Michigan Supreme Court; Docket No. 98197; Published
Opinion by Justice Brinkley; 4-2 (with Justice Boyle, Concurring, Justice Weaver, not Participating, Justices Cavanaugh and Mallet, Dissenting)
Official Michigan Reporter Citation: 449 Mich 33; Link to Opinion 
STATUTORY INDEXING:
Standards for Deductibility of State and Federal Governmental Benefits [§3109(1)]
Other State No-Fault Benefits [§3109(1)]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
In this three Justice majority Opinion (Justice Boyle concurring, Justice Weaver not participating, and Justices Cavanagh and Mallett dissenting), the Supreme Court reversed the Court of Appeals (see Item No. 1671) and held that medical benefits provided pursuant to an out-of-state no-fault automobile insurance plan, in compliance with the laws of that state, may be set off as governmental "benefits" under §3109(1) of the Michigan No-Fault Act, and therefore deducted from the Michigan no-fault insurance policy that was obligated to provide medical expense payments to the injured plaintiff.
Plaintiff was injured when her bicycle was struck by an automobile which was insured by Auto Club. Plaintiff, a resident of Pennsylvania, was visiting her grandparents in Michigan at the time of the accident. Plaintiff received $10,000 in medical benefits under a Pennsylvania no-fault automobile insurance policy issued to her parents pursuant to Pennsylvania law. Auto Club claimed that under §3109(1) of the Michigan No-Fault Act, it was entitled to offset from its obligation to pay no-fault first party medical expense benefits the amounts received by plaintiff under the Pennsylvania policy. The Court of Appeals upheld the trial court's ruling that the defendant was not entitled to a set off because the private insurance coverage purchased by plaintiffs parents was not a "state mandated governmental benefit" and, therefore, was not subject to a set off under §3109(1).
In holding that benefits paid to the plaintiff under her parents' Pennsylvania no-fault policy were "benefits provided or required to be provided under the laws of any state" within the meaning of §3109(1) of the no-fault act, the Supreme Court revisited its decisions in LeBlanc v State Farm Mutual Automobile Insurance Company, 410 Mich 173 (1981) and Profit v Citizens Insurance Company, 444 Mich 281 (1993). Plaintiff argued that in both LeBlanc and Profit, the Supreme Court had defined the word "benefit" in §3109(1) to mean benefits provided as a part of a "mandatory, comprehensive social welfare entitlement program generally providing benefits to all persons who have been wage earners, and dependents of such persons, largely paid for by taxes from all wage earners." In distinguishing those previous decisions, the Supreme Court held that rather than defining the scope of the term "benefit" narrowly, it had left "benefit" as a relatively open term, but held that where a benefit is also "coverage" under §3109a, then the coordination of benefits provisions of that section must be applied. The Supreme Court held that in LeBlanc and Profit it had defined the scope of the word "coverage" in §3109a to be more narrow than that of "benefits" in §3109(1). In LeBlanc, the court had compared Medicare benefits to other forms of health and accident coverage and ruled that there was no way to distinguish Medicare from those other forms of coverage. In Profit, conversely, the court had concluded that social security disability benefits were not "coverage" under §3109a, but rather, were benefits provided or required to be provided under the laws of the federal government, and thus deductible from work loss benefits otherwise payable under a no-fault policy.
In summarizing the rules governing application of §3109(1) and §3109a as developed through several decisions, the court set forth the following tests:
First, whether a benefit is a "benefit" under §3109(1) or "coverage" under §3109a requires the application of two separate tests, the Jarosz test to determine the former, and the LeBlanc "similarity" test to determine the latter, (citations omitted). Second, a benefit may be a "benefit" under §3109(1), "coverage" under §3109a, neither, or both. The applicability of the sections is not an "either or" proposition, (citation omitted). Third, if the benefit falls under the ambit of both sections, a court must initially apply §3109a. The subtraction of §3109(1) from benefits otherwise payable under the no-fault insurance policy is not permitted in this situation, unless coverage was coordinated under §3109a. (See, Tatum v Government Employees Insurance Company, 431 Mich 663 at 670-671; LeBlanc, supra, at 206.) Finally, when only one section is applicable, that section is applied without reference to the other.
In applying the above rules to the present case, the court held that the benefits received by plaintiff from State Farm under the Pennsylvania policy were required to be provided by the Pennsylvania state government. The Pennsylvania no-fault act required that an insurer issuing a liability insurance policy was required to include in that policy coverage providing a "medical benefit in the amount of $10,000." Therefore, the medical benefit under Pennsylvania's no-fault law was a benefit "provided or required to be provided under laws of" Pennsylvania, even though it was funded with no-fault insurance premium dollars and was paid to plaintiff by a private insurer, rather than tax dollars collected and disbursed by Pennsylvania. Having thus determined that the no-fault benefits under Pennsylvania law were "required to be provided," the court then applied the Jarosz test and determined that these benefits served the same purpose and were required to be provided as a result of the same accident.
The Supreme Court then analyzed whether the particular payment also met the definition of "coverage" under §3109a. In analyzing that section, the court held that it restricts its applicability to benefits payable to certain persons, specifically, the deductibles and exclusions required to be offered by §3109 shall be subject to prior approval by the commissioner and "shall apply only to benefits payable to the person named in the policy " Since plaintiff was not named in the applicable Michigan no-fault policy, the court held that §3109a had no application to the present case.
Thus having determined that the payment was a benefit required to be provided under Pennsylvania law, the court concluded that it was a proper set off pursuant to §3109(1) of the Michigan No-Fault Act. In further support of its decision, the court held that §3109(1) was designed to reduce the cost of no-fault premiums, by reducing the potential liability of insurance carriers. The court's conclusion that out-of-state insurance benefits are included in the definition of benefits under §3109(1).furthers the purpose behind this provision.
Therefore, the benefits provided by State Farm under the Pennsylvania policy should be subtracted from the benefits otherwise payable for the injury under the Michigan driver's no-fault automobile insurance policy.
Justice Boyle in her concurrence agreed with the analysis of Justice Brickley, but felt that §3109a had no relevance to the present case and, therefore, the majority's discussion of the parameters of §3109a coverage was unnecessary.
In his dissent, Justice Cavanagh would hold that foreign no-fault benefits fall outside the intended scope of §3109(1) benefits. Since Michigan no-fault benefits are not §3109(1) governmental benefits, he felt that there was no compelling statutory basis for concluding that "foreign" no-fault benefits must be treated as §3109(1) benefits. To find that §3109(1) benefits include foreign no-fault benefits would, in Justice Cavanagh's view, amount to judicial legislation. Justice Cavanagh believed the result was dictated by §3163 dealing with out-of-state residents injured in Michigan.
