Summary
In Girgis, relying on the higher Court's decision in Neighbors, the Superior Court denied recovery to the self-employed plaintiff because she had not taken periodic draws from her day-care center sufficient to represent predictable income.
Summary of this case from DeSantis v. Donegal Mut. Ins. Co.Opinion
C.A. No. 07C-12-033 PLA.
Submitted: January 27, 2010.
Decided: March 9, 2010.
Upon State Farm Mutual Automobile Insurance Company's Motion for Summary Judgment.
GRANTEDSherry R. Fallon, Esquire, TYBOUT, REDFEARN PELL, Wilmington, Delaware, Attorney for Respondent-Below/Appellant.
Michael A. Pedicone, Esquire, SCHUSTER JACHETTI, LLP, Wilmington, Delaware, Attorney for Claimant-Below/Appellee.
Introduction
This is an action brought by Plaintiff Soheir Girgis ("Girgis") for damages arising from the alleged breach of the Personal Injury Protection (PIP) clause of an automobile insurance contract issued by Defendant State Farm Mutual Insurance Company ("State Farm") to Girgis. Girgis seeks reimbursement of no-fault insurance benefits as a result of an automobile accident in which she was involved on May 7, 2005. Specifically, Plaintiff seeks payment for "lost earnings" on the basis of her inability to maintain her daycare business during a one-month period following the accident, when her physician restricted her from working, as well as for the period from June 2005 to January of 2006, when her clients, who had previously been forced to seek care elsewhere, began to return to her.
Following discovery, State Farm filed the instant Motion for Summary Judgment. It contends that Girgis is not entitled to recover "lost earnings" under either the insurance policy or the PIP statute, 21 Del C. § 2118(a)(2)a, because she cannot meet her burden of proving the loss of a predictable and ascertainable source of income and because lost wages based on the distribution of profits from her daycare business are not recoverable under the PIP statute.
Girgis has filed a Response to the Motion in which she relies on a single case, Moody v. Nationwide Mutual Ins. Co., to support her contention that even conjectural evidence of lost wages is sufficient and the fact that there is some uncertainty as to the amount of those wages or difficulties in measuring them will not preclude a jury from determining their value.
546 A.2d 291 (Del. 1988).
For the reasons discussed more fully herein, the Court concludes that Moody is distinguishable, and that Girgis has not demonstrated any basis on which "lost earnings" within the meaning of § 2118(a)(2) can be determined. Accordingly, State Farm's Motion for Summary Judgment will be GRANTED.
Factual and Procedural Background
Girgis was the driver of a vehicle owned by her husband when she was involved in a motor vehicle accident on May 7, 2005. Girgis' automobile was hit from behind by a vehicle owned and operated by an uninsured motorist. Girgis sustained personal injuries to her head, neck, knees, and back, for which she was treated at a hospital and released. As a result of these injuries, Girgis underwent physical therapy, chiropractic treatment, and surgery, and was restricted from work from May 5, 2005, through June 9, 2005, a period of a little more than a month.Prior to the accident, Girgis had been self-employed as the director of a daycare center called ABC Daycare, for which she was licensed to provide daycare services for a maximum of nine children. She alleges that although she was released by her physician from working for one month after the accident, she lost additional income for several more months because her clients were forced to seek child care elsewhere. She submits that she was not able to rebuild her business to obtain the same number of children until some months later, in January of 2006. Therefore, Girgis' income dropped significantly as a result of the accident even though the period of her medical disability only lasted either one month or five months, depending upon which of Girgis' two doctors' notes is considered.
Although State Farm paid Girgis' medical expenses in the amount of $20,015.65, it tendered only $1,351.50 for lost earnings, which is significantly less than the more than $20,000.00 that she is seeking. Plaintiff's federal income tax return for the year 2004 establishes that the day care had net profits of $5,992.00, which is the equivalent of $499.33 per month, with annual gross receipts of $33,566.00, or $2,797.17 per month. The Schedule C Forms attached to ABC Daycare's tax returns show net profits of $2,638.00 for the year 2005, and $141.00 for the year 2006. In none of those three years was Girgis paid a salary, nor did she take any draw, let alone regular periodic withdrawals.
