Wood v. Detroit Automobile Inter-Insurance Exchange

Citations: 299 N.W.2d 370; 99 Mich. App. 701; 1980 Mich. App. LEXIS 2897Docket: Docket 45634

Court: Michigan Court of Appeals; August 28, 1980; Michigan; State Appellate Court

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An uninsured motorcyclist (plaintiff) was injured in a collision with a vehicle insured by the defendant, who initially paid for the plaintiff's medical expenses and wage loss benefits. After the defendant ceased wage loss payments in 1976, the plaintiff filed a lawsuit alleging wrongful withholding of benefits. The defendant countered that the plaintiff failed to provide necessary documentation. 

In July 1978, the plaintiff served interrogatories, but the defendant did not respond. The plaintiff filed a motion to compel, and after a court order for response went unheeded, the plaintiff sought a default judgment. The court granted the default judgment on March 23, 1979, awarding the plaintiff 14 months of wage loss benefits, interest, $50,000 for mental anguish, $5,000 in attorney fees, and six percent interest on the total judgment. 

The defendant's subsequent motion to set aside the default judgment was denied. On appeal, the defendant argued that the trial court abused its discretion in entering and refusing to vacate the default judgment, citing the court’s authority under the discovery rules which allows for sanctions, including default judgments, for non-compliance. The appellate court noted that the trial judge's decisions are upheld unless there is an abuse of discretion, referencing relevant case law and procedural rules regarding discovery and default judgments.

A default judgment is a drastic measure used only when preliminary actions fail, particularly when a party willfully ignores court orders. In this case, the defendant failed to respond to interrogatories despite two court orders, constituting willful noncompliance that justified the court's default judgment. A motion to set aside the default judgment must demonstrate good cause and include an affidavit supporting a meritorious defense. The defendant's claim of being unable to depose the plaintiff does not qualify as good cause, and the potential for a setoff of governmental benefits is not a valid defense. Additionally, the defendant is not entitled to a jury trial on damages after defaulting. The court incorrectly awarded the plaintiff damages for mental suffering, as the no-fault insurance act limits penalties to attorney fees and interest for overdue payments. Therefore, the $50,000 awarded for mental anguish must be reversed. Although the court awarded $5,000 in attorney fees to the plaintiff, which is reasonable, this amount may need to be adjusted on remand due to the reversal of mental suffering damages. Lastly, the defendant contends that the trial court erred in awarding both six percent judgment interest and twelve percent penalty interest under the no-fault act, which requires further consideration.

The trial court awarded a 12 percent interest on overdue wage loss payments from the time they became overdue, and a 6 percent interest on the entire judgment from the date the complaint was filed. The defendant argued that these overlapping interest provisions were impermissible. The 6 percent interest serves to compensate the prevailing party for litigation expenses and delays in receiving damages, while the 12 percent interest penalizes insurers for non-compliance, as established in various Michigan case law and statutes. The court ruled that these interest statutes are not mutually exclusive and upheld both interest awards. The total amount for overdue wage loss benefits, including the 12 percent interest, was calculated at $11,708.93. However, the court found that the $50,000 awarded for emotional pain and suffering was improperly granted, necessitating an adjustment to the judgment on remand. The decision was affirmed in part and reversed in part, with no costs awarded to either party.