                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 09a0584n.06

                                             No. 07-1663                                    FILED
                                                                                        Aug 19, 2009
                           UNITED STATES COURT OF APPEALS                         LEONARD GREEN, Clerk
                                FOR THE SIXTH CIRCUIT

RICARDO VILLAFLOR,                                         )
                                                           )
       Plaintiff-Appellee,                                 )         ON APPEAL FROM THE
                                                           )         UNITED STATES DISTRICT
               v.                                          )         COURT FOR THE EASTERN
                                                           )         DISTRICT OF MICHIGAN
STATE FARM MUTUAL                    AUTOMOBILE            )
INSURANCE COMPANY,                                         )                 OPINION
                                                           )
       Defendant-Appellant.                                )
                                                           )

Before: KEITH, COLE, and WHITE, Circuit Judges.

       WHITE, Circuit Judge. Defendant State Farm Mutual Automobile Insurance Company

appeals the district court’s order granting plaintiff Ricardo Villaflor (Villaflor)’s post-trial request

for attorney fees pursuant to section 3148 of Michigan’s No-Fault Insurance Act, Mich. Comp. Laws

§ 500.3148, and its denial of defendant’s motion for fees under the same provision. Finding no

abuse of discretion, we AFFIRM.

                                          BACKGROUND

       On January 19, 1994, Ricardo Villaflor was involved in a serious automobile accident when

he drove his car into the rear end of a semi truck that was stalled on the freeway. He was

unconscious at the scene, suffered very bad facial and chest injuries, and had to be extracted from

his vehicle with the jaws of life. The accident left him with a traumatic brain injury. He has been

unable to return to his job working as a hibachi-style chef at a Japanese steakhouse, and is treated

regularly for his continuing medical issues by a psychiatrist. Plaintiff’s wife, Editha Villaflor (Mrs.
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


Villaflor), previously worked at a nursing home as a licensed practical nurse, but stopped soon after

her husband’s accident in order to take care of him, which she has done ever since.

       At the time of the accident, plaintiff was insured under a no-fault automobile insurance policy

issued by State Farm. At various times, State Farm paid attendant care benefits to Villaflor due to

the injuries he suffered.1 State Farm understood that Mrs. Villaflor was providing the attendant care

for which it was paying. At other times, State Farm stopped paying benefits, requiring Villaflor to

bring suit so that payments would resume. Prior to the instant suit, Villaflor filed three lawsuits

against State Farm to recover overdue attendant care benefits—in 1994, 1997, and 1998. Each prior

suit concluded with State Farm paying Villaflor’s accrued attendant care benefits.

       Between 1998 and 2003, State Farm did not ask Mrs. Villaflor to detail the services she was

providing to her husband. Rather, the 1998 lawsuit was resolved with an agreement that State Farm

would pay attendant care benefits at a daily rate of $250, and State Farm paid benefits accordingly.

Bonnie Childs, the claims representative at State Farm who had assumed responsibility for plaintiff’s

claim in 1998, maintained an activity log for Villaflor’s claim as part of Villaflor’s file. A log entry


       1
         At trial, Dr. Gerald Shiener—a psychiatrist who treated Villaflor and who has lectured on
the subject of attendant care issues and frontal lobe brain injuries—testified as to what is commonly
meant by the term “attendant care”:
        [A]ttendant care is the use of an assisted individual to help someone who has a
        disability resume a more normal life and continue to function in the community. So
        it’s someone who is available to an injured person who can help them do the things
        they can’t do because of their injury and in terms of psychiatric issues or emotional
        issues who can provide supervision, reminders or cuing, limit setting, and advise [sic]
        and behavioral control and behavioral management for people who have
        impairments[.] . . . The goal of attendant care is to allow someone to lead as normal
        a life as possible with whatever limitations their injury has caused.

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Villaflor v. State Farm Mutual Automobile Insurance Co.


dated September 5, 2002 states in pertinent part that Villaflor is “unable to work since the accident,”

“his wife does [attendant] care at $250 a day” and “this was not broken down into hours since it can

vary as his daily needs vary.”2 This entry also states that Villaflor “has a [closed head injury],

emotional problems, increased irritability, sleep is poor, is easily disturbed by noises. . . . Per

rec[o]rds just rec[eive]d from Dr[.] Sh[ie]ner, Ricardo continues to need [attendant] care.” The log

recounted that Villaflor had suffered a “traumatic injury to the brain [and] had [loss of

consciousness] of several hours” due to the accident, and that his “current medical problems and

head injury are related to the injuries received in this accident.” In recounting the services Villaflor

required, the entry states that “he needs [attendant] care/[supervisory] care due to his [traumatic brain

injury] and emotional problems. We have a recent note from Dr[.] Sh[ie]ner that he continues to

need this care for his safety.” The stated “clinical outcome” was that “he continues to need

counseling and aide care. He needs someone to [supervise] him for his safety.”