Parties' Contentions
State Farm asserts that it has no duty to compensate Girgis because she conceded that she was never paid a regular salary and did not take regular draws or other income from the daycare business. It submits that the PIP statute precludes recovery of lost profits in the absence of evidence of predictable regular salary payments to her, and her tax returns demonstrate that no wages or salary have been paid to Plaintiff for work associated with her daycare operation. State Farm contends that Girgis is, in reality, seeking to recover benefits based exclusively on the distribution of profits from her business, which she is precluded from doing under the PIP statute. In addition, State Farm submits that even if gross profits could be considered evidence of lost earnings under the PIP statute, recovery is limited to those earnings that are "reasonable" and "necessary." It asserts that Girgis has failed to establish either reasonableness or necessity in this case.Standard of Review
When considering a motion for summary judgment, the Court examines the record to ascertain whether genuine issues of material fact exist and to determine whether the moving party is entitled to judgment as a matter of law. Initially, the burden is placed upon the moving party to demonstrate that its legal claims are supported by the undisputed facts. If the proponent properly supports its claims, the burden "shifts to the non-moving party to demonstrate that there are material issues of fact for resolution by the ultimate fact-finder." Summary judgment will only be granted if, after viewing the evidence in the light most favorable to the non-moving party, there are no material facts in dispute and judgment as a matter of law is appropriate.
Super Ct. Civ. R. 56(c).
E.g., Storm v. NSL Rockland Place, LLC, 898 A.2d 874, 879 (Del. Super. 2005).
Id. at 880.
Id. at 879-80.
Discussion
Section 2118 of Title 21 of the Delaware Code generally provides that no owner of a motor vehicle registered in this State shall operate such vehicle without certain minimum insurance coverages. Thus, all motor vehicles registered in Delaware must carry insurance to compensate injured persons for, among other things, net "lost earnings" incurred within two years from the date of an accident. While lost earnings under § 2118(a)(2)a.2 are defined to "include net lost earnings of a self-employed person," the plaintiff has the burden to establish loss of a predictable and ascertainable source of income. The phrase "loss of earnings" is more specifically defined in Amended Regulation No. 9 of the Delaware Insurance Commission as "any amounts actually lost net of taxes on income which would have applied by reason of inability to work and earn wages or salary that would otherwise have been earned in the normal course of an injured person's employment but not other income." Thus, without evidence of a predictable income, the Court has no basis to award lost earnings under the statute.In U.S. Fidelity and Guaranty Co. v. Neighbors, the Delaware Supreme Court recognized that even though Neighbors was self-employed, the periodic draws he made from the earnings of his gas station were compensable as lost earnings, and thus recoverable from the no-fault carrier. In so holding, the Court found that, even if there is some fluctuation in the amount of the draws, it was possible to ascertain a base minimum amount of predictable income, consistent with the objectives of § 2118. The Court held that those predictable draws were the equivalent of wages or salary. In such instances, the economic dependence upon a regular draw would be indistinguishable from the dependence upon salary and wages, and in keeping with the objective of the statute "to assure prompt payment to an injured party for . . . lost earnings . . . without awaiting protracted litigation."
421 A.2d 888 (Del. 1980).
Id. at 898-90.
DeVincentis v. Md. Cas. Co., 325 A.2d 610, 612 (Del. Super. 1974).
The Neighbors court did not suggest that lost business profits are always recoverable under the PIP statute, nor did it overrule earlier decisions that found loss of business profits of a self-employed person not to be the equivalent of "loss of earnings" under the statute. Rather, it distinguished those cases because Neighbors' base minimum draw was readily ascertainable and predictable. In affirming the lower court, it explained the distinction by quoting from the decision below:
See Neighbors, 421 A.2d at 899-90 (discussing Downs v. Lumbermans Mutual Casualty Co., C.A. No. 442 (Del. Super. May 25, 1976); Klaus v. Nationwide, C.A. No. 287 (Del. Super. 1976)).
Accepting, for purposes of this decision, the premise stated in Downs that the payments contemplated under § 2118 were payments which could be easily ascertained without substantial dispute, where a business has established a regular and periodic draw which is in effect at the time of the accident and has been in effect for a sufficient time to be predictable, the problems which impelled the exclusion of business profits and farm profits under Downs and Klaus would not be present and hence would be entitled to the same treatment as salary and wages. In such instance the economic dependence upon a regular draw would be indistinguishable from the dependence upon salary and wages.
Id. at 890.
The instant case is clearly distinguishable from Neighbors. Here, the earnings that Plaintiff seeks from her carrier under the PIP statute are, unlike the draws in Neighbors, anything but clear. Her gross receipts and profits fluctuated dramatically over the years for which tax returns were submitted. In 2004, for example, Girgis had net profits of $5,992.00 for the entire year, yet she claimed lost earnings for the one-month period that her physician had certified her to be disabled in the amount of $20,000.00. In no year for which tax returns were submitted did Girgis earn anything close to $20,000.00 net profits for a month. In 2005, her net profits were only $2,638.00 for the entire year, a far cry from the $20,000.00 monthly earnings she claimed from her carrier. There is no evidence in this case comparable to the periodic base minimum draws in Neighbors so as to represent a predictable income that would establish a basis upon which she can be compensated for lost earnings under § 2118(a)(2). Indeed, Girgis' choice of $20,000.00 as the amount that she seeks in benefits is so random that it serves to illustrate why her claim for loss of wages is speculative, and why the statute precludes such recovery.
