Adams v. AUTO CLUB INS. ASSOCIATION

397 N.W.2d 262, 154 Mich. App. 186
CourtMichigan Court of Appeals
DecidedAugust 19, 1986
DocketDocket 84937
StatusPublished
Cited by28 cases

This text of 397 N.W.2d 262 (Adams v. AUTO CLUB INS. ASSOCIATION) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adams v. AUTO CLUB INS. ASSOCIATION, 397 N.W.2d 262, 154 Mich. App. 186 (Mich. Ct. App. 1986).

Opinions

Per Curiam.

Plaintiff filed suit in Wayne Circuit Court against the defendant seeking reinstatement of no-fault work-loss benefits which had been terminated by the defendant. The defendant filed a counter-complaint seeking reimbursement for amounts previously paid plaintiff allegedly in excess of what plaintiff was entitled to under the no-[190]*190fault act. Thereafter, the trial court denied plaintiffs motion for summary judgment and ordered a judgment in favor of the defendant by declaring the proper method of calculating work-loss benefits and ordering reimbursement of any overpayment. Plaintiff appeals by leave gránted and defendant has filed a cross-appeal.

On May 5, 1983, plaintiff was involved in a motor vehicle accident which left him permanently disabled. He applied to the defendant, his no-fault automobile insurer, for work-loss benefits. At the time of the accident, plaintiff was a self-employed cosmetologist who worked as an independent contractor, paying forty-one percent of his weekly gross revenue as chair rental to the shop in which he worked. As an independent cosmetologist he was also required to pay all of his own business expenses including expenses for supplies and materials. Based on records received from plaintiff, defendant approved payment of eighty-five percent of plaintiff’s average daily gross receipts commencing May 6, 1983.

In May, 1984, defendant determined that it had been overpaying the plaintiff and terminated further payments. Defendant maintained that plaintiff was only entitled to eighty-five percent of his net as opposed to his gross revenue. According to defendant, it should have deducted plaintiff’s business expenses, claimed on Schedule c of his federal income tax return, from plaintiff’s gross income in order to calculate his work-loss benefits under MCL 500.3107(b); MSA 24.13107(b). Plaintiff strenuously objects to defendant’s interpretation 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 that a self-employed [191]*191person is entitled to recover work-loss benefits. Plaintiff contends, however, that he is entitled to recover work-loss benefits under § 3107(b) based on the entirety of the gross receipts from the operation of his business, unreduced by any of the costs of doing business. Defendant argues that plaintiff’s work-loss benefits should be based on his taxable income after subtracting plaintiff’s business-related expenses which were claimed and deducted on his federal income tax return. Thus, defendant believes that work-loss benefits should be based solely on the profít plaintiff received from his business. The trial court agreed with defendant’s interpretation of § 3107(b) and ruled that some, but not all, of plaintiff’s business expenses should be deducted in determining work-loss benefits.

Section 3107(b) provides in part that a no-fault insurer is liable to pay benefits for work-loss consisting of the loss of income from work that an injured person would have performed during the first three years after the date of the accident if he had not been injured. The purpose of the section is to ensure that work-loss benefits are available to compensate injured persons for the income they would have received but for the accident. MacDonald v State Farm Mutual Ins Co, 419 Mich 146, 152; 350 NW2d 233 (1984), reh den 419 Mich 1213 (1984). In general, the no-fault act is designed to achieve the expeditious compensation of damages resulting from motor vehicle accidents and to minimize administrative delays and factual disputes. Miller v State Farm Mutual Automobile Ins Co, 410 Mich 538, 568; 302 NW2d 537 (1981), reh den 411 Mich 1154 (1981).

Unfortunately, the term "loss of income from work” is not defined in the statute. As a result, it is our duty to attempt to discover and give effect to the Legislature’s intention in enacting § 3107(b) [192]*192from the language employed and the no-fault act as a whole. Miller, supra, p 556.

Although no Michigan case can be found which directly considers the issue presented, there are decisions which have considered the issue peripherally. In Coates v Michigan Mutual Ins Co, 105 Mich App 290; 306 NW2d 484 (1981), for example, the Court considered the legitimacy of a truck driver’s claim for work-loss benefits under § 3107. In remanding the case to the trial court this Court stated:

It is our opinion that the lost "rental” income in the present case represents lost income from work plaintiff would have performed if he had not been injured, but only to the extent it would have exceeded his costs of operating the truck on behalf of Central Transport. We therefore remand to the trial court to afford the parties an opportunity to present proofs regarding plaintiff’s expected depreciation costs and expenses of operating the truck, which costs must then be subtracted from plaintiff’s expected "rental” income, had he not been injured, in computing the benefits recoverable under § 3107(b). [Id., p 297.]

Thus, from the opinion in Coates it appears that the Court believed that the term "loss of income” under § 3107(b) contemplates the deduction of business expenses from gross income where the claimant is a self-employed individual.

Further, in McAdoo v United States, 607 F Supp 788 (ED Mich, 1984), the federal district court expressly stated that any wages earned by an independent contractor seeking compensation for work-loss benefits must be offset by any sum that the claimant would have expended in facilitating his job responsibilities. In McAdoo, plaintiff was an independent contractor who produced earnings [193]*193records for the four years preceding his accident. His tax return indicated that expenses were approximately sixty-four percent of his business income. The district court held that plaintiffs work-loss benefits must be based upon his adjusted gross income and that he was entitled to recover only thirty-six percent of his projected receipts for the period during which he was unable to work. McAdoo, supra, pp 797-798. The Pennsylvania courts have reached similar results. See Kamperis v Nationwide Ins Co, 503 Pa 536; 469 A2d 1382 (1983).

In the present case, we believe that the trial court did not err in ruling that plaintiffs business expenses should be deducted from his gross receipts in determining his lost income. The goal of the no-fault act is to place individuals in the same, but no better, position than they were before their automobile accident. Certainly, plaintiff cannot claim that his actual expendable income included even that income which he was required to pay out as business expenses. Therefore, in order to avoid over-compensating plaintiff, the trial court’s interpretation of § 3107(b) was proper.

On cross-appeal, however, defendant argues that the trial court should have relied solely upon Schedule c of plaintiff’s income tax return in determining what were appropriate business-related expenses. We disagree.

The trial court determined that only certain costs of doing business should be subtracted from plaintiffs gross receipts. These included chair rental, materials and supplies, advertising, laundry and cleaning, accounting services, utilities, telephone, license and office expenses.

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Bluebook (online)
397 N.W.2d 262, 154 Mich. App. 186, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adams-v-auto-club-ins-association-michctapp-1986.