain v Gen Motors
Corp, 254 Mich. App. 576, 590; 657 NW2d 804 (2002). “When the standard jury instructions do
7
In particular, the verdict form asked the jury whether allowable expenses were incurred by or on
behalf of plaintiff, and the jury answered “yes.” The jury then specified the amount of allowable
expenses as $353,438.79. However, the verdict form was not specific as to what constituted
allowable expenses, and there is no indication how the jury arrived at its particular figure.
-13-
not adequately cover an area, the trial court is obligated to give additional instructions when
requested, if the supplemental instructions properly inform the jury of the applicable law and are
supported by the evidence.” Bouverette v Westinghouse Elec Corp, 245 Mich. App. 391, 401-402;
628 NW2d 86 (2001). “Supplemental instructions, when given, must be modeled as nearly as
practicable after the style of the Standard Jury Instructions and must be concise, understandable,
conversational, unslanted, and nonargumentative.” Id. at 402. See also MCR 2.512(D)(4).
“Supplemental instructions need not be given if they would add nothing to an otherwise
balanced and fair jury charge nor enhance the ability of the jury to decide the case intelligently,
fairly, and impartially.” Central Cartage Co v Fewless, 232 Mich. App. 517, 528; 591 NW2d 422
(1998). Ultimately, jury instructions must be viewed in their entirety rather than “extracted
piecemeal to establish error.” Case, 463 Mich. at 6. See also Bouverette, 245 Mich. App. at 403.
“Even if somewhat imperfect, instructions do not create error requiring reversal if, on balance, the
theories of the parties and the applicable law are adequately and fairly presented to the jury.” Case,
463 Mich. at 6.
1. ALLOWABLE-EXPENSES INSTRUCTION
Before trial, Citizens filed a motion in limine seeking special jury instructions on allowable
expenses, particularly relating to (1) everyday expenses, such as food, and room and board, and
(2) vocational rehabilitation. With regard to everyday expenses, relying on Griffith, Citizens asked
the trial court to instruct the jury:
Food, room and board and other ordinary or everyday expenses of daily
living are not recoverable under the Michigan No-Fault Act unless they are directly
related to a person’s care, recovery or rehabilitation from an injury caused by an
automobile accident.
Regarding vocational rehabilitation, Citizens requested the following instruction:
Vocational Rehabilitation may be recoverable as an allowable expense
under the Michigan No-Fault benefit, but only to the extent that it is aimed at
restoring an injured person to the working condition he was in before sustaining his
injuries.
An actual return to work is not compensable as Vocational Rehabilitation.
The trial court denied the request for these special instructions, and ultimately only read
the model jury instruction on allowable expenses, M Civ JI 35.01, instructing the jury:
We have a state law known as the no-fault—excuse me no-fault automobile
insurance law which provides that if a person sustains accidental bodily injury or
death arising out of the operation of a motor vehicle, as a motor vehicle, by himself,
an insurance company may be responsible to pay the following types of benefits:
The first type of benefit is known as allowable expenses and consists of all
reasonable charges incurred for reasonably necessary products, services, and
-14-
accommodations for an injured persons care, recovery or rehabilitation. Allowable
expenses include but are not limited to medical expenses.
With respect to the instruction about everyday expenses, we first note that based on our
legal conclusions in Part II, the cost of Loiola’s food should not have been submitted to the jury
because it was noncompensable as a matter of law. Yet the larger idea behind that requested
instruction—that ordinary, everyday expenses are not compensable—may still be relevant with
respect to other submitted costs. Addressing that issue, we agree with the trial court that Citizens’
requested instruction was not appropriate. As noted by the trial court, Griffith expressly permits
compensation for everyday expenses in an “institutional setting,” see Griffith, 472 Mich. at 537-
539, and the parties disputed whether NeuroRestorative was an institutional setting. As discussed
in Part II, while NeuroRestorative allows more freedom than a hospital, it is distinct from
independent living at home, so certain everyday expenses (like room and board) may be
compensable. Thus, Citizens’ proposed instruction as applicable to this case is not an “unslanted”
recitation of the “applicable law,” Bouverette, 245 Mich. App. at 401-402, because it omits that
everyday expenses can be compensable in an institutional setting.