        In 2003, State Farm arranged for videotaped surveillance of plaintiff’s activities on portions

of various days. State Farm interpreted the surveillance footage as undermining plaintiff’s claim for

attendant care:

        The surveillance videos . . . revealed that Plaintiff was not, in fact, receiving 24-hour-
        a-day attendant care; that Plaintiff was apparently operating and performing in a
        music business; that Plaintiff was capable of operating a large conversion van, not
        owned by him prior to the accident; that Plaintiff was able to operate that van, both
        forward and backward, with a trailer attached; that Plaintiff could apparently direct
        others in activities; that Plaintiff was allowed to chauffeur his children to and from


        2
        Another entry on this log—this one dated July 1, 2002—also states that the care his wife
provides is for “$250 a day” and is “not broken into hours since they vary.”

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Villaflor v. State Farm Mutual Automobile Insurance Co.


       school; that Plaintiff was driving over long distances; that he was driving without his
       wife in the van or the Escalade, and that Plaintiff was engaging in recreational
       basketball with apparent ease and coordination.[3]

State Farm asserts that it perceived a number of “inconsistencies” between the surveillance videos

and the claim file. First, it contends that State Farm was paying for care on a 24-hour per day basis,

but Villaflor was not receiving such care. Second, it argues it believed plaintiff could not drive

alone, but the video showed he was doing so. Third, it concluded plaintiff’s playing golf, playing

with a band, and going to a gym were inconsistent with a report that his I.Q. was 64.

       On June 30, 2003, Childs sent a letter to Dr. Gerald Shiener, who had been treating Villaflor,

to request an update regarding Villaflor’s condition and treatment. She did not disclose that

surveillance had recently been conducted. In a letter to State Farm dated July 7, 2003, Dr. Shiener

responded in part that “[i]n response to [the] additional request for information,” he would “remind

[her] that [she] requested a copy of [his] chart very recently” and that he “ha[s] been providing [her]

with regular documentation and updates regarding Mr. Villaflor’s condition.” He wrote that

Villaflor “has required ongoing 24 hour attendant care for poor impulse control and poor

judgement.” He further wrote that his “proposed treatment plan . . . is to continue to provide him

with supportive psychotherapy aimed at helping him deal with his loss of independence and loss of

ability to function as a provider and breadwinner for his family. His impairments are apparent to him



       3
         The videotapes also showed numerous instances when plaintiff was driving and Mrs.
Villaflor was accompanying her husband. As to plaintiff’s playing basketball, defendant’s
surveillance report merely stated that on June 14, 2003, plaintiff was seen playing with a small
basketball on his driveway with a child.

                                                  4
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


and he is demoralized at the prospect of ongoing disability.” He stated that Villaflor’s “need for

medical attendant care is ongoing and continuous. He needs regular supervision on a 24 hour basis

daily, 7 days a week. He needs supervision while awake because his judgement is impaired. He

does not know his limitations. . . . He will wake up in the night, wander around the house, and

engage in high risk activities that are dangerous to him and the family.” Dr. Shiener concluded that

Villaflor’s need for constant supervision “continues to exist,” and noted his belief that Villaflor

“cannot drive alone, and is not safe spending time alone during the day because of his poor impulse

control and impaired judgment.” He observed that Villaflor’s wife has provided “numerous

examples of the patient’s need for supervision and the difficulty that she has in addressing his

problems with irritability and impulsive behavior.”4 Dr. Shiener’s prognosis was guarded: “I do not

feel that he will get better” and “I expect that in his late 40s or early 50s his cognitive function will

begin to decline and his need for attendant care, supervision, and supportive services will increase.”


        4
          At trial, Dr. Shiener explained that it is common for someone with a frontal lobe brain injury
like plaintiff’s to not recognize one’s own limitations. He also explained that even after viewing the
surveillance videos, he is still of the opinion that it is unsafe for Villaflor to drive, concluding that
“his driving was more an expression of his poor judgment and an expression of a struggle that he has
had in trying to manage him than an expression or an indication of his ability to drive.” In a June
2005 letter from Dr. Shiener to plaintiff’s counsel that was introduced at trial, Dr. Shiener noted that
“[i]t is not surprising that Mr. Villaflor’s limited insight [] may cause him to occasionally resist
certain restrictions on his activities that his wife, as his attendant care provider, seeks to impose.”
He observed that “while Mr. Villaflor should not drive a motor vehicle as a result of his traumatic
brain injury, he expects to drive and occasionally may insist on driving since he is a male and the
head of his household.” He stated that Villaflor’s driving “reflects both the delicate balancing act
that Ms. Villaflor must perform and the unavoidable difficulty she occasionally confronts in
attempting to ensure Mr. Villaflor’s compliance with recommendations for his safety.” He
concluded by reiterating that he “ha[s] not seen anything in these tapes of surveillance that would
lead me to change my opinion about Mr. Villaflor’s need for attendant care in any way.”

