Court finds fee schedules under new No Fault reform 'unconstitutional'

May 5, 2022

On March 18, 2022, a motion for injunction to enforce payment of no-fault benefits was filed before Genesee County Circuit Court Judge, Archie Brown, on behalf of Stephen Gedda, who suffered a catastrophic spinal cord injury when he was rear ended by a semi-truck in 2011 [Gedda v State Farm, Washtenaw County Circuit Court, 22-000152-NF]. The injury rendered the plaintiff a quadriplegic requiring 24/7 “high-tech” home health care for ancillary medical complications, including, neuromuscular respiratory failure, dysphagia, and neurogenic bowel and bladder. He was also required to undergo a tracheotomy for placement of a ventilator to breathe.

According to the pleadings, the defendant, State Farm Insurance Company, abruptly stopped making payments in September 2021, shortly after the no-fault reform medical fee schedules were made effective on July 1, 2021. Prior to cutting off payments without notice or warning, State Farm was paying attendant care benefits at a rate of $29.50 per hour for a “high-tech” home health aide and $72.50 for skilled nursing care. After 6 months of no payments, Gedda filed suit against State Farm. In response, State Farm sent a letter to the plaintiff indicating that it would only pay $16.80 per hour for high-tech home health care and $41.51 for nursing services, prompting filing for an injunction.

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Motion for Injunction

In its motion, the family argued that the adjusted rates were so low that Gedda would be unable to meet his care needs, thereby placing his life at risk. Gedda himself characterized the refusal to pay these essential benefits as a matter of “life and death.” In support of his contention, Gedda offered the testimony of his treating physician, a board-certified spinal cord injury physical medicine and rehabilitation specialist, and his long-time-nurse, who stated “if [plaintiff] loses his home care, he will not survive.” Elaborating further saying, “if [the plaintiff] is admitted to a hospital or some other facility, he would be unable to push an emergency call button, thus, would not survive.”

In furtherance of his position, Gedda cited a bulletin issued by the Department of Insurance and Financial Services (DIFS) on September 22, 2021, warning auto insurers from arbitrarily refusing payment where rates or amounts are disputed, directing carriers to pay “something” or face penalty interest sanctions under the statute. He also pointed out to the court, that as recent as October 11, 2021, DIFS issued a bulletin cautioning insurers against applying “fee schedules” to services that, under the statute, are not subject to fee schedule rates.

Additionally, Gedda persuasively argued Michigan jurisprudence has historically held that a claim for Personal Injury Protection (PIP) benefits accrues at the time of the accident [Kalata v Allstate, 136 Mich App 500 (1984)] and a rule that was recently recognized by the Supreme Court in Lafontaine Saline, Inc. v Chrysler Group, LLC, 496 Mich 26 (2014) (“retro­active application of legislation presents problems of unfairness because it can deprive citizens of legitimate expectations and upset settled transactions”). Perhaps most compelling, Gedda cited a bipartisan “memo” signed by 70 members of the Michigan Legislature acknowledging that the no-fault reform legislation was “never” intended to be applied retroactively nor permissible under state law.

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Opinion: “No-Fault Reform is Unconstitutional”

On April 20, 2022, having dispensed with oral argument, the Court issued its opinion granting the plaintiff injunctive relief. However, the import of the decision is not merely centric to the plaintiff. Rather, this opinion may signal the death knell of the 2019 auto reform act entirely. First, the court determined that State Farm’s refusal to pay benefits placed Gedda at risk of irreparable harm from the standpoint of his health and life, and that Gedda’s physical and mental safety outweigh State Farm’s “possible” economic loss. It is patently clear that the court refused to be complicit in placing profits over people. Moreover, the court recognized that home health care and nursing workers should not be discounted, emphatically stating, “[t]he legislature did not intend that high-tech/trained health care providers be paid at the same rate as a teenager in the fast-food industry.” Furthermore, the court determined that MCL 500.3157 (fee schedules) do not apply to an injury that occurred in 2011, holding, “[t]he legislature’s silence as to retroactivity speaks loudly to this Court.” Further, it held that the plaintiff was eligible for payment reimbursement at the rates claimed ($29.50 for high-tech attendant care and $72.50 for nursing services). And, perhaps most importantly – and likely to be challenged – the court held the new fee schedule, adopted in the 2019 reform, to be unconstitutional.

It is important to point out that this opinion is not an anomaly. Other courts in Genesee and Kent Counties have been critical of the adoption and enforcement of the no-fault reform legislation. Ultimate resolution may require a Supreme Court determination.

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A. Vince Colella is a co-founder of personal injury and civil rights law firm Moss & Colella.

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