Further, the instruction as given by the trial court still allowed Citizens to argue one of their
defenses: that Loiola did not need NeuroRestorative and that he was essentially living there to
receive free room and board. The instruction given provides that an allowable expense “consists
of all reasonable charges incurred for reasonably necessary products, services, and
accommodations for an injured persons care, recovery or rehabilitation.” This instruction left the
door open for Citizens to argue that Loiola’s living at NeuroRestorative was not necessary for his
care following his injury, and that he was merely living there to receive free room and board. In
this respect, even if the instruction given by the trial court was imperfect, it did not deprive Citizens
of a defense, and “on balance, the theories of the parties and the applicable law [were] adequately
and fairly presented to the jury.” Case, 463 Mich. at 6.8
Turning to the requested vocational-rehabilitation instruction, we note that given some of
our legal conclusions in Part II, Loiola’s wages paid to him by NeuroRestorative as part of his
vocational rehabilitation should not have been submitted to the jury. Nonetheless, we believe that
the instruction should have still been given in light of other vocational-rehabilitation charges that
Citizens was asked to pay. The evidence showed that Loiola received “prevocational
rehabilitation” at NeuroRestorative and that NeuroRestorative also charged for what it
characterized as “vocational rehabilitation” while Loiola actually worked at stores such as Kroger
and Marshalls. Loiola was paid for his work at both Kroger and Marshalls. While working at
Marshalls, Loiola had a “shadow” of some sort from NeuroRestorative, but there was no testimony
about what this person did that would constitute “vocational rehabilitation” as opposed to mere
assistance for someone who is actually working. See Maxwell, 245 Mich. App. at 486-487. Given
this evidence, Citizens asserted that Loiola had returned to work and that he was no longer entitled
8
Citizens did not request an instruction specifically addressing nonmedical transportation being
an allowable expense, so we do not address whether a supplemental instruction on that issue would
have been appropriate. As proposed, we do not believe that the requested instruction about
everyday expenses would have sufficiently brought that issue before the jury.
-15-
to vocational rehabilitation benefits. On the facts of this case, given the ample evidence that Loiola
had returned to work, the trial court abused its discretion by denying a special instruction on
vocational rehabilitation, in keeping with Maxwell, that was legally accurate and would have been
incredibly useful to the jury’s determination whether Loiola was entitled to benefits for vocational
rehabilitation. The standard jury instruction given by the trial court did not adequately address
Citizens’ arguments in light of the facts of this case, and failure to give the instruction denied
Citizens a strong defense to the vocational rehabilitation charges.
By refusing to give this accurate, properly requested, and helpful special jury instruction
on allowable expenses, the trial court failed to adequately and fairly present the theories of the
parties and the applicable law to the jury. See Case, 463 Mich. at 6. Given that what constituted
an allowable expense was the central issue at trial, and in light of the inadequate instructions given
to the jury to assess what constituted an allowable expense as well as the other errors noted
throughout this opinion, it would be inconsistent with substantial justice to allow the jury’s verdict
to stand. See Cox, 467 Mich. at 8.
2. FRAUD INSTRUCTION
Before trial, Citizens also request an instruction on fraudulent insurance acts under MCL
500.3173a(2). The statute states:
A person who presents or causes to be presented an oral or written
statement, including computer-generated information, as part of or in support of a
claim to the Michigan automobile insurance placement facility for payment or
another benefit knowing that the statement contains false information concerning a
fact or thing material to the claim commits a fraudulent insurance act under section
4503 that is subject to the penalties imposed under section 4511. A claim that
contains or is supported by a fraudulent insurance act as described in this subsection
is ineligible for payment or benefits under the assigned claims plan. [MCL
500.3173a(2).]
This Court has explained the application of MCL 500.3173a(2) as follows:
a person commits a fraudulent insurance act under this statute when (1) the person
presents or causes to be presented an oral or written statement, (2) the statement is
part of or in support of a claim for no-fault benefits, and (3) the claim for benefits
was submitted to the MAIPF. Further, (4) the person must have known that the
statement contained false information, and (5) the statement concerned a fact or
thing material to the claim. [Candler v Farm Bureau Mut Ins Co of Mich, 321 Mich
App 772, 779-780; 910 NW2d 666 (2017).]