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No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


       In July 2003, State Farm transferred plaintiff’s claim from its Personal Injury Protection

claims unit to its Special Investigations Unit. After August 2003, State Farm failed to pay any

additional attendant care benefits. In a letter dated September 5, 2003 from Kim Grassel, a Claim

Representative at State Farm’s Special Investigations Unit, State Farm informed plaintiff that his

claim had been reassigned, requested certain documentation, and asked for an interview “[t]o

continue our handling of [the] claim.” State Farm stated that “no further payment will be issued

during the investigation process. Once our investigation is complete, we will be in a better position

to determine whether additional payment is warranted.” In a letter to Villaflor three days later,

Sheila Smith of the Special Investigations Unit claimed State Farm had the following specific

concerns:

       It is questionable whether you have given us all the details about the injury,
       treatment, or other information we need to determine the amount payable.

       It is questionable whether there is continuing need for attendant care due to injuries
       arising out of the motor vehicle accident of January 19, 1994.

       It is questionable whether you have made false statements with the intent to conceal
       or misrepresent any material fact or circumstance in connection with any claim under
       this policy.

       Plaintiff’s counsel replied to State Farm on September 18, 2003. In that letter, counsel

maintained that “[t]his file has been previously litigated and State Farm possesses all relevant

information concerning the nature of Mr. Villaflor’s disability and, since it has paid attendant care

benefits, it equally knows what attendant care benefits have been incurred.” It further stated that

Villaflor had not been employed since his accident, and that “[t]here has been no change in his


                                                 6
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


condition to support State Farm’s actions, and no activity on the part of Mr. Villaflor and his

caregiver inconsistent with the nature of his traumatic brain injury.” Counsel requested that

attendant care benefits be reinstated immediately.

       Plaintiff’s attorney eventually consented to State Farm’s attorney examining Villaflor under

oath, in exchange for subsequently providing a copy of the surveillance footage to plaintiff. This

sworn examination of Villaflor occurred on June 14, 2004. At one point, State Farm’s counsel asked

Villaflor about his driving:

       Q.      Do you drive, sir?
       A.      Yes.
       Q.      Do you drive alone in the vehicle?
       A.      Only when good days, my wife let me go.

Plaintiff’s counsel also posed a series of questions:

       Q.     Does your wife ever send you on little errands for her?
       A.     Yeah.
       Q.     Does she maintain telephone contact with you?
       A.     Yes.
       Q.     Does she, when you sometimes go out, follow you?
       A.     Yes.
       Q.     Has she followed you in the car when you’ve driven?
       A.     Yes.
       ...
       Q.     Because of your brain injury, does your wife always monitor the activities
       you’re doing?
       A.     Yes.
       Q.     And sometimes is monitoring those activities sending your son out with you?
       A.     Yes.
       ...
       Q.     Do you have more bad days than you have good days?
       A.     Yes.
       Q.     Does your wife help you every day?
       A.     Yes.

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No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


       ...
       Q.      Since the accident has occurred, have you relied on her to tell you what you
       can do and can’t do?
       A.      Yes.
       Q.      Has anything changed in that regard?
       A.      No.
       ...
       Q.      Has Dr. Shiner [sic] told you that you need your wife providing this care at
       all times?
       A.      Yes.
       Q.      And does she provide this care at all times, even if you go off on an errand
       alone?
       A.      Yes.

Villaflor was also asked about his music activities. He testified that he has been involved with music

and disc jockeying since his accident: “I go with my son. . . . I help. I just – during good days. I try

to help. I try.” He also testified that when he does this, he needs someone to supervise him, and his

wife and son do so. He acknowledged playing keyboards—which he also played prior to his

accident—and that he “jams” with a band on “good days” with his wife’s permission.

       After this examination, State Farm did not resume attendant care benefits. Thus, on July 28,

2004, plaintiff filed suit in Oakland County (Michigan) Circuit Court against State Farm. After

recounting the three previous suits involving State Farm’s refusal to pay benefits, plaintiff alleged

that State Farm “continued to pay attendant care benefits until August 3, 2003, when, in spite of there

being no change in Plaintiff’s condition, Defendant failed and refused a fourth time to pay any

attendant care benefits, even though repeated calls and demands for same were made on Defendant

and counsel.” Plaintiff further alleged that State Farm “has no proof that [his] condition has changed

since the third resolution of this matter,” and that his condition “has not changed.” Plaintiff alleged


                                                   8
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


that he complied fully with the requirements of the policy and made demand on State Farm to

comply with Michigan’s No-Fault Act, but that State Farm refused to do so. Plaintiff sought

declaratory relief, a money judgment for the benefits owed and accruing through the time of the entry

of judgment, and attorney fees and interest as provided for under the No-Fault Act.5

       Defendant removed the case to the Eastern District of Michigan. Plaintiff’s motion to

remand was denied. After a relatively contentious period of discovery, the case proceeded to trial.

