Case Name: PARK v. AMERICAN CASUALTY INSURANCE COMPANY
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1996-09-24
Citations: 219 Mich. App. 62
Docket Number: Docket Nos. 171787, 179930
Parties: PARK v AMERICAN CASUALTY INSURANCE COMPANY
Judges: Before: Fitzgerald, P.J., and Corrigan and C. C. SCHMUCKER JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 219
Pages: 62–79

Head Matter:
PARK v AMERICAN CASUALTY INSURANCE COMPANY
Docket Nos. 171787, 179930.
Submitted March 12, 1996, at Lansing.
Decided September 24, 1996, at 9:00 am.
Leave to appeal sought.
Benjamin Park brought an action in the Sanilac Circuit Court against American Casualty Insurance Company, seeking to compel arbitration of his claim for uninsured motorist coverage under a no-fault automobile insurance policy issued by the defendant to the plaintiff’s employer. The plaintiff was injured while driving the employer’s truck when the truck allegedly was struck by a hit-and-run driver. The defendant claimed that the loss was not subject to arbitration because there was no contact between the alleged hit- and-run vehicle and the truck driven by the plaintiff. When the defendant’s counsel did not appear on the scheduled trial date, the court, Donald A. Teeple, J., entered a default against the defendant. The court reviewed the evidence and found that contact had occurred. The court then granted the plaintiff’s request to submit the matter to arbitration. The arbitration panel decided that the worker’s compensation and social security disability benefits received by the plaintiff could not be set off because they were not of like kind to the noneconomic damages sought. The panel awarded the plaintiff damages. The defendant appealed from the order dismissing the plaintiff’s cause of action and ordering the case to arbitration pursuant to the language of the policy (Docket No. 171787). The defendant also appealed from the order of judgment affirming the arbitration award (Docket No. 179930). The appeals were consolidated.
In an opinion by Fitzgerald, P.J., joined in part by Corrigan, J., the Court of Appeals held:
The trial court did not abuse its discretion in refusing to set aside the default judgment. The trial court’s order must be affirmed in that regard.
In an opinion by Corrigan, J., joined in part by C. C. Schmdcker, J., the Court of Appeals held-.
The arbitration award must be reversed. The worker’s compensation and social security disability benefits are economic losses that, pursuant to the insurance contract, the insurer is entitled to set off from the uninsured motorist coverage. The arbitration panel erred in not allowing the setoff.
Order in Docket No. 171787 affirmed. Order in Docket No. 179930 reversed.
Fitzgerald, P.J., would find that the arbitration panel did not err in denying the setoff.
C. C. Schmucker, J., would find that the trial court abused its discretion in entering the default judgment against the defendant.
1. Motions and Orders — Default Judgments — Setting Aside Defaults — Attorney and Client.
A motion to set aside a default or a default judgment, except when grounded on lack of jurisdiction over the defendant, may be granted only if good cause is shown and an affidavit of facts showing a meritorious defense is filed; good cause sufficient to warrant setting aside a default or a default judgment includes a substantial defect or irregularity in the proceeding on which the default was based, a reasonable excuse for the failure to comply with requirements that created the default, or some other reason showing that manifest injustice would result if the default or default judgment were allowed to stand; an attorney’s negligence is attributable to the client and normally does not constitute grounds for setting aside a default judgment (MCR 2.603[D][1]).
2. Insurance — No-Fault — Uninsured Motorist Provisions — Setoffs — Worker’s Compensation Benefits — Social Security Benefits.
Worker’s compensation and social security disability benefits received by an injured insured are properly set off from the benefits due the insured under the uninsured motorist provision of a no-fault automobile insurance policy that provides that any amount payable under the uninsured motorist provision shall be reduced by “all sums paid or payable under any worker’s compensation, disability benefits, or similar law.”
John S. Paterson and Kimberly A. Tomczyk, and Appellate Services (by Rosemary A. Gordon), for the plaintiff.