In general, “[a] statement is material if it is reasonably relevant to the insurer’s investigation of a
claim.” Bahri v IDS Prop Cas Ins Co, 308 Mich. App. 420, 425; 864 NW2d 609 (2014).
“Importantly, MCL 500.3173a(2) does not require that any particular recipient have received the
false statement in order for the act to qualify as a fraudulent insurance act, as long as the statement
was used as part of or in support of a claim to the [MAIPF].” Candler, 321 Mich. App. at 780
(quotation marks and citation omitted). “Generally, whether an insured has committed fraud is a
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question of fact for a jury to determine.” Meemic Ins Co v Fortson, 324 Mich. App. 467, 473; 922
NW2d 154 (2018).
In seeking an instruction regarding fraudulent insurance acts, Citizens asked the trial court
to read the statutory language from MCL 500.3173a(2) and to provide the following additional
explanation:
If you determine that Plaintiff presented or caused to be presented any oral or
written statement that contains false information concerning a fact or thing material
to the claim, Plaintiff’s claim is not eligible for payment or benefits under the
assigned claims plan.
In support of its assertion that an instruction on MCL 500.3173a(2) was warranted, before trial,
Citizens maintained that Loiola engaged in fraudulent insurance acts by (1) requesting a food
stipend that was not used solely for food and (2) being dishonest with doctors about his medical
and substance-abuse history. During trial, Citizens also asserted that the instruction was warranted
because Loiola was dishonest about his “baseline” when speaking with doctors. In arguing for the
applicability of the instruction, Citizens also asserted that Loiola lied during trial by testifying
inconsistently with his claim for benefits insofar as Loiola testified that he worked full-time before
the accident and he asserted that he lived independently rather than with his mother.
Before trial, the trial court indicated that a fraud instruction might be appropriate,
depending on the facts. However, the trial court also specified that if the facts at trial did not
support a fraud instruction, one would not be given. The applicability of the fraud instruction was
argued by the parties during trial, and the trial court ultimately declined to give the instruction,
reasoning that Loiola’s claims about working under the table and living with his girlfriend rather
than his mother did not rise to the level of fraud. The trial court did not address Citizens’ assertion
that providing false information to doctors in support of a claim constituted fraud under MCL
500.3173a(2).
On the facts of this case, the trial court abused its discretion by concluding that the fraud
instruction was not applicable.9 Briefly stated, in concluding that there was no fraud, the trial court
9
On appeal, Loiola argues that Citizens failed to plead fraud in their complaint, and that even if
they pleaded that defense, they failed to plead it with particularity. Loiola raised these arguments
below, but the trial court declined to address them.
First addressing whether Citizens pleaded fraud in their answer, they clearly did. Citizens’
answer stated, “Under MCL 500.3173a(2) and the Michigan Assigned Claims Plan, Plaintiffs [sic]
is ineligible for any benefits through the Michigan Assigned Claims Plan if Plaintiff has made or
caused to be made false statements during the course of their claim for Plaintiff’s benefits
regarding the alleged accident,” and, “Should it be determined that Plaintiff’s claim is supported
by fraudulent information, the entire claim is ineligible for benefits.”
Turning to Loiola’s claim that Citizens’ failed to plead fraud with particularity, he relies
on MCR 2.112(B)(1), which states, “In allegations of fraud or mistake, the circumstances
-17-
erred by ignoring evidence of the falsity of Loiola’s statements. The evidence of fraudulent
insurance acts may not have been overwhelming, but it was for the jury to decide whether MCL
500.3173a(2) precluded Loiola’s claims for PIP benefits.
Specifically, there was evidence that Loiola was not truthful with doctors about his
substance abuse and mental health problems before the accident. Dr. Robin Hanks, for example,
testified that Loiola denied any previous mental health or substance-abuse issues despite the fact
that his medical records showed a history of anxiety and depression, suicidal ideation, and
substance abuse, including alcohol dependence, cocaine use, abuse of prescription medications,
and narcotics withdrawal.10 Dr. Maury Ellenberg also testified that Loiola “denied” alcohol and
drug abuse during their first meeting. There was also testimony that Loiola was dishonest about
his academic record when speaking with doctors insofar as, for example, he told Dr. Hanks that he
received mostly C’s in school when his academic records showed that he had a 1.25 GPA in high
school and that he failed a number of classes, both in high school and at Henry Ford Community
College. Clearly, the information was false, and the jury could determine whether Loiola knew it
to be false.
