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How to calculate Michigan No Fault wage loss benefits after returning to work

August 6, 2015 by Steven M. Gursten

Formula created by Court Of Appeals in Agnone v. Home-Owners short-changes high-wage earning auto accident victims

wage loss

Wage loss reimbursement is one of the many essential No Fault (also known as PIP) insurance benefits that Michigan auto accident victims are guaranteed under Michigan’s No Fault law.

No Fault benefits provide a critical lifeline for many people who have crash-related injuries that have totally disabled them from working. When this happens, No Fault wage loss benefits (sometimes referred to as “work loss” benefits) help by compensating for the wages the victims would’ve earned from working had they not been injured.

And for those who are able to return to work on a restricted, “light duty” and thus, lower-pay basis, No Fault wage loss benefits can – in some instances – help make up the difference.

However, calculating a person’s wage loss benefits after he has returned to work (albeit at a lower wage than what he was making before being injured in a collision) can be a tricky. It’s an area where even many Michigan personal injury lawyers make mistakes. And, in the defense of these lawyers, it’s not always a fair and logical route to wage loss benefits, as a recent Michigan Court of Appeals case has demonstrated.

In Agnone v. Home-Owners Insurance Company, John Agnone, who owned and operated “his own insurance agency,” claimed that due to his auto-accident-related injuries, his post-crash income (after having returned to work), which varied between $140,000 and $135,000 per year was significantly less than his pre-accident income, which averaged $196,000 per year.

Specifically, Agnone went from earning approximately $16,333 per month before his 2009 accident to approximately $11,666 (to $11,250) in 2011 and 2012. Thus, he claimed he was entitled to the difference between his pre- and post-accident income as No Fault wage loss benefits.

The Court of Appeals disagreed, concluding that Agnone was entitled to $0 (zero) in wage loss:

  • Mr. Agnone cannot collect No Fault wage loss benefits for the “difference between [his] income before the accident and his income after the accident.”
  • “Because the undisputed evidence showed that Agnone earned more [after his auto accident] than the applicable [monthly] maximum [for No Fault wage loss benefits], he was not entitled to any work-loss benefit” under the No Fault Law.

Today, I’ll discuss the No Fault wage loss “formula” that the appellate judges used in determining that Mr. Agnone deserved no wage loss benefits —  even though he clearly lost wages as a result of his crash-related injuries.

Tomorrow, I’ll discuss why I believe that, based on the actual language of the No Fault wage loss statute, the Court of Appeals’ wage loss “formula” is neither fair nor logical.

No Fault wage loss ‘formula’ for calculating wage loss benefits after returning to work

Relying heavily on the Court of Appeals’ 1988 ruling in Snellenberger v. Celina Mutual Insurance Company, the Agnone court used the following “formula” for calculating No Fault wage loss benefits after Michigan auto accident victim has returned to work:

  • First, “determine[] the total monthly income that [an auto accident victim] earned at the time of his [or her] injury – and would presumably have continued to earn had he [or she] not been injured …”(Agnone, page 5)
  • Second, “adjust[] it downward by the required fifteen percent …” (“Because the benefits received from personal protection insurance for loss of income are not taxable income, the benefits payable for such a loss of income shall be reduced by 15% …” MCL 500.3107(1)(b)) (Agnone, page 5)
  • Third, “compare[]” the accident victim’s “adjusted monthly income from before the accident … to the maximum work-loss benefit applicable at the time …” (There is a “statutory maximum” for how much an auto accident victim can receive in No Fault wage loss benefits. See MCL 500.3107(1)(b)) (Agnone, page 5)
  • Fourth, “use the lower amount as the starting point for calculating the work-loss benefit.” In other words, “deriv[e] a base wage-loss benefit” amount which is “equal to the lesser of the applicable statutory maximum or the injured person’s total monthly income from the work that he or she used to perform before the accident.” (Agnone, pages 5 and 6)
  • Fifth, “reduce the [“base wage-loss benefit” determined in step #4] by the amount of income from work that [the auto accident victim] performed after the accident.” In other words, “to derive the compensable work-loss benefit,” one must “subtract[] from the base wage-loss benefit the injured person’s actual income from work performed [after the accident] …” (Agnone, pages 5 and 6)

For more information about calculating No Fault wage loss benefits and determining the monthly, “statutory maximum,” take a look at my post, “Michigan No Fault work loss rate raised October 1, 2014.”

Agnone court applies No Fault wage loss ‘formula’

Applying its No Fault wage loss “formula” for calculating benefits after returning to work to Mr. Agnone’s situation, the Court of Appeals concluded he could not collect No Fault wage loss benefits for the “difference between [his] income before the accident and his income after the accident”:

  • “In the years before the 2009 accident, Agnone made substantially more each month than the applicable statutory maximum of $4,878.”
  • “Therefore, under the formulation from Snellenberger, we would use the statutory maximum as his base potential benefit.”
  • “We would then subtract from that base wage-loss benefit the income that he earned in the same 30-day period to derive his compensable work-loss benefit for that period.”
  • “Because he continues to make more than $4,878 in every 30-day period even after his injury, his work-loss benefit is zero.” (Agnone, page 6)

High-wage earners still have options after an automobile accident

Significantly, the Court of Appeals explained that high-wage earners like Agnone were not completely without options for recouping lost wages.

They could always file a third-party, tort lawsuit against the driver who was at-fault in causing the accident:

  • “[T]he Legislature has not left injured persons with high income without a remedy for their work losses [i.e., the “difference between [his] income before the accident and his income after the accident”]  beyond the statutory maximum …”
  • “[T]hose persons may sue an at-fault driver to recover their work losses in excess of the limits provided by MCL 500.3107(1)(b),” i.e., the statutory provision for No Fault wage loss benefits.

As for Mr. Agnone, in particular, the judges explained: “Agnone may be able to recover his work losses, just not as a PIP benefit.”

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