Opinion ID: 2975232
Heading Depth: 2
Heading Rank: 4

Heading: Penalty interest

Text: As explained above, the district court’s initial order granting summary judgment in favor of Shields also provided that she was “entitled to interest on the overdue payment at the rate of 12% per year.” The district court’s subsequent order, however, denied Shields any penalty-interest award after it concluded that she had not presented adequate information to determine when State Farm became delinquent on the payment. Ultimately, the district court reaffirmed its decision by denying Shields’s petition for reconsideration of this issue. Under Michigan law, a claimant is entitled to 12% penalty interest on “overdue” benefits. Mich. Comp. Laws § 500.3142(3). Michigan caselaw employs the term “penalty interest” to distinguish the high rate of interest recoverable under § 500.3142 from ordinary statutory interest. See, e.g., Shanafelt v. Allstate Ins. Co., 552 N.W.2d 671, 679 (Mich. Ct. App. 1996) (“[W]e would note that a plaintiff may recover both statutory and penalty interest.”). Overdue benefits are defined as benefits “not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained.” Mich. Comp. Laws § 500.3142(2). Shields petitioned the district court below for $36,343 in penalty interest. The spreadsheet attached to her petition shows that this sum is the result of calculating 12% interest on each individually itemized medical treatment billed, beginning on the date of the particular treatment and running through December 31, 2004. Starting the interest calculation from the date on which each medical service was rendered, however, is unjustified under the circumstances of this case. The only overdue benefit at issue is the payment that State Farm refused to make in response to GEHA’s reimbursement claim, which arose long after the treatments. Relying on Shanafelt, Shields argues to the contrary that State Farm’s obligations arose as it received the medical bills shortly after each treatment was rendered, and that the action and rights of GEHA are irrelevant. In Shanafelt, the claimant brought suit against a no-fault liability insurer regarding an “uncoordinated” policy pursuant to which the insurer had denied a claim for benefits. 552 N.W.2d at 673. The court held that the claimant incurred expenses as treatment was administered, irrespective of the fact that the claimant’s health insurance policy was already covering the expenses. Id. at 676. Shanafelt, however, is inapposite because, as the court in that case emphasized, “one salient fact immediately becomes apparent: the instant plaintiff has brought suit against the insurer providing uncoordinated coverage.” Id. at 678 (emphasis in original). Benefits under an uncoordinated policy become payable irrespective of another insurer’s rights and actions. In the present case, however, the State Farm policy was coordinated, meaning that benefits were not payable at the time the medical care was rendered because they were otherwise covered by GEHA, No. 05-2346 Shields v. Gov’t Employees Hosp. Assoc., et al. Page 7 Shields’s primary insurer. Indeed, had Shields not obtained a third-party settlement from which GEHA was entitled to recoup the benefits it had paid, State Farm would never have had to pay Shields any medical benefits at all. See Shields, 450 F.3d at 646 (holding that State Farm’s obligation to pay arose only because, once GEHA demanded reimbursement, GEHA’s initial payment to Shields no longer qualified as an “amount paid” under the coordination clause of State Farm’s policy). Shields’s argument that penalty interest should begin accumulating from the date that the medical care was administered thus runs contrary to both law and logic. The district court ultimately denied Shields’s petition for penalty interest on the ground that she had not provided “all the necessary figures and dates to determine when, and to what extent, State Farm’s obligation to reimburse [Shields] arose.” We agree. As explained above, the district court properly determined that State Farm’s obligation arose as a result of—and thus only after—GEHA exercised its right to reimbursement by asserting a lien against Shields’s settlement for a specific amount. The record simply contains no indication of precisely when and in what amount Shields obtained the settlement funds, nor does it demonstrate when and in what amount GEHA actually sought reimbursement. Although the record does reflect that GEHA submitted a notice of its lien on April 30, 2003 against any settlement Shields might receive, this letter provides no indication of when or if a settlement had been reached, nor of the settlement amount. In its denial of Shields’s motion to reconsider, the district court also referred to two other documents submitted by Shields. First, the court took note of an April 17, 2003 letter from GEHA stating that its reimbursement lien claim totaled only $1,734.00 at that time, but that GEHA would continue to update that figure “until settlement.” This letter plainly fails to establish when GEHA asserted a lien for the full $162,074. Second, the court referenced a demand letter sent by Shields to State Farm on May 15, 2003 that sought payment of the full amount. As the district court explained, however, even assuming that a settlement had been reached by the date of Shields’s demand letter, the extent of GEHA’s actual reimbursement claim at that point (and State Farm’s resultant obligation) cannot be determined from the record. Shields’s extensive briefing on appeal leaves unanswered the question of why, particularly after the district court denied her petition for penalty interest, she did not simply submit documentation regarding the date of the settlement agreement and the extent of GEHA’s claim for reimbursement in her petition for reconsideration. Such documentation would likely have allowed the district court to determine the proper date from which to begin calculating the penalty interest that Shields was due. Without establishing the date or dates on which State Farm’s obligation arose, however, Shields cannot establish when payment became “overdue” for the purpose of calculating penalty interest under § 500.3142. The district court’s determination that Shields failed to produce sufficient evidence to ascertain precisely when State Farm’s obligation arose for the purpose of calculating penalty interest, therefore, was not clearly erroneous.