Court majority overturns award of attorney's fees against no fault insurer making late payments
James Gregory was underpaid PIP benefits by Home-Owners Insurance Company after a car accident. Gregory suffered a spinal cord injury that made him incapable of working. His base salary from his sub-S corporation was at least $29,237 each year, and he also reported--and was taxed on--about $63,326 in profit.
Home-Owners calculated his wage loss at $,534.83 per month. It then decided it had over-paid Gregory and suspended payment until $32,684.16 was re-paid. Six months later, it acknowledged its error and reinstated the original payment amount and paid the back-pay. Mr. Gregory then hired an attorney to represent him in untangling wage loss issues because Home-Owners was arguing the position that sub-chapter S profits of a self-employed person should not be included in wage loss.
Gregory's lawyer filed suit. The Commissioner of Financial and Insurance Regulation intervened in the case to file a brief repudiating Home-Owners' argument. Home-Owners sought summary disposition of the claim, arguing that it owed no further wages. Ultimately the trial judge awarded Gregory $3,748 every 30 days. Gregory's attorney then sought an award of fees and penalty interest for Home-Owners' late payment of wages.
The Court awarded $812 of penalty interest and attorneys' fees in the amount of $36,610.00 for 100+ hours of work. Home-Owners appealed and Gregory and his attorneys had the misfortune of drawing Christopher M. Murray, the insurance companies' best friend, on the Court of Appeals panel considering the case. Murray ruled that even though Home-Owners owed Gregory penalty interest when Gregory sued, the company had not been "unreasonable" in delaying benefits, and therefore no attorney fees were due. On a 2-1 vote, the Court of Appeals overturned the award of fees to Gregory--meaning it cost Home-Owners $812 to mess around with the spinal cord-injured man's three years of lost income.