Michigan Court of Appeals; Docket # 341876; Published
Judges Letica, Kelly, and Boonstra; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
In this unanimous published per curiam decision regarding a dispute as to whether the defendant, Allstate Insurance Company, was entitled to a set-off under MCL 500.3172(2) for any amounts payable by the plaintiff’s self-funded ERISA plan, the Court of Appeals reversed the trial court’s partial summary disposition order in favor of Allstate, finding that Allstate was the primary payer of the plaintiff’s benefits, and therefore not entitled to any such set-off. The plaintiff applied for no-fault PIP benefits through the assigned claims plan at the same time as she was receiving health insurance under a self-funded ERISA plan. The ERISA plan expressly disavowed primary coverage if its insured was entitled to benefits under a program “required or provided by law”—i.e the Michigan Assigned Claims Plan. Under the statutory provisions of the MACP, however, an insurer to which a claim for no-fault PIP benefits is assigned is generally entitled to “a set-off for any other benefits covering the same loss that are received by or on behalf of the injured party.” A debate as to who was the primary payer of the plaintiff’s benefits ensued, and the Court of Appeals determined that an ERISA plan pre-empts a state law on a coordination of benefits issue if (1) it is self-funded, and (2) it contains an unambiguous coordination-of-benefits clause, both of which were present in this case.
The plaintiff applied to the MACP for no-fault PIP benefits after she was injured in a motor vehicle collision, and the MACP assigned her claim to Allstate. At the time of the collision, the plaintiff did have health insurance through a self-funded ERISA plan, the benefits under which were primary except in specific circumstances in which the plan “expressly disavow[ed] primary coverage in favor of other insurance benefits, including benefits claimed under a program required or provided by law”—i.e. the Michigan Assigned Claims Plan. The Michigan Assigned Claims Plan, however, specifically MCL 500.3172, provides that an insurer to which a claim for no-fault benefits is assigned is “generally entitled to a set-off for any other benefits covering the same loss that are received by or on behalf of the injured party.” After the plaintiff filed a complaint against Allstate asserting that it was primarily responsible for paying her no-fault benefits, Allsate successfully moved for partial summary disposition, arguing that it was entitled to a set-off under MCL 500.3172 by any amounts payable for the same loss under the plaintiff’s ERISA plan.
The Court of Appeals reversed the trial court’s partial summary disposition order, relying on two previous decisions by the Michigan Supreme Court and Court of Appeals. In Auto Club Ins Ass’n v Frederick & Herrud, Inc, (After Remand), 443 Mich 358, (1993), the Supreme Court determined that a similar provision of the no-fault act, MCL 500.3109a, was pre-empted by an ERISA plan because the ERISA plan had an unambiguous coordination of benefits clause. Auto Club Ins Ass’n reads, in pertinent part:
In Alessi [v Raybestos-Manhattan, Inc, 451 US 504; 101 S Ct 1895; 68 L Ed 2d 402 (1981)], the United States Supreme Court held that state law was preempted to the extent that it attempted to control the terms of an ERISA pension plan. In Shaw [v Delta Air Lines, Inc, 463 US 85; 103 S Ct 2890; 77 L Ed 2d 490 (1983)], the Court interpreted the preemption clause to prevent state regulation of welfare benefits in multibenefit ERISA plans, while noting the danger of the administrative difficulty that would result from piecemeal state legislation. Next, the Court defined the saving clause to preserve state law mandating certain minimum benefits in an ERISA plan as long as the state law regulates insurance law rather than an ERISA plan directly. Metropolitan Life [Ins Co v Massachusetts, 471 US 724; 105 S Ct 2380; 85 L Ed 2d 728 (1985)]. Although the Court majority in Fort Halifax [Packing Co, Inc v Coyne, 482 US 1; 107 S Ct 2211; 96 L Ed 2d 1 (1987)], concluded that a one-time severance payment required by state law did not relate to an ERISA plan so that it was preempted, the majority did reiterate the ERISA purpose of avoiding variable state regulation that would pose administrative burdens to plan administrators. Finally, the Court concluded in FMC Corp that states could not regulate the contractual terms of ERISA benefits plans in cases of self-funded plans. ERISA plans, however, are subject to indirect regulation in a case in which a state regulates an insurance carrier that has contracted with the plans to provide coverage for claims made on the plans. [Id. at 386.]
. . .