Regarding whether this false information was material, as explained by experts at trial,
Loiola’s history was relevant to determining his pre-accident functioning, and it was significant in
constituting fraud or mistake must be stated with particularity.” Yet Loiola has failed to cite any
precedent indicating that the pleading requirement set forth by MCR 2.112(B)(1) is applicable to
affirmative defenses in the first instance. Generally, that rule “applies only to the original
pleadings opening a case,” Williams v Williams, 214 Mich. App. 391, 395; 542 NW2d 892 (1995)
(emphasis added), and affirmative defenses do not qualify as “pleadings” under our court rules,
MCR 2.110(A); McCracken v City of Detroit, 291 Mich. App. 522, 527; 806 NW2d 337 (2011).
10
Loiola claims that Dr. Hanks “recanted” this statement on cross-examination based on the
following:
Q. You just said several times that there was a diagnosis of depression.
Would you show that to me?
A. Sure.
Q. And we’re talking about before the accident?
A. Right. I’m sorry, he reported depression. He was given a diagnosis of
alcohol dependence and cocaine use.
At best, the statement is unclear whether Dr. Hanks meant that Loiola reported to her that
he had depression before the accident or that “he reported depression” to other doctors
before the accident leading to the “diagnosis of depression” before the accident. At any
rate, we do not read this as a recantation of Dr. Hanks’ testimony that Loiola denied the
other mental health and substance-abuse issues.
-18-
establishing a “baseline” for Loiola in order to determine the effects of the accident. Use of
cocaine, for example, can have long-term effects on the brain, including cognitive problems, and
there was testimony that Loiola’s IQ scores after the accident were consistent with someone with
a history of poor academic performance. Further, among Loiola’s complaints after the accident
were anxiety and depression, conditions which he had, at least to some degree, before the accident.
In this context, information about Loiola’s baseline before the accident could be considered
material to evaluating Loiola’s claims, and the fact that Loiola denied past problems or provided
false information about his history could support a finding of fraud under MCL 500.3173a(2).11
Although there was evidence to support Citizens’ request for an instruction under MCL
500.3173a(2), not all of Citizens’ arguments regarding the fraud instruction have merit. In
particular, Citizens also asserts that a fraud instruction was warranted because (1) Loiola sought
payment for a food stipend, (2) he sought payment for prevocational programming that was in
actuality a job at NeuroRestorative, (3) false statements were made that Loiola could not drive
despite the report of an occupational therapist who concluded that Loiola could drive, and (4)
Loiola asserted at trial that he worked full-time but in documents provided to Citizens he claimed
that he only worked 11 hours a week.
Regarding the food stipend and Loiola’s wages from NeuroRestorative, as discussed
earlier, these items are not compensable as a matter of law. But Citizens fails to explain how
seeking these benefits constitutes the presentation of “false information” in support of a claim. In
other words, as long as Loiola provided correct information, Citizens can evaluate and reject these
claims as a matter of law; it does not follow that rejection of these claims evinces fraud under MCL
500.3173a(2).12
11
Loiola argues that even if he provided false information to doctors about his history, the false
statements were “wholly innocuous” because Loiola “provided the records regarding his past drug
use” to Citizens, and Citizens made those records available to doctors. However, Loiola does not
explain how this excludes the application of MCL 500.3173a(2). It seems as though Loiola is
contending that MCL 500.3173a(2) is inapplicable because the doctors could easily discover that
he gave them false statements because the doctors only needed to compare Loiola’s statements to
his records to see that they were false. We fail to see how the language of MCL 500.3173a(2) can
lead to such a conclusion.
