*1 ASSOCIATION CLUB INSURANCE ADAMS v AUTO 1986, 13, Decided at Detroit. Submitted March No. 84937. Docket 19, appeal applied for. August 1986. Leave Adams, 1983, in a 5, plaintiff, was involved May W. James On permanently disabled. him which left motor vehicle accident Association, defendant, Insurance Auto Club to the He insurer, At the benefits. for work-loss his no-fault automobile cosmetologist accident, self-employed plaintiff awas time of the contractor, paying independent chair rental worked as an who expenses. shop his own business he worked and to the in which plaintiff’s eighty-five percent approved Defendant 6, May, commencing May average daily gross receipts overpaying it had been defendant determined payments. main- Defendant plaintiff further and terminated eighty-five percent of only plaintiff entitled to was tained that gross that defendant opposed revenue and to his his net as expenses, plaintiff’s claimed business have deducted should return, from tax income Schedule C of his federal benefits. Plain- gross his work-loss in order to calculate seeking Wayne reinstate- Circuit tiff then filed suit counter-complaint payments. filed ment of the Defendant previously to the seeking the amounts plaintiff entitled to allegedly plaintiff in excess of what Roumell, J., court, trial Thomas no-fault act. The under the summary judgment and denied a motion declaring judgment in favor of the defendant ordered a ordering calculating proper work-loss benefits method of any overpayment. trial court also The the reimbursement plaintiff attorney of $250. fees in the amount awarded judg- appeals by granted trial court’s from the Plaintiff leave cross-appeals. and order and the defendant ment Appeals The Court of held: 3107(b) of from work” under § The term "loss of income _1. References 2d, seq. 340 et Am Jur Automobile Insurance §§ 2d, seq. 61 et Am Jur Limitation of Actions §§ Limitation Annotations under the annotations in the Index to See Actions; Insurance. No-fault Adams Auto Club Ins contemplates expen- the no-fault act the deduction of business gross self-employed from ses income where the is a claimant plaintiffs individual. trial did court not err in receipts gross should be deducted from his lost income. *2 determining 2. The trial court did err in not which business- expenses expenses related should be deductible for business purposes determining Ap- of work-loss benefits. The Court of peals adopt refused to the rule advocated the defendant that self-employed expenses reported of all a claimant’s business automatically Schedule C of a federal tax return should determining be deducted in work-loss benefits under the no- act. fault 3. The trial err court did not that defendant could any overpayment plaintiffs recover of work-loss benefits. There nothing language legislative of the no-fault act or its purpose requires abolishing a construction the common- right payments law of reimbursement for made under a mis- take of fact. 3145(1) one-year period 4. The of limitation found in of applicable no-fault act is not to this action because defendant’s seeking recovery overpaid action for amounts involves a com- general six-year period mon-law of action. The limitation provided applicable for in MCL 600.5813 is to defendant’s claim for reimbursement. plaintiffs request deny 5. The trial court’s decision to for attorney appropriate. entirely fees under MCL 500.3148 was inapplicable, Once 3148 found was to be the trial court had no authority attorney to award $250 and fees grant inappropriate $250 of and is reversed. part part. Affirmed in reversed Townsend, J., except E. majority concurred with the as to period their determination of the of limitation to overpayment defendant’s claim for reimbursement for the of parties recovery work-loss benefits. He noted that both seek the of no-fault benefits and believes that it does not matter whether the defendant’s form of action is based statute or common sought damages law because the nature of determines which applied. of statute litations be should He believes that it is patently apply one-year period unfair a of limitation to a six-year for apply claim of no-fault benefits and to a period of limitation to a claim for of no-fault paid benefits in error under the same insurance contract and as a result of the same motor vehicle accident. He would reverse part six-year the trial court’s a decision which application a period and remand limitation reimbursement of claim for of limitation defendant’s benefits in error. no-fault Opinion — — — Self-Em- Work-Loss Benefits No-Fault Act Insurance ployed Persons. person self-employed recover work-loss benefits is entitled to A person act; expenses of such no-fault the business under the determining gross receipts in his should be deducted from (MCL 24.13107[b]). 500.3107[b];MSA lost income — 2. Insurance Act. No-Fault same, place goal individuals in the of the no-fault act is to better, position they were before their automobile but no than (MCL seq.; seq.). et et MSA 24.13101 accident 500.3101 — — — 3. Insurance Self-Em- Act Benefits No-Fault Work-Loss Expenses. ployed — Persons Business-Related expen- concerning whether certain business-related The decision self-employed of a insured are deductible ses purposes work-loss benefits the insured’s question; primarily factual a trial under the no-fault act is *3 appeal ruling regard affirmed on unless court’s in this will be (MCL 500.3107[b]; clearly MSA the erroneous 24.13107[b]). Payments — — — — 4. Insurance Act Common Law No-Fault Mistakes of Fact. the common- The enactment of the no-fault act did not abolish right payments fact law to recover made under a mistake of provided payment legally payable when has not caused not change position payee it would be such a of (MCL unjust require seq.; a refund 500.3101 et MSA seq.). 24.13101 et — — — 5. Limitation Act Work- Actions Insurance No-Fault — — Loss Benefits Reimbursement Common Law. period applicable insurer’s claim The limitation to a no-fault overpayment for reimbursement for the of work-loss benefits seeking recovery years; to its insured is an action six such overpaid of action for amounts involves the common-law fact, therefore, payments to recover made under a mistake 3145(1) period limitation found in of the no-fault (MCL 600.5813; applicable 500.3145[1], act is not to the action 27A.5813). 24.13145[1], MSA Adams v Auto Club Opinion op the Court Attorney — — — 6. Insurance No-Fault Act Fees Work-Loss Benefits. denying request

