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July 08, 2015

MSC to hear mini-oral argument on the proper standard for reasonable attorney fee determinations in no-fault insurance suits

The Michigan Supreme Court granted mini-oral argument in Estate of Pirgu v. USAA Ins. Agency, Inc., No. 150834, to hear the issue of whether the determination of reasonable attorney fees under MCL 500.3148(1) is governed by Smith v Khouri, 481 Mich 519 (2008), and/or Wood v DAIIE, 413 Mich 573 (1982) and whether the Oakland Circuit Court abused its discretion in calculating the attorney fees due the plaintiff.
In October 2008, Feridon Pirgu was struck by a car driven by one of the defendant’s insureds while riding his bicycle.  Shortly after a court determined that the defendant, USAA, bore primary liability for these benefit payments, the defendant discontinued payments to Pirgu.  Pirgu’s guardian and conservator filed a first-party no fault action seeking reinstatement of the discontinued PIP benefits.  As MCL 500.3148(1) of the No-Fault Insurance Act entitles an attorney to reasonable fees for advising and representing a claimant in an action for personal or property protection insurance benefits that are overdue, the trial court awarded the plaintiff $70,237.44 in overdue PIP benefits and $23,412.48 in attorney fees against the defendant.
On appeal, the plaintiff argued that the trial court abused its discretion in awarding only $23,412.48 in attorney fees, the reasonableness of which should have been governed by the standard set forth by the Michigan Supreme Court in Smith v. Khouri, 481 Mich 519 (2008).  The framework in Smith requires a trial court to “begin its analysis by determining the fee customarily charged in the locality for similar legal services” and then multiply the hourly rate by the reasonable number of hours expended in the case.  Smith, 481 Mich at 530; see also Adair v. Michigan, 301 Mich App 547, 552 (2013).  The Michigan Court of Appeals analyzed the trial court’s award of attorney fees under MCL 500.3148(1) and held the lower court did not abuse its discretion when it considered different factors in determining reasonable attorney fees.  The appellate court relied on its decision in Univ Rehab Alliance, Inc. v. Farm Bureau General Insurance Co of Michigan, 297 Mich App 691, which expressly rejected that Smith applies when determining an award of attorney fees under MCL 500.3148(1).  In that case, the Court applied the factors set forth in Wood v. DAIIE, 413 Mich 573 (1982) and held that “a reasonable fee is determined by considering the totality of the circumstances.”  Univ Rehab Alliance, 297 Mich App at 700. 
At oral argument, the Michigan Supreme Court will address whether the Smith framework and/or the Wood factors should govern the determination of reasonable attorney fees under MCL 500.3148(1) and whether the lower court abused its discretion in its calculation of attorney fees.

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