Nickola v. Mic Gen. Ins. Co.

500 Mich. 115

894 N.W.2d 552

Joseph G. NICKOLA, Personal Representative of the Estates of George and Thelma Nickola, Plaintiff–Appellant,

v.MIC GENERAL INSURANCE COMPANY, d/b/a GMAC Insurance, Defendant–Appellee.

No. 152535

Supreme Court of Michigan.

Argued January 10, 2017

Decided May 12, 2017

Zahra, J.

The issue presented in this case is whether an insurer's untimely payment of underinsured motorist (UIM) benefits is subject to penalty interest under the Uniform Trade Practices Act (UTPA).¹ We hold that an insured making a claim under his or her own insurance policy for UIM benefits cannot be considered a "third party tort claimant" under MCL 500.2006(4), a provision of the UTPA. This holding is required by the plain language of MCL 500.2006(4) and is entirely consistent with this Court's opinion in Yaldo v. North Pointe Ins. Co.² and the Court of Appeals’ opinion in Griswold Props., LLC v. Lexington Ins. Co.³ We overrule the Court of Appeals’ opinion in Auto–Owners Ins. Co. v. Ferwerda Enterprises, Inc. (On Remand)⁴ to the extent it is inconsistent with this opinion. We reverse the opinion of the Court of Appeals denying plaintiff penalty interest under the UTPA and remand to the trial court for further proceedings consistent with this opinion.⁵

I. FACTS AND PROCEEDINGS

On April 13, 2004, George Nickola and his wife, Thelma, were injured in a car accident. The driver of the other car who caused the accident, Roy Smith, was insured by Progressive Insurance Company. Smith's automobile no-fault insurance policy provided the minimum liability coverage allowed by law: $20,000 per person, up to $40,000 per accident.⁶

On May 7, 2004, the Nickolas’ son, Joseph G. Nickola, then acting as their attorney,⁷ penned a letter to the Nickolas’ insurer, defendant MIC General Insurance Company, doing business as GMAC Insurance. The letter explained that Smith's "liability insurance policy is insufficient to cover the ... injuries sustained by both [the Nickolas]." The letter also advised that the Nickolas "are claiming [UIM] benefits under the provisions of their automobile policy...." The Nickolas’ policy provided for UIM limits of $100,000 per person, up to $300,000 per accident, and they sought payment of UIM benefits in the amount of $160,000; $80,000 for each insured.⁸

On February 8, 2005, the Nickolas again demanded payment of $160,000, the full UIM limits available to George and Thelma. On February 17, 2005, an adjuster for defendant denied the claim, asserting that the Nickolas could not establish a threshold injury for noneconomic tort recovery. Defendant's adjuster explained:

We believe your client's [sic] were adequately compensated for their pre-existing injuries, which were aggravated in the accident. Your client's [sic] appear to be able to lead their normal life as described in the Kreiner [ v. Fischer ]^{[9 ]} decision. If however, you have some additional information that you want me to review, please forward the medical records and I will be happy to review the matter again.

On February 22, 2005, the Nickolas demanded arbitration of the UIM claim. Their policy provided that if defendant and the insured did not agree about whether the insured was entitled to recover damages under the UIM endorsement, or did not agree about the amount of damages, then "[e ]ither party may make a written demand for arbitration."¹⁰ Despite the standardized arbitration language, defendant advised the Nickolas that the policy required both parties to agree to arbitration, and defendant refused to arbitrate the claim.

Accordingly, on April 8, 2005, the Nickolas filed suit, asking the trial court to refer the matter to arbitration. The court ordered the case to arbitration while retaining jurisdiction. The UIM endorsement provided that each side would select an arbitrator, and those two arbitrators would then select a third. If a third arbitrator could not be selected by agreement, then either side could ask the court to select the third arbitrator. The two arbitrators selected by the parties could not agree on a third arbitrator. Remarkably, for the next six years this case remained stagnant with neither side asking the court to appoint a third arbitrator.¹¹

Finally, in 2012, plaintiff asked the trial court to appoint a neutral arbitrator. The court agreed and the case proceeded to arbitration, where the arbitration panel awarded $80,000 for George's injuries and $33,000 for Thelma's injuries. The award specified that the amounts were "inclusive of interest, if any, as an element of damage from the date of injury to the date of suit, but not inclusive of other interest, fees or costs that may otherwise be allowable by the Court."