12
On appeal, Citizens also notes that Fried sought payment of bills for appointments that he
attended with Dr. Jay Meythaler and Loiola. Fried stated that the appointments with Dr. Meythaler
were in August and September 2016, but Dr. Meythaler last saw Loiola in April 2016. Although
discussed at trial, this issue was not raised in support of Citizens’ request for a fraud instruction,
and this unpreserved argument does not warrant relief on appeal. Although it appears to be false
information to suggest that Fried and Loiola saw Dr. Meythaler in August or September 2016, this
appears to be a representation made by Fried, not Loiola, and there is no evidence to suggest that
Loiola caused Fried to present this false information. See MCL 500.3173a(2). The jury instruction
sought by Citizens under MCL 500.3173a(2) would have disqualified Loiola from any benefits,
but this penalty is inapplicable absent evidence that Loiola “present[ed] or caus[ed] to be presented
-19-
Regarding whether Loiola could drive, MCL 500.3173a(2) involves “false information
concerning a fact or thing material to the claim.” There is evidence that Loiola returned to daytime
driving in 2012 and that an occupational therapist cleared him for this daytime driving; there is
also no indication that this information was withheld from Citizens or that Loiola lied about the
results of his occupational driving test. Instead, Citizens maintains that because Loiola drove in
2012 he must still be able to drive and any claim to the contrary must be false. But the evidence
indicated that, after he returned to daytime driving, Loiola was involved in another accident, and
after this second accident, he again stopped driving. Further, there was evidence that Loiola
reported dizziness, vision issues, and uncertainty while driving in 2013. Given the second accident
and Loiola’s complaints in 2013, opinions could differ as to whether Loiola could actually drive.
In these circumstances, whether Loiola could drive was a matter of opinion and not demonstrably
“false information” that would support a claim of fraud under MCL 500.3173a(2).
Lastly, with respect to Citizens’ claim that Loiola lied about how many hours he worked
in forms submitted to Citizens because his trial testimony differed from the statements made on
those forms, this Court in Haydaw v Farm Bureau, ___ Mich App ___; ___ NW2d ___ (2020)
(Docket No. 345516); slip op at pp 5-6, recently held that nothing discovered after the insurer
stopped paying benefits and the insured sued can be used to support a fraud defense because, by
that time, the insurer has denied the insured’s claim and the parties are now adversaries in
litigation. While we question whether Haydaw can be applied to claims in this case because that
case dealt with a fraud exclusion in a policy and Loiola’s claim arises under the MACP, see
Candler, 321 Mich. App. at 780 n 6 (explaining that a case arising out of a fraud exclusion in an
insurance contract “is not relevant” to a case arising under the MACP), we need not decide that
issue today because the parties have not briefed the issue and its resolution is ultimately irrelevant
to our disposition of this case given our determination that Citizens was entitled to the fraud
instruction based on Loiola’s false statements to doctors about his substance abuse and mental
health problems before the accident.13
In sum, the trial court abused its discretion by denying an instruction on fraud given
evidence that Loiola submitted false information in support of his claims by misrepresenting his
mental health, substance abuse, and academic record when speaking with doctors. This evidence
was material to establishing Loiola’s “baseline” for purposes of investigating his injuries and his
need for treatment. By failing to give this instruction despite evidence of fraudulent insurance
acts, the trial court denied Citizens a defense to Loiola’s claims for benefits. On this record,
particularly when coupled with the other errors in this case, it would be inconsistent with
substantial justice to allow the jury verdict to stand. See Cox, 467 Mich. at 8.
an oral or written statement . . . knowing that the statement contains false information.”
Accordingly, Fried’s potentially false claim regarding visits with Dr. Meythaler did not warrant
this instruction with regard to Loiola.
13
We note that even if Haydaw can apply to claims under the MACP, it is nevertheless inapplicable
to Citizens’ fraud defense related to Loiola’s statements to Dr. Hank and Dr. Ellenberg. Those
statements were made prior to the start of litigation, and indeed before Loiola began treatment at
NeuroRestorative.
-20-
IV. ATTORNEY FEES
Finally, Citizens asserts that the trial court erred by awarding attorney fees to Loiola given
the factual disputes and legitimate questions of statutory interpretation in this case. We agree.
A. STANDARD OF REVIEW
The no-fault act provides for attorney fees when an insurance carrier
unreasonably withholds benefits. The trial court’s decision about whether the
insurer acted reasonably involves a mixed question of law and fact. What
constitutes reasonableness is a question of law, but whether the defendant’s denial
of benefits is reasonable under the particular facts of the case is a question of fact.