A trial court not does err in an insured’s for attorney seeking fees in an action of work-loss by benefits under the no-fault act where the amounts withheld dispute the insurer were in and the insurer not did unreason- (MCL ably 500.3148; delay making payment to the insured 24.13148). MSA Townsend, E. Partial J. Partial Concurrence and Dissent — — — 7. Limitation of Actions Act Insurance No-Fault Work- — Loss Benefits Reimbursement. of limitation to a no-fault insurer’s claim overpayment for reimbursement for the of no-fault work-loss year; beneffts is one it does not matter whether the insurer’s form of action is based statute or on the common law (MCL500.3145, 24.13146). 500.3146; 24.13145, MSA Damages Sought. — 8. Limitation of Actions Nature of damages sought The nature of the rather than the form of a plaintiff’s action determines which statute of limitations con- particular trols a case. (by

Law Offices Michael J. Brochert David S. Anderson), plaintiff.

Dickinson, Brandt, Hanlon, Becker & Lanctot Oakes), (by Jeffrey Gromek, A. Bendure & Bosh), (by Nancy Thomas counsel, L. for defen- dant. Bronson, P.J.,

Before: and R. B. Burns and J. E. Townsend,* JJ. Wayne Per Curiam. Plaintiff filed suit Circuit against seeking the defendant reinstatement

of no-fault work-loss benefits which had been ter- minated the defendant. The defendant filed a counter-complaint seeking *4 previously plaintiff allegedly

amounts in ex- plaintiff cess what was entitled to under the no- * judge, sitting Appeals by assignment. Circuit on the Court of Opinion op the Court Thereafter,

fault act. plain- the trial court denied tiffs motion for summary judgment and ordered a judgment in favor of the declaring defendant by proper calculating method of work-loss benefits ordering of any overpayment. appeals Plaintiff gránted leave and defendant has filed a cross-appeal. 5, 1983, May

On was involved motor vehicle accident which left him perma- nently defendant, disabled. He to the his insurer, no-fault automobile for work-loss benefits. accident, At the time of the plaintiff was a self- employed cosmetologist who indepen- worked as an contractor, dent paying forty-one percent of his weekly gross revenue as shop chair rental to the in which he worked. an independent As cosmetolo- gist he required was also all pay of his own including expenses for supplies and materials. Based on records received from plaintiff, defendant approved eighty- percent five of plaintiff’s average gross re- daily ceipts 6, commencing May

In May, defendant determined that it had been overpaying plaintiff and terminated fur- ther payments. Defendant maintained that plain- tiff was only entitled to eighty-five percent of his net as opposed to gross revenue. According defendant, it should have plaintiff’s deducted busi- expenses, ness claimed on Schedule c of his federal return, income tax from gross order to calculate his work-loss benefits under 24.13107(b). MCL 500.3107(b); MSA Plaintiff stren- uously objects to interpretation defendant’s of the relevant statute.