[T]he COB clause in an ERISA policy must be given its clear meaning without the creation of any artificial conflict based upon MCL 500.3109a. Therefore, because both plans provide that no-fault insurance is primary where the potential for duplication of benefits occurs, we hold that the ERISA plans’ terms control. The no-fault insurer, ACIA, is primarily liable for the benefits at issue. Although the Michigan statute purports to regulate insurance and not ERISA plans, we conclude that it has a direct effect on the administration of the plans in these cases because it would virtually write a primacy of coverage clause into the plans. This is the type of state regulation that would lead to administrative burdens that the historical progression of federal cases recounted earlier forbids. [Id. at 387 (emphasis added).]
In American Med Security, Inc v Allstate Ins Co, 235 Mich App 301 (1999), the Court of Appeals declined to extend the Supreme Court’s ruling in Auto Club Ins Ass’n to cases where an ERISA plan was not self-funded. American Med Security, Inc reads, in pertinent part:
In FMC Corp, the [United States Supreme] Court stated:
We read the deemer clause to exempt self-funded ERISA plans from state laws that “regulat[e] insurance” within the meaning of the saving clause. By forbidding States to deem employee benefit plans “to be an insurance company or other insurer . . . or to be engaged in the business of insurance,” the deemer clause relieves plans from state laws “purporting to regulate insurance.” As a result, self-funded ERISA plans are exempt from state regulation insofar as that regulation “relate[s] to” the plans. . . . State laws that directly regulate insurance are “saved” but do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purposes of such state laws. On the other hand, employee benefit plans that are insured are subject to indirect state insurance regulation. An insurance company that insures a plan remains an insurer for purposes of state laws “purporting to regulate insurance” after application of the deemer clause. The insurance company is therefore not relieved from state insurance regulation. The ERISA plan is consequently bound by state insurance regulations insofar as they apply to the plan’s insurer. [Id. at 61 (emphasis added).]
The Supreme Court distinguished between insured and uninsured plans, “leaving the former open to indirect regulation while the latter are not.” Id. at 62, citing Metropolitan Life Ins Co v Massachusetts, 471 US 724, 747, 105 S Ct 2380, 85 L Ed 2d 728 (1985). It emphasized that “if a plan is insured, a State may regulate it indirectly through regulation of its insurer and its insurer’s insurance contracts.” FMC Corp, supra at 64. See also Lincoln Mut Casualty Co v Lectron Products, Inc, Employee Health Benefit Plan, 970 F2d 206, 210 (CA 6, 1992).
Section 3109a is not preempted under the circumstances of this case. The employee benefit plan at issue was not a self-funded plan, and plaintiff’s insurer, United Wisconsin, was subject to Michigan insurance law and regulation, specifically § 3109a, even where that statute indirectly affects the plan. Our ruling does not allow our state law to control an ERISA plan, but simply recognizes that state law can regulate the insurer of an ERISA plan even if that regulation may indirectly affect the plan, which is the case here. [Id. at 305-307.]
Thus, the Court in the present case concluded that, in order to preempt a state law on a coordination-of-benefits issue, an ERISA plan must (1) be self-funded, and (2) contain an unambiguous coordination-of-benefits clause. The plaintiff’s ERISA plan was self-funded, and the plan, itself, contained an unambiguous coordination-of-benefits clause. Therefore, the ERISA plan did preempt MCL 500.3172, and Allstate was deemed to be the primary payer of benefits to the plaintiff.
On appeal, Allstate seeks to avoid application of Auto Club by noting that, in that case, there were two competing COB clauses: one in the ERISA plan and one in the applicable no- fault policy. Allstate correctly points out that there is only one policy in this case: the ERISA plan. However, like a COB clause, MCL 500.3172(2) provides for the coordination of benefits. Specifically, it establishes that where duplicative benefits are available, i.e., where benefits from multiple sources cover the loss, the assigned-claims insurer is entitled to a set-off, i.e., the insurer is not primarily liable. Therefore, in this case, there is a state law expressly providing that George’s ERISA plan is primary whereas the ERISA plan expressly disavows primacy under these circumstances. Because George’s ERISA plan is self-funded and because it contains an unambiguous COB clause, Allstate is primarily liable for the benefits at issue here. To hold to the contrary would have the direct effect of dictating the terms of the ERISA plan, which the state is not permitted to do under federal law. Auto Club, 443 Mich at 389-390.