Whereas questions of law are reviewed de novo, a trial court’s findings of
fact are reviewed for clear error. A decision is clearly erroneous when the
reviewing court is left with a definite and firm conviction that a mistake has been
made. [Ross v Auto Club Group, 481 Mich. 1, 7; 748 NW2d 552 (2008) (quotation
marks and citation omitted).]
B. ANALYSIS
The trial court awarded attorney fees under MCL 500.3148(1), which states:
[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 that are overdue.
The attorney’s fee is 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.
Under this provision, “[w]hen an insurer refuses to make or delays in making a no-fault payment,
a rebuttable presumption arises that this refusal to pay or delay in paying is unreasonable.” Ivezaj
v Auto Club, 275 Mich. App. 349, 353; 737 NW2d 807 (2007). The burden is then on the insurer
to justify its refusal or delay. Ross, 481 Mich. at 11. “The insurer can meet this burden by showing
that the refusal or delay is the product of a legitimate question of statutory construction,
constitutional law, or factual uncertainty.” Id. “[W]hen considering whether attorney fees are
warranted under the no-fault act, the inquiry is not whether coverage is ultimately determined to
exist, but whether the insurer’s initial refusal to pay was reasonable.” Shanafelt v Allstate Ins Co,
217 Mich. App. 625, 635; 552 NW2d 671 (1996). In other words, “the court must examine the
circumstances as they existed at the time the insurer made the decision, and decide whether that
decision was reasonable at that time.” Brown v Home-Owners Ins Co, 298 Mich. App. 678, 691;
828 NW2d 400 (2012). “[A]n insurer’s initial refusal to pay no-fault benefits can be deemed
reasonable even if it is later determined that the insurer was required to pay those benefits.” Moore
v Secura Ins, 482 Mich. 507, 526; 759 NW2d 833 (2008).
In concluding that attorney fees were appropriate under MCL 500.3138, the trial court
reasoned:
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The arguments that were made at trial were largely focused on two issues.
One was the insurer’s disagreement, I would call it disagreement with the concept
of a per diem for the care of Mr. Loiola and Defendant was hyper focused on pulling
apart, what was provided by way of the per diem, rather than addressing whether
the per diem itself was a reasonable amount and was it necessary for Mr. Loiola.
But to focus on what NeuroRestorative chose to do with the per diem that it
demanded was, in my view, reasonable.
The second argument that prevailed, second Defense argument that
prevailed at trial, and by prevailed I don’t mean won, but that was pervasive was
that Mr. Loiola had committed fraud in his Application for Benefits, and the jury
rejected that. I rejected well—, the jury didn’t have a line item for it, but did not
determine that the benefits were unreasonable. I don’t believe that there was fraud
committed by Mr. Loiola in pursuing benefits. The fraud defense has grown from
something that probably should apply when someone says they were in an accident
and they weren’t in an accident, or claims, claims payment for care that was never
rendered, and now is opened or is on the verge of being opened or advanced to be
open for anyone who doesn’t give a complete history to his doctor or who claims
that care was provided on Tuesday when it was provided on Wednesday, or misses
something in making an application without the intent to defraud the insurance
company or to obtain benefits to which the person wasn’t otherwise entitled. And
I didn’t see anything in this case that indicated to me that Mr. Loiola, or anyone on
his behalf, was fraudulently billing the insurance company or advancing a claim
that didn’t have merit. And again, the jury did not find that Mr. Loiola was
advancing a claim that didn’t have merit.
Briefly stated, the trial court appeared to conclude that Citizens acted unreasonably by
denying benefits because (1) Citizens could not “pull apart” the per diem and (2) Loiola did not
commit a fraudulent insurance act as evinced by the fact that the jury “did not find that Mr. Loiola
was advancing a claim that didn’t have merit.” There are several significant flaws in this
reasoning.
First, as discussed earlier, the trial court erred as a matter of law by concluding that Citizens
could not challenge the combined charges rolled into the per diem; for example, the food stipend
and wages that NeuroRestorative paid Loiola were not compensable as a matter of law. Second,
setting aside the trial court’s erroneous view of the per diem, the trial court erred by failing to
recognize that whether the per diem could be “pulled apart” presented a legitimate question of
statutory interpretation regarding what constitutes an allowable expense. That is, under Griffith
and Admire, Citizens clearly had, at the very least, a legitimate statutory basis for arguing that the
per diem could be challenged as a combined charge, which included noncompensable items such
as a food stipend and wages for Loiola. Attorney fees under MCL 500.3148 are not appropriate
given this legitimate question of statutory interpretation. See Ross, 481 Mich. at 11.
