Pirgu v. United Services Automobile Association
499 Mich. 269
| Mich. | 2016Background
- In 2008 Feridon Pirgu suffered closed-head injuries after being struck by a vehicle; his wife Lindita was appointed guardian/conservator and sought overdue PIP benefits.
- USAA (defendant) discontinued PIP payments; Lindita sued for reinstatement of benefits and attorney fees under MCL 500.3148(1).
- Jury awarded $70,237.44; plaintiff requested $220,945 in attorney fees based on >600 hours at $350/hr.
- Trial court found insurer’s refusal unreasonable and awarded attorney fees equal to ~33% of the verdict ($23,412.48), mirroring the ratio of verdict to demand.
- Court of Appeals affirmed (relying on University Rehab), but this Court granted relief in lieu of leave, reversed, vacated the fee award, and remanded for recalculation using the Smith framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Smith v. Khouri baseline methodology (reasonable local hourly rate × reasonable hours) applies to fee awards under MCL 500.3148(1) | Smith’s method governs all "reasonable fee" statutes; §3148(1) awards a "reasonable fee," so Smith applies | Smith addressed MCR 2.403(O) (case-evaluation sanctions) only; University Rehab governs §3148(1) and Smith is inapplicable | Smith framework applies to §3148(1); University Rehab is overruled to the extent inconsistent |
| Proper factors to adjust the Smith baseline (including result/contingency) | Results obtained and whether fee was contingent are relevant and must be considered in §3148(1) fee adjustments | Those factors are not binding per the Smith lead opinion for case-evaluation context; University Rehab used a totality approach | Trial courts must consider the distilled set of Wood and MRPC 1.5(a) factors (including amount/results and fixed vs contingent) when adjusting the baseline |
| Whether the trial court abused its discretion in awarding fees (court used percentage-of-verdict approach) | Trial court failed to calculate Smith baseline (hourly rate × hours) and did not discuss the required factors; award should be vacated/remanded | The award was reasonable under University Rehab’s totality approach; using a percentage of recovery aligns with contingency expectations | Trial court abused its discretion by not applying Smith baseline and failing to discuss the enumerated factors; fee award vacated and remanded for recalculation |
Key Cases Cited
- Smith v. Khouri, 481 Mich 519 (establishes baseline methodology: reasonable local hourly rate × reasonable hours, then adjust using enumerated factors)
- Wood v. Detroit Auto Inter-Ins Exch., 413 Mich 573 (multifactor reasonableness factors for fee awards)
- University Rehab Alliance, Inc. v. Farm Bureau Gen. Ins. Co. of Mich., 279 Mich App 691 (Court of Appeals decision that previously declined to apply Smith to §3148(1); partially overruled)
- Coblentz v. City of Novi, 485 Mich 961 (applied Smith framework outside the case-evaluation context and required remand when improper factors were considered)