Vandeveer Garzia, PC. (by Hal O. Carroll, Terrance P. Lynch, Robert D. Brignall, and Christine A. Fischer), for the defendant.
Before: Fitzgerald, P.J., and Corrigan and C. C. SCHMUCKER JJ.
Circuit judge, sitting on the Court of Appeals by assignment.

Opinion:
Fitzgerald, P.J.
In Docket No. 171787, defendant appeals as of right from an order dismissing plaintiffs cause of action and ordering the case into arbitration pursuant to the language of a no-fault automobile insurance policy. In Docket No. 179930, defendant appeals as of right from an order of judgment affirming the arbitration award of $482,226.51. The appeals were consolidated.
Defendant issued a business automobile policy to plaintiffs employer, Ben Fox Trucking Company. While driving a truck owned by the company, plaintiff was allegedly struck by a hit-and-run driver. As a result of being forced off the road, plaintiff suffered severe injures. Plaintiff filed this suit to compel arbitration of his claim for uninsured motorist coverage under the policy. Defendant answered that plaintiffs loss was not subject to arbitration because "there was no contact between the [truck] and the phantom vehicle."
Plaintiff moved for summary disposition on the ground that the terms of the insurance policy clearly required arbitration upon the request of a party where the parties disagree whether the insured is entitled to coverage for uninsured motorist protection. Defendant disagreed, arguing that summary disposition was inappropriate because there was no contact between the hit-and-run vehicle and the truck and, therefore, the uninsured motorist provision did not apply. Although the trial court denied the motion without prejudice, an order was not entered, and plaintiffs counsel renoticed the hearing for May 24, 1993.
On April 29, 1993, the trial court entered a scheduling conference order and notice of pretrial settlement conference and trial. The court scheduled the bench trial for three days, beginning November 16, 1993.
On August 17, 1993, the court entered an order submitting the matter to arbitration upon the parties' stipulation. The stipulation provided that "an order may be entered by this Court as the question of contact has been agreed by the parties and this matter should go to arbitration on the point of injury." However, the order for arbitration was set aside on November 1, 1993, on the basis of the parties' stipulation and "for the reason that the issue of contact is not agreed to at this time." Plaintiff then filed a motion for summary disposition on November 10, 1993, and noticed the hearing for December 6, 1993.
Defense counsel did not appear on the scheduled trial date of November 16, 1993. The court entered a default against defendant at that time. Plaintiff requested that the court decide whether contact occurred and allow plaintiff to present his case based upon the proofs already submitted on the record. After reviewing the evidence before it, the court found that contact occurred. The court thereafter granted plaintiff's request to submit the matter to arbitration and issued an order requiring the parties to appear on December 6, 1993.
On November 29, 1993, defendant filed a motion to set aside the court's order on the ground that defendant's new counsel was not apprised of the date set for trial. Defendant sought an order to submit the issue of contact to arbitration along with the issue of injury.
At the hearing regarding the motion, the court noted that defendant's request to submit the question of contact to the arbitrators was the relief plaintiff originally sought. After recounting defense counsel's missed conference dates and adequate notice of the trial date, the court determined that it would be unfair to plaintiff and "not good for the administration of justice" to set aside the order. The court entered an order denying defendant's motion to set aside the determination.
An arbitration panel heard the case. The panel decided that the worker's compensation and social security disability payments received by plaintiff were not a permissible setoff because they were not of like kind to the noneconomic damages sought. The panel awarded plaintiff $482,226.51.
DOCKET NO. 171787
Defendant first contends that the trial court abused its discretion in refusing to set aside the default judgment. I disagree.
