A court has temporarily rejected a plea by Michigan State University to legally sanction its own insurance company for refusing to pay a former employee what she’s owed.
The Michigan Court of Appeals rejected MSU’s request last month to take “punitive” action against United Educators. UE continues to appeal a $7.5 million judgment to a woman who was left permanently disabled in a tragic accident back in 2014. To date, at least 10 different judges have ruled against the insurer.
Elisabeth Ostendorf, a 32-year-old German native, came to MSU in 2012 to conduct research at the MSU Plant Biology lab. The focus of her work was to help find ways to enhance the production of biofuels.
6 News brought you Ostendorf’s story back in July, sharing the details of how her life was changed forever on October 10, 2014. Ostendorf was crossing a pedestrian walkway when she was run over by a university vehicle driven by an MSU student employee.
As a result, Ostendorf suffered massive brain injuries that have left her permanently disabled, confined to a wheelchair, and in need of 24-hour institutional care. She will never be able to work again.
Through her attorney, George Sinas, Ostendorf pursued a lawsuit against the university. The case was eventually tried in April of 2017.
The judge found that MSU was negligent in the operation of its truck and as a result, the university was civilly liable to Ostendorf for damages.
She was awarded $7.5 million, but to this day, has not seen a penny.
That’s because MSU’s insurance company, United Educators, does not agree with the court’s decision and has filed several appeals in several different courts alleging that Ostendorf was entitled to workers’ compensation benefits.
Under Michigan law, eligibility for workers’ compensation benefits is considered to be an employee’s “exclusive remedy” against an employer. However, if no workers’ compensation benefits are payable, the employee can seek limited damages against the employer in a traditional negligence-type liability lawsuit.
United Educators ongoing litigation efforts regarding this issue have resulted in rulings from at least 10 judges from three different tribunal courts in Michigan, all of which have considered and rejected UE’s argument.
In the most recent ruling by the Michigan Appellate Commission in June, the commission rejected UE’s contention that Elisabeth Ostendorf is entitled to workers’ compensation benefits because the “foreign national exclusion,” which would prohibit payment of workers’ compensation benefits, does not apply to Ostendorf because her employment was not funded by the United States Department of State.
In the ruling, the commission said: “We reject United’s argument. We conclude United’s interpretation of ‘to provide’ and ‘financing’ and who may be the most immediate paymaster is overly restrictive and inconsistent with the intent of the statute and State Department regulations.”
It goes on to say that the sponsor (MSU) is “by contract with a federal government grant recipient, entitled to seek reimbursement from federal grant funds for compensation and expenses it pays the foreign national,” which in this case, would be Ostendorf.
“United has not shown MSU would have hired Ostendorf or even pursued the plant research project she worked on had MSU not received federal financing,” the ruling continues. “An exchange visitor may receive compensation from the sponsor or the sponsor’s appropriate designee, such as the host organization, when employment activities are part of the exchange visitor’s program.”
The insurance company continues to fight that opinion.
On August 16th, MSU filed a motion in the Court of Appeals, asking the court to impose monetary sanctions on UE for filing “vexatious, duplicative, and multiple proceedings” in the case.
According to the motion, MSU argues that while it is self-insured for workers compensation, it purchased commercial general liability insurance from UE that covers Ostendorf’s claim.
“The record in these appeals demonstrates that UE has engaged in vexatious litigation in a transparent scorched-earth attempt to manipulate and avoid its insurance obligation to MSU and contractual indemnification responsibility to the gravely injured Ostendorf,” the motion said.
It goes on to say that because UE continues to “doggedly” pursue its appeals of the Court of Claims’ rulings, it qualifies as “grossly lacking in the requirements of propriety and gross disregard of the requirements of a fair presentation of the issues of the court.”
In the filing, MSU argues that UE’s actions have been a “transparent attempt to forum shop and skirt the rules once an adverse decision was issued in the WCA.” WCA is the abbreviation for Workers Compensation Agency.
“This court has previously held in an analogous context that ‘sanctions may be proper when the issues raised in the appeal are virtually indistinguishable from those raised in prior litigation,’” the motion said. “While UE may have had a ‘right’ to seek appellate review in the each of the various actions, it did not have a ‘right’ to cause MSU to incur fees and costs in defending UE’s duplicative and overlapping attempts to have multiple bites of the very same apple.”
The motion also cites the Supreme Court’s recognition in explaining the policy underlying the related doctrine of “res judicata” saying “the claimed right to ‘sue till something gives’ cannot be sound law. There must be an end of litigation, and out of sheer self-defense and considerations of broad public policy our courts cannot gladly permit repeated litigation of the same old question.”
Finding an appeal that’s vexatious allows for actual damages, including recent attorney fees, as well as punitive damages, not to exceed actual damages, according to the filing.
A month later, on September 6th, the Court of Appeals granted UE’s Application for Leave to Appeal and denied MSU’s Motion for Sanctions “without prejudice.” This means that the motion can be re-filed if UE loses its latest appeal.
According to Sinas, this means the case could be delayed another year or two.
Ostendorf’s visa expired on July 31st after being extended several times, given her current state and recovery. She fears she will be forced to go back to Germany without getting the money she’s legally obligated to have.
During an interview in mid-July, MSU Interim President John Engler told 6 News that Ostendorf is entitled to the insurance payment and the university is in full agreement with her.
Engler also said that even though the insurance company is obligated to pay, it has fought UE’s position in the case every step of the way.
“She’s entitled to damages, she was grievously injured,” he said. “She’s not going to go anywhere without a big settlement.”
MSU is currently at odds with United Educators because it said the insurance company is refusing to pay out a portion of the $500 million settlement to the more than 300 women who were sexually abused by convicted doctor Larry Nassar.
In late July, the university filed a lawsuit against UE and several other insurance companies it contracts with, accusing them of failing to provide the insurance coverage it agreed upon in multiple contracts.
“This is a complaint for breach of contract and declaratory relief, and MSU seeks to enforce its rights under general liability, Educators Legal Liability, and medical malpractice policies issued to it by Defendant insurers,” the complaint said.
6 News reached out to United Educators for comment on this story on multiple occasions, but has not heard back.
UE is a risk retention group, which provides liability insurance and risk management services to nearly 1,600 members representing schools, colleges, and universities across the United States, is also at odds with Penn State.
According to records, UE continues to deny the $42 million in claims the university settled with the survivors of Jerry Sandusky. The settlement was reached in October of 2013.
As for Ostendorf, she remains at the Origami Brain Injury Rehabilitation Center in Mason while Sinas works with her immigration attorneys to keep her in the United States while the court proceedings continue.
“What is particularly disturbing and fundamentally unfair is that MSU does not accord to Elisabeth Ostendorf the same protection and deference it has commendably demonstrated to the victims of the Nassar case,” Sinas said. “There, MSU has agreed to pay the Nassar victims a total of $500 million in settlement of their claims against MSU and to fight UE later for reimbursement after those victims have received their compensation. In fact, the Ostendorf case is even more appropriate for such an approach.”
According to Sinas, unlike the civil case involving Nassar, Elisabeth Ostendorf actually did get a Court Judgment, which found that MSU is liable.
“And in the course of that case, MSU succeeded in obtaining several judicial rulings that UE’s position is legally wrong,” Sinas added. “For some inexplicable reason, however, MSU refuses to treat Elisabeth with the same fair‑minded consideration. One would think that a renowned university such as MSU would feel a greater obligation to do what is right for such a tragically injured victim of the university’s conduct.”