After hearing testimony and arguments, the jury reached its verdict in favor of plaintiff on September

29, 2006. The jury found that “allowable expenses,” which the court defined as “all reasonable

charges for reasonably necessary products, services, and accommodations for the plaintiff’s care,

recovery, or rehabilitation,” had been incurred by or on behalf of Villaflor subsequent to State

Farm’s cessation of benefits in August 2003, and that State Farm owed Villaflor $156,000 for such

expenses.6 The jury also answered in the affirmative when asked whether “payment for any of the

expenses to which the plaintiff was entitled” was “overdue.”7 Finally, the jury was asked to calculate




       5
        Nowhere in the complaint did plaintiff specify the dollar amount he was seeking to recover
from State Farm in the instant litigation.
       6
       According to plaintiff, “[t]he jury awarded Plaintiff $156,000 for attendant care benefits
from August 3, 2003 to September 29, 2006.” Defendant maintains that the verdict of $156,000
means that the jury awarded plaintiff $1,000 per week for three years (i.e., 156 weeks) of benefits.
       7
         The verdict form provided the following definition: “Payment for an expense or loss is
overdue if it is not paid within 30 days after the defendant receives reasonable proof of the fact and
the amount of the claim. An overdue claim bears interest at the rate of 12 percent per annum from
the date the expense or loss became overdue.”

                                                  9
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


the penalty interest on the overdue benefits.8 The jury determined that the amount of such interest

owed to the plaintiff on his overdue benefits was $37,440. The court thus entered judgment for

Villaflor in the amount of $193,440.

       Plaintiff subsequently filed a motion for attorney fees, costs, expenses, and interest. He

sought a total of $1,270,750.00 in attorney fees under Mich. Comp. Laws § 500.3148(1)9 and Federal

Rules of Civil Procedure 11 and 37. He specifically sought attorney fees pursuant to § 500.3148 in

the amount of $470,125.00, which he calculated by multiplying what he contended was the

reasonable hourly rate of $500/hour by the 940.25 hours he claimed his attorneys devoted to the case.

Besides attorney fees, he also sought various costs, expenses, and interest, and also asked for Rule

11 sanctions against State Farm.

       Defendant opposed this motion, and also filed a motion for its own attorney fees pursuant

to Mich. Comp. Laws § 500.3148(2).10 It maintained in part that plaintiff “never presented or


       8
         See generally Moore v. Secura Ins., 759 N.W.2d 833 (Mich. 2008) (characterizing this
calculation as statutory “penalty interest” for overdue benefits).
       9
        Mich. Comp. Laws § 500.3148(1) provides for a claimant’s attorney fees as follows:
       An attorney is entitled to a reasonable fee for advising and representing a claimant
       in an action for personal or property protection insurance benefits which are overdue.
       The attorney’s fee shall be a charge against the insurer in addition to the benefits
       recovered, if the court finds that the insurer unreasonably refused to pay the claim or
       unreasonably delayed in making proper payment.
       10
          Mich. Comp. Laws § 500.3148(2) provides for an insurer to recover its fees in certain
situations:
        An insurer may be allowed by a court an award of a reasonable sum against a
        claimant as an attorney’s fee for the insurer’s attorney in defense against a claim that
        was in some respect fraudulent or so excessive as to have no reasonable foundation.

                                                 10
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


articulated any specific claim prior to litigation,” but that plaintiff’s counsel “demanded [$10

million] as damages at the time of the final settlement conference in this matter, and then, at trial

Plaintiff presented a demand for benefits for between [$950,000] and [$1,450,000] as compensation

for allegedly owed no-fault benefits provided to Plaintiff, which claim was then based on an alleged

need for 24 hour a day attendant care.” It argued that the jury’s combined verdict “represents little

more than between [13%] and [20%] of the excessive demand for benefits requested by Plaintiff.”

It also argued that [p]laintiff “never offered subjective proof” that he needed 24-hour care, and that

the “surveillance video definitively established” that such care was not provided, “contrary to

Plaintiff’s assertions.” State Farm thus contended that the jury’s award, combined with the evidence

and trial testimony, showed that plaintiff’s claim was “in some respect fraudulent or so excessive

as to have no reasonable foundation,” such that defendant was entitled to an award of its attorney

fees. Defendant requested attorney fees at the rate of $300/hour.

        The district court held a hearing on these motions in February 2007. After hearing from both

parties, the court stated on the record that plaintiff was entitled to attorney fees in this case because

“it was unreasonable for the defendant not to pay something.” In calculating the fees, the court took

the averages of both counsels’ claimed hours worked and requested rates. The court declined to

award Rule 11 sanctions. The court issued an order awarding attorney fees pursuant to Mich. Comp.


