New Appeals case impacts insurer’s coverage of conservator fees in auto no-fault cases

The Michigan Court of Appeals has issued an important opinion on an auto no-fault insurer’s duty to pay for conservator fees under the Michigan No Fault Act.  Significantly, the Court held that fees incurred for a conservator’s services are not allowable expenses for the “care” of an injured person under MCL 500.3107(1)(a), but instead are considered replacement service expenses subject to the $20.00 per day and three year limitations under MCL 500.3107(1)(c).  The case is In Re Conservatorship of Deanna Theresa Cisneros, (unpublished) Court of Appeals No. 298922 (March 21, 2013).

The facts of the case will be familiar to those with no-fault conservator files.  Deanna Cisneros was badly injured in a motor vehicle accident and a conservatorship was opened on her behalf in the St. Clair County Probate Court.  The initial conservator was removed by the court and attorney Mark Fullmer, was appointed as successor conservator.  As conservator, Mr. Fullmer defended Ms. Cisneros in real estate and debt disputes and also assisted in her action to recover no-fault benefits from ACIA.  His attorney/conservator fees were presented to ACIA as a claim for “allowable expense” PIP benefits.  The probate court granted Mr. Fullmer’s request for reimbursement in the amount of $11,274.00, accepting the argument that these were reasonable expenses incurred for the “care” of Ms. Cisneros pursuant to §3107(1)(a).

ACIA appealed the decision, arguing that Mr. Fullmer’s services in managing the ward’s assets qualified, at best, as replacement services under §3107(1)(c), for which benefits are capped at $20.00 per day and limited to three years post-accident under the statute.  ACIA argued that Mr. Fullmer’s services as an attorney for Ms. Cisneros were not compensable under PIP coverage.  The Court of Appeals initially rejected ACIA’s arguments, affirming the probate court decision to approve the conservatorship fees.  Relying on a 2011 Court of Appeals decision, In re Carroll, 292 Mich App (2011), the Court reasoned that the expenses incurred by Mr. Fullmer in managing Ms. Cisneros’s business and legal affairs would not have been necessary but for the accident.  It followed, in the Court’s opinion, that the conservator fees therefore came under the definition of allowable expenses under §3107(1)(a).

ACIA filed appeals to the Michigan Supreme Court in both the Cisneros and Carroll cases.  The Supreme Court was at the time addressing two other cases concerning the distinction between no-fault replacement services and allowable expense “care” services, Douglas v Allstate Insurance Co, 492 Mich 241 (2012), and Johnson v Recca, 492 Mich 169 (2012), and thus held the Cisneros and Carroll applications in abeyance until decisions were issued in the preceding cases.

The opinions issued in Douglas and Johnson clarified the scope of services covered under §3107(1)(a) and §3107(1)(c) of the No Fault Act.  In Douglas, the Court held that allowable expenses do not include those incurred as replacement services since such ordinary and necessary services are “not for an injured person’s care, recovery or rehabilitation.” “Care” services compensable under §3107(1)(a) thus do not include services relating to ordinary matters not directly related to the injury.  (The Douglas case is summarized in greater detail in Law Fax Volume XXIV, No.13 August 21, 2012).  The distinction is reinforced in Johnson, in which the Michigan Supreme Court held that services required both before and after the injury, but after the injury can no longer be provided by the injured person himself or herself because of the injury, are replacement services, not allowable expenses.

Having thus clarified the distinction between “allowable expense” services and “replacement services” in Douglas and Johnson, the Supreme Court proceeded to vacate both Court of Appeals decisions in Carroll and Cisneros and remanded them to the Court of Appeals for reconsideration.  Although Carroll remains pending at this point, the Court of Appeals issued its new opinion in Cisneros on March 21, 2013, this time reversing the probate court’s approval of the claimed conservator fees and agreeing with ACIA’s position. Michigan auto no-fault.