The first issue on appeal concerns the proper method for calculating work-loss benefits under 3107(b) of the no-fault act for a self-employed claimant. It is undisputed a self-employed *5 191 Adams Ins v Auto Club Opinion of the Court person benefits. is entitled to recover work-loss contends, however, he to Plaintiff that is entitled 3107(b) § under based recover work-loss benefits the tion opera- gross receipts entirety from the of the by any business, of the costs his unreduced argues plaintiff’s doing business. Defendant be on his taxable work-loss benefits should based subtracting plaintiff’s after business-re- income lated expenses and deducted which were claimed Thus, defendant on his federal income tax return. should be based believes that work-loss benefits solely profít from on the received agreed The trial court with defendant’s business. 3107(b) interpretation some, §of and ruled that all, should but not deducted in work-loss benefits. be 3107(b) provides part that a no-fault Section pay for work-loss con- insurer is liable to sisting injured person benefits that an of the loss of income from work performed during have the would years the accident if he first three had not after date the injured. purpose of the section is been to are available to ensure work-loss benefits compensate injured persons they for the would have received but for the accident. MacDon- Co, 419 ald v State Farm Mutual Ins Mich (1984), 152; 350 NW2d 233 reh den 419 Mich 1213 (1984). general, designed In the act is no-fault expeditious compensation damages achieve resulting from motor vehicle accidents and to delays minimize administrative and factual dis- putes. Miller v State Farm Mutual Automobile Ins (1981), Co, 538, 568; 302 NW2d 537 reh (1981). den 411 Mich 1154 Unfortunately, income from term "loss of result, it work” is not defined the statute. As a give duty attempt to effect to is our discover and 3107(b) enacting Legislature’s intention 154 Mich Opinion of the Court the language from no-fault act employed Miller, supra, as a 556. p whole.

Although Michigan no case can be found which directly presented, considers issue there are decisions which have the issue periph- considered Michigan Coates Mutual erally. App 290; (1981), 306 NW2d example,

the Court considered the of a legitimacy truck driver’s claim for work-loss benefits under *6 In remanding the case trial to the court this Court stated: opinion It is our that the lost "rental” income in represents present

the plaintiff lost from case work performed would have if he had not been only injured, but to the extent it would have operating his exceeded costs truck behalf Transport. of Central We therefore remand to the court parties opportunity trial to afford the an present proofs regarding plaintiff’s expected depre- expenses truck, ciation costs and of operating the which costs must then from plain- be subtracted expected income, tiff’s "rental” had he not been injured, computing the benefits recoverable un- 3107(b). [Id., p der § 297.] Thus, from in Coates it appears opinion that the Court that believed the term "loss of income” 3107(b) under contemplates the deduction of busi- expenses gross ness from income where the claim- ant is a self-employed individual.

Further, States, McAdoo v United 607 F Supp (ED Mich, 1984), the federal district court expressly stated that wages any earned an independent contractor seeking compensation work-loss benefits must be offset by any sum that the claimant expended would have in facilitating McAdoo, his job responsibilities. plaintiff was an independent contractor produced who earnings Adams v Auto Club Ins Opinion years preceding records for four his accident. ap His tax return indicated that were percent proximately sixty-four of his business in plaintiffs come. The district court held that loss benefits must be based income and thirty-six percent work- upon gross adjusted only he entitled that was to recover projected receipts of his for the period during which he was to work. Mc unable supra, pp Pennsylvania Adoo, 797-798. The courts Kamperis have reached similar results. See Na (1983). tionwide Pa A2d 1382 present case, In the we believe that the trial plaintiffs court did not err in expenses gross should be deducted from his re- ceipts goal his lost income. The place same, the no-fault act is to individuals in the position they better, but no than before their were Certainly, plaintiff automobile accident. claim that his actual even that cannot

expendable income included required pay income which he was expenses. Therefore, out as business in order to over-compensating plaintiff, avoid the trial court’s 3107(b) interpretation proper. §of cross-appeal, argues however, On defendant solely the trial court should have relied *7 Schedule c of income tax return in determining appropriate what were business-re- expenses. disagree. lated We only

The trial court determined that certain doing costs business should be subtracted from plaintiffs gross receipts. These included chair supplies, advertising, rental, materials and laun- dry cleaning, accounting services, utilities, telephone, expenses. license and office There were expenses a number of other business-related plaintiff reported on his Schedule c which the legitimate court did not consider to be business expenses purposes of the no-fault act. The Opinion of the Court decision concerning whether certain business-re- expenses lated should be deductible business ex- penses purposes of determining work-loss bene- fits is primarily question. case, factual In this we cannot say that the trial court’s findings were 2.613(C). clearly erroneous. MCR Thus we refuse to adopt the rule advocated defendant that all of a self-employed claimant’s reported on Schedule c of his or her tax return should automatically be deducted work-loss benefits under the no-fault act. There- fore, we affirm of the trial court on this issue.