        To the extent that personal or property protection insurance benefits are then due or
        thereafter come due to the claimant because of loss resulting from the injury on
        which the claim is based, such a fee may be treated as an offset against such benefits;
        also, judgment may be entered against the claimant for any amount of a fee awarded
        against him and not offset in this way or otherwise paid.

                                                   11
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


Laws § 500.3148(1) to plaintiff in the amount of $345,200 (863 hours multiplied by $400/hour),

denying plaintiff’s motion for costs and sanctions, and denying defendant’s motion for attorney fees.

       Defendant subsequently filed a motion for reconsideration. The district court denied this

motion on April 19, 2007 in a written order, in which the court further explained the basis for its

ruling granting plaintiff’s motion for attorney fees. The court observed, inter alia:

       Several facts support the court’s conclusion that State Farm acted unreasonably when
       it terminated plaintiff’s attendant care benefits—most recently—in August 2003.
       State Farm has a long history of paying benefits to Ricardo Villaflor, cutting them
       off, restoring the benefits after losing litigation, and then cutting off benefits again.
       This behavior is unreasonable because plaintiff’s medical condition, and therefore
       his need for attendant care, has not changed. While State Farm keeps pointing to the
       video surveillance, trial testimony established that the videos simply show plaintiff
       performing activities State Farm knew he could do and which his physicians have
       said are consistent with his diagnosed need for attendant care.

The court also disposed of State Farm’s argument that because evidence showed that Villaflor did

not need attendant care “on a 24/7 basis,” his need for full-time care could therefore reasonably have

been questioned. The court noted that the no-fault statute includes a provision which “requires an

insurer to pay partial benefits even if the evidence does not support a claim for full benefits.” See

J.A. 190 (quoting Mich. Comp. Laws § 500.3142(2) (“If reasonable proof is not supplied as to the

entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after

the proof is received by the insurer.”)). The court found that State Farm “was required to pay some

amount for attendant care, even if the precise level of care was unclear at that time,” and that State

Farm “clearly acted unreasonably by cutting plaintiff off in August 2003 and paying no benefits

whatsoever after that date.” (Emphasis in the original.) Finally, the court observed that State Farm’s


                                                  12
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


conduct “was all the more egregious because of its long history of litigation with Ricardo

Villaflor.”11 Under these circumstances, the court concluded, “there was no legitimate factual or

legal dispute to justify State Farm’s decision to terminate plaintiff’s attendant care benefits.”

                                           DISCUSSION

       A trial court’s award of attorney fees is generally reviewed for an abuse of discretion. Shields

v. Gov’t Employees Hosp. Ass’n, Inc., 490 F.3d 511, 514-15 (6th Cir. 2007). The district court’s

factual determinations are reviewed under the clearly erroneous standard, and its legal interpretations

are reviewed de novo. Id. at 515. The substantive issues are governed by Michigan law. Id.

A.     Attorney Fees for Plaintiff

       The Michigan Supreme Court recently explained what an award of attorney fees under the

applicable statute requires:

       MCL 500.3148(1) establishes two prerequisites for the award of attorney fees. First,
       the benefits must be overdue, meaning “not paid within 30 days after [the] insurer
       receives reasonable proof of the fact and of the amount of loss sustained.” MCL
       500.3142(2). Second, in postjudgment proceedings, the trial court must find that the
       insurer “unreasonably refused to pay the claim or unreasonably delayed in making
       proper payment.” MCL 500.3148(1). Therefore, assigning the words in MCL
       500.3142 and MCL 500.3148 their common and ordinary meaning, “attorney fees are
       payable only on overdue benefits for which the insurer has unreasonably refused to
       pay or unreasonably delayed in paying.” Proudfoot v. State Farm Mut. Ins. Co., 469
       Mich. 476, 485, 673 N.W.2d 739 (2003) (emphasis omitted).




       11
        The court also observed that the jury found that State Farm’s payment for attendant care
was “overdue”—that is to say, “[t]he jury has found, as a matter of fact, that defendant received
‘reasonable proof’ of [plaintiff’s] entitlement to attendant care benefits in the amount of $156,000.”

                                                  13
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


Moore, 759 N.W.2d at 838. Whether an insurer “unreasonably refused to pay the claim or

unreasonably delayed in making proper payment” is a question for the court. Regents of the Univ.

of Mich. v. State Farm Mut. Ins. Co., 650 N.W.2d 129, 139 (Mich. Ct. App. 2002). “The trial court’s

decision about whether the insurer acted reasonably involves a mixed question of law and fact. What

constitutes reasonableness is a question of law, but whether the defendant’s denial of benefits is

reasonable under the particular facts of the case is a question of fact.” Ross v. Auto Club Group, 748

N.W.2d 552, 555 (Mich. 2008).