The question whether a default or a default judgment should be set aside is within the sound discretion of the trial court and will not be reversed on appeal absent a clear abuse of that discretion. Gavulic v Boyer, 195 Mich App 20, 24; 489 NW2d 124 (1992). Except when grounded on lack of jurisdiction over the defendant, a motion to set aside a default or a default judgment generally may be granted only if good cause is shown and an affidavit of facts showing a meritorious defense is filed. MCR 2.603(D)(1); Marposs Corp v Autocam Corp, 183 Mich App 166, 171; 454 NW2d 194 (1990). Good cause sufficient to warrant setting aside a default or a default judgment includes: (1) a substantial defect or irregularity in the proceeding on which the default was based, (2) a reasonable excuse for the failure to comply with requirements that created the default, or (3) some other reason showing that manifest injustice would result if the default or default judgment were allowed to stand. Gavulic, supra at 24-25. An attorney's negligence is attributable to the client and normally does not constitute grounds for setting aside a default judgment. Pascoe v Sova, 209 Mich App 297, 298-299; 530 NW2d 781 (1995). However, even if there is no reasonable excuse for the failure to comply with the requirements that created the default, "[t]he showing of a meritorious defense and factual issues for trial may, under certain circumstances, fulfill the good-cause requirement by way of constituting a reason evidencing that manifest injustice would result from permitting a default to stand." Komejan v Suburban Softball, Inc, 179 Mich App 41, 51; 445 NW2d 186 (1989).
Here, there is no reasonable excuse presented for defense counsel's failure to appear. Substitute counsel admitted that a copy of the April 29, 1993, scheduling order that set the November 16, 1993, trial date was included with the transferred file. Counsel should have discerned the trial date from the case file when the file was received from former counsel.
Further, defendant argued only that the arbitrators should determine the question whether contact occurred. As the court correctly pointed out, plaintiffs initial position was that the arbitrators should determine whether contact occurred. Because defendant originally requested that the court make such a determination, defendant could not then argue that the court erred in making the determination. Defendant cannot now seek reversal on the basis that the court decided an issue that defendant itself asked that the court decide. See Detroit v Larned Associates, 199 Mich App 36, 38; 501 NW2d 189 (1993). Defendant failed to show good cause to set aside the judgment.
Defendant also failed to show that it had a meritorious defense. In its motion to set aside the November 16, 1993, determinations, defendant failed to argue that contact between the truck and the phantom driver did not occur. Rather, defendant relied solely upon a showing of "good cause," which, as indicated above, was not established.
Next, defendant contends that the trial court's factual finding that contact occurred is clearly erroneous. By failing to show facts constituting a meritorious defense, defendant did not raise any factual issues that would warrant a trial on the merits of the question of contact. See Komejan, supra at 51. Further, MCR 2.603 does not require the court to weigh evidence or proofs before entering a default. Therefore, defendant cannot argue on appeal that the court's finding that contact occurred was clearly erroneous on the basis of the evidence before the court at the time it entered the default.
DOCKET NO. 179930
Defendant argues that the trial court erred in failing to set aside the arbitration award because the arbitrators made an error of law in holding that a setoff clause in the uninsured motorist provision requiring deduction of social security disability benefits and worker's compensation benefits from amounts payable under an uninsured motorist provision is contrary to public policy. I disagree.
The uninsured motorist provision of the insurance policy provided:
2. Any amount payable under this coverage shall be reduced by:
a. All sums paid or payable under any workers' compensation, disability benefits or similar law.
A purpose of the no-fault act is to provide a contractual right of action against one's own insurer for wage-loss and medical expenses arising from a motor vehicle accident. A tort action for noneconomic and excessive loss was preserved in cases of severe loss. Bradley v Mid-Century Ins Co, 409 Mich 1, 62; 294 NW2d 141 (1980). A thorough discussion of the relationship between no-fault benefits and uninsured benefits was provided in Bradley, id. at 62-63, and is worth repeating:
The Legislature has thus divided an injured person's loss into two categories — loss for which the no-fault insurer is liable and loss for which the tortfeasor is liable. No-fault insurance provides security for the first type; uninsured motorist coverage, which presupposes that the insured is entitled to recovery under the tort system, provides security for the second type — it is offered to protect against being left with a worthless claim against an uninsured motorist.