Further, notably missing from the trial court’s analysis is any mention of the conflicting
medical opinions that drove this case. No fewer than eight doctors examined Loiola, and the
conflicting opinions of these medical professionals were presented to the jury over multiple days
of trial. These conflicting opinions evinced significant factual disputes regarding (1) the degree
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of Loiola’s traumatic brain injury, (2) the implications of his pre-accident problems including his
preexisting mental health and substance-abuse issues, (3) the extent to which he had recovered
following the accident, and (4) ultimately whether the level of care provided by NeuroRestorative
was reasonably necessary for Loiola’s rehabilitation, recovery, and care.
Presented with conflicting medical opinions, Citizens relied on the opinions of the IMEs.
Considering the circumstances as they existed when Citizens denied coverage for
NeuroRestorative, see Brown, 298 Mich. App. at 691, this decision to rely on the IMEs was not
unreasonable on the facts of this case. See Moore, 482 Mich. at 523 (rejecting assertion that a
“defendant insurer must ‘go beyond’ defendant’s doctor or IME”). Three of the IME doctors (Dr.
Ellenberg, Dr. Hanks, and Dr. Saul Foreman), who concluded that Loiola did not need long-term
residential or semi-independent care, offered their opinions to Citizens before Loiola’s admission
to NeuroRestorative. And the two additional opinions that Citizens later sought (Dr. Brian Roth
and Dr. Christian Schutte) bolstered these conclusions. Although Loiola had doctors who opined
that he needed NeuroRestorative, Citizens had no obligation to ignore the opinions of the IMEs.
See id. Indeed, it was particularly reasonable for Citizens to rely on the IME opinions in this case
given (1) the consistent validity concerns in Loiola’s neuropsychological testing, (2) Loiola’s
failure to provide his doctors with a full and accurate history,14 and (3) the fact that even his own
doctors believed that he was exaggerating at least some of his symptoms.15 That Loiola previously
lived more independently (at, for example, Progressions) provided further support for Citizens’
conclusion that he did not need NeuroRestorative’s more intensive level of care. Overall, given
the dispute among the experts and the other circumstances of this case, Citizens acted reasonably
by denying benefits in reliance on the opinions of its IMEs and the evidence supporting those
opinions. See id.
Yet the trial court ignored the conflicts in the evidence and simply concluded that Citizens
acted unreasonably because Loiola did not commit fraud and the jury found his claims meritorious.
The conclusion that Loiola did not commit a fraudulent insurance act is dubious given that this
question was not submitted to the jury. More generally, that the jury ruled in Loiola’s favor is not
dispositive of the question whether Citizens’ initial refusal to pay was unreasonable. See id. at
526. By ignoring the factual dispute surrounding the contested expenses and concluding that the
refusal to pay was unreasonable because the jury awarded the claimed expenses, the trial court
clearly erred. See Bonkowski v Allstate Ins Co, 281 Mich. App. 154, 171; 761 NW2d 784 (2008).
14
As noted, Loiola was not forthcoming with the IME doctors. In addition, Dr. Charles Seigerman,
who was not an IME doctor, was initially unaware that Loiola had a history of cocaine and
marijuana use as well as anxiety and depression.
15
Dr. Seigerman, for example, testified that Loiola’s testing suggested that he was exaggerating
and overreporting his symptoms. Dr. Meythaler likewise testified that there was evidence that
Loiola exaggerated, at least with regard to “side issues.” Although these doctors did not believe
these concerns invalidated all the testing results, the fact remains that Loiola consistently failed
validity testing, which provided sound reason for questioning the results of his tests and his self-
reported complaints.
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On the whole, this case involved legitimate questions of statutory interpretation and
significant factual disputes regarding Citizens’ liability for benefits. On this record, the trial court
erred as a matter of law by awarding attorney fees to Loiola. The award of attorney fees is vacated.
Vacated and remanded for a new trial. We do not retain jurisdiction.
/s/ Patrick M. Meter
/s/ Colleen A. O’Brien
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