Plaintiff then filed a motion in the trial court for entry of judgment on the arbitration award. Plaintiff also asked the court to assess 12% penalty interest under the UTPA. The court affirmed the arbitration awards but declined to award penalty interest under the UTPA, finding that penalty interest did not apply because the UIM claim was "reasonably in dispute" for purposes of MCL 500.2006(4). Plaintiff appealed.

The Court of Appeals affirmed the trial court, holding that the "reasonably in dispute" language applied to plaintiff's UIM claim because a UIM claim "essentially" places the insured in the shoes of a third-party claimant.¹² Plaintiff sought leave to appeal in this Court. We directed the Clerk of this Court to schedule oral argument on whether to grant the application or take other action.¹³

II. STANDARD OF REVIEW

Matters of statutory and contractual interpretation present questions of law, which this Court reviews de novo.¹⁴

III. ANALYSIS

A. PENALTY INTEREST UNDER MCL 500.2006(4)

UIM policies are not mandated by statute. Individuals seeking UIM coverage contract for it freely, voluntarily, and at arm's length.¹⁵ When the UIM insured is injured by a tortfeasor motorist whose policy is insufficient to cover all of the insured's damages, the insured makes a claim for the shortfall against his or her UIM insurer.¹⁶ Notwithstanding the fact that the Nickolas’ UIM coverage was governed by contract, this case presents a statutory claim for penalty interest under the UTPA, which applies to all insurers doing business in Michigan. The UTPA provides for 12% penalty interest on certain claims not timely paid by an insurer.¹⁷

We begin all matters of statutory interpretation with an examination of the language of the statute.¹⁸ "The primary rule of statutory construction is that, where the statutory language is clear and unambiguous, the statute must be applied as written."¹⁹ "A necessary corollary of these principles is that a court may read nothing into an unambiguous statute that is not within the manifest intent of the Legislature as derived from the words of the statute itself."²⁰

In this matter, the relevant statutory provisions of the UTPA are Subsections (1) and (4) of MCL 500.2006. Subsection (1) requires insurance claims to be paid on a timely basis, or penalty interest will be imposed under the UTPA.²¹ As it relates to the imposition of penalty interest, Subsection (1) directs us to Subsection (4), which, at the time of the trial court's decision, provided:

If benefits are not paid on a timely basis the benefits paid shall bear simple interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum, if the claimant is the insured or an individual or entity directly entitled to benefits under the insured's contract of insurance. If the claimant is a third party tort claimant , then the benefits paid shall bear interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum if the liability of the insurer for the claim is not reasonably in dispute, the insurer has refused payment in bad faith and the bad faith was determined by a court of law . [Emphasis added.]^{[22 ]}

Subsection (4) consists of two sentences, which together create a straightforward scheme. These sentences divide insurance claimants into two distinct classes. The first sentence creates a class of claimants who are insureds or an individual or entity directly entitled to benefits under an insured's insurance contract. The second sentence creates a class of third-party tort claimants.

The first sentence contains no "reasonably in dispute" exemption from the imposition of penalty interest for the untimely payment of benefits due under an insurance contract. The Legislature cast a broad net when defining circumstances under which insurers would be subject to penalty interest. All claims made by an insured or an individual or entity directly entitled to benefits under a policy of insurance must be timely paid under the policy or the insurer risks the imposition of penalty interest. The UTPA encourages prompt payment of contractual insurance benefits.

The second sentence addresses situations in which "the claimant is a third party tort claimant."²³ In stark contrast to the first sentence, the second sentence of Subsection (4) expressly states that third-party tort claimants are not entitled to penalty interest under the UTPA if their claim is "reasonably in dispute."²⁴ The omission of a provision in one part of a statute that is included in another part of the same statute should be construed as intentional.²⁵ "We do not read requirements into a statute where none appear in the plain language and the statute is unambiguous. ‘It is not within the province of this Court to read therein a mandate that the [L]egislature has not seen fit to incorporate.’ "²⁶ Therefore, because the "reasonably in dispute" limitation is contained only in the second sentence of MCL 500.2006(4), this limitation applies only to third-party tort claimants, not claims made by an insured.²⁷

We reject defendant's argument that the Nickolas were not "directly entitled to benefits" and therefore are not within the class of claimants identified in the first...