See Graham, 444. A.2d at 288 (holding that a self-employed newspaper deliverer was not entitled to recover as lost earnings under § 2118(a)(2) amounts paid to her substitute helpers).
The case upon which Girgis relies to support her claim for recovery of lost profits as loss of earnings under the no-fault statute, Moody v. Nationwide Mutual Insurance Co., is not factually similar to the case at bar, nor does it overrule cases decided before 1988, as she contends. As here, the Moody case involved a claim by plaintiff to recover no-fault personal injury benefits for lost wages as a result of injuries the plaintiff sustained in an automobile accident. To support his entitlement to lost earnings, Moody presented during his jury trial a handwritten document for his recently opened car wash business that contained six daily entries reflecting total gross receipts for the week of $707.00. He further testified that his net share for the first week's receipts was determined by subtracting certain estimated expenses from gross receipts, and that he received $240.00 in salary for that week, but was unable to return to work after the accident. The trial court directed a verdict in favor of Nationwide on the lost wages claim, concluding that Moody had failed to present "substantial evidence" or adequate records to prove his lost earnings claim.
549 A.2d 291 (Del. 1988).
Id. at 292.
On appeal, the Supreme Court reversed, reasoning that "the trial judge is not permitted to take a claim away from the jury simply because the evidence the plaintiff offers to bolster his credibility is deficient." The Court further noted that all questions concerning the credibility and quality of the evidence must be resolved in favor of the non-moving party when the Court decides a motion for a directed verdict.
Id. at 294.
Id.
While Moody's evidence of a single week's receipts was barely sufficient to permit a projection for the eighteen months of disability that followed, the Court relied upon the fact that Moody did actually receive a draw for the first week of the business' operation. While the evidence was indeed scant and somewhat conjectural, the Supreme Court nevertheless reasoned that the evidence should be presented to a jury, which could accept or reject the projection based on the evidence, or lack of evidence, supporting it.
While the Moody case does indeed lower the bar for the amount of proof needed to establish a weekly wage loss, or at least for the amount of proof necessary to go to the jury, in this case, the plaintiff's own arbitration hearing testimony disavowed receipt of any salary or periodic draw:
Q. And do you see that there is nothing for wages? So can I assume from that that you did not take any kind of a regular draw out of your business in terms of a weekly or monthly draw of wages from your day care business? Is that correct? In other words, you didn't pay yourself on any regular basis from your day care business, did you?
A. I paid for myself?
Q. In the way, you know, if you had been working for someone else, that they would pay you. You didn't draw —
A. No.
Q. — a salary, any wages, did you?
A. No.
Def.'s Mot. for Summ. J., Ex. B, at 27:14-28:4.
The foregoing testimony is not simply a weak conjectural estimation or projection of a self-employed individual's salary, as in Moody, but undisputed evidence that Girgis did not receive any salary or wages from the daycare business. Thus, unlike the Moody case, there is no evidence from which a jury could calculate lost earnings.
Moreover, the amount that Plaintiff is suggesting that she is entitled to recover is not in any way a "reasonable" sum, given the tax returns that she has filed. Even assuming that her gross receipts could be considered the equivalent of lost earnings, Girgis has never established an earning capacity of $20,000.00 per month. Given the gross receipts in her best year in 2004, the daycare had maximum monthly gross income of $2,797.17, nowhere near the $20,000.00 she is seeking — and that $2,797.17 figure is not even discounted for any expenses.
Finally, under the statute and the decisional law interpreting it, the amount sought to be recovered must not only be reasonable, but also "necessary." In this context, necessary is interpreted to mean those lost earnings which are unavoidable or inescapable. Under § 2118, the requirement that lost earnings be "necessary" means that the insured has a duty to mitigate by seeking substitute employment. Prior to the accident, Girgis utilized the services of a "substitute" caretaker who assisted her from time to time when she was not available. Girgis testified at the arbitration hearing that, although she had a full complement of nine children in her care at the time of the accident, she did not call her substitute to take over for her, even on a part-time basis, until she could return to work. Plaintiff thus made no effort to mitigate her lost profits after she was injured.
Casson, 455 A.2d at 366.
Id.