        1.      Unreasonableness of Defendant’s Refusal to Pay

        State Farm first argues that this court should reverse the district court’s award of attorney fees

to plaintiff because, it claims, the district court “expressly found” that there was a “bona fide factual

dispute as to the amount of Plaintiff’s claim.”12 Defendant points to a statement made by the district

court as part of its colloquy with defense counsel at the motion hearing, ignoring that it was made

in the context of the court’s considering whether State Farm was unreasonable in not paying any

benefits and its conclusion that State Farm knew that it owed Villaflor benefits yet, unreasonably,

paid him nothing. It does not appear that the district court expressly found that the refusal to pay was


        12
           “The purpose of the no-fault act’s attorney-fee penalty provision is to ensure prompt
payment to the insured. Accordingly, an insurer’s refusal or delay places a burden on the insurer to
justify its refusal or delay. The insurer can meet this burden by showing that the refusal or delay is
the product of a legitimate question of statutory construction, constitutional law, or factual
uncertainty.” Ross, 748 N.W.2d at 558. “[A] refusal or delay in payments by an insurer will not be
found ‘unreasonable’ within the meaning of § 3148 where [it] is the product of a . . . bona fide
factual uncertainty.” Gobler v. Auto-Owners Ins. Co., 404 N.W.2d 199, 205-06 (Mich. 1987); see
also Moore, 759 N.W.2d at 843 (“[A]n insurer’s initial refusal to pay no-fault benefits can be
deemed reasonable even if it is later determined that the insurer was required to pay those benefits.”).

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No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


“the product of a legitimate question of . . . factual uncertainty.” See Ross, 748 N.W.2d at 558.

Moreover, in its motion for reconsideration, State Farm again argued to the district court that there

was “a ‘legitimate question of factual uncertainty’ as it relates to the nature, amount and frequency,

if any, of attendant care benefits actually performed (and thereby incurred) by Plaintiff.” (Emphasis

added.) The court looked to the no-fault statute and, specifically, the provision which the district

court read as “requir[ing] an insurer to pay partial benefits even if the evidence does not support a

claim for full benefits.” See J.A. 190 (citing Mich. Comp. Laws § 500.3142(2) (“If reasonable proof

is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid

within 30 days after the proof is received by the insurer.”)). The court again rejected State Farm’s

argument, concluding that State Farm “was required to pay some amount for attendant care, even if

the precise level of care was unclear at that time,” and that State Farm “clearly acted unreasonably

by cutting plaintiff off in August 2003 and paying no benefits whatsoever after that date.” (Emphasis

in the original.) The district court’s conclusion that it was unreasonable for State Farm to refuse to

pay at least some benefits was not erroneous. “The fact that an insurer may be liable for some

expenses (i.e., those reasonably incurred) does not necessarily establish its liability for all of the

expenses. However, the fact that . . . some services [were provided] that [defendant] may have had

a bona fide reason for disputing does not justify making no payment.” McKelvie v. Auto Club Ins.

Ass’n, 512 N.W.2d 74, 77 (Mich. Ct. App. 1994) (citations omitted).13


       13
       This opinion in McKelvie addressed the trial court’s award of attorney fees following trial.
The Michigan Supreme Court denied leave to appeal that ruling. McKelvie v. Auto Club Ins. Ass’n,
525 N.W.2d 460 (1994) (Table). Plaintiff subsequently filed a motion for an award of appellate

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No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


       State Farm also argues that the record demonstrates a legitimate factual dispute concerning

the fact and amount of Villaflor’s claim. The court found that State Farm’s cutting off of Villaflor’s

benefits in August 2003 was unreasonable because “plaintiff’s medical condition, and therefore his

need for attendant care, has not changed,” and that “the videos simply show plaintiff performing

activities State Farm knew he could do.” These findings are amply supported by the record. Prior

to trial, State Farm admitted that it “knew before it began video surveillance on Ricardo Villaflor

in 2003 that he goes on errands by himself” and “drives by himself,” that “[n]obody advised between

December, 2001 and July, 2003 that Ricardo Villaflor discontinued driving without supervision,”

that “[t]he frequency with which Ricardo Villaflor drove a vehicle without supervision remained the

same between the period of December, 2001 to May, 2003 and the period of June, 2003 to October,

2003,” that it knew before beginning video surveillance of Villaflor in 2003 that after his accident

he “had attended a Drivers Rehabilitation Program at Providence Hospital,” “continued to exhibit

ability as a musician,” “had been serving as the emcee at a Karaoke musical program,” “continued

to play the keyboards,” “performed with a band,” and “had been appearing as the keyboard player

with a band,” and that it knew prior to the surveillance that Villaflor “had played golf since the . .

. accident.” At trial, the individual at State Farm who had final say regarding approving or denying



attorney fees, which the trial court denied. The appeals court reversed that determination, McKelvie
v. Auto Club Ins. Ass’n, 566 N.W.2d 658 (Mich. Ct. App. 1997), but the Michigan Supreme Court
reversed the appeals court. McKelvie v. Auto Club Ins. Ass’n, 586 N.W.2d 395 (Mich. 1998). In
doing so, the Michigan Supreme Court did not reverse or otherwise undermine the opinion we cite
regarding the award of trial attorney fees. See id. (stating that it “reverse[s] the second judgment of
the Court of Appeals”).

