MICHIGAN AUTO ACCIDENT INJURY LAW: IMPORTANT CHANGES

Case Impact on Auto Accident Law in Michigan:  
How to Compute Wage Loss After a Car Accident

Ross v. Auto Club Group, 269 MA 356 (2005)

Holding:  The proper method for computing wage loss following a car accident for an employee of a corporation, even if he is the sole shareholder of the corporation, is to take 85% of his W2 wages and not a profit and loss analysis.

Facts:  Mr. Ross was injured in a car accident.  As a sole shareholder and the employee of the corporation, his attorney filed a lawsuit for work-loss benefits. The insurance company responsible for providing Michigan wage loss, AAA, argued that he had failed to demonstrate a loss of income, because the corporation did not yield a net profit. Mr. Ross’ attorney argued in the court filings that he was nevertheless entitled to recover loss of income because he was paid wages as an employee of the corporation. The circuit court judge agreed with the accident victim and found for Mr. Ross and also awarded attorney fees.  AAA appealed.

Reasoning:    "Wage loss" under Michigan No Fault MCL 500.3107 includes "lost profit attributable to personal effort and self-employment," the goal being to place individuals in the same position as they were in before their injury from an automobile accident.  Here, the plaintiff received wages, and was not paid based on the "gross receipts" of the corporation. Further, business expenses of the corporation are irrelevant in calculating an injured person’s wage loss, and the plaintiff is treated as being in no different position than an employee of any other corporation operating at a loss.