Next, we are asked to determine whether enactment of the no-fault act abolished the com- mon-law to recover payments made under a mistake of fact. According to the plaintiff, since there is no section of the no-fault act which enti- tles insurers to maintain actions against insureds to recover overpaid work-loss benefits unless dupli- cate payment source, received from a collateral defendant is therefore not entitled to reimburse- ment for any overpayments made to plaintiff. We do not agree. law,

At common it recognized that a pay ment made under a mistake of fact when not legally payable may be provided recovered has not caused such a change position of the payee that it would be unjust a refund. General require Corp Motors v Enter prise Heat & Power (1957). Here,

NW2d 257 a mistake of fact did occur concerning what plaintiff’s average income was. Therefore, under law, common defendant would be entitled to plain unless tiff could establish some detrimental reliance. However, as points out, correctly the no- fault act is a derogation of the common law and *8 Adams v Auto Club 195 op Opinion the Court there is no specific provision permits which reim- bursement for overpayment. Schultz, Rusinek v & Steele Snyder Lumber 507; (1981), 309 NW2d 163 reh (1981),

den 412 Mich 1101 our Supreme Court held right common-law to recover for loss of consortium was not impliedly abrogated enact- ment of the no-fault statute. The Court stated that:

Although extinguishes a statute which expressly proper legisla common-law is a exercise of tive authority, Myers Auditor, County v Genesee 1; (1965), 375 Mich 133 NW2d 190 statutes in derogation of the common law strictly must be construed, Morgan McDermott, 333; 382 Mich (1969), 169 NW2d 897 will not be extended implication mon NW 287 construed abrogate established rules of com law, Bandfield, Bandfield v 117 Mich (1898). statute, however, must be sensibly and in harmony legis with the purpose. Estate, lative In re Cameron’s 170 Mich (1912). 578; 136 [Id., NW 451 pp 507-508.] In the present case, there nothing language of the no-fault act or its legislative pur- pose that requires a construction abolishing the common-law right of reimbursement for payments made under a mistake of Indeed, fact. the statute appears equally susceptible to either interpreta- argued tion by plaintiff and However, defendant. in following the well-established principle of statu- tory construction statutes which abolish a common-law right should be construed, strictly we find that the trial court did not err in ruling that defendant could recover any overpayment plain- tiff’s work-loss benefits.

Plaintiff also argues that only the one-year pe- riod of limitation under MCL 500.3145(1); MSA op Opinion the Court

24.13145(1) is to defendant’s claim for for overpayment of work-loss bene- fits to an insured and therefore defendant can only collect the amount overpaid during the one- year period prior to the filing of its action. Defen- dant, hand, on the other argues that the six-year limitation period of MCL 600.5813; MSA 27A.5813 should be applied.

Both parties have presented compelling argu- ments However, on this issue. we believe that because seeking defendant’s action for recovery amounts overpaid involves a common-law right of action, 3145(1) the limitation found in is not § applicable. Since there is no other statute of limi- tations directly applicable, general six-year period limitation argued by defendant must be applied. Although recognize we that a strong argu- ment to the contrary made, could be see Badger State Mutual Casualty Ins Co v Auto-Owners Ins Co, Mich App 128-129; 339 NW2d 713 (1983), we believe that plaintiffs argument tor- tures the language of and the legislative §3145 intent in enacting that section in attempting to extend the limitation found in that section to the facts of this case involving a common-law of action. Therefore, defendant’s claim against plaintiff is not barred by the one-year period of 3145(1). limitation provision of § both

Finally, sides contend that the trial court erred in its award of attorney fees. Although the trial court specifically rejected plaintiffs request for reasonable attorney fees under MCL 500.3148; MSA 24.13148, the plaintiff was awarded attorney in fees the amount of On appeal, plaintiff $250. maintains that he was entitled to all his attorney fees, while defendant maintains that no attorney fees should have been awarded.

Initially, we hold that the trial court’s decision Adams v Auto Club J. E. Townsend, Partial Concurrence and Partial Dissent to deny plaintiffs request attorney fees under 3148 was entirely appropriate because dispute amounts withheld were in and defendant did not unreasonably making to delay reliance on Cole v Detroit Au- plaintiff. Plaintiffs tomobile Exchange, Inter-Ins (1984) Further, misplaced. NW2d once 3148 was found to be the trial court inapplicable, had no authority plaintiff award the $250 Therefore, attorney grant fees. $250 fees was attorney inappropriate. Therefore, except for the award of in attor- $250 fees to the ney plaintiff, of the trial judgment court is affirmed.

Affirmed in part part. reversed *10 in Townsend, (concurring part and dis- J. E. J. senting part.) I concur in the foregoing opinion, except as to the of limitation defendant insurance claim for reim- company’s bursement of overpayment no-fault work-loss benefits. act,

Sections 3145 and 3146 of the no-fault MCL 500.3101 et seq.; MSA 24.13101 et seq., establish a special one-year period of limitation for commenc- ing benefits, actions to recover no-fault whether by the insured or the insurer for reimbursement or recovery.

At issue is whether the statutory pe- riod of limitation relating to the of no- recovery fault benefits or the reimbursement thereof will be given a restricted or a application. broad (1) (2)

The initial clauses of subsections and of 3145 broadly a apply one-year period of limita- tion to actions for recovery personal of and prop- erty protection insurance benefits.

It recognized has been repeatedly by Michigan general courts of purpose the no-fault act App 198 154 Mich 186 J. E. Townsend, Partial Concurrence and Partial Dissent prompt is to ensure of no-fault settlement provisions claims. Other statutory empha- which placed size the on importance prompt resolu- 3142, tion of imposes no-fault claims are which a percent twelve not paid rate interest benefits days loss, 3148, within thirty proof and § imposes which a sanction an insurance com- it the reasonable fees of pany pay attorney a claimant’s attorney where the court finds an un- reasonable refusal or a claim. delay paying reciprocal Such section a imposes equivalent against a advancing sanction claimant a fraud- claim ulent or no having one reasonable founda- A corollary tion. of the goal prompt claim goal resolution is of finality of claim resolu- tion. damages sought nature of than rather plaintiffs

form action determines which stat ute of limitations case. Rach particular controls a Wise, 729, 46 App 731-732; Mich 208 NW2d 570 (1973), Reiterman v (1973); lv den 390 Mich 778 Westinghouse, Inc, 698, 106 705; Mich 308 State Mutual Cyclone Ins Co v O 612 (1981); NW2d Cooperative, & A Electric 318, 324-325; v B F (1968); 161 NW2d 573 Parish Goodrich (1975) 280; NW2d essence, general such principle panel aby of this Court of Badger case State Mutual Casualty Ins Co v Auto-Owners Ins Co, Mich App (1983), 339 NW2d 713 *11 ruling that the no-fault of limita- applied tion to an by action a no-fault insurer against a workers’ compensation insurer for reim- bursement of no-fault paid benefits to an insured. Badger The pages stated on 128 and 129 as follows: case, plaintiff

In the instant is clearly seeking Club Auto Adams v Townsend, by J. E. Dissent Partial Partial Concurrence As paid to Read. the benefits recovery of no-fault arguments stated, while the trial court MCL statutory language of compelling, "the are one- mandatory the and 500.3146 makes 500.3145 is where an action statute of limitations year personal protection recovery of commenced Legislature intended . . . insurance benefits [t]he the subject of section to the matter by this make than limitation rather determinative of the action defendant, as would position of the the advocate.” 3145(1) applicable find if is further that We § against a no-fault by casualty

a suit insurer casualty paid benefits to an recovery insurer for of insured, App Rosquin, 90 Mich Home Ins Co v (1979), is then the section also 282 NW2d by an a no-fault insurer action for reim- against compensation a workers’ insurer paid of to an insured. bursement no-fault benefits against compensa- exception for suits To create an purpose the of the sec- tion carriers would defeat general, is to and the no-fault act which tion prompt of claims. Kem- ensure settlement Federal 204, Cos, per Ins Co v Western Ins (1980). 211; 293 NW2d that despite The Court so found fact not question specifically action authorized application of limited to which is under tort claims parties

In this case both opposing recovery seek addi- no-fault benefits. Plaintiff claimed no-fault should be and defen- tional benefits it receive dant claimed should in error payments no-fault made or mistake. damages sought by opposing nature both parties same. The terms the same no-fault and of the insurance must statute same contract proper be to determine amount not payable or reimbursable. It matter benefits *12 Townsend, J. E. Partial Concurrence and Partial Dissent whether the defendant’s form of action is based or on statute common law. patently apply one-year period

It is a unfair of limitation to a claim for of no-fault grant period six-year benefits and to a of limita- tion to advance a claim for no- paid fault benefits in error under the same insur- ance a contract as result same motor vehicle accident. part

I would reverse that of the trial court’s six-year decision which of limita- application tion and remand for of a period of limitation to defendant’s claim for reim- bursement of no-fault benefits in error.