One who has purchased uninsured motorist coverage would not expect to collect twice for the same economic loss and the insurer prevents this from happening through the set-off clause. But neither would he expect to have his uninsured motorist coverage reduced or eliminated altogether because of other coverage he has purchased. He would expect, even in the face of the set-off clause, that amounts paid by the insurer for economic loss would not reduce the amount payable for non-economic or excess economic loss.
In providing insurance against the uninsured motorist, the insurer promises the insured that his right of action for greater than threshold injuries will not be worthless if the tortfeasor turns out to be uninsured.
If the tortfeasor is insured or otherwise collectible, the insurer paying no-fault benefits has a statutory right to reimbursement for benefits theretofore paid by it only out of a recovery for those economic losses. So, too, if the insurer contracts to make good for an uninsured motorist— coverage complementary and supplementary to the basic no-fault policy and standing in the place of third-party residual liability insurance — the insurer and the insured should have corresponding rights relative to amounts recoverable under an uninsured motorist endorsement; the insurer should be permitted a set-off only to the extent a recovery duplicates benefits it has already paid.
Worker's compensation and social security disability benefits are economic benefits and are not of like kind to the noneconomic benefits sought by plaintiff under the uninsured motorist provision of the policy. Pursuant to Bradley, benefits received under an uninsured motorist provision that are not of like kind to those recoverable against the insurer under the uninsured motorist provision are not a permissible setoff even where policy language is clear and unambiguous that a setoff was provided. If the setoff of worker's compensation and social security disability benefits were to be enforced in the manner defendant seeks, it would make the coverage for noneconomic damages illusory and defeat the reasonable expectations of the insured and the policy of the no-fault act to distinguish between economic and noneconomic loss.
Defendant also claims that the arbitrators made an error of law in failing to consider evidence of plaintiff's comparative negligence in determining the amount of damages to be awarded. The arbitrators' opinion, however, specifically refers to evidence received by the arbitrators regarding the issue of plaintiff's negligence, including plaintiff's admission that he was not wearing a seat belt at the time of the accident. The arbitrators then reduced plaintiff's award by the full statutory five percent for failure to wear a seat belt. See MCL 257.710e(6); MSA 9.2410(5)(6). Thus, defendant's argument is without merit.
Last, defendant maintains that the trial court erred in failing to set aside the arbitration award on the ground that the "neutral" arbitrator was partial to plaintiff. A party attacking the impartiality of an arbitrator has the burden of proof. Emmons v Lake States Ins Co, 193 Mich App 460, 466; 484 NW2d 712 (1992). "[T]o overturn the arbitration award, the partiality or bias must be certain and direct, not remote, uncertain or speculative." Gordon Sel-Way, Inc v Spence Bros, Inc, 177 Mich App 116, 120-121; 440 NW2d 907 (1989), aff'd in part, rev'd in part, and remanded 438 Mich 488; 475 NW2d 704 (1991). Here, defendant suggests that partiality is apparent in the neutral arbitrator's "tactical suggestion [on how to proceed] that the arbitrator thought would allow plaintiff to prevail." A review of the record, however, reveals that the neutral arbitrator wanted the parties to distinguish the difference between the coverage for economic loss under the no-fault act and coverage for excess economic loss under the uninsured motorist policy. Plaintiff then withdrew his claim for excess wages and sought only damages for pain and suffering. Defendant's theory that the neutral arbitrator acted with partiality in posing the question and making a suggestion is merely speculative and is not sufficient to justify setting aside the arbitration award.
I would affirm.
The court decided the matter despite its belief that the arbitration clause "leaves the legal determination [whether contact occurred] to the arbitrators."
Plaintiff withdrew his claim for economic damages, including wage loss beyond the three-year period provided in the no-fault act. Therefore, we are not presented with the issue whether worker's compensation and social security disability benefits are of like kind to benefits for excess wage loss under an uninsured motorist provision.