Court holds next friend's appointment is proper, and victim's prior lawsuit is binding on health care provider
Auto Owners Insurance Company failed to timely pay PIP benefits (primarily medical expenses and initial lost wages) to David Elser after a devastating head injury. His next friend filed suit and ultimately, in 1996, a jury ruled that the reasonable value of the services rendered by Ann Arbor Rehabilitation Centers was only one-third of the billed amount. From that point on, Auto Owners arbitrarily paid one-third of AARC's billings, regardless of the nature of the billings.
Over time, Auto Owners and the provider agreed upon a compromise per diem (daily) payment which continued for several years. While at the facility, however, Elser fell and broke his neck and the provider provided additional services beyond the needs that were considered when the compromise per diem was set. The next friend filed another lawsuit and this case again went to trial by a jury. The jury awarded more than $4.3 million dollars, including sanctions and fees. Auto Owners appealed.
Auto Owners first argued that the case should be dismissed because the Conservator/Guardian ("next friend") was not appointed before the action was filed. It argued that on this basis, the case should be dismissed because the next friend was a "new party," so that his appointment did not "relate back" to the date the PIP complaint/lawsuit was filed and the statute of limiations had now run. The Court rejected this argument, pointing out that where a plaintiff becomes incompetent during the pendency of a lawsuit, the appointment of a next friend is mandatory and he or she is not a "new party."
Auto Owners' next argument related to the contract signed by the Plaintiff with the health care provider back in 1994 and the insurer's claim that it preempted any damages claim. The Court pointed out that the document appeared to be of questionable validity given that its pages did not match. Therefore, the jury was not bound by its content, if it found that the old contract was not properly documented.
Auto Owners also argued that the trial judge erred in applying the doctrine of res judicata with regard to causation of the victim's injuries. The judge had ruled that the first jury's finding that Elser had suffered auto-related injuries, was binding in the second case. The higher court noted that since Auto Owners' argued that Elser's condition was "unchanged" from the date of the first trial, it could not claim that the initial finding of "causation" was no longer binding.
The victim cross-appealed over issues of computation and attorneys fees. The Court held that the lower court had erred in how it computed and explained its outcome, but upheld the court's refusal to award fees.