                                                  16
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


benefits acknowledged that State Farm had information in its file before it received the surveillance

videos that Villaflor would drive without another adult in the car, that he sometimes was outside the

presence of his care provider, and that his need for attendant care and his receipt of attendant care

varied from day to day. State Farm’s continuing effort to argue that it was reasonable to question

plaintiff’s need for 24-hour care in light of the surveillance videos is disingenuous, given that the

claims file never indicated that State Farm was making payments for 24 hours’ care each day, and

that the file shows it was understood that the number of hours of attendant care would vary.

        Thus, State Farm’s arguments that the surveillance footage and Dr. Shiener’s July 2003 letter

stating that Villaflor cannot drive alone somehow justified its suspension of benefits ring hollow.

From its past dealings with Villaflor, State Farm knew Villaflor had driven alone, that his driving

alone in his car did not mean he was not being monitored, and that one of Villaflor’s impairments

was poor judgment and impulsiveness. As Kim Grassel of the Special Investigations Unit testified,

State Farm knew about “whatever information was found in the [claim] file.” At trial, Bonnie Childs

testified:

        Q.      Based upon your review of the surveillance video, if you had believed that the
        activity level shown in the surveillance video was consistent with what State Farm
        already knew from its file, then you would have believed it appropriate to continue
        to pay attending care benefits?
        A.      I would have paid. I would have had no questions.

Given that the footage in the surveillance video was consistent with what State Farm already knew,

see supra, the court’s conclusion as to unreasonableness is amply supported. If State Farm had

simply reviewed its claim file before deciding to stop payments, it likely would not have believed


                                                 17
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


it needed additional information. We find no error in the district court’s observation that “State

Farm’s conduct was all the more egregious because of its long history of litigation with Ricardo

Villaflor.” Given State Farm’s history of litigation with Villaflor—litigation that always resulted

in it having to resume paying benefits it owed—its failure to take this basic step before cutting off

benefits a fourth time and thus again forcing Villaflor to court to vindicate his rights seems well

outside the bounds of reasonable conduct.14




       14
          State Farm argues that Villaflor should have responded to its twenty-two requests for
information following its surveillance—requests which State Farm now recasts as simple requests
as to the “amount” of the claim notwithstanding its initial 2003 letter suspending benefits which
indicated the question existed “whether there is continuing need for attendant care.” This argument
ignores the history of these parties’ dealings. State Farm already had information regarding the loss,
and had been paying benefits to Villaflor for some time—including an uninterrupted period of years
in which it paid benefits each month in amounts constituting $250 per day. Moreover, as plaintiff’s
counsel explained at the hearing on plaintiff’s motion for attorney fees, typically claimants submit
medical records and calendars showing the number of hours per day that services are being provided,
but “that was not the[] way it was done” in this case. Rather, “[b]eginning in 2000, after resolution
of the third lawsuit, for the next 38 months, payment was made without receipt of any calendars.”
State Farm’s own activity logs show this. Indeed, State Farm admitted that it “determined that
[plaintiff] was entitled to [the] attendant care benefits [paid] from December, 2001 to July, 2003,”
and that it determined that such benefits paid to plaintiff during that period “were reasonable and
necessary.” As plaintiff’s counsel has explained, “[a]s of this point, there is a several-year history.
There is copious medical [sic] that supports the need for attendant care. Everybody was well aware
that there were periods of unsupervised time.”
        State Farm also argues that it “never denied Plaintiff’s claim, but simply suspended payment
of benefits because of Plaintiff’s refusal to provide any documentation as to the amount of his loss.”
In fact, State Farm stopped paying benefits and then requested an interview and certain
documentation, stating that “no further payment will be issued during the investigation process.”
It did so even though State Farm already had information in its own claim file—including
information from Villaflor’s prior lawsuits to obtain the benefits owed him—which readily revealed
the tenuous nature of the supposed “inconsistencies” that gave rise to State Farm’s suspicion and its
resulting refusal to continue payments.

                                                  18
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


       2.         Whether Benefits Were Overdue

       State Farm also argues on appeal that the benefits owed to Villaflor were not “overdue,” and

thus no attorney fees can be awarded to Villaflor pursuant to the Michigan no-fault statute. “An

attorney is entitled to a reasonable fee for advising and representing a claimant in an action for

personal or property protection insurance benefits which are overdue.” Mich. Comp. Laws §

500.3148(1) (emphasis added). “[P]ersonal protection insurance benefits become ‘overdue’ when

an insurer fails to pay ‘within 30 days after an insurer receives reasonable proof of the fact and of

the amount of loss sustained.’” Moore, 759 N.W.2d at 835 (quoting Mich. Comp. Laws §

500.3142(2)).

       State Farm’s argument here is that “as a matter of law,” no attorney fees can be awarded

because “at the time of the initial refusal to pay, and at the time suit was filed, no benefits were

overdue.” It first contends that benefits were not “overdue” because Villaflor did not “submit[] proof

as to the number of hours per day that his wife actually spent supervising him.” Given the parties’

prior arrangement and course of conduct, and given what State Farm admitted it already knew when

it ceased paying benefits, see supra, this line of reasoning is without merit.

       State Farm next contends that as a factual matter, “[t]he jury’s award of only 24 months’

interest is a finding that benefits were not overdue at the time Plaintiff filed his complaint.” Because

the jury in late September 2006 awarded 12% simple interest provided by statute15 in the amount of

$37,440, State Farm reasons, the jury must have determined that the benefits were only overdue for


        15
             Mich. Comp. Laws § 500.3142(3).

                                                  19
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


two years—and thus only became overdue after plaintiff filed his complaint in July 2004—because

$37,440 equals 24% of the $156,000 the jury awarded in allowable expenses. Because State Farm

failed to raise this argument below, it is waived. See, e.g., Taft Broad. Co. v. United States, 929 F.2d

240, 243 (6th Cir. 1991) (“A long line of cases in this circuit strongly reinforces the principle that

issues not litigated in the trial court are generally not appropriate for appellate consideration in the

first instance.”); see also Shields, 490 F.3d at 515. In any event, the argument fails on the merits as

well. State Farm makes much of the recent Michigan Supreme Court decision of Moore v. Secura

Insurance, 759 N.W.2d 833, but although that case endorses the propriety of a court examining the

amount of statutory penalty interest awarded by a jury in order to determine how much time the jury

believed the benefits were overdue, see id. at 838-39, it does not compel a different result in the

instant case. The facts here do not lead to the same kind of unequivocal interpretation of the jury’s

calculation as the determination in Moore, and it would be speculative to read the jury’s verdict in

the instant case as its clear indication of the date on which State Farm had adequate proof of the

claim. The jury’s award of interest in this case could also reflect its recognition that the more

recently-incurred attendant-care expenses had remained overdue for a lesser period of time.

B.     Attorney Fees for Defendant

       State Farm argues that the district court erred in not awarding it attorney fees pursuant to

Mich. Comp. Laws § 500.3148(2), which states that “[a]n insurer may be allowed by a court an

award of a reasonable sum against a claimant as an attorney’s fee for the insurer’s attorney in defense

against a claim that was in some respect fraudulent or so excessive as to have no reasonable


                                                  20
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


foundation.” Given our analysis supra, we cannot say that plaintiff’s claim was “fraudulent.” Nor

can we say that the district court erred by not finding plaintiff’s claim to be “so excessive as to have

no reasonable foundation.” Plaintiff acknowledges that he demanded $10 million at the final pre-

trial conference, but states that this amount also reflected his belief that sanctions were warranted

given the “tortuous history of litigation between the parties.” Defendant’s argument that plaintiff’s

claim was excessive because he was awarded less than 11% of what he purportedly requested from

the jury in benefits is unavailing. Though the jury did not award plaintiff everything his counsel

requested during closing argument, defendant’s argument erroneously presupposes that plaintiff

sought an award for the payment of benefits based on hourly figures.16 Plaintiff’s counsel’s reference

to the prevailing hourly rate in his closing argument was in the context of how much State Farm was

paying Mrs. Villaflor for her services before it terminated payments versus how much more State

Farm would reasonably have had to pay for outside caregivers who, like Mrs. Villaflor, would be

available at any time.17


        16
         During closing argument, plaintiff’s counsel stated that “Mr. Villaflor and Mrs. Villaflor
were getting paid attendant care benefits on a daily basis. Not a 24 hours basis, but a daily basis, it
was a flat rate. And why was it a flat rate? Because State Farm knew, some doctor told them, that
the number of hours of attendant care may vary.” (Emphasis added.)
        17
          At closing argument, plaintiff’s counsel asked the jury to “decide what a reasonable charge
is for the services of Mr. [sic] Villaflor. . . . Think about . . . the uncontradicted testimony[] from
Dr. Ancell and Dr. Sewick regarding what reasonable charges are.” Earlier, counsel had recounted
that those doctors testified to an hourly rate of “somewhere in the neighborhood of $40 . . . . What
we know is that for three years, . . . State Farm had been paying $250 a day. $250 a day for three
shifts for the work of three people, seven days a week, no vacations, little resting, no benefits, a very
hard job for Mrs. Villaflor to stay on top and continually guide and supervise and provide necessary
assistance to her husband.”

                                                   21
No. 07-1663
Villaflor v. State Farm Mutual Automobile Insurance Co.


                                       CONCLUSION

       This is the fourth lawsuit between these parties. The district court’s decision is amply

supported, and